8 ways to tell an issue from a crisis

It’s a major mistake to treat issue and crisis as interchangeable terms. And it’s time managers stopped “inflating” every other issue into a supposed crisis just in order to attract executive attention and maybe spring some extra budget.

Certainly, issues and crises are interconnected, but they need to be managed in different ways. Failure to understand that can risk misallocation of resources; desensitising management to the true potential impact of crises; and creating a false sense of preparedness for when a real crisis strikes.

For executives and communication professionals the difference falls under eight key categories.

Choice
Issue management is designed to allow you to explore all possible strategy choices, weigh the benefits of each option, and make an informed decision. Typically the more you explore the issue the more possible choices open up. In a crisis the positive choices narrow rapidly as the situation deteriorates.

Certainty
When facing an issue you can research every possible fact, analyse the views of key stakeholders, and obtain independent expert opinion. In a crisis you often have to make decisions without knowing all the facts, when it is still unclear exactly what happened, who was responsible and what it will cost. But you still have to go with what you do know.

Urgency
Directly linked to choice is the question of time. In issue management you usually have time to fully assess and make the best decision. In a crisis you are frequently under pressure to make a decision right now. In fact the best decision might be the one you should have made 30 minutes ago.

Cost
When you are facing an issue, costs tend to increase as an issue develops and potential cost is an important consideration in deciding how to proceed. By contrast, in a crisis urgently needed money simply gets found and cost is most often not a main consideration. It’s only after the crisis that lawyers and accountants start to argue about the dollars and cents.

Continuity
Issue management is a normal executive activity, done according to schedule in office hours while business continues. A crisis, by definition, is outside normal experience. It causes top executives to drop all other priorities, and it may severely disrupt continuity of the organization’s core activity.

Duration
Issues can extend over months, years or even decades. Crises generally have a more explicit time frame and eventually come to an end. However the consequences of the crisis, particularly financial, legal or reputational, may persist for much longer.

Impact
The impact of an issue is often measured in terms such as market share, reputation, community concern, licence to operate and stock price. A crisis may have some of the same impacts in the longer run, but more immediately a crisis threatens life, property or the environment, or threatens organizational survival or capability to operate.

Outcomes
The purpose of issue management is to identify potential problems early and work towards planned, positive outcomes. By contrast, despite the theorists who claim that a crisis is both a threat and opportunity, the reality is that a crisis typically endangers the entire organization, and the primary objective is to minimise damage and help the organization survive.

Remember, Issue Management is steering the ship out of troubled waters. Crisis management is trying to save the ship after it has struck an iceberg.

 

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Where the buck stops. Lessons from the Westpac crisis.

Looking back over 2019 there is an increasing expectation that CEOs should personally take the blame for a corporate crisis and resign. But the Westpac money-laundering crisis last month showed a distinct reluctance to accept that the buck stops in the Executive Suite.

Australia’s second largest bank was accused by regulators of failing to report more than 23 million transactions alleged to have breached anti money-laundering laws, and some allegedly linked to child sex exploitation. It was unquestionably a massive reputational crisis, with the Westpac share value taking a $6 billion hit and the company facing a potential $1 billion fine.

After an emergency Board meeting, Westpac Chairman Lindsay Maxsted issued what news.com called a grovelling apology, saying the Board were deeply distressed and truly sorry. However CEO Brian Hartzer survived. He took issue with the suggestion that the whole fiasco reflected a systemic failure by senior management; claimed he had heard “high level” reports about the child exploitation matters only about a month earlier; and said he knew nothing of the detail until the regulator lodged its allegation.

Yet the bank CEO insisted he was the right person to “fix the problem” and attempted to push responsibility down the line. “It is clear,” he said, “that there has not been enough attention at a working level paid to resolving these issues.” As the Financial Review commented: “This simply isn’t good enough.”

Days later Hartzer held a private meeting with his senior managers and reportedly told them the scandal was “no Enron” and was not playing out as a high street issue. “For people in mainstream Australia going about their daily lives, this is not a major issue, so we don’t need to overcook this.” He urged them to focus on securing mortgages, and added that he was very sorry they would have to cancel staff Christmas parties. A few hours later he resigned and the Chairman announced he too would step down.

