CRISIS MANAGEMENT

By:Sri Krishna Hari Anirudh Garg Jitesh Bhatia

INTRODUCTION
A significant business disruption that stimulates extensive negative media coverage. With resulting public scrutiny affecting the organizations normal operations and also could have a political, legal, financial and governmental impact on its business."

Stages in crisis management

Pre-Crisis Phase
The pre-crisis phase is concerned with prevention and

preparation. Prevention involves seeking to reduce known risks that could lead to a crisis. This is part of an Organizations risk management program. Preparation involves creating the crisis management Plan, selecting and training the crisis management team, and conducting exercises to test theCrisis management plan and crisis management team.

Crisis Response
The crisis response is what management does and says after

the crisis hits. Public relations plays a critical role in the crisis response by helping to develop the messages that are sent to various publics. A great deal of research has examined the crisis response. That research has been divided into two sections: (1) the initial crisis response and (2) Reputation repair and behavioral intentions

Post-Crisis Phase
In the post-crisis phase, the organization is returning

to business as usual. The crisis is no longer the focal point of managements attention but still requires some attention.

Examples of Crisis Management

Odwalla
Exxon

Cadbury

Case Study-Odwalla
Odwalla (pronounced "odewalla") is the healthconscious juice company which began a couple of decades ago when Greg Stelt enpohl, Gerry Percy

and Bonnie Bassett began squeezing fresh oranges on a $200 hand juicer. The company was growing strongly with annual sales rising 30% per year and approaching $90m. The company had established a strong brand with enormous customer loyalty.

Case Study Cont.

Odwalla juice e-coil outbreak in 1996
Health officials in Washington state

informed the company that they had discovered a link between several cases of E. coil 0157:H7 and Odwalla fresh apple juice.

Case Study Cont.

One child died and more than 60 people in the Western United States and Canada became sick after drinking the juice.
Sales plummeted by 90%, Odwalla's stock price fell 34%. Customers filed more than 20 personal-injury lawsuits and the company looked as though it could well be destroyed.

What did the company do?

Odwalla's CEO Stephen Williamson ordered a

complete recall of all products containing apple or carrot juice. This recall covered around 4,600 retail outlets in 7 states.
On all media interviews, Williamson expressed sympathy and regret for all those affected and immediately promised that the company would pay all medical costs.
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What did the company do? cont.

Internal communications: Williamson conducted regular company-wide conference calls on a daily basis, giving employees the chance to ask questions and get the latest information. This approach proved so popular that the practice of quarterly calls survived the crisis. External communications: Within 24 hours, the company had an explanatory web site (its first) that received 20,000 hits in 48 hours. All possible attempts were made to provide up to the minute, accurate information. 11

Fixing the Problem

The next step was to tackle the problem of contamination. The company switched from unpasteurized juice to a

process called "flash pasteurization" which would guarantee that E-coli had been destroyed without compromising flavor.
Within months of the outbreak, the company had in place

what some experts described as "the most comprehensive quality control and safety system in the fresh juice industry."
The new process was communicated in all advertising and

public outreach campaigns

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Conclusion
The company's values spoke of nourishing people - and

when the crisis came it was an adherence to honest, straight talking and accepting responsibility that helped to get the company through. There are critics who refuse to credit the company with any integrity whatsoever - but even these will concede that as an exercise in crisis management, Odwalla stands as an example of best practice that few can match. The year after the crisis, Odwalla was voted "Best Brand Name in the Bay Area" by San Francisco Magazine. This was the first indication amongst many that Odwalla's reputation had survived.

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Case Study -EXXON Valdez

In 1989, the Exxon Valdez oil

tanker, entered the Prince William Sound, on its way towards California.
The ship ran aground and began

spilling oil. Within a very short period of time, significant quantities of its 1,260,000 barrels had entered the environment.

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Continued
At the moment of the collision the third mate, who was not certified to take the tanker into those waters, was at the helm.
The probable cause was established that the Captain and many of the crew had been drinking alcohol in considerable quantities.

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What did the company do?

The action to contain the spill was slow to get going.
The company refused to communicate openly and effectively to the public about the incident. The Exxon Chairman, Lawrence Rawl, was immensely suspicious of the media, and reacted accordingly.
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Poor Crisis Management

The Chairman refused to be

interviewed on TV and said that he had no time for that kind of thing.
A company spokesman

misrepresented the extent of the spill and clean-up efforts

This was in contrast to the

footage of the ecological disaster shown on TV

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Failure to Fix the Problem

While Exxon stalled and attempted to cover up the

problem, the clean-up operation was slow to begin

Around 240,000 barrels had been spilled, with another

million still on the ship.

