Superannuation and dog racing: Policy back-flip or ‘responding to stakeholders’?

One of the challenges for policy makers and managers everywhere is how best to communicate a major change of mind. Will it be negatively perceived as a back-flip by a weak leader, or recognised as a positive outcome resulting from flexible consultation with stakeholders?

This issue management conundrum was highlighted by two recent high-profile developments in Australia.

In the first case, Federal Treasurer Scott Morrison had to explain why the Government had backed down from some unpopular changes to the national superannuation system. His communication strategy was clear and unapologetic. The Minister told reporters he had listened and then made the right decision – and the story pretty quickly went away.

Contrast this with the issue management debacle surrounding greyhound racing. Reacting to a television exposé of cruel practices in the sport, New South Wales Premier Mike Baird announced a total ban on greyhound racing in the state. Predictably, animal welfare groups praised it as trend-setting and courageous, while the greyhound industry, along with their allies in politics and the media, were outraged and angry.

Aside from the arguments for and against the ban, what is of interest is how the NSW Premier managed the growing controversy. After three months of damaging headlines, and repeatedly denying reports he was about to change his mind, to the apparent surprise of no-one, the hapless Premier announced last week he had dropped the proposal.

Mr Baird certainly tried to emphasise that new rules would be introduced to clean up the sport. But what appeared on news bulletins across the country was of a sombre-faced Premier declaiming: “I was wrong. The Cabinet was wrong. The Government was wrong.” The perception was a humiliating defeat.

The question is: Did it have to be that way? There is no doubting the Premier’s sincerity, but the first important precept of issue management is to fully understand your stakeholders. Mr Baird very evidently over-estimated the extent and persistence of public attention to animal welfare, and under-estimated support for the greyhound industry and its economic reach.

Second, keep your allies and potential allies inside the tent. NSW was not able to rely on supporters from leaders in other states and increasingly looked out of step with the rest of the nation.

Third, leave yourself room to manoeuvre. While a total ban was a bridge too far, the Premier could have demonstrated leadership and secured political credit by a more measured response to a legitimate matter of public concern. Issue management is a two-way process and he needed to do more listening and consulting before jumping in at the deep end.

Finally, in the words of Kenny Rogers, know when to hold, know when to fold. The Premier’s repeated denials left him no dignified way out and he waited far too long. There is an important difference between being firmly resolute and stubbornly blind to reality.

So it’s worth considering the two strategies for managing a policy reversal. The Treasurer framed his superannuation change of mind as a virtue, responding maturely to feedback. Naturally his critics labelled that as spin to cover up a back-down, but he seemingly suffered little lasting political damage. By contrast Premier Baird went from being one of the nation’s most popular politicians to being perceived as misguided, inflexible and plain wrong. There has to be a lesson somewhere there.

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When big business intervenes in social issues

When Australian Federal Treasurer Scott Morrison chastised superannuation funds for selecting investments for “political reasons” rather than financial return he was flying in the face of a growing trend in issue management.

The Minister attacked the funds for not investing in coal, but perhaps he had overlooked the fact that just months earlier the world’s  biggest Sovereign Wealth Fund – the $860 billion Norwegian fund – announced it will drop investment in 52 companies linked to coal.

Using investment muscle in support of a social issue is nothing new. As long ago as the 1990s, withdrawal of business investment in South Africa was a major factor in speeding the collapse of Apartheid.

Similarly, Corporate Social Responsibility and Ethical Investment have been around for decades, helping big business play a role in the community to help protect their operations and maintain their social licence to operate.

But now corporations and CEOs seem to be showing a renewed willingness to play a role in high-profile social issues with little or no apparent direct relevance to their core business. Some people are describing this as Corporate Social Advocacy, or Corporate Activism.

Look no further than the 81 American multinationals which pledged to support President Obama on climate change. Or the Who’s Who of Australian corporates who lent their names and brands to a newspaper advertisement in support of same-sex marriage. Or the more than 200 CEOs and business leaders who signed an open letter to Governor of North Carolina to protest against new legislation which overturns protections for the LGBTI community.

In that case some companies did a lot more than just sign an open letter.  For example PayPal cancelled plans to open a global operations center in Charlotte, North Carolina, that would have created 400 jobs, and the Washington Post reported that Deutsche Bank cancelled expansion plans into the state.

Corporate philanthropy is another concept which has been around for a very long time, but now some high profile philanthropists are no longer simply supporting existing good projects and good causes. A good example is West Australian mining magnate Andrew “Twiggy” Forrest who began by championing the issue of indigenous disadvantage, then masterminded the international Walk Free Foundation which aims to shame governments into action on modern slavery and to persuade global corporations to ”slavery-proof” their supply chains. The Walk Free campaign was later rolled into a US charity, but it highlights how CEOs can use their money and status to promote issues onto the global agenda.