Contrast this with AMP CEO Craig Meller who resigned in April 2018 just days after the Australian Banking Royal Commission exposed shocking financial wrongdoing at the wealth management and insurance giant. Meller insisted he did not know about the company’s misdeeds, but acknowledged that he was ultimately responsible. “As they occurred during my tenure as CEO, I believe that stepping down as CEO is an appropriate measure to begin the work that needs to be done to restore public and regulatory trust in AMP.” Chairwoman Catherine Brenner fell on her sword a week later and two other senior executives soon followed.

It’s been a tough period for the finance industry and a real learning experience about crisis leadership and responsibility at the top. An earlier money-laundering scandal, at the Commonwealth Bank in 2017, saw the departure of the CEO, followed by four senior executives. And revelations at the Banking Royal Commission in 2018 also cost the jobs of the Chairman and the CEO of National Australia Bank, and the Chairman and CEO of wealth manager IOOF.

Beyond crises arising from individual executive misbehaviour – where the answer should be obvious – it seems clear that public and shareholder expectation about executive responsibility in a systemic crisis is hardening and that the idea of “staying on to fix the problem” is less acceptable.

It’s also clear that CEO reputation can be a mixed asset for the organisation. One global survey showed that 45% of company reputation and 44% of market value is directly attributable to the reputation of the CEO. That’s great when things are going well. But when a crisis strikes, it’s now increasingly likely the CEO (and Chairperson) may need to walk the plank.

 

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Separating social media outrage from real issues

The Internet lit up recently when a supposedly outraged mother posted a foul-mouthed rant arguing that childless millennials should be banned from Disneyworld. Why you may ask? Because, she said, long queues of adults without children delayed her little darling waiting for a Mickey Mouse-shaped pretzel.

The story went viral and was picked up by mainstream media around the world, including an opinion piece in the New York Post. And how did Disney respond? Judging from media reports they totally ignored the rant and continued their well-publicised strategy of marketing theme parks to adults as well as children.

Similarly, Kmart Australia appear to have ignored the Melbourne mother who achieved her 15 minutes of fame earlier this year by complaining about a toy lion which had – gasp – tiny plastic genitals.

Social media has proved a powerful tool for elevating legitimate issues onto the public agenda. But it has also facilitated a flood of confected issues and manufactured outrage.

Identifying the difference between the two is a growing challenge for issue managers and other senior executives. When can you reasonably ignore a confected issue and when might a real issue slip under the radar and cause reputational damage?

Contrast the Disneyworld case and the anatomically correct lion with the recent decision by Kmart to withdraw a bride costume aimed at six-year-olds when critics claimed it trivialised the issue of child-marriage: or when Australian clothing brand Peter Alexander recalled a children’s pyjama top with the slogan “Boys will be boys” after social media claims of sexism.

Then there was the case last year when an American writer tweeted about the artwork on Kellogg’s Corn Pop cereal boxes. Saladin Ahmed pointed out that of all the cartoon characters on the box, only one had a brown skin, and he was a janitor polishing the floor. Within five hours Kellogg’s had tweeted a sincere apology, and agreed to redesign the packaging.

Or when animal activists PETA complained about the packaging for Barnum’s Animal Crackers, which for more than 100 years has animals beasts in cages on a circus train. Cookie-maker Nabisco redesigned the box to show the beasts free in the wild.

Such decisions inevitably further outrage keyboard warriors who say these companies are “caving in” to noisy critics. But the Internet will always provide a platform for outrage, be it Kate Duchess of Cambridge for allowing four-year-old Prince George to play with a toy gun, or Meghan Duchess of Sussex for “not holding baby Archie the right way.” And let’s not forget the faux horror when a Donald Trump speech last week contained the word bullshit and the media had to struggle with whether to bleep it out. Or the co-ordinated partisan political outrage when Congresswoman Rashida Tlaib called Trump a motherf*****

Scott Adams (of Dilbert fame) coined the word outragism and defined it as the act of generating public outrage by quoting famous people out of context. But for consumer companies whose products or services become the subject of online outrage, it’s far more significant.

We know from risk guru Peter Sandman that risk is a function of hazard (what kills you) and outrage (what makes you upset) and that hazard and outrage are equally real, equally measurable and equally manageable. He warns that it’s very dangerous to dismiss outrage – manufactured or otherwise – as “just perception.”

