Can t Run Can t Hide New Rules of Engagement for Crisis Management Knowledge Wharton http knowledge wharton upenn edu article cfm articleid 1807 Can t Run Can t Hide New Rules of Engagement for Crisis Management Published September 19 2007 in Knowledge Wharton The corporate apologies are piling up Mattel CEO Robert Eckert apologized before a Senate subcommittee on September 12 for lead paint found in millions of the company s toys On September 14 TD Ameritrade CEO Joe Moglia apologized for a database breach that compromised customer addresses phone numbers and email addresses Apple CEO Steve Jobs apologized on September 6 for cutting the price of the high end iPhone to 399 just weeks after die hard customers waited in long lines to pay 599 Dell executives apologized in August on the company s corporate blog for delayed deliveries of certain laptop and desktop models And in February Jetblue apologized for canceling 250 flights during an ice storm and leaving some passengers on the tarmac for as long as 11 hours This is a single personal use copy of Knowledge Wharton For multiple copies custom reprints e prints posters or plaques please contact PARS International reprints parsintl com P 212 221 9595 x407 The common thread linking these apologies Executives were moving quickly to stem damage to their companies reputations And while not all corporate crises are created equal there is a playbook to handle these events according to professors at Wharton First a corporate response should take hours not days It should include a well thought out apology delivered through multiple mediums and it should feature some remediation so that the event won t happen again The stakes are high Companies that manage these events well tend to preserve a good reputation Those companies that take a long time to respond to a crisis may be permanently scarred by customer perception What s different these days say Wharton experts is the speed with which the Internet and globalization have facilitated the dissemination of information This means that word of mouth both good and bad travels farther and faster than ever An example of this is Jobs open letter which came with a 100 credit at Apple s retail or online stories for those who bought the iPhone on its June 29 launch It was posted on Apple s site a day after the company announced the iPhone price cut We want to do the right thing for our valued iPhone customers the letter said We apologize for disappointing some of you and we are doing our best to live up to your high expectations of Apple Three Categories of Crisis Customized responses to a crisis are critical given that not all crises are the same Maurice Schweitzer a Wharton operations and information management professor puts crises in three primary categories Customer service issues failures of competence and screw ups that aren t related to core competence The third category refers to incidents such as Martha Stewart s stock trading scandal Although Stewart served jail time the incident didn t reflect on her core competence which is giving advice on home decorating food and entertaining Dell s inability to fulfill orders for some laptops and Apple s iPhone price cuts are customer service issues says Schweitzer The goal here is to keep customers from giving up on the company When All materials copyright of the Wharton School of the University of Pennsylvania Page 1 of 4 Can t Run Can t Hide New Rules of Engagement for Crisis Management Knowledge Wharton http knowledge wharton upenn edu article cfm articleid 1807 Apple unveils its next product it wants to avoid having people feel like suckers says Schweitzer Apple doesn t want customers to wait to make their purchase the next time they launch a new product JetBlue s failure to get customers to their locations in February and Mattel s manufacturing troubles in China are examples of failures of competence says Schweitzer Both companies had problems that should have been prevented In Mattel s case the last thing parents want to worry about when they give a child a toy is safety Mattel s safety issues adds Wharton marketing professor Lisa Bolton require a response that appeals to consumers emotions Indeed Mattel s Eckert addressed parents concerns directly in his September 12 testimony before the Senate Committee on Appropriations Subcommittee on Financial Services and General Government Like many of you I am a parent he said I like you care deeply about the safety of children And I like you am deeply disturbed and disappointed by recent events As to lead paint on our products our systems were circumvented and our standards were violated We were let down and so we let you down On behalf of Mattel and its nearly 30 000 employees I apologize sincerely We are doing everything we can to prevent this from happening again Literate in Multiple Media To get its message out to its customers Mattel utilized online media its web site and video More importantly Mattel reacted quickly Of those steps speed may be the most important factor says Yoram Jerry Wind a Wharton marketing professor and author of the forthcoming book Competing in a Flat World Wharton School Publishing The Internet means that there is full transparency and you cannot hide Anything can be distributed worldwide Management has to respond fast and effectively Ron Culp a managing director at public relations agency Ketchum agrees noting that the traditional news cycle where daily newspaper deadlines dictated how companies managed crisis communications doesn t exist any more A company facing a crisis used to have at least a day to respond but now the timetables are speeded up as blogs and online news operations report stories faster than traditional media outlets Just a few years ago I knew if I got a call at 10 a m I would have until 5 p m to respond with an answer to an inquiry says Culp Today I need to respond by 10 05 a m Culp also notes that companies have to be literate in multiple media Traditional outlets for example are increasingly monitoring blogs or online diaries for tips By reaching customers directly via blogs companies in crisis can deliver a more effective message The best approach is posting the corporate response on the company s web site and allowing the bloggers to take it from there says Culp The traditional media follow Given the new dynamics he recommends that companies continually monitor all news sources especially blogs where potential problems may surface Companies have
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