Issues and Crisis Management

Learning Outcomes
1. Distinguish between the conventional and strategic approaches to issues management.

2. Identify and briefly explain the stages in the issues management process.
3. Describe the major components in the issues development process and factors in actual practice. 4. Define a crisis and identify the four crisis stages. 5. List and discuss the major stages or steps involved in managing business crises.
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Chapter Outline
The Relationship Between Issues Management and Crisis Management

Issues Management Crisis Management Summary

Issues Management and Crisis Management

The business environment is turbulent and stakeholders are sensitive to emerging issues. Some firms have not thought seriously about public policy and ethical issues.
Can be impossible to separate the two the Siamese twins of public relations.

Well-conducted issues management can help avoid crises.

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Issues Management
A process by which organizations identify issues in the stakeholder environment, analyze and prioritize those issues in terms of their relevance to the organization, plan responses to the issues, and then evaluate and monitor the results.

Issues Management: Conventional Approach

Conventional Approach

Narrowly focused. Issues fall within the domain of public policy

or public affairs management.

Issues have a public policy/public affairs

orientation.

Any trend, event, controversy, or public

development that might affect the corporation.

Issues originate in social, political, regulatory,

or judicial environments.
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Issues Management: Strategic Management Approach

Strategic Management Approach Broadly inclusive.

Is typically the responsibility of senior line

management or strategic management staff.

Issues identification is more important than

it is in the conventional approach.

Issues management is seen as an approach

to the anticipation and management of external/internal challenges to the company strategies, plans, and assumptions.
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Strategic Issue Management

Issues
Issue
A matter that is in dispute between parties. The dispute evokes debate, controversy, or differences of opinion. The portfolio approach of issues management helps firms to prioritize and focus resources on the most important issues.
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Emerging Issues
Characteristics of an emerging issue

Terms of the debate are not clearly defined Issue deals with matters of conflicting
values and interest

Automatic resolution is not available Issue is often stated in value-laden terms Trade-offs are inherent
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Issues Management Process

Basic Assumptions Issues can be identified earlier, more completely, and more reliably. Early anticipation:
Widens the range of options. Permits study and understanding of the full range of issues. Permits organization to develop a positive orientation towards the issues.

Organization will have earlier identification of the stakeholders. Organization will be able to supply information to influential publics earlier and more positively, creating better understanding.
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Model of Issues Management Process

Identification of Issues

Analysis of Issues Prioritization of Issues Formulation of Issue Responses

Implementation of Issue Responses Evaluation, Monitoring, and Control of Results
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Identification of Issues

Scan the environment

Identify emerging issues and trends

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Identification of Issues (continued)

Leading forces as predictors of social change

Events Authorities/advocates Literature

Organizations Political jurisdictions

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Issues Selling and Buying

Issues selling

Relates to middle managers exerting

upward influence in organizations as they try to attract the attention of top managers.

Issues buying

Top managers adopt a more open

mind-set for the issues that matter to their subordinates.
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Analysis of Issues

Who (which stakeholder) is affected by the issue? Who has an interest in the issue? Who is in a position to exert influence? Who has expressed opinions on the issue? Who ought to care about the issue?
Who started the ball rolling? (Historical view) Who is now involved? (Contemporary view) Who will get involved? (Future view)
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To help with issue analysis:

Ranking or Prioritization of Issues

Two essential questions
1. How likely is the issue to affect the organization? 2. How much impact will the issue have?

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Formulation and Implementation of Response

Formulation
The response design process.

Implementation
The action design process. Plan clarity Resources needed Top management support Organizational structure Technical competence Timing
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Evaluation, Monitoring, and Control

Companies should continually evaluate the results of their responses to issues.
Includes careful monitoring of stakeholder opinions.

Information from this stage helps firms to make adjustments to the process as needed.

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Issues Development Process

Issues Development Process
The growth process or life cycle of an issue.

Has five stages:

1. Early 2. Emerging

3. Current
4. Crisis 5. Dormant
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Issues Development Life Cycle Process

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Issues Management in Practice

Issues management covers a range of
public relations and management activities.