So while companies don’t want to give oxygen to nonsense, ignoring legitimate issues and concerns can be a very costly mistake. Deciding whether something is a substantive concern or merely trivial is a challenging call for executives and issue managers everywhere. It demands wisdom and judgement … and strong nerves.

 

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Is CEO behaviour your reputation weak link?

Two weeks ago the Board of McDonald’s had the embarrassing task of sacking their CEO for a consensual but inappropriate relationship with a female employee. The Board said Steve Easterbrook had “demonstrated poor judgement” and the former CEO himself told staff he agreed and that it was time for him to move on.

But it’s also time to recognise that such events are not uncommon and have a real impact. Just last year Intel boss Brian Krzanich stepped down for having an extramarital affair with an employee against company rules. And let’s not forget Uber founder Travis Kalanick, forced out over numerous allegations of abuse and sexual harassment; Dov Charney, founder and CEO of American Apparel, ousted for alleged sexual harassment of employees; David Jones CEO Mark McInnes who left after inappropriate behaviour towards a female employee; and Seven West Media boss Tim Worner, whose relationship-turned-sour with a former employee dominated the headlines for months in 2017.

Of course that’s just a small sample – and only from those which were publicly disclosed. From a reputation and issue management perspective, in a #MeToo world, the questions are: Is such behaviour becoming more common? What’s the impact on the company? And what can be done about it?

One long-term study by PriceWaterhouseCooper showed that companies have in fact become more likely to dismiss their CEOs over scandal and improper conduct, such as fraud, bribery, insider trading, inflated resumes and sexual indiscretion. According to the study, reasons for the trend include an increasingly suspicious public; more proactive governance and regulation; risks in emerging markets; the rise of digital communication; the 24/7 news cycle; and media amplification of negative stories.

Moreover, the impact is not just temporary embarrassment. There can be very real financial impacts. Think no further than Harvey Weinstein, whose misbehaviour and arrest led to the virtual destruction of the company he co-founded. Another well-documented case is when Hewlett Packard CEO Mark Hurd resigned after misusing his expenses to support a relationship with a female contractor. The company’s shares fell by $10 billion in a day and more than $14 billion over four days.

Such losses are not isolated examples. An American study of 219 cases of arrests, lies or extramarital affairs of CEO and other top executives showed an average share value loss of $226 million in the three days after the revelation. Furthermore, the stock prices of such companies fell in total between 11 and 14 per cent in the subsequent 12 months. Worryingly, they also found that 65 per cent of the accused executives retained their positions, including those with repeat offences.

Most importantly it’s not just the public and stockholders who are concerned about executive behaviour. A British study of 508 managers found that 40 per cent believed their own higher management was the single biggest risk of a PR crisis. And 30 per cent specifically identified the CEO, and his or her reputation, as putting them at risk of a crisis.

So what can be done? Some badly behaving CEOs are unrepentant serial offenders who simply need to go. But in other cases there are some steps which may limit reputational damage.

We know from research that most crises are preceded by red flags and clear warning signs. And the most troubling statistic above is that 30 per cent of managers think their own CEO is putting the organisation at risk of a PR crisis. If that’s true, then companies need more careful executive recruitment, better risk assessment, better Codes of Behaviour, better upward communication, better whistle-blower protection and much better planning for crisis prevention.

 

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Fake news is not the only threat to truth

In our so-called post-truth society, fake news is a well-recognised danger to democracy and informed public debate. But there is another less well-known risk which threatens to contaminate legitimate issue management, and that’s the rise of the ‘non-fact’.

Unlike lies, hoaxes, propaganda and fake news – which tend to have a relatively limited life, often based on political opportunism – this is about information which is not true but ‘becomes’ a fact and gets embedded into real-life discussion on subjects which genuinely matter. There is no agreed language to define the outcome of this insidious process by which falsehoods ‘become true,’ so I call them non-facts, and they are important to issue management because they get to be accepted as reality.

Drama and repetition are key factors in the longevity of a non-fact, and a good recent example is environmental activists frequently repeating the claim that 500 million plastic straws a day are used in the United States. This appealing number was first proposed in 2011 by nine-year-old Milo Cress on the basis of some phone calls to manufacturers.

