Cer, Mark Saylor, Was on a Family Outing to a College
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!"#$%&'&($ %&'#'# ()*)+,(,*$, !"#$!"#$ $"-"$) By Victoria Gri.th n August of 2009, an o#-duty California Highway Patrol o$- cer, Mark Saylor, was on a family outing to a college soccer game when he lost control of a Lexus ES, on loan from a Toy- ota dealer. A passenger in the car called 911 and reported the accelerator was stuck. The ensuing crash killed Saylor and three others. Toyota issued a press release two and a half weeks later, but there was little in it to indicate IIthat the tragedy was more than a sad but isolated incident, perhaps attributable to a dealer’s installing the wrong size floor mat in the Lexus. The company urged its dealers and “all other automakers, dealers, vehicle owners and the independent service and carwash industries to as- sure” that any floor mat “is correct for the vehicle.” Media interviews were delegated to United States-based managers, while Toyota’s Japanese executives stayed in the background. Five months later, Toyota’s chief executive, Akio Toyoda, was forced to appear before a United States Congressional committee to address widespread vehicle failures. In emotional testimony, he apologized for the company’s mistakes. It was a stark reminder of how a single, seemingly insignificant incident can escalate into a full-blown corporate crisis. The Japanese car company’s woes have fueled a sense of impending calamity for corporate managers already thrown o# guard by the global banking crisis and a string of natural disasters like the earth- quakes in Haiti and Chile. (all) Scott Roberts !" 23.4565 )*$ +"%&,-$%%. /&0)/)1 ) $ 7%/ $ -/&!0 "& )'8$&) 9 8 $':$%0*/ ; 23.4565!% There is a sense that crises are becoming more common. But many crisis management advisers see great value in The data are sketchy on this point, but one thing is certain: training. Crisis training runs the gamut from a simple discus- In today’s highly wired society, a corporation’s missteps are sion around a meeting-room table to full-blown simulations. more likely than ever to become public. And the bad publicity Some consulting firms even hire actors to play the roles of kid- surrounding those mistakes can itself have disastrous conse- nappers or terrorists. quences. “It’s hard to keep a secret these days,” said Ian Mi- Christine Pearson, a professor at the Thunderbird School tro#, president and founder of the California-based consult- of Management, believes simulations can be instructive, and ing group Mitro# Crisis Management. “It’s best not to try.” described one of her own client’s experiences. Pearson worked Globalization raises financial stakes and can make coping with an oil refinery, whose executives decided to pretend there with disaster more of a challenge. When senior management had been an explosion at the plant. This was a full-scale simu- is geographically removed from the epicenter of a corporate lation, with everyone acting out the part that he or she would shock, it may be di$cult to fully comprehend its implications. play in a real-life disaster. Even outside o$cials such as the city’s And if the problem is not tackled quickly and forcefully, even mayor and its fire department were involved. Important les- a minor problem can easily spin out of control. The British re- sons were learned. For one thing, it turned out that the mayor, search firm Oxford Metrica estimates that, these days, execu- the fire chief and the head of the refinery each thought he would tives have an 82 percent chance of facing a corporate disaster be in charge. That realization triggered essential discussions within any given five-year period. That’s up from a 20 percent about the division of responsibility in the case of a real-life chance two decades ago. explosion. The simulation also yielded some practical infor- How should corporations prepare? One line of thinking mation: the hoses brought by the fire department to the scene is that there’s little that any business can do to get ready for a of the pretended disaster did not fit the nozzles at the plant. crisis ahead of time, because the very nature of a crisis lies in “Not everyone can have these kinds of full-blown simula- its unpredictability. “The only way to prepare is to make sure tions,” Pearson said. “It takes a lot of money and time, and it’s you have a leader who can deal with it,” said Eric Dezenhall, a not always practical. But every company should at least engage crisis management expert who is said to have advised the do- in the discussion-around-the-conference-table form of crisis mesticity guru Martha Stewart, the entertainer Michael Jack- management preparation.” son and the Enron executive Je#rey Skilling. Studying the way other companies have dealt with crisis Dov Frohman, who was general manager