22 March 2010

How Not To Manage a Crisis

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Case study: Crisis Management of Cadbury and Odwalla 

"There are two kinds of companies: those that have had crisis, and those that will.” 
(PR Week 1999)

In this post I’m going to focus on two particular case studies of crisis management, the Cadbury’s Salmonella Scare in UK and Odwalla E.Coli outbreak in USA. These cases aren’t new anymore but they give opportunity to compare two similar situations which were approached in two very different ways. Below is a video presentation on these two cases.

But first, a little bit of basic background on crisis management (mostly for those who don’t know anything about it).

What is Crisis?
According to the Institute for Crisis Management crisis is:
„ ... A significant business disruption which stimulates extensive new media coverage. This can result in public scrutiny which can affect the organisation’s normal operations and also could have political, legal, financial and governmental impact on the business.”
In Simpler words: crisis is a major unpredictable event that threatens to harm an operation, reputation or the legal or financial status of an organisation.

There are three most common elements of crisis: (1) a threat to the organisation, (2) the element of surprise, and (3) a short decision time.

In contrast to risk management, which involves assessing potential threats and finding the best ways to avoid those threats, crisis management involves dealing with threats after they have occurred. It can strike at any time and it can cause confusion, uncertainty and fear. It often is unpredictable but shouldn’t be unexpected. 

Categories of Crisis Management
  • Human error
  • Mechanical failure
(eg. Recent Toyota cars problems, failure of breaking system)
  • Management decisions/indecisions
(i.e. Cadbury)
  • Technology failure
(i.e. Chernobyl Disaster 1986 nuclear reactor accident. Exxon Oil Spill – the biggest human cause environmental disaster that happened at sea 1989)
  • Acts of God and natural disasters
(For example: terrorism attack on UK Transport for London in 07/07/2005, or Mexico – Swine Flu 2009)

When handling sensitive or controversial issues, a company will be judged on:
  • How much care was taken to prevent the issue arising in the first place?
  • How quickly did it respond and manage the issue?
  • How well did it communicate?
Characteristics of good crisis management
  • Fast and active communications
  • Ability to admit mistakes
  • Full appreciation of the needs of all stakeholders
  • Clear recovery strategy
  • Consistent corporate messages

Cadbury Salmonella Scare

The Problem: In 2004 Cadbury Shweppes was named as a Britain’s most admired company. It’s name was tested in 2006 when it chose to keep quiet for 6 months about salmonella traces in their chocolate. Cadbury neglected most important rule in crisis management: Be honest and quick! Many critics saw it as a PR disaster.

Odwalla E.Coli Outbreak

The Problem: In 1996 there was an outbreak of dangerous bacteria - e.coli - in Odwalla apple juices in several US states and in Canada. Company didn't know about it until health officials linked the 'pandemic' of sick people with Owallas juice. The way they dealt with the situation could serve as an exemplary case study for good crisis management

Although Cadbury handled its crisis badly it came out of it pretty well because people forgave the company. Pam Williams (one of my leading tutors at Uni of Westminster) explained, it is easier to forgive to companies we like, and honestly, who doesn't like chocolate?

Odwalla on the other hand gave consumers the feeling that there was a community of ordinary people within the company, who were devastated at the fact that they had created a situation that ended in a loss of life. 

There are many books on ‘how to’ handle a crisis and how to prepare for it. Corporations pay lots of money for drills during which they place their employees in pressured and simulated situations to test their crisis management plans. 

But crisis in its nature is something that occurs unexpectedly and perhaps it is easy to say how a crisis should have been handled after it is over. I'm sure, however, that people who find themselves in such unpredictble situations don't feel the same way when they are in the middle of it.


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