While experts have shown the fourth-grader’s estimate to be wildly wrong, it has appeared in some of the world’s leading media outlets and continues to shape debate. Cress, now aged 17, argues that the precise number is less important than the waste. “We use far too many straws than we need to, and really almost any number is higher than it needs to be.”

This is precisely how some non-facts thrive. Not on the basis of truth, but what people think ought to be true. Or as comedian Stephen Colbert defined his satirical concept of truthiness: “Sort of what you want to be true as opposed to what the facts support.”

A classic non-fact is the belief that wind-turbines are a serious danger to passing birds. This is so deeply entrenched that a proposed 52-turbine windfarm at Bald Hills in Victoria was blocked because of supposed threat to the endangered orange-bellied parrot. The decision was later reversed when it was revealed that the actual risk to the little parrots had been calculated at one death every 600-1,000 years. And of course that was before Donald Trump bizarrely tried to claim that noise from wind turbines causes cancer (though that isn’t a non-fact because pretty much no-one believes it).

Real non-facts emerge and persist for a variety of reasons, including lazy journalism, the decline of basic fact-checking and the echo chamber of social media which is then reflected back into mainstream news and commentary. But the two main driving factors are constant repetition and the desire by some group or organisation to promote the non-fact for their own purposes.

For instance, the claim that childhood vaccination causes autism has been comprehensively debunked by medical authorities and the World Health Organisation declared this as one of the top 10 threats to global health in 2019. Yet it continues to thrive as a non-fact, driven by anti-vaccination activists, aided by the power of the Internet and by the news media’s misguided pursuit of ‘balance’ and false equivalency.

Such non-facts are a constant challenge for communicators. In the heat of a high-profile issue campaign it is not possible to respond to each and every attack. But fundamental non-facts which undermine the core issues should not be allowed to stand. This means ensuring close and viable relationships with key stakeholders so that personal conversations can contextualise non-facts should they start to take effect.

The process by which non-facts ‘become’ facts has parallels in the process by which trademarks become generics. Companies typically act promptly and firmly – and assign the necessary resources – to prevent their registered trade names from becoming generics. In exactly the same way issue managers and communicators should act promptly and firmly to prevent non-facts from becoming facts and contaminating legitimate debate.

For more detail on the rise and threat of non-facts, see my full essay in Global Media Journal or listen to my interview on ABC Radio National

 

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Since when has age disqualified issue activism?

Whatever you think of Greta Thunberg and school students around the world marching to protest about climate change, there is an important underlying question: Do young people have a valid voice in important issues of the day?

There were plenty of politicians and others who argued that Thunberg and her followers should be in school. But ‘time off school’ didn’t get mentioned when 15-year-old Coco Gauff was beating Venus Williams at Wimbledon, and only by grinches when 16-year-old Jessica Watson sailed solo around the world.

Apart from her thousands of supporters, the 16-year-old Swedish climate activist came in for a barrage of personal abuse, not only for her views and medical condition, but for her temerity at speaking out so young. The message was very clear – what would she know at her age, wait till she grows up and understands the real world, she’s a puppet of agenda-driven adults, and so on.

The tone grew even nastier after she was invited to speak at the United Nations and delivered a scathing and possibly unwise lecture to the adults in the room. Thunberg herself described her approach as “too loud for people to handle.”

However, the strength of reaction from her critics was remarkable. Sky News Commentator Andrew Bolt called it child abuse and wrote: “I hope all those activists, those reckless politicians, who treated this chronically anxious and disturbed 16-year-old as the new Messiah are now shocked into some sense . . . she is not the Messiah, she is just a depressed, extremely anxious and very unhappy girl.”

And his Sky stablemate Chris Kenny piled on criticism of the messenger rather than the message, saying the UN had handed the floor over to a hysterical teenager. “This ought to be pretty hilarious stuff. We ought to be able to giggle and scoff at it . . . We all know about the emotional roller-coaster ride that teenagers go through, which is why we tend to encourage and nurture them without taking their obsessions too seriously. But this girl seems overwrought, and instead of caring for her there seems to be a movement taking advantage of her.”