of Intel’s Israeli can be helpful. But executives need to be careful. When calam- plant during the Persian Gulf war of 1991, warns that too much ity strikes, much of the ensuing action happens behind closed planning and training can be counterproductive. Threats, in doors. The lack of transparency has led to misperceptions about themselves, are often foreseeable. In the lead-up to Iraq’s the way crises sometimes play out. invasion of Kuwait and the ensuing United States attack, Here, experts attempt to dispel some of the most common for example, it was clear that something was going to myths about crisis management. happen. “Everyone assumed that when war broke out, the men would go to the front The interests of and the women would stay home (-$/ individual managers with the kids,” Frohman said. Compa- *"1. are the same as those nies focused on obtaining replacement of the corporation. workers. Events didn’t play out that way. In- I' F()*+,*- 2007, ./( ,0*10'( J(. stead, with Israeli o$cials unsure Blue faced its first big public relations where missiles would fall, everyone disaster. Weather-induced flight delays in the high-risk zone was told to stay at stranded thousands of United States pas- home. Companies like Intel were ordered sengers and left one plane full of travel- to shut operations. Frohman refused to ers sitting on the tarmac for a harrowing comply, and instead invited workers to eight hours without su$cient water or bring their entire families to Intel’s plant. food. In the days that followed, the company’s founder He turned the company’s bomb shelters and CEO, David Neeleman, seemed to model the best into day-care centers so that employees would feel they were post-crisis approach. actually protecting their families by showing up for work. A charismatic leader who had promised to “bring the hu- “The danger is that if you have a script, you’ll be tempted to manity back to airplane travel,” Neeleman immediately and stick to it, even if it’s not applicable to your specific situation,” publicly apologized. He had workers contact a#ected passen- Frohman explained. “There’s no replacement for a leader.” gers personally, by e-mail and telephone, collecting informa- !& 23.4565 )*$ +"%&,-$%%. /&0)/)1 ) $ 00 hen calamity strikes, much of the ensuing action happens behind closed doors. The lack of transparency has led to misperceptions about the way crises sometimes play out. tion about their bad experiences to formulate a response. He The best advice in a ponied up $30 million in compensation and issued a pas- (-$/ crisis comes from the senger Bill of Rights, e#ective retroac- *"2. legal department. tively, promising a free-round trip ticket if any Jet Blue flight is delayed I' 1996, , 3,4.-5*670'5 8+09( :,;(*, more than six hours. Odwalla, faced a terrible situation. O$cials But three months later, Neeleman, in Washington State had linked the com- who had become personally linked pany’s apple juice to an outbreak of E. coli to the crisis in many people’s bacteria that had killed a small child and minds, resigned. “No one ad- sickened many others. The group’s sales vances a career by becoming asso- plummeted 90 percent. ciated with a debacle,” Dezenhall The chief executive, Stephen Wil- said. According to an Oxford Metrica liamson, brushed aside legal concerns about study, any CEO facing a corporate liability, taking care during every media inter- crisis big enough to rock the share view to apologize for the disaster. Odwalla price stands a better than even also adopted a new method of “flash pasteuri- chance of being out of job six months later. zation,” which eliminated bacteria while re- Because individual executives’ interests are not taining most of the juice’s flavor. As a result, the company’s always the same as those of the company, a corporation share price quickly recovered. Williamson later said that he might improve its chances of survival by taking the weak- had no preparation in crisis management, but just went with nesses of human nature into account ahead of time. A num- his gut instinct, following tenets of the company’s core values. ber of corporations have predesignated “crisis teams” whose Corporate executives can be tempted to rely heavily on job is to deal with calamity. “This could be a good idea,” said their legal department to steer them through situations. This Sarah Kovoor-Misra, an associate professor specializing in is often a mistake. Public apologies strike fear in the hearts of crisis management at the business school at the University of lawyers, because they seem to imply culpability. Yet apologies Colorado Denver, “as long as those teams have the under- are golden in the eyes of the public — particularly the Ameri- standing and authority to really deal with any crisis that may can public, which is often a company’s biggest market.