Although various forms of corporate intervention are well known, what’s new is the growing pace and profile of such intervention. Sometimes, however, the line between corporate social activism and longer term self-interest is somewhat blurred. Like the decision of the worlds ten biggest PR agencies not to represent climate-change deniers. Or the Male Champions of Change group which brings together some of Australia’s most influential and diverse male CEOs and Chairpersons to use their individual and collective influence and commitment to drive the issue of women’s representation in leadership.

But in some ways it’s less important whether the rising tide of intervention is labelled as CSR or corporate activism or ethical investment or corporate social advocacy or philanthropy or the bandwagon effect. The real trend here is that business and its leaders are increasingly willing to play a role in high-profile social issues, and issue managers everywhere need to pay attention.

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Crisis Proofing: A new approach to protecting your company

Most managers want to do what’s right for their organisation. Yet some struggle with exactly what needs to be done to protect against the reputational and organisational damage threatened by a crisis or major public issue.

In response to this challenge I have developed a new concept called Crisis Proofing, which focuses on the role of executive managers and the practical steps they can take to secure proper protection.

Research shows senior managers recognise that the best crisis management is to take steps to help prevent a crisis from happening in the first place. But how to do this? How to manage both preparedness and prevention? And what should remain in the executive suite and how much can be delegated downward?

Crisis Proofing has emerged to help answer such questions. And to help move the focus of crisis management leadership from tactics in the war room up to strategy in the board room. It’s introduced in the new book Crisis Proofing: How to save your company from disaster which spells out how the role of senior managers in crisis prevention and reputation protection has never been more important.

Yet many companies continue to leave crisis management in the hands of operational managers or technicians with little expertise beyond what to do when things go wrong. Corporate crisis management traditionally has a strong emphasis on tactical element such as crisis manuals, table top simulations and a well-equipped war room. However leading companies are now shifting from reactive crisis response to proactive crisis prevention and that demands a new involvement from the executive suite and the board.

But progress is slow. A global survey of board members published early in 2016 found that fewer than half of the non-executive directors reported they had engaged with management to understand what was being done to support crisis preparedness. And only half the boards had under taken specific discussion with management about driving crisis prevention.

The other key factor driving increasing senior executive engagement has been acknowledgement that most crises which threaten a company are not unexpected events but are, in fact, preceded by clear warning signals, which are frequently ignored. Together, these two factors – that most crises are not truly unexpected and that most are avoidable – fuel the move from the operational emergency context of the war room to strategic planning in the board room.

So what’s needed to help move management focus from crisis response to crisis prevention? One answer is the Crisis Proofing approach. Most managers aren’t looking for a textbook analysis, or yet another how-to manual on tactics. The new book Crisis Proofing is neither a textbook nor a manual. It’s an informal conversation at executive level which shows how responsibility for protecting the organisation lies absolutely in the C-suite.

It gives practical advice on how senior executives can provide participation and leadership from the top. And, faced with the fact that one in four organisations which suffer a major crisis going out of business, it provides a realistic blueprint for how to save your company from disaster.

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Data security – the crisis risk elephant in the room

If you’re ever tempted to doubt the impact of a data breach, just think about the hackers who leaked emails immediately before the US Democratic National Convention, which exposed the party machine’s bias against election hopeful Bernie Sanders.

There’s some question as to who engineered the hack. Maybe it was the accused Russians and maybe it wasn’t. But there is no question at all as to the reputational impact for the Democratic Party (which appeared to endorse the bias); for Chairwoman Debbie Wasserman Schultz (who was forced to resign); and for Presidential nominee Hillary Clinton (who had to wear the damage).

While not every data breach is so high profile, such security lapses are increasingly common and constitute a massive crisis risk for organisations of all sizes. Indeed the Australian Institute of Management recently reported 60 percent of IT professionals in Australia and New Zealand expect a cyber attack to affect their organisation this year, yet only 43 percent believe they are prepared for it.

Similarly, a new survey for Accenture found that a majority of security executives around the world (69 percent) had experienced an attempted or successful theft or corruption of data by insiders during the prior 12 months, and more than half (54 percent) indicated that their current employees are under-prepared to prevent security breaches.

While such worrying numbers are not exactly a surprise, they highlight that vulnerability to cyber-attack is a crisis risk which demands a higher level of management commitment and communication planning. (Look no further that the Australian Census debacle in the last issue of Managing Outcomes)

However, executive support often seems to be lacking. For example the PwC Cybercrime Survey last year found that fewer than half of the global organisations surveyed had a cross-organisation team which regularly convenes to discuss, coordinate and communicate about issues involving information security.

