Fonterra crisis report exposes failure to prepare

The independent report into the ‘botulism-in-milk-powder’ crisis at New Zealand dairy giant Fonterra is a searing assessment of failure to adequately prepare and execute at both management and operational level.

Although the botulism scare in August eventually turned out to be a false alarm, the incident had a major impact on reputation and trade for the company and New Zealand, not to mention triggering a hit to the kiwi dollar.

When the report was released this week, the NZ Herald carried the blunt headline: “Fonterra failed to see ‘explosive reputational risk’.”  The full 160 page report contains a litany of failures at almost every stage of the emerging crisis.

Using the issue/crisis model developed by Tony Jaques as the framework for its analysis, the independent committee found:

• Commissioning and design of product testing was inadequate
• Fonterra was unable to promptly and definitively track affected  product
• Delay in recognition and escalation to senior management and the board of the risk involved
• Failure to ‘join the dots’ between infant food products, consumer sensitivities and Fonterra’s global reputation

• Crisis management was inadequate for an event of this kind and scale
• Early management of the crisis was not well executed
• The crisis plan had never been tested at a corporate level
• Lack of alignment between Fonterra and the NZ Government during the critical early phase
• Manuals didn’t have communication templates capable of being quickly adapted
• Lack of social media strategy and capability
• Fonterra didn’t say sorry

The independent inquiry, assisted by a legal team and two international experts, has made 33 recommendations for Fonterra.  But, perhaps surprisingly, their report concluded “our findings and recommendations do not indicate any fundamental problems within Fonterra.”

From a practitioner perspective, the two most worrying aspects of the entire fiasco are (a) that a multinational company as large and influential as Fonterra could be so deficient in such basic tools and processes; and (b) that a major food producer would be so unprepared for the most obvious crisis scenario – a product contamination and recall.

This report should be compulsory reading for issue and crisis managers everywhere.  In fact it is so good that one loyal reader of Managing Outcomes has called it “crisis manager porn.”

We are not sure if we would go that far, but while we await the separate NZ Government report into the Fonterra crisis (due out shortly) the question must be: Will other companies just sit back and be thankful it didn’t happen to them, or will they make a genuine effort to learn from this corporate disaster and get ready to avoid making the same mistakes.  With the independent Fonterra report now available there simply is no excuse.  For help contact Tony Jaques

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About managingoutcomes

Issue and crisis management expert
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