Could a change of name protect the reputation of Weinstein movies?

 

All of Hollywood was eagerly waiting to see who would buy and rename the scandal-plagued Weinstein Company.

Now it seems there will be an auction for the assets of the bankrupt enterprise. While the Weinstein name is sure to disappear, will erasing a poisoned brand be enough to protect the movies?

In responding to a reputational crisis, adopting a new name can be an effective strategy. Consider the iconic Australian construction company Leightons which was renamed CIMIC by its new Spanish owners to distance themselves from past corruption allegations.

Or take the American low-cost airline ValuJet which was quickly renamed AirTran soon after one of its jets crashed into the Florida everglades killing everyone on board. It was an openly acknowledged effort to escape the ignominy associated with a litany of company safety violations . . . and the day after the change their share price went up more than 30 per cent.

Or consider the infidelity website Ashley Madison which became an international joke when hackers exposed the details of millions of would-be cheaters. Parent company Avid Life Media later changed its name to Ruby which, the new management helpfully explained, “has a sensual, feminine quality, connotes value and fits with the fresh start our company is undergoing.”

Other companies have had to try somewhat harder to justify a change of name. When Transfield Holdings became Broadspectrum, the company reportedly said it had nothing to do with distancing itself from alleged human rights violations during its management of Nauru and Manus Island refugee detention centres. And when Ardent Leisure, the parent company of Dreamworld, voted to change its name to Main Event, it was said to be unrelated to the fatal accident at their theme park just two days earlier. More recently, high-profile arms manufacturer Smith and Wesson changed its name to American Outdoor Brands, supposedly to reflect their broader business and nothing to do with the risk of anti-gun sentiment. As Salon.com headlined the news: “A gunmaker by any other name.”

Of course a name change is not only employed in the wake of a reputational crisis. Sometimes it occurs simply because of a damaging new association. Think no further than the Wisconsin Tourism Federation whose initials came to mean something altogether different; or the Lance Armstrong Foundation which became Livestrong after its founder’s drug cheating was exposed; or the West Melbourne health provider ISIS Primary Care which had to change its name in 2016 because . . . well, you get the picture.

However, a name change is usually much more consequential when it’s done deliberately to divert attention from a dubious past . . . and it’s not always entirely successful. Take the case of security contractor Blackwater which changed its name to the unpronounceable Xe after employees were accused of killing unarmed civilians in Iraq. A few years later the name was changed again, to Academi, which the company admitted was intended to sound as boring as possible. Yet the original Blackwater tag continues to persist in the mainstream media.

There’s an important lesson here. The prospective new owners of the Weinstein Company said they would rename the organisation and install a majority-female board of directors. That deal fell through, but whoever buys the assets will most likely still need to create a new identity. Only time will tell whether a change of name on the Weinstein movies can mask the brand’s terrible stench. And that may depend on whether the news media are willing to let the old name die.

 

 

 

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How not to manage infrastructure crisis risk

The best crisis management is taking planned steps to prevent a crisis from happening in the first place. But that important principle sometimes seems to take a back seat when it comes to a crisis risk involving costly, vulnerable infrastructure.

Take the entirely predictable and avoidable crisis which struck New Zealand’s largest city. A ruptured pipeline carrying fuel to Auckland airport led to almost two weeks of cancelled and disrupted flights and questions about the vulnerability of the country’s main international gateway.

The crisis began late last year when a major break shut down the 170 km pipeline conveying fuel from the Marsden Point Refinery, the sole fixed supply to Auckland City and its busy airport. With limited local storage available, the impact was sudden and dramatic, with scores of flights cancelled or delayed.

Some incoming long-haul flights were diverted to Australia or Fiji to load fuel before arriving, and Qantas even sent two “fuel mule” jets to top up their smaller aircraft on domestic routes in New Zealand. By the time the crisis finally eased almost two weeks later, 150 flights out of Auckland airport had been cancelled, disrupting tens of thousands of domestic and international passengers. Plus of course damaging New Zealand’s air freight exports and its reputation as a tourist destination.

