June 1, 2020

Total Performance Leadership Blog Post #18: Stakeholder Engagement-During Crisis

By Rob Andrews

Effectively engaging stakeholder groups is huge when dealing with the crises that inevitably affect us all. In today’s piece, we will contrast two corporate crises and one social crisis. I have long been befuddled by leaders who, when faced with a catastrophe, seem to think that lack of decisiveness and/or communications will somehow make it better. I was tempted to catalog the top ten communications disasters of the 21st century but thought better of it. Boeing’s 2019 misstep around the 737 Max suffices, as it is a stellar example of a bad situation made worse by a lack of decisiveness and transparency, poor communications, and poor leadership.

When the first 737 Max went down, Boeing had no clue how to deal with it. It makes most of its money from the military, and generally keeps a very low public relations profile. The first public statement was slow in coming and woefully inadequate. The next one was the standard “thoughts and prayers” sympathy statement, which clearly fell on deaf ears. Then they blamed the pilots and the airline’s procedures. Next, they blamed the victims, including the flight crew, and defended their new plane, specifically the computer system that automatically corrects the angle of ascent upon takeoff. As the excuses and complaints mounted, and lawsuits were filed, the second plane went down, and all hell broke loose.

After more sympathy, thoughts, and prayers, Boeing’s CEO called President Trump and urged him not to ground the 737 Max planes, which of course the media picked up on, adding fuel to the fire. The series of unfortunate events continued until CEO Dennis Muilenburg was ousted. At last count, this debacle has cost Boeing $9.2 billion and the planes have been grounded for fifteen months and counting. Only time will tell how much damage has been done to Boeing’s culture, brand, and enterprise value. It is a sure thing that Airbus, Lockheed Martin, Antonov, and other Boeing competitors will benefit for decades to come.

Contrast this mess with how Johnson & Johnson CEO Jim Burke dealt with the crisis that arose when someone slipped cyanide into Tylenol containers and placed them on Chicago area store shelves in 1982. When Tylenol was found to be the common denominator in seven mysterious deaths, a firestorm of media coverage turned a tragic local event into a national horror. Not yet knowing who was at fault, Jim Burke chose transparency over a brand protecting public relations strategy. He quickly decided that nothing would be hidden from the media. He went as far as to invite Mike Wallace and the 60 Minutes camera crew to sit in on upstaged meetings dealing with the crisis. Jim Burke was behaving in a manner consistent with Johnson & Johnson’s values.

Burke issued a nationwide recall of all Tylenol products and went to work immediately to develop a tamper-proof bottle and ultimately revolutionized the medical packaging industry.   Over 31 million bottles were recalled with a total retail value of over $300 million and not a single bottle was placed back on store shelves until the new containers were perfected. The short term hit to J&J’s enterprise value was over $1 billion and Tylenol’s market share dropped from 35% to 8%.

While many would have chosen a damage control solution, Burke recognized that risk does not increase in proportion to transparency and vulnerability. Scary as it was, J&J’s willingness to quickly deal with the problem actually lowered its risk and dramatically increased the consumer’s level of trust and the strength of the brand. The Tylenol case has now become the benchmark for dealing with crises, and a powerful lesson on how crises, when well-managed, build a stronger organization, culture, and reputation. Tylenol’s market share spiked from 33% before the crises to 48% 90 days after the re-launch. Consumer trust in Tylenol increased three-fold compared to the period prior to the crisis, restoring confidence in the brand and value of the enterprise. What began as J&J’s darkest hour turned out to be its brightest in terms of its reputation.

This very week, the Minneapolis Star Tribune Editorial Board reported that neighbors fought with garden hoses and buckets to save homes after rioters set fire to a multi-story affordable housing complex under construction near the Third Precinct on May 27th. The protests were sparked by the death of George Floyd at the hands of a Minneapolis Police officer Monday. By Friday, swaths of Minneapolis and St. Paul lay in ruins after three days of protest, riot, unrest, looting, arson, and vandalism.

By Friday morning, it was clear that state, county, and city leadership had fallen short. Mayor Jacob Frey did act following the death of George Floyd, promptly working with his police chief to fire the offending officer and three other officers involved in the arrest. As history should have informed us, that would not be enough, in a city and country with a long history of rocky relations between police and communities of color, Floyd’s death would likely set off a powder keg.

Where were the plans that should have already been in place at every level to deal with prolonged civil unrest? Would the carnage of the last few days have been avoided? Perhaps not. But the sight of looters and arsonists pillaging stores at will has shaken the confidence of many that law enforcement is capable of maintaining the peace. It has also tainted the very real grief felt over the tragic loss of life.

To then have the destruction continue for days, culminating in the abandonment of the city’s Third Precinct headquarters on Thursday is unimaginable. Frey’s flawed calculation, that “the symbolism of the building cannot outweigh the importance of life,” was puzzling. What it did was signal that lawlessness would reign once police fled, leaving businesses and residents on their own. Much of the damage in the last few days was done to property rather than people. But the damage was deep, costing already fragile communities businesses and assets that took years to build.

Gov. Tim Walz on Friday, along with leaders from the Minnesota National Guard, State Patrol and Department of Public Safety, said that requests for assistance from Minneapolis and St. Paul came late and, in some instances, lacked the clarity needed to act. When the State Patrol moved in after midnight Thursday, there was another bungle: State troopers cuffed and arrested a CNN crew in the middle of a live shot. It is incredible that Walz, Frey, and St. Paul Mayor Melvin Carter seemingly were not on the same page until the violence overwhelmed both cities Thursday night.

Asked what the plans for Friday night were, Walz said at a morning news conference that they would be forthcoming and that “there will be no lack of leadership tonight.” But there were few details, speaking again to a seeming planning void. Later Friday, former Minneapolis officer Derek Chauvin was charged with third-degree murder, and curfews were ordered in both cities.

Early Friday, ordinary Minnesotans took to the streets to exercise their own leadership: fixing, cleaning, patching, helping restore their communities as best they could. They did so while depending on elected leaders to do their jobs — restoring safety and, even more importantly, making the often-talked-about, seldom-executed changes that will avoid similar events in the future.

Every crisis is different. No response is perfect, and understanding must be extended to those leaders who are given little time to make excruciating decisions. And yet, that is the job, and stakeholders corporate and civil, have a right to expect foresight, planning and clear communications from their leaders, along with the appropriate course corrections.