Nicolazzo & Associates

2012-01-05T16:00:00.005-05:00

Crisis Plans Incomplete Without A Social Media Component

By Richard E. Nicolazzo

Let’s be realistic: Crisis communications contingency planning is always a moving target.
The way we communicate has evolved for thousands of years and will continue to change. New forms of communications are unstoppable.

Social media has become a powerful influence in virtually every form and aspect of communications in today’s world. In the early days of this new medium, public relations executives and crisis planners could adapt existing crisis contingency plans to address the basic needs of social media.

That day has passed. Social media’s enormous impact on our daily lives has transformed how we communicate. Need convincing? Consider these statistics:

• 800 million active Facebook users (one of every nine people on the planet)

• Over 500 million unique users who visit YouTube every month

• Over 200 million average tweets per day on Twitter

• More than 100 million LinkedIn users

• 62 million Google+ users (estimated to be 100 million by February 2012)

• 3,000 images uploaded to Flickr every minute

And, as social media rockets ahead, acceptance levels are exploding exponentially. When Facebook started, it took 852 days to reach 10 million users. For Twitter, it took 780 days. When Google+ launched in June 2011, it only took 16 days to reach 10 million users. More “net speed” records will be broken.

Social Media Crises on the Rise

Altimeter Group, a San Mateo, California, research-based advisory firm that helps companies manage disruptive technologies, recently reported a rise in social media crises. In a survey of 144 companies, it found that while most organizations are quick to deploy the latest social media technology, few have prepared for a major social media crisis and the potential long-term effects on their businesses.

When analyzing actual social media crises, Altimeter found that in more than three-fourths (76%) of the cases, reputational damage would have diminished or been averted had the companies invested in internal planning.

According to the same research, the top three reasons for the crises were:

1. Lack of internal social media education;

2. Absence of professional staff to monitor and manage social media issues; and

3. Lack of an emergency strategy and plan.

Without advance preparation, fallout from a social media crisis can be painful and swift. It’s easy to find a few good examples when looking back at 2011.

When Anthony Weiner tweeted a photo of his private parts to a Seattle woman, he first claimed his account was hacked. However, the unrelenting scrutiny of social media nailed him in a matter of days, forcing him to admit he was the one who sent the photo. A successful 12-year career in Congress was finished.

Gilbert Gottfried lost his job as the voice of the Aflac duck when he posted jokes about the Japanese tsunami on his Twitter account.

The Kenneth Cole brand took a reputational hit when it tried to ride the coattails of the Arab Spring uprising in Egypt. Cole decided to capitalize on the resulting press momentum with a thoughtless tweet that said, “Millions are in uproar in #Cairo. Rumor is they heard our new spring collection is now available online.” Cole apologized in a hurry.

And consider what happened to Chrysler when an employee from their new media agency dropped an F-bomb in a tweet from @ChryslerAutos. The auto company had just launched a Super Bowl ad and a new “Imported from Detroit” campaign. The fallout didn’t hurt sales, but was embarrassing for a brand on the rebound.

How a company or individual deals with a social media crisis is fundamentally an outgrowth of general crisis communications contingency planning. However, when one factors in the speed with which information is circulated, some processes and procedures must be rethought. In my view, institutions and individuals should think about three levels of social media crises.

Level I, the least serious, might involve minor exposure from flare-ups, such as customer complaints, poor customer service, misguided tweets, or website malfunctions. These incidents can be managed by a direct social media response. For example, FedEx might deliver a package with contents damaged or destroyed. The recipient might tweet about the problem. If FedEx is properly monitoring social media feeds, it can quickly reply with an apology and commitment to solve the problem. This prevents other tweeters from piling on. Additionally, this can turn a potential pitfall into a positive event by delivering exemplary customer service.

Level II occurs when the initial problem crosses into mainstream media and impacts the individual or company’s reputation. An example of this is what happened when two rogue Domino’s Pizza employees posted a revolting YouTube video that went viral. The company was slow in responding and suffered major damage to its reputation. A post-incident study conducted by HCD Research revealed that 65% of respondents who would previously visit or order Domino’s were less likely to do so after viewing the offensive video.

In a Level III crisis, an enterprise loses business or the individual loses his/her job. In the case of an individual, what happened to Anthony Weiner is an excellent example. He’s gone and so are his hopes for future political office. A good corporate example is what happened to Netflix when it announced a plan to spin off its DVD-rental service into a new entity called Qwikster. Not only did Netflix mis-gauge customer attitude, but it failed to acquire the Qwikster Twitter account ahead of its announcement, confusing consumers that were looking for a venue for Qwikster. After a series of nasty tweets, the story hit every major TV, radio and newspaper outlet in the U.S. Netflix killed the new service, but not before losing some 800,000 subscribers. Their management’s reputation, stock price, and customer base all plunged.

