Posts Tagged ‘crisis management’
In 1982, James Burke, CEO of Johnson & Johnson was confronted with the news of seven poison related deaths caused by Tylenol capsules laced with cyanide. He looked the facts in the face and immediately understood the gravity of the situation. Against the vehement opposition from his management team, he decided to go directly to the public.
- Backed with a $ 50 million product recall, Burke communicated a strong sense of concern, openness and accountability as he frequently appeared on the major television shows of the time.
- This contributed to the restoration of public trust and saved the Tylenol brand.
- Burke was strong, bold and decisive and this built trust and confidence.
- He placed his personal stature and reputation on the line.
- Burke’s proactive communications brought his message to the public, and by doing so controlled the crisis, expectations and protected his company’s image and reputation.
Fast forward to 2010:
Tony Hayward when confronted with the enormity of the Deepwater Horizon oil spill mounted a feeble public response.
- Unlike James Burke, Hayward didn’t immediately grasp the severity of the situation.
- He didn’t go directly to the public, but rather allowed a hostile media and government to filter his message, while they demonized Hayward and politicized the crisis.
- He lost control, was hostage to events, and was perceived as weak and reactive.
Obviously it was easier for Johnson & Johnson to respond quickly with a total product recall, than it was for BP, which had to overcome extreme technical problems to cap a spill over a mile below the ocean’s surface.
However, Hayward could have taken a proactive position, communicating and educating the public about the challenges, progress and shaping their expectations regarding the capping of the spill and the subsequent clean up.
- His response was further complicated by aggressive legal threats being made against BP by the Department of Justice.
- Rather than openly communicating with the media and public, communications were effectively shut down.
- At the same time Hayward was perceived as tone deaf with comments about getting his life back.
- He appeared disengaged in front of Congress and unconcerned about the plight of the Gulf Coast citizens, while he attended a yacht race in England.
- Hayward was unaware that his personal stature and reputation were on the line.
Whether or not these interpretations are true, perceptions are stronger than reality.
- Hayward was ultimately ousted as BP’s CEO and complained about being demonized, victimized and vilified.
- Contrast that with James Burke’s actions, which are hailed as a textbook response to crisis management.
The two different outcomes can be attributed to diverse leadership styles.
- Burke was deeply influenced by Johnson & Johnson’s corporate credo, which stated that the “first responsibility” was to its customers and then to employees, management, communities, and stockholders.
- He reacted accordingly.
- Hayward placed the crisis into the context of scale. He stated that in relation to the size of the Gulf of Mexico, the spill was relatively small.
- While that may be a factional response, it displayed a lack of empathy with the people affected by a potentially large environmental disaster.
- He appeared indifferent to the pain and suffering experienced by these individuals.
- It shaped a perception of an uncaring executive motivated by profit.
This was reinforced by the Obama administration, which was looking to shift the blame for its poor response. Hayward played into administration’s hands, surrendering control and losing his emotional standing with his key constituencies.
- James Burke understood the importance of his emotional standing with all of his key constituencies, because it was ingrained into Johnson & Johnson’s culture.
- Tony Hayward did not.
- Within a 100-day period, he destroyed his emotional bonds and standing with key constituencies.
- When BP posted a $ 17 billion loss, he lost his emotional standing and support with his board and stockholders.
- His reaction to the crisis unwittingly destroyed the trust, credibility and validity he needed to lead BP.
The lessons learned from Tony Hayward’s actions and response are quite clear.
- Leaders must pay close attention to the factors that contribute to their validity and legitimacy.
- Trust, credibility and a balance of emotional bonds and standing are fragile.
- They take time to develop, sometimes over the span of one’s career.
Trust and credibility can be destroyed, along with one’s reputation in an instant. Hayward placed his reputation and stature on the line, as the face of BP during this crisis. He ignored these lessons at his peril. Both suffered due to his leadership and it will take time to restore them.