It’s worth remembering another 16-year-old addressing the United Nations – Malala Yousafzai who was shot in the head by the Taliban for speaking out on the issue of education for girls. She went on to become the youngest-ever winner of the Nobel peace prize in 2014, and I don’t recall anyone saying: “She’s only a teenager, what would she know?” Or that she should be in school. Or that adults were taking advantage of her.

So when did age become a barrier to having an opinion on the important issues of the day and being willing to say it out loud? Clearly, the different challenge represented by Greta Thunberg and her young supporters is not really their age but the political sensitivity of the issue.

Even the usually moderate Network Ten commentator Joe Hildebrand fell into the “uninformed youth and why aren’t they at school” trap. He wrote: “Older and wiser heads have been working on these questions for years, sensible scientists and pragmatic policymakers who are constantly racking their brains to come up with workable solutions . . . And they are probably the sort of people who stayed in school.”

Certainly a clever line, but Hildebrand went on to tell us he was “not sure if any of the millions of kids on the streets came up with a fix” for climate change.

Like the right-wingers with their personal abuse, Hildebrand seemed to misunderstand how issue management works. The role of street protesters in issue activism – regardless of their age and regardless of the issue – is typically not to propose solutions or come up with a fix. It’s to forcibly bring attention to a problem and to urge action by those who have the power to drive change.

 

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Has Alan Jones finally stirred the corporate conscience?

Should corporations try to position themselves on the side of the Angels? We know from research that the public don’t trust big business or CEOs. So does it make any difference when companies step in and take a moral stance on a high-profile public issue?

This was the test for advertisers on Sydney radio station 2GB following protest when shock-jock Alan Jones suggested Australian Prime Minister Scott Morrison should “shove a sock down the throat” of New Zealand Prime Minister Jacinda Ardern.

Jones is a serial delinquent, with a long history of “offend-apologise-offend again.” But his latest misogynist rant was a step too far and appears to have stirred the corporate conscience in board rooms around the country. More than 100 companies said they would withdraw or suspend advertising, reportedly costing the broadcaster over $1 million.

Add this to the recent report that the company’s accounts have brought forward $3.2 million to cover unspecified potential legal claims and you have a genuine organisational crisis.

Amidst a flurry of apologies, this led to what Mumbrella called a “PR Offensive” by the radio station, writing to its advertisers to apologise for Alan Jones’ on-air conduct, and offering clients meetings with both management and Jones to hear their views on how the station can recover.

Why an offended advertiser would want to meet with the 78-year-old broadcast bully is not exactly clear. Nor is it clear whether a PR campaign is the answer to a severely damaged reputation. But it is clear that a dose of hip-pocket pressure by withdrawing advertising is more effective than a stiff letter of complaint to management.

Contrast this with a corporate response on the other side of the Pacific. Following the tragic shooting at a Walmart’s store in Texas, 145 American CEOs last month signed a letter calling on Congress to enact stronger background checks on firearm sales and ‘red flag’ laws designed to keep guns out of the hands of high-risk carriers. But NBC pointed out that just three retailers signed on – only one of those involved in selling guns – and the Walmart CEO did not add his signature to letter, arguing that Congress was already well aware of his view. Similarly, some the big PR and advertising companies signed up, but many of their clients did not.

There’s no doubt that the public – especially younger people – want companies and brands to speak up about social issues. For instance, the Edelman Earned Brand Report for 2018 shows that 64% of consumers worldwide are “belief driven buyers,” up from 51% the previous year.

Similarly a recent YouGov study in the United States showed that than half of millennials and 27% of those aged 55+ supported brands taking a stance on social issues.

But did last month’s letter to Congress serve any purpose at all? New York attorney and crisis expert Richard Levick is hardly convinced. “Ultimately, companies can flex their financial muscle, but the impact is likely ‘de minimis’,” he told NBC. “If Sandy Hook didn’t move Congress, it’s hard to imagine a letter from several CEOs will.”

Meantime every day, on average, a hundred or more Americans are killed by guns and hundreds more are wounded. And in Australia, a similar advertising boycott of Alan Jones in September 2012 had died down by Christmas as advertisers trickled back.

Be it in Australia or the United States, companies may want to position themselves on the side of the angels. But without meaningful, long-lasting action, it will be about as useful as a heavenly flapping of wings.

 

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