10-Point Checklist

What can be done? Here’s a 10-point checklist to help senior management and communications executives prepare for the worst:

Obtain all the facts before responding and, in particular, before making any statement online or on a mobile device. An Internet posting cannot be retrieved.
Control the message before it controls you. Audit previously scheduled tweets or posts, and remove those that could be misinterpreted if they are published during a crisis.
Take whatever steps are appropriate to maintain the institution’s brand and the integrity of its management, board and products/services.
If there is a problem, acknowledge it and begin remedial action. Social media is unforgiving. The issue will not fade away.
Scale responses to appropriately reflect the importance of the problem and the audience of the questioner. Many bloggers and power users of Twitter or Facebook have small armies of followers that should be considered when responding.
Ensure that someone on the social media crisis communications team is available 24/7.
Calculate the appropriate degree of response and determine whether a high-level, medium-level or low-level response is in the institution’s best interest. Important responses should be posted or reposted at high-traffic times.
If the disruptive entity or perpetrator is known, communicate via the proper medium (i.e., don’t call a blogger; rather, leave a comment so other readers can understand your side of the story).
Avoid posting negative comments that could start a “flame war” by people who intentionally post inflammatory comments to generate a huge response from other commenters; this could lead you to say something harmful about your company or yourself.
If someone has a legitimate gripe, respond quickly and appropriately while respecting other person’s feelings. Start with, “I understand and appreciate your thoughts on this matter”…”I hear what you are saying”. If, for example, it’s a minor complaint posted to Twitter, ask for the complainer to send a “direct message” describing the problem, then escalate from there to email or phone contact if necessary.

The simple rule of thumb is: Don’t underestimate the power of social media. At times, the social media crowd can influence public opinion just as effectively as mainstream media.

And remember: In most cases, it’s not the crisis itself that causes damage, but the response.

# # #

Richard E. Nicolazzo is Managing Partner of Nicolazzo & Associates, a strategic communications and crisis management firm headquartered in Boston, Mass.

Joe M. Grillo, Partner at Nicolazzo & Associates, contributed to this blog.

Strategic Communications is Always a Force in the "Art of the Deal"

2011-12-01T16:21:00.001-05:00

Despite market fluctuations, the pace of mergers and acquisitions has been frenetic in the U.S. for nearly two decades.

Whether it’s private equity, financial services, the food industry, healthcare, industrials, telecommunications, oil and gas, utilities, high-tech, Internet, or social media, consolidation in most major market sectors continues at a torrid pace.

For 2010, the last full year measured, Thomson Reuters reported a 14.2 percent gain in U.S. M&A activity for a dollar value of $822 billion. Recently, USA Today reported that U.S. activity is running at a $1.6 trillion pace this year. This is still below the peak of $2.6 trillion in 2007, but still qualifies as an active market.

In my view, one of the biggest factors in the success of M&A deals is the execution of a strategic communications plan that describes and positions the transaction appropriately. Without this roadmap, it’s extremely difficult to articulate the deal to critical audiences -- employees, shareholders, the general public, and the diverse audiences associated with a corporate merger. Therefore, it is critically important that the business rationale supporting the transaction be concise and cohesively communicated.

To strengthen a successful M&A deal, the parties involved need to make strategic communications a driving force. Senior managers, lawyers, investment bankers and consultants involved in deal-making should formulate a 10-step process to ensure the adoption of a strategic communications plan before the deal is announced.

Here’s a checklist:

Step 1: Evaluate the corporate reputations. Components include ethics, workplace environment, financial performance, leadership, management, social responsibility, customer focus, quality, reliability, and emotional appeal. Develop a matrix and rank each component on a scale of 1 to 10.

Step 2: Investigate major issues/concerns. Conduct Internet searches going back five years and review news media coverage for major corporate events involving both parties. This ensures that when the transaction is communicated, senior management will be prepared to address any negative issues that surface.

Step 3: Establish communications goals. Define and establish the goals of your strategic communications efforts. Determine what you are trying to accomplish and agree on the three or four most important communications goals in the process. Without these agreed-upon goals, each entity may move in opposing directions, which will add confusion to the deal.

Step 4: Define relevant audiences. During the early planning stages, it’s critical that every audience affected by the deal be defined. This list typically includes employees, Wall Street analysts, institutional investors, stockholders, customers, business partners, distributors, political leaders, regulators, and trade associations.

Step 5: Establish positioning strategy. Any way you look at it, two different organizations are joining forces. Whether it’s a friendly merger or a hostile acquisition, the new entity will need to create a positioning strategy, clearly defining how the combined entity will be perceived by its audiences and how it will execute its business strategy and plan for growth.