While the crisis itself was relatively short-lived, the implications for the security of critical national infrastructure were wide-reaching, especially with the revelation that the Government had been warned at least 12 years earlier.

A Government report in 2005 identified the impact of a major outage, and a second alarming report, in 2012, raised the possibility of duplicating the pipeline or building extra storage capacity. Yet politicians decided not to proceed with either option, perhaps encouraged by the report saying the probability of a short-term disruption to the pipeline was only 0.5 to one per cent per year, or once every 100-200 years. Extraordinarily, just as the pipeline was failing, Government officials were “taking a fresh look” at the issue, and yet another draft report was out for review.

As a communication strategy, Refining New Zealand, owner of the refinery and the pipeline, tried to position itself as a victim of the crisis. Within days, CEO Sjoerd Post said there was “clear evidence” the pipeline had been struck, with digger marks visible near the breach. Remarkably though, this damage appeared to have occurred up to three years earlier.

For its part, the Ministry of Business, Innovation and Employment unhelpfully concluded: “Given the costs of additional infrastructure that would very rarely be used, operational responses, such as managing airline refuelling at other airports and trucking in petrol and diesel, remain the best way to minimise any disruption.”

It was a classic bureaucratic response and no comfort to the thousands of individuals and businesses affected. Nor was the optimistic declaration by then-Deputy Prime Minister Paula Bennett: “I think people will see this as a very rare occurrence. It hasn’t happened for 30 years and we don’t expect it to happen again.”

Potential crises demand acknowledgement and effective preventive action rather than denial. And don’t be misled by a calculated risk of once in a hundred years. For any given crisis risk, that once just might be this year.

Footnote: Just weeks after the crisis the NZ Government lost an election, and last month the Refinery CEO resigned.  Adapted from Crisis Response Journal

 

 

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Lessons from the Great KFC Chicken Crisis

When your whole business depends on just one key product, you’d think there would be a bulletproof contingency plan for when that product runs out. But that clearly wasn’t the case for KFC when a “new and improved” distribution system failed to deliver fresh chickens and about 750 KFC stores across Britain were forced to close.

The fried chicken giant had recently appointed DHL as its “delivery partner” who proudly declared they were “Committed to setting a new industry benchmark by delivering outstanding service to all KFC’s restaurants and its consumers.” Sadly, problems with the logistics of distribution left hundreds of stores without their scheduled deliveries.

Faced with a major crisis, KFC struck a humorous note: “The chicken crossed the road, just not to our restaurants.” They emphasised that the shut-downs were because “we won’t compromise on quality.” They also offered a genuine apology, published lists of restaurants still open, and issued a smart “shout out to our restaurant teams who are working flat out to get us back up and running again.”

It was textbook effective crisis management, though perhaps less helpful was the observation – or was it an excuse – that “getting fresh chicken out to 900 restaurants across the country is pretty complex.”  It was a statement of fact, but surely invited the obvious response: “Yes, but isn’t that your job?”

The crisis generated an extraordinary response. The Sun newspaper devoted its entire front page to the splash headline “Kentucky Fried Closed”; social media went into meltdown with a flood of hilarious gifs and tweets; the typically over-excited Daily Star reported calls for Government action on the shortage of fried chicken; and London police had to issue a message urging chicken-lovers to stop calling them about the crisis. “It is not a police matter if your favourite eatery is not serving the menu that you desire.”

But behind this over-wrought drama, the case also exposed the inevitable consequences. In just about every crisis someone steps forward and says “I told you so” and, sure enough, the union reported it had warned KFC months earlier against the switch to DHL. They called the decision “bird-brained” and said: “We tried to warn KFC this would have consequences and now the chickens are coming home to roost.”

In any consumer crisis, competitors will likely jump on the bandwagon and, as expected, smaller rivals across Britain quickly boasted that they had plenty of fresh supplies. Typical messages were: “The chicken made it across the road here” or “Chicken shortage? Not here. Sam’s chicken is open for business.”