Companies that adopt issues

management processes: Develop better overall reputations Develop better issue-specific reputations Perform better financially

Provides a bridge to crisis management.

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Crisis Management
To manage a crisis, one first must understand that crises
Occur abruptly Cannot always be anticipated

May not occur within a specific issue category Good issues management is a form of precrisis planning and can help stave off crises.
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Crisis Management
We are in the era of the mega-crisis
Enron, WorldCom, Arthur Andersen, Tyco, and others accused of financial scandals and malfeasance. Firestone and Ford were implicated in massive tire recalls due to faulty tires.
Bernie Madoffs Ponzi scheme defrauded thousands of investors out of billions of dollars.
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The Nature of Crises

Crisis definitions

An extreme event that may threaten your very existence. At the very least, it causes substantial injuries, deaths, and financial costs, as well as serious damage to your reputation. An organizational crisis is a low-probability, highimpact event that threatens the viability of the organization and is characterized by ambiguity of cause, effect, and means of resolution, as well as by a belief that decisions must be made swiftly.

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Crisis Management
Rules of crisis management:
1. Dont wait
2. Dont run from the truth 3. Dont hide

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Types of Crises
Economic Physical Personnel Criminal
Information Reputational Natural disasters
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Outcomes of Major Crises

Escalated in intensity Subjected to media and government scrutiny Interfered with normal business operations Damaged the companies bottom line Resulted in major power shifts

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Crisis Management: Four Stages

Prodromal Crisis Stage
Warningprecursor Symptom precrisis

Acute Crisis Stage

Point of no return Crisis has occurred

Learning
Chronic Crisis Stage
Lingering onperhaps indefinitely; period of selfdoubt; self-analysis

Crisis Resolution Stage

Patient is well/ whole again

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Managing Business Crises

Five practical steps in managing crises
1. 2. 3. 4. 5. Identifying areas of vulnerability Developing a plan for dealing with threats Forming crisis teams Simulating crisis drills Learning from experience

Effective crisis management requires tailoring a program to a firms industry.

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Ten Steps of Crisis Communications

1. 2. 3. 4. 5. 6. 7. 8. 9. 10.
Identify crisis communication team
Identify key spokespersons Train your spokespersons

Establish communications protocols

Identify and know the audience Anticipate crises

Assess the crisis situation Identify key messages to communicate

Decide on communication methods Be prepared to ride out the storm
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Be First, Be Right, Be Credible

Be First
Get the message out first to control content and accuracy.

Be Right
Say and do the right thing.

Be Credible
Be open, honest, and speak with one consistent voice.
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Successful Crisis Management

Being prepared for a crisis helps companies get their acts together and respond more quickly, with less damage. Being prepared for one type of crisis provides valuable learning for when other types of crises strike.

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Regardless of the crisis model used, crisis management involves four strategic considerations, or the Four Cs. All plans should include at least these aspects.

Classic Crisis Case: J&Js 1982 Tylenol Tampering

In this presentation you will cover:

stages of the crisis

key considerations for intervention

constructing an ecomap

description of the case

impact of the case on the industry what was learned Case Overview

When the Johnson & Johnson Company faced the Tylenol poisonings in 1982 they applied the Four Cs quite effectively. They relied on the value and strength of their culture credo which also identified the stakeholders

Four responsibilities: To the customers To the employees To the communities they serve To the stockholders

Tylenol Case Analysis

Background
In the mid 1950s Tylenol became a needed and popular substitute for aspirin for such conditions as flu and chicken pox, since aspirin was related to Reyes Syndrome (liver degeneration, brain edema, 20-30% fatality)

Large market: 100 million users, 19% of corp profits, 13% of year to sales growth, 37% market share of painkillers, outselling other top analgesics combined
J&J was one of the Best 100 companies to work for Tylenol became a product trusted by physicians and families alike Numerous other Tylenol products were developed for an active market

J&J strong family corporate culture

Tylenol Case

The Crisis Begins

September 1982 Extra Strength Tylenol bottles of at least 6 pharmacies and food stores were opened, & capsules were filled with cyanide (10,000 x fatal dose) Media reporter asked PR Asst. Dir Andrews about poisoned Tylenol then it hit the news! 7 people died in the Chicago area