And, amazingly, the new Accenture study found that more than a third of the experts surveyed believed their executive management consider cyber-security “an unnecessary cost.” Sheesh. Tell that to Hillary Clinton. Or to the Australian Bureau of Statistics

We know from experience that companies which are not properly prepared to manage a crisis sometimes say “We are small and not likely to have a crisis.” The same dangerous mistake applies in spades to the risk of cyber-attack. A 2015 survey of small US businesses by Nationwide Insurance, found 63 percent said they had been attacked at least once. Meantime, in a survey by UK insurer Towergate, 82 percent of small business owners believed they were safe from a cyber-attack because “they didn’t have anything worth stealing.”

Oh Really? Forbes magazine recently warned this belief couldn’t be more wrong. In fact they said hackers often go after small companies, which may not be so well protected, specifically to worm their way into more valuable victims. Like when data thieves hacked into a small contractor to access records of 70 million customers of US retail giant Target.

So data security is the elephant in the room.  Everyone knows it’s there but sometimes it seems too big to tackle. Mark Twain famously said (or repeated): “Everyone complains about the weather, but nobody does anything about it.” The same might be said about data security as a leading crisis risk. However, unlike the weather, in this case you can do something about it, and you need to take action now.

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The Australian census crisis: what can we learn?

One of the highest profile organisational crises in recent times was last week’s disastrous failure of the Australian online census. The Bureau of Statistics website failed on census night, leaving millions of angry and frustrated citizens unable to submit their census information for almost 40 hours.

There are plenty of theories about what happened and who was responsible, but it’s still far too early to make a definitive assessment of exactly what went wrong. We should leave that to the slew of different inquiries and investigations which were rapidly announced.

However, there are already some important broad lessons for crisis managers everywhere about preparedness and prevention. An angry Prime Minister Malcolm Turnbull stated the blindingly obvious when he thundered: “Denial of service attacks are absolutely predictable.”

Of course they are, Mr Turnbull. In fact there could have been no more predictable crisis risk for the online census than a system melt-down. Yet the headlines are full of organisations which ignore the predictable and pay the price. What becomes obvious is that they often had no real plan for how to respond after those predictable crises struck.

Crisis management falls into two distinct categories of action – resistance and resilience. Resistance is the effort you make to try to prevent crises happening in the first place. Resilience is the steps you take to minimise the damage from a crisis, and to protect reputation. Organisations should be committing resources to both.

For the Bureau of Statistics, the minute the system failed, nothing they did or said could have prevented it being a major national crisis. The only uncertainty at that stage was how damaging the crisis would be and how long it would last. From the evidence so far it would seem that the planning and load testing was all about technical issues and not enough about how to explain a failure and how to minimise the fallout.

Effective crisis management demands a full communication contingency plan for the most likely and the worst case crises. A system failure is never “just an IT problem” and the Bureau’s apparent focus on system integrity for the census evidently left them dangerously vulnerable and unprepared when it came to communicating the nightmare scenario. The crucial question here is not what could go wrong and how can we prevent it, but what is our communication plan when it does go wrong?

Moreover, nightmare IT scenarios are certainly nothing new in major government agencies. Think no further than last December when China was blamed for a massive hack attack on the Bureau of Meteorology, which houses one of Australia’s largest super-computers. The predictable crisis risk was well captured by a headline in The Australian: “The hacking of the Bureau of Meteorology shows the vulnerability of all agencies.”

Yes, all agencies. Which brings us back to last week’s census debacle, where the political game began with the Opposition calling for ministerial resignations, and the Prime Minister warning that heads will roll. They were setting the scene for one of the brutal realities of post-crisis management. Investigations and commissions of inquiry are seldom primarily to find out what happened. Their real purpose is to apportion blame, and history shows that “poor communication” is a popular scapegoat.

The Bureau of Statistics didn’t just need load testing for the website. It needed load testing for the crisis communication contingency plan.

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An issue management lesson from Lady Gaga?

Picking a fight with China can be dangerous. But singer Lady Gaga has shown how it can be done without creating fresh reputational risks for yourself, your organisation or your sponsors.

When she posted pictures of herself interviewing the Dalai Lama the reaction from China was swift and predictable. Chinese Netizens posted messages such as: “The way the Chinese feel is just like you were shaking hands with Osama bin Laden,” and the Beijing Government promptly banned the singer from visiting the country.

However she had only just been taken off the “list of hostile foreign forces” after a previous three year ban, which may reflect that she is reportedly the most popular Western singer in China. The issue management lesson for dealing with China was that Madam Gaga said nothing, and neither did her sponsor Shiseido, for which she is the face of the brand in Japan.