Moreover, in any crisis there is usually no shortage of excuses. DHL blamed “operational issues” including an accident on the M6 motorway which caused traffic gridlock, and a problem with software around its new computer ordering and delivery system. Amid stories of undelivered chickens in the warehouse going to waste, DHL offered the public no program of improvement, and reports suggested it could be weeks before some restaurants reopened.

For its part KFC steadfastly resisted the urge to shift the blame. They even took out cheeky full page newspaper ads with the company name “rearranged” as FCK to stress how sorry they were. In terms of crisis response, the company managed well and appear not to have suffered any substantial loss of reputation. But as one distressed chicken-lover tweeted: “How can you be out of the one thing you are known for selling.”

It’s a very good question, and one which KFC never properly addressed.

 

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How well would you manage a charge of racism?

When an organisation is accused of racism – even if it was inadvertent – the risk to reputation is fierce, and the rational options are few.

Some recent cases highlight that such accusations generally offer the target company zero upside, and the only realistic strategy is damage limitation. The question is: how best can that be achieved?

Swedish fashion brand H&M found itself in hot water after having a black child model a hooded top with the slogan “Coolest monkey in the jungle.” The ensuing outcry was predictable and protesters in South Africa even ransacked H&M stores. Although the offending image was withdrawn, it took the company three separate attempts at an apology before managing to avoid the qualifications and excuses which so often undermine sincerity.

How much cleaner and simpler was the response 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 also agreed to redesign the packaging.

Contrast this with a University of Sydney advertisement, which was officially found to be racially discriminatory. An independent reviewer who argued in its favour remarked (among other things) that: “The complaint against the advertisement was made by only one person.”  The ad has just been rejected for a second time by the Advertising Standards Bureau.

A more contentious case was the Facebook ad for Dove body wash, where a black woman peels off a dark shirt and is transformed into a white woman in a beige shirt. Here too the company quickly withdrew the ad and apologised that it had “missed the mark.” But as Time magazine commented: “For many the apology did not suffice, with consumers dumbfounded as to how the ad ever got the go-ahead.”

That’s a really good question, which was partly answered by the model herself, Lola Ogunyemi, who wrote a newspaper article and recorded a video message about the controversy.  “I can see how the snapshots circulating the Web have been misinterpreted,” she wrote. “I can also see a lot has been left out. The narrative has been written without giving consumers the context on which to base an informed opinion.”

It’s not clear whether the model’s decision to speak out was encouraged by Dove or was her own initiative.  But it does seem clear that her intervention – however well intentioned – had no discernible impact on the spread and impact of the negative publicity.  And this comes just two years after Dove was involved in another racism controversy for promoting a skin lotion for “normal to dark” skin.

The latest Dove case is a timely reminder that denial or explanation in the face of an accusation of racism is seldom useful and sometimes makes the situation even worse. In fact what the accused organisation thinks is probably the least important opinion.

Perhaps the best advice comes from Sherry Holladay and Tim Coombs, the contemporary power couple of public relations:  “If stakeholders think there is a risk or crisis, there is one.”

In other words, recognise it and deal with it, own up and genuinely apologise, put plans in place to avoid a repeat . . .  and learn from the experience.

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What reputation risks lurk in your supply chain?

Many organisations have major risks lurking in their supply chain – often unrecognised – like potential mines waiting to explode. But supply chain risks seem to remain a seriously under-rated source of reputational crises.

The notorious Rana Plaza collapse in Bangladesh in 2013 was a wakeup call for fashion brands produced in dangerous conditions in pursuit of cheap labour. Yet just last year angry workers demanding better conditions and benefits destroyed the production line of a Chinese-owned factory in Myanmar making clothes for Swedish apparel-maker H&M.

Although H&M is widely regarded as a leader in promoting workers’ rights and fair wages, recent human rights violations must raise fresh questions for any foreign company doing business in Myanmar.