CEO James Burke refers to the Credo, alerts to the danger, & assigns team to discover the source
Formed 7-member strategy team Stop the killings

Reasons for the killings

Provide protection & assistance to people

and snowballs!
Police drove through streets with loudspeaker warnings

Chicago hospital received >700 calls in one day

Immediate stories in major magazines and newspapers

Over 100,000 separate news stories ran in US papers

Hundreds of hours of national and local TV coverage

>90% of Americans had heard of the Chicago deaths

Widest coverage since Kennedy assassination & Viet Nam

Copycat tampering 270 reported incidents (36 true)

Tylenol, killer or cure? -- Washington Post

J&J stock fell 7 points Market share dropped from 37% of pain-reliever market to 7%; from $400 million in annual revenue to $70

Initial Response Phase 1 Crisis response

Immediate alert to consumers not to use any type Tylenol product or resume use until extent determined
Live TV satellite feed of press conferences; media exposure via 60 Minutes, Donahue, etc.

800# Hotline for customers (30,000 calls in Oct-Nov)

Toll-free phone for news organizations; pre-taped messages and updated statements for distribution Strict production, different lot $, & crisis only in Chicago indicated post-production tampering Withdrew bottles from Chicago area; ordered recall of >31 million bottles nationally at a cost of >$100 million (against FDA & FBI) It temporarily ceased all production of capsules High public profile and repeated reassurance by Burke Working relationship with law enforcement agencies Notification of health professionals nationwide & FDA

Initial ResponsePhase 2, PR Rebound

Five-Point Plan
1. Replaced them with tamper-resistant caplets (triple safety seal within 6 months) 2. Incentives: free replacement of caplets for capsules, special coupons ($2.50 off) easily obtained 3. New pricing program: discounts up to 25% 4. New advertising program: national 1 minute commercial, News & talk shows, 5. New presentations by 2250 sales personnel made to medical stakeholders

positive press articles regarding J&J, products, & safety indications of regaining market share held up as positive example of ethics & responsibility 450,000 e-mail messages

Strategies
Most public recovery strategies incorporate the following five components:

Forgiveness: win forgiveness from stakeholders and create

acceptance for the crisis

Sympathy: portray organization as unfair victim of attack by

outside persons; willing to accept losses

Remediation: offer compensation for victims and families

(counseling & financial assistance)

Rectification: take action to reduce recurrence (triple sealed &

increased random inspection)

Effective leadership: clear, visible, consistent role-modeled

message from beginning by CEO

Employee Response

Strong family-oriented culture, we care about our employees

Open and current communication with employees; 4 video programs on the unfolding process Emphasizing plant workers were innocent

CEO speech in a week to employees, Were coming back (wearing buttons)

Idle employees given tasks to keep involved & reduce rumoring and boredom Indications of market recovery bolster spirits Congruence and consistency in demonstrating the Credo

Consequences Lessons learned

J&J showed that they were not willing to risk public safety even at excessive cost J&J could be trusted all the way to the top they lived their Credo & having a functional credo worked
J&J set a new standard for protection thereby requiring competitors to expensively follow suit J&J was viewed as a co-victim of the crime Stakeholder involvement and relationships is essential One must anticipate and prepared for crises; expect the unexpected Cynicism: Be aware that 75% of people dont believe companies take responsibility for crises or tell the truth No matter what you do in the beginning, in the end you will have to tell the truth React fast, openly and decisively

1983 Tylenol Bill by Congress made malicious tampering of consumer products a federal offense
1989 federal legislation to make consumer products tamper resistant

(learning contd)

Report your own bad news dont wait for reporters to root it out Speak with one voice

Gather facts and disseminate from one info center

Be accessible to the media so they wont go to other sources

Target communications to those most affected by the crisis, and can affect the media
If you cant discuss something, explain why Provide evidence for your statements Record events via video and documents so you can later present your side of the story

Activity
Cases of baldness are reported with your companys hair shampoo Vesty , now present how would you deal with this crisis. An angry consumer of your brand Axe has sued you on the grounds that your brand is unable to fulfil its promise getting a partner. Prepare a PR response for it.
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