During the first two days, when calm weather would have

allowed it, little was done to contain the spillage.

This spillage spread out into a 12 square mile slick.

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The Problemstruck, making further containment Then the bad weather Compounds
almost impossible.
After more than a week, the company was still giving no

ground on the request for better communication.

The media clamor became so hostile that eventually Frank

Larossi, the Director of Exxon Shipping, flew to Valdez to hold a press conference.
It was not a success. Small pieces of good news claimed by

the company were immediately contradicted by the eyewitness accounts of the present journalists and fishermen.
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Outrage Builds
John Devens, the Mayor of Valdez, commented that

the community felt betrayed by Exxon's inadequate response to the crisis, in contrast to the promises that they would be quick to react exactly in this eventuality.

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Poor Communication
Eventually, Chairman Rawl was interviewed live He was asked about the latest plans for the cleanup. It turned out he had neglected to read these, and cited the fact that it was not the job of the chairman to read such reports. He placed the blame for the crisis at the feet of the world's media.
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The Aftermath
Exxon lost market share and slipped from being the largest oil company in the world to the third largest.
The "Exxon Valdez" entered the language as a shortcut for corporate arrogance and damage.

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What went wrong? they had effective The company failed to show that
systems in place to deal with the crisis - and in particular their ability to move quickly once the problem had occurred was not in evidence
They showed little leadership after the event in ensuring such problems would never happen again They quite simply gave no evidence that they cared

about what had happened. They appeared indifferent to the environmental destruction.

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THE WORMY CONTROVERSY

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 State FDA Commissioner Uttam Khobragade said a group of

RISE OF THE CONTROVERSY

people approached him with chocolates that had worms in them. Sebastian Fernandez had purchased Cadbury Dairy Milk chocolate from a shop at Pick and Pay, Vile Parle. Fernandez discovered that the chocolate (Batch No28F3I10703) had worms in it. Fernandez complained to the shopkeeper Jitendra Shah who later informed Pravin Marve, vice-president, Andheri Vyapar Manch. Marve then contacted the FDA and gave them the sample. FDA Joint Commissioner Hindurao Salunkhe said Cadbury's Talegaon plant will also be inspected.
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 The state Food and Drug Administration has ordered abduction of Cadbury's Dairy Milk

EFFECTS OF THE CONTROVERSY ON CADBURY

chocolates from all over Maharashtra after worms were found in two of them in Mumbai. bad storage practices by retailers and distributors that had led to the worms. Festival season sales (Cadbury sells almost 1,000 tones of chocolates during Diwali) plummeted 30 per cent.
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ROLE OF THE PUBLIC RELATIONS

NOT DENYING THE FACT
Maharashtra Food and Drug Administration had given a clean chit to the company's two plants in the state. tell consumers about improper storage Bharat Puri, Cadbury's mild-mannered MD, went to media offices around the country

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ROLE OF THE PUBLIC RELATIONS

TAKING PRECAUTIONS

(cont)

company launched Project Vishwas, a retail education programme.(generating awareness and providing assistance in improving storage quality.) Steps to ensure quality & regain the confidence
new double packaging even for the smallest offering wrapped in aluminium foil and enclosed in a poly flow pack, which was sealed on all sides. company also carried out quality checks
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ROLE OF THE PUBLIC RELATIONS

GAINING BACK TRUST

(cont)

AB played a pivotal role in all communication relating to Cadbury's products and brands created a campaign which aimed for both rational and emotional appeal.

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ROLE OF THE PUBLIC RELATIONS

BENEFITS OF A GOOD CAMPAIGN

The company bounced back soon after the campaign hit the screens. Between October 2003 and January 2004, Cadbury's value share melted from 73 per cent in to 69.4 per cent. The recovery began in May 2004 when Cadbury's value share went up to 71 per cent.

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How to handle a crisis 11 communications tips

Tip 1 :- Have A Crisis plan ready to go.
Tip 2 :- Build The Crisis Support Infrastructure. Tip 3 :- Speak With One Voice. Tip 4 :- Be Prepared Before You Talk. Tip 5 :- Remembers Social Media. Tip 6 :- Be there.

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Contd..

Tip 7 :-Fall On Your Sword. Tips 8 :-Protect The Record. Tips 9 :-keep reading the situation. Tips 10 :-dont go quiet. Tip 11 :- learn & tweak.

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Conclusion
A crisis management plan generates order out of chaos. It needs strong leadership by well-trained and rehearsed individuals. Everyone within an organisation should know what his or her role is in a crisis and should be prepare to deal with one.

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