Contrast this with what happened just a few weeks earlier when cosmetics giant Lancôme (owned by L’Oréal) cancelled a promotional concert in Hong Kong by local pop star Denise Ho, a high-profile advocate for Hong Kong’s pro-democracy movement who recently posted photos of herself with the Dalai Lama. The concert was cancelled for “possible security reasons” after Chinese protesters called for a boycott of Lancôme products, including Listerine mouthwash. The company briefly closed down their stores across Hong Kong as a safety measure (and later dumped Ho from advertising for Listerine, claiming its marketing had “entered a new phase.”)
Unlike Lady Gaga’s model of restraint, Denise Ho reacted with a full-scale media assault on Lancôme, driving an online petition, publicly challenging management to justify cancelling the concert, and accusing them of “kneeling down in the face of a bullying hegemony.” Writing in the South China Morning Post under the headline “Lancôme has only itself to blame for public relations fiasco,” columnist Alex Lo called the singer’s response: “Fine words – and just about every international corporation’s nightmare.”

A nightmare indeed, and hardly new. Think no further than when film star Sharon Stone declared that the devastating Szechuan earthquake was perhaps ‘karma’ for China not being nice to her friend the Dalai Lama. In the face of a threatened boycott, luxury brand Christian Dior had to quickly apologise and remove the actress from their advertising in China. Or when Procter and Gamble’s SKII cosmetics faced similar criticism in China for choosing as brand ambassador a Taiwanese model who supported Taiwanese independence from the mainland.

We have no particular view about the Dalai Lama, or about the political status of Hong Kong or Taiwan. But such cases highlight the critical importance of choosing the right celebrity to endorse your company. Plus of course highlighting the challenge of dealing with Chinese sensitivity, and the risk to reputation when advertising sponsorships go wrong.

When it comes to managing issues in a highly politicised environment, Lady Gaga showed that – sometimes – the right response may not be to reach for a cleverly-worded media statement or a sharp social media riposte, but to maintain a dignified silence.

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Organisations dropped the ball on McGuire football gaffe

It was no surprise to see broadcaster and football personality Eddie McGuire fumbling to disentangle himself from yet another self-inflicted disaster. But the case highlights the reputational risk to associated organisations when individuals overstep the mark, and their failure to effectively manage the issue.

It started during radio discussion about a charity event where Australian football personalities were to slide into freezing water. McGuire said he’d pay $20,000 to see high-profile sports journalist Caroline Wilson go down the slide, and would make it $50,000 “if she stayed under.”

His fellow football broadcasters guffawed and joined in the “joke,” but it all turned sour when commentators, anti-violence campaigners and politicians of all stripes piled on to condemn the comments. And to make it even worse, the broadcast coincided with football’s White Ribbon Round, designed to focus attention on combatting violence against women.

While McGuire is no stranger to controversy, it took him three attempts at an apology before he finally abandoned excuses and apologised unreservedly.

But as the outcry spread, it became a genuine test of issue management for the organisations drawn into the controversy, and few enhanced their reputation. Opposition Leader Bill Shorten cancelled a scheduled interview with the radio host, branding the comments “unacceptable,” yet the radio station simply said it “had discussion with those directly involved” and apparently saw no reason to take any action against their star.

The Collingwood Football Club, of which McGuire is President, said it took the issues raised by the comments seriously, but accepted McGuire’s apology and, rather surprisingly, used the opportunity to express its “complete and ongoing support for his position as President.”

Meanwhile CEO Gillon McLachlan of the Australian Football League condemned the comments but stopped short of punishing the men involved.  Which in turn triggered even more media and community outcry, given that in the very same week the League had fined a football coach $30,000 for criticising a match referee.

The only organisation to emerge with any dignity was carmaker Holden, a major sponsor of Collingwood, which categorically condemned the broadcast and announced it would be reviewing its association with the club. Holden subsequently said half their multi-million dollar sponsorship would be diverted to Collingwood’s women’s team and community programs.

For Caroline Wilson, the sometimes controversial journalist at the centre of the affair, what seemingly rankled most was her belief that McGuire was forced to apologise. “I think he had to be dragged to that point, kicking and screaming. He was, I believe, pressured to do so and I believe that he is not really sorry personally to me. But at least he’s sorry that he used that language and I think that’s a start.”

Her comments echo the headline on a New York Times essay by Deborah Sontag at the time of the Clinton/Lewinski scandal. “Too busy apologising to be sorry.”  For any organisation or individual facing a serious issue or a crisis, the best way to protect reputation may be to spend less time worrying about the timing and the wording of an apology and more time demonstrating in a meaningful way that they really are sorry.

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