And supply chain risks are certainly not confined to the textile industry. Consider the famous “Toxic Barbie” crisis, when a Chinese supplier permitted lead paint to be used on Barbie Dolls and other toys, resulting in a massive reputation hit for Mattel. Or when it was revealed that iconic Australian Sherrin footballs were being hand-stitched by 10-year-old girls in India for as little as 12 cents a ball. Or when contaminated berries from China were linked to an Australian outbreak of Hepatitis A and critically damaged the Nanna’s brand.

While reputational vulnerability in the supply chain is most often seen affecting such consumer-facing brands, more and more businesses are exposed. As KPMG’s Peter Liddell recently wrote: “Traditionally, supply chain risks have been a concern for manufacturing, distribution, retail and agriculture, but they now extend across all sectors, including financial services and government.”

However the capacity to manage supply chain risk seems worryingly low. For example,

  • European study of small to medium businesses found one in ten could not identify their key suppliers, and 70% lacked visibility over their entire supply chain.
  • recent report on American use of conflict minerals from Africa showed 80% of companies admitted they didn’t know their raw material’s country of origin.
  • A survey of supply chain executives and finance managers at large global organisations across a wide range of industries found almost half said they lacked the resources needed to assess risks at supplier sites, and nearly 40% said they lacked the leverage needed to force suppliers to develop adequate risk management processes.
  • An Australian Human Rights Commission report concluded businesses have the aspiration and commitment to address human rights impacts in their supply chains, but many lack clear strategies and processes to trace, monitor and address such risks.

Meantime, with companies relentlessly chasing lower costs, the possibility of poor ethical or environmental practices in the supply chain increases, and with it increased risk of reputational damage and a growing role for issue and crisis managers. Moreover social media has dramatically increased the likelihood that dubious practices will be exposed, the speed at which word will spread and the impact of reputational damage.

Crisis management experts know that most crises are preceded by red flags, or warning signs, and social media intelligence can provide valuable early insight into many problems in the supply chain. Issues around ethical behaviour are often driven by concerned individuals or groups who generate conversations on social media. And NGOs and campaigners are increasingly sophisticated and active on-line identifying and taking action on supply chain issues such as child labour, unfair pay, slavery and animal welfare.

Effective issue management demands proactive planning to scan for potential risks, including systematic social media monitoring, and your supply chain may prove a rich vein of possibilities.

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Are you ready for your ‘natural’ crises?

Companies which are not properly prepared to manage a crisis sometimes say “We are small and not likely to have a crisis” or “There are so many possible crises you can’t plan for everything.” Such excuses are dangerously wrong and can lead to costly reputational and operational damage.

There surely is no shortage of surprises when it comes to crisis management. And of course no company can develop a detailed crisis response for every possible eventuality.

One answer to this challenge is to focus initially on what I call your ‘natural’ crises. This doesn’t mean they result from natural disasters. They are natural to the organisation. They are the industry-specific or company-specific crises which are most likely, which are reasonably predictable, and should be clear priorities. They are the risks which keep mindful managers awake at night.

For example, a chemical company would be expected to plan for a possible leak, fire or explosion; a transport company should have a plan in place for a serious road or rail accident; a hotel must be prepared for a highly publicised outbreak of food-poisoning; and a bank should be prepared for customers in ski-masks making large unauthorised cash withdrawals.

Sadly, some companies fail to adequately prepare for even the most obvious ‘natural’ crises, and this is exposed by some well-known examples. For instance, every food manufacturer should be expected to have strong plans in place for a major product contamination or recall. But when suspected botulism contamination of milk product caused an international recall crisis for New Zealand dairy giant Fonterra (which eventually proved to be a false alarm), the official investigation concluded the organisation was badly unprepared. They said it had failed to “join the dots” between botulinum contamination, infant food products, consumer sensitivities and the company’s global reputation. And now they have just been ordered to pay $183 million in damages to a major client affected by the recall.

Similarly, there could hardly be a more likely crisis for an oil exploration company than a major spill. Yet in the wake of the mishandled Deepwater Horizon disaster in the Gulf of Mexico, BP CEO Tony Hayward later admitted the company’s contingency plans for such an oil spill were inadequate. He told a reporter: “We were making it up day to day.”