For more information on this topic, refer to Great! What Makes Leaders Great: What They Did, How They Did It and What You Can Learn From It by Timothy F. Bednarz (Majorium Business Press, Stevens Point, WI 2011)
Timothy F. Bednarz, Ph.D. | Author | Publisher | Majorium Business Press
Author of Great! What Makes Leaders Great: What They Did, How They Did It and What You Can Learn From It (Finalist – 2011 Foreword Reviews‘ Book of the Year)
Linkedin | Facebook | Twitter | Web| Blog | Catalog |800.654.4935 | 715.342.1018
Originally published on the Examiner.com on September 24, 2012.
Copyright © 2012 Timothy F. Bednarz, All Rights Reserved
The great and influential leaders were no strangers to failure. My research illustrates that most experienced levels of failure and adversity that would compel typical individuals to pack their bags and quit in frustration and disappointment. The levels of success they achieved did not come easily, but from persistence. Their personal levels of perseverance and self-reliance are what realistically defined them. Most viewed failure as a learning experience, rather than a defining event. Fred Smith (FedEx) observed, “Just because an idea isn’t implemented or doesn’t work out doesn’t mean that a person has failed.” 
Early in his career at Johnson & Johnson, General Robert Wood Johnson taught James Burke a valuable lesson about failure. “Shortly after he arrived at J&J in 1953 as a product director after three years at Procter & Gamble, Burke attempted to market several over-the-counter medicines for children. They all failed-and he was called in for a meeting with the chairman.
‘I assumed I was going to be fired,’ Burke recalls. ‘But instead, Johnson told me, ‘Business is all about making decisions, and you don’t make decisions without making mistakes. Don’t make that mistake again, but please be sure you make others.’”
In 2001, John Chambers (Cisco) saw his company’s revenues and stock price fall off the cliff during the tech and telecom busts. He was challenged with the reality of massive and likely fatal failure. “Within days of realizing Cisco was crashing, Chambers leapt into trying to fix it. ‘He never dwelled on it,’ says Sam Palmisano, CEO of IBM (IBM) … ‘John kept the company focused. He said this is where we are, and he drove the company forward.’
He reached out to [Jack] Welch (General Electric) and a handful of other CEOs. They told him that sudden downturns always take companies by surprise, ‘so I should quit beating myself up for being surprised,’ Chambers recalls. He did. Chambers decided that the free fall had been beyond his control. He now wraps it up in an analogy he retells time and again, likening the crash to a disastrous flood: It rarely happens, but when it does, there’s nothing you can do to stop it… Those other CEOs also told Chambers to figure out how bad it was going to get, take all the harsh action necessary to get through it and plan for the eventual upturn.” 
David Packard (Hewlett-Packard) faced failure and adversity in a gruff and straightforward manner. “When he returned to HP in the early 1970s after his stint as deputy secretary of defense and found the company on the verge of borrowing $100 million to cover a cash-flow shortage, he immediately met with employees and gave them what came to be known as a ‘Dave Gives ‘Em Hell’ speech. Packard lined up the division managers in front of employees and told them, ‘If they don’t get inventories under control, they’re not going to be your managers for very long.’ Within six months, the company once again had positive cash flow, to the tune of $40 million.” 
John D. Rockefeller (Standard Oil) advised, “‘Look ahead… Be sure that you are not deceiving yourself at any time about actual conditions.’ He notes that when a business begins to fail, most men hate ‘to study the books and face the truth.” 
 Federal Express’s Fred Smith (Inc. Magazine, October 1, 1986)
 Alumni Achievement Awards: James E. Burke (Harvard Business School, 2003)
 Maney Kevin, Chambers, Cisco Born Again (USA Today, January 21, 2004)
 O’Hanlon Charlene, David Packard: High-Tech Visionary (CRN, November 8, 2000)
 Baida Peter, Rockefeller Remembers (American Heritage Magazine, September/October 1988, Volume 39, Issue 6)
Excerpt: Great! What Makes Leaders Great, What They Did, How They Did It and What You Can Learn From It (Majorium Business Press, 2011)
If you would like to learn more about how the great American leaders responded to failure and adversity through their own inspiring words and stories, refer to Great! What Makes Leaders Great: What They Did, How They Did It and What You Can Learn From It. It illustrates how great leaders built great companies, and how you can apply the strategies, concepts and techniques that they pioneered to improve your own leadership skills. Click here to learn more.
Copyright © 2011 Timothy F. Bednarz All Rights Reserved