Stages of Crisis & Crisis Management

The “stage” approach: Segmenting complex processes

• Stages refer to relatively distinctive segments of a more complex or lengthy process

• Stages are differentiated by identifying the beginning or end of some important event, reaction, or process

• Stages enable the user to communicate clearly about change over time, adapt interventions to what is needed at each stage, & monitor progress across stages.

• Stages also imply development from one stage to another; this enables changing outcomes at a later stage by intervening at an earlier one

Stages of Crisis Management

Signal detection

Warning signs & efforts to prevent

Probing & preventionSearch risk

factors & reduce potential for

damage

Damage containment

Keep from spreading to

uncontaminated areas

RecoveryReturn to normal

operations asap

LearningReview & critique

CM efforts for improvements

Mitroff’s Five Stages of Crisis Management

Fink’s Crisis Lifecycle

ProdromalRisk cues that potential crisis can emerge

Crisis breakoutTriggering event with resulting damage

ChronicLingering effects of crisis

ResolutionCrisis no longer a concern to stakeholders

Like most human events, crises can be described in terms of stages, or relatively identifiable sequences of events and reactions. Stages enable planners to monitor risks, progress, target stakeholders, and take strategic action appropriate to the stage. There are many models; below are two prominent ones:

The long view…

http://www.gartner.com/resources/130100/130115/gartners_hype_c.pdf

Gartner’s Hype Cycle for emerging technologies 2005

Ecomap of Stakeholders

Primary Effect

Secondary (Vicarious) Effect

Tertiary Effect

An “ecomap” or ecological map of stakeholders can help to identify all involved parties in the crisis. Concentric circles are used to set parameters on primary or direct stakeholder involved, secondary or “spillover” effected, and tertiary or very indirect affected. These help prioritize response to them and ensure that no one is left out of consdieration.

Regardless of the crisis model used, crisis management involves four strategic considerations, or the “Four C’s.” All plans should include at least these aspects.

Crisis Case: J&J’s Tylenol Tampering

In this presentation you will cover:

• stages of the crisis

• key considerations for intervention

• constructing an ecomap

• description of the case

• impact of the case on the industry

• what was learned

Case Overview

Four responsibilities:• To the customers• To the employees• To the communities they serve• To the stockholders

When the Johnson & Johnson Company faced the Tylenol poisonings in 1982 they applied the Four C’s quite effectively. They relied on the value and strength of their culture credo which also identified the stakeholders

Tylenol Case Analysis

Background

• In the mid 1950’s Tylenol became a needed and popular substitute for aspirin for such conditions as flu and chicken pox, since aspirin was related to Reyes Syndrome (liver degeneration, brain edema, 20-30% fatality)

• Large market: 100 million users, 19% of corp profits, 13% of year to sales growth, 37% market share of painkillers, outselling other top analgesics combined

• J&J was one of the “Best 100” companies to work for

• Tylenol became a product trusted by physicians and families alike

• Numerous other Tylenol products were developed for an active market

• J&J strong “family” corporate culture

Tylenol Case

The Crisis Begins…

• September 1982 Extra Strength Tylenol bottles of at least 6 pharmacies and food stores were opened, & capsules were filled with cyanide (10,000 x fatal dose)

• Media reporter asked PR Asst. Dir Andrews about poisoned Tylenol– then it hit the news!

• 7 people died in the Chicago area

• CEO James Burke refers to the Credo, alerts to the danger, & assigns team to discover the source

• Formed 7-member strategy team

• Stop the killings

• Reasons for the killings

• Provide protection & assistance to people

…and snowballs!

• Police drove through streets with loudspeaker warnings

• Chicago hospital received >700 calls in one day

• Immediate stories in major magazines and newspapers

• Over 100,000 separate news stories ran in US papers

• Hundreds of hours of national and local TV coverage

• >90% of Americans had heard of the Chicago deaths

• Widest coverage since Kennedy assassination & Viet Nam

• Copycat tampering– 270 reported incidents (36 true)

Poison Madness in the Midwest--Time Magazine

The Tylenol Scare--Newsweek

Tylenol, killer or cure?-- Washington Post

• J&J stock fell 7 points• Market share dropped from 35% of pain-reliever market to 8%

Initial Response– Phase 1 Crisis response

• Immediate alert to consumers not to use any type Tylenol product or resume use until extent determined

• Live TV satellite feed of press conferences; media exposure via 60 Minutes, Donahue, etc.

• 800# Hotline for customers (30,000 calls in Oct-Nov)

• Toll-free phone for news organizations; pre-taped messages and updated statements for distribution

• Strict production, different lot $, & crisis only in Chicago indicated post-production tampering

• Withdrew bottles from Chicago area; ordered recall of >31 million bottles nationally at a cost of >$100 million (against FDA & FBI)

• It temporarily ceased all production of capsules

• High public profile and repeated reassurance by Burke

• Working relationship with law enforcement agencies

• Notification of health professionals nationwide & FDA

Initial Response—Phase 2, PR Rebound

Five-Point Plan

1. Replaced them with tamper-resistant caplets (triple safety seal within 6 months)

2. Incentives: free replacement of caplets for capsules, special coupons ($2.50 off) easily obtained

3. New pricing program: discounts up to 25%

4. New advertising program: national 1 minute commercial, News & talk shows,

5. 2250 sales personnel made new presentations to medical stakeholders

• positive press articles regarding J&J, products, & safety• indications of regaining market share• held up as positive example of ethics & responsibility• 450,000 e-mail messages

• Forgiveness: win forgiveness from stakeholders and create acceptance for the crisis

• Sympathy: portray organization as unfair victim of attack by outside persons; willing to accept losses

• Remediation: offer compensation for victims and families (counseling & financial assistance)

• Rectification: take action to reduce recurrence (triple sealed & increased random inspection)

• Effective leadership: clear, visible, consistent role-modeled message from beginning by CEO

Strategies

Most public recovery strategies incorporate the following five components:

Employee Response

• Strong family-oriented culture, “we care about our employees”

• Open and current communication with employees; 4 video programs on the unfolding process

• Emphasizing plant workers were innocent

• CEO speech in a week to employees, “We’re coming back” (wearing buttons)

• Idle employees given tasks to keep involved & reduce rumoring and boredom

• Indications of market recovery bolster spirits

• Congruence and consistency in demonstrating the Credo

Consequences– what was learned

• J&J showed that they were not willing to risk public safety even at excessive cost

• J&J could be trusted all the way to the top– they lived their Credo & having a functional credo worked

• J&J set a new standard for protection thereby requiring competitors to expensively follow suit

• J&J was viewed as a co-victim of the crime

• Stakeholder involvement and relationships is essential

• One must anticipate and prepared for crises; expect the unexpected

• Cynicism: Be aware that 75% of people don’t believe companies take responsibility for crises or tell the truth

• “No matter what you do in the beginning, in the end you will have to tell the truth”

• React fast, openly and decisively

• Report your own bad news– don’t wait for reporters to root it out

• Speak with one voice

• Gather facts and disseminate from one info center

• Be accessible to the media so they won’t go to other sources

• Target communications to those most affected by the crisis, and can affect the media

• If you can’t discuss something, explain why

• Provide evidence for your statements

• Record events via video and documents so you can later present your side of the story

(learning cont’d)

Copycat tamperings:

• Lipton Cup-A-Soup (1986)

• Exedrin (1986)

• Tylenol again (1986)

• Sudafed (1991)

• Goody's Headache Powder (1992)

“Déjà vu all over again”

Following the Tylenol crisis, several other tamperings plagued other companies. Impact could have been reduced by learning from J&J’s experience.