Finally let’s consider the risk of data breach, which should be a ‘natural’ crisis for just about every organisation which holds confidential information in computer systems. Some IT experts say there are only two sorts of companies – those that have been hacked and those which don’t yet know they have been hacked. That might be an exaggeration, but it clearly identifies a priority. So how did Sony CEO Michael Lynton respond after his company was hacked, allegedly by North Korea? He tried to present the breach as a complete surprise and the company as a helpless victim. “There’s no playbook for this,” he said.  “You’re on completely new ground. We were adequately prepared, just not for an attack of this nature, which no firm could have withstood.”

Sony shareholders and Hollywood celebrities compromised by the hack must have wondered how a cyber-attack was “new ground,” and how a major corporation could have “no playbook” and still be “adequately prepared.”

Clearly not every crisis falls into my category of ‘natural’ risks. But it’s a pretty good place to start. The American management expert Kurt Stocker once wrote: “When you look at the majority of crises, what happened should have been on or near the top of the list of possible events. Why wasn’t anyone prepared?”

It’s a good question and one every company should ask.

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How passionate people drive important issues

The Nobel Peace Prize in Oslo last month is a striking example of the power of passionate people to drive issues, both large and small.

Just ten years ago two academics in Melbourne Australia – Dimity Hawkins and Tilman Ruff – co-founded the International Campaign to Abolish Nuclear Weapons (ICAN). Now the organisation has just been awarded the 2017 Nobel Peace Prize for its work drawing attention to the catastrophic consequences of any use of nuclear weapons, and after playing a pivotal role in an historic UN treaty prohibiting nuclear weapons.

Such global-scale activism may seem like an exception, but it’s a reminder that issue managers should never discount the potential of small groups to grow and exert substantial influence.

For any organisation facing damaging issues it’s a pretty easy default to focus on the high profile activist groups with massive budgets and brand recognition and international reputations. Yet the greater challenge in managing potential issues may instead be responding to passionate individuals and micro organisations.

ICAN’s Tilman Ruff says one of his inspirations was the work of American teacher Jody Williams who, like many activists in the late 1980s and early 1990s, became concerned about the terrible effects of anti-personnel landmines left over from wars.

Most people at the time thought a few concerned individuals and some disconnected NGOs had no hope of success against the power of governments and militaries around the world. But in 1992 Jody Williams launched the International Campaign to Ban Landmines (ICBL)) which eventually grew to a coalition of over 1,200 organizations working in 90 countries, and recruited high profile supporters such as Princess Diana. In 1997 Williams and ICBL shared the Nobel Peace Prize and the Mine Ban Treaty became a binding international law.

However, passionate people don’t always need a big organisation and celebrities and a massive profile to drive an important issue. Take Melbourne cancer specialist Bronwyn King who had an epiphany in 2010 when she discovered her superannuation investment portfolio contained highly profitable tobacco company shares.  “I thought it was a very bad fit for me as a cancer doctor,” she says. “I had watched hundreds of people die from tobacco-related disease.

So she set out to personally persuade Australian pension funds to adopt tobacco-free investment mandates. Relying on collaboration rather than coercion – her technique has been called “persuasion with teeth” – at last count 35 major Australian funds had abandoned more than $2.5 billion of investment in tobacco. And as founder and Chief Executive Officer of the tiny Australian non-profit organisation Tobacco Free Portfolios, her work has gone global, with multinational insurance firm AXA dropping 1.8 billion euro of tobacco assets.

At her urging, the Union for International Cancer Control launched the Global Task Force for Tobacco Free Portfolios, and now Dr King is also Project Manager for the Task Force, which leads an international coalition of like-minded individuals and organisations from government, business and health sectors to encourage sovereign wealth funds and pension funds to go tobacco-free.

For issue managers everywhere, the lesson is very clear – never underestimate the influence of passionate individuals.

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