Step 6: Agree on messages. Building off the positioning strategy, agree on three to five key messages to be incorporated into all internal and external documents. If, for example, the merger of company X and company Y is going to create the largest player in its industry, you need to emphasize this in all communications. It sounds simple, but agreeing on key messages can be difficult. If the M&A activity involves a hostile takeover, specific strategies should be developed to address potential issues in the public domain.

Step 7: Select and train spokespeople. This area often breaks down. Once the deal is done, too many people tend to communicate different and inconsistent messages. Today, audiences quickly assimilate information from multiple sources and form immediate opinions. Keep the circle of spokespeople small, and make sure they stay “on message”. Appoint and train specific individuals to disseminate messages internally and externally.

Step 8: Utilize social media. It’s unrealistic to announce a deal today without using social media. Gone are the days when dealmakers could rely on the print and broadcast news media to announce M&A activity. At the time of an announcement, the organizations joining forces need to use (at a minimum) Facebook, Twitter, YouTube, and Linked-In. These are the modern channels that feed news to key audiences. In addition, a social media crisis communications plan needs to be developed if events don’t go as planned on the social media front.

Step 9: Synchronize communications. Devise a detailed blueprint and timetable to implement your communications strategies. This requires well-defined plans with specific communications responsibilities assigned to the appropriate individuals. Both sides need agreed-upon documents to guide the process, such as key messages, talking points, and a Q&A. There must be a coordinated game plan in place to anticipate and answer every possible question. In today’s high-stakes communications environment, there is no margin for error.

Step 10: Plan Immediate Measurement. Once deal communications are launched, the parties need to implement qualitative and quantitative measurement. New software tools can analyze news media coverage and social media channels. Research can also be conducted among employees to determine if the correct messages are being transmitted. Don’t rely on anecdotal evidence.

In conclusion, senior executives involved in M&A activity must understand that announcing the deal is the beginning of a long-term communications challenge. If a well-conceived and executed strategic communications plan is undervalued and underestimated by the parties involved, it will have a detrimental impact on a successful transaction announcement and subsequent communications initiatives.

# # #

Richard E. Nicolazzo is management partner of Nicolazzo & Associates, a strategic communications and crisis management firm headquartered in Boston, Mass.

Joe M. Grillo, a partner at Nicolazzo & Associates, contributed to this blog.

Bartz Firing Mess Breaks New Ground for Crisis Pros

2011-09-23T11:04:00.044-04:00

September 6, 2011 may go down in history as a day when the rules for crisis communications management changed forever.

In making one blunt statement, “I’ve just been fired,” former Yahoo CEO Carol A. Bartz has likely re-written the rules for successfully managing a change in corporate protocol and leadership.

In a move that should send shockwaves to anyone involved in crisis management and strategic communications, Ms. Bartz blasted an email to Yahoo’s 13,400 employees shortly after she got the axe.

As the story was reported, this bizarre episode began to unfold when Yahoo board chairman, Roy Bostock, called Ms. Bartz and told her she was fired while she was on vacation on the East Coast, flying from Maine to New York.

Yahoo, a company already under fire on Wall Street for losing its way in the Internet space and underperforming financially, made numerous serious missteps in this process.

First, even if the CEO expects it, being fired by telephone is poor policy. Likely, this is a case of an out-of-control board that does not respect its CEO and, concurrently, does not value effective communications management. I would be hard-pressed to believe that any senior communications executive would agree with Yahoo’s strategy.

Where were the company’s lawyers in all this? It’s obvious that Ms. Bartz had a contract, and when contracts are going to be dissolved, skilled lawyers guide the process, non-disparagement clauses get written, and press releases approved by both sides are generated. There should be no substitute for this process.

It’s also astonishing that Ms. Bartz was allowed to send her email. Any company the size of Yahoo, even one that is dysfunctional, has an MIS director who can instantly delete anyone from the email system, thereby preventing widespread distribution of an email like the one that Ms. Bartz authored.

Not taking control of the technology before she was fired was a critical error. When it comes to controlling communications, no employee – from the custodian to the CEO - should have an opportunity to send emails from the corporate server after they have been terminated. Instant communications has changed the rules.

Clearly, Ms. Bartz had a rocky tenure at Yahoo. Didn’t anyone on the board consider that the reportedly high-strung CEO would do something dramatic?

Reckless Action

Some have argued that Ms. Bartz is a pioneer in that she told the truth and didn’t fall in line with the “corporate-speak” that accompanies most CEO dismissals. Others have said her action provides increased transparency and insight into how corporate America’s upper echelons really operate.

In a statement in The New York Times, Jeffrey Pfeffer, a Stanford professor in organizational behavior, says, “The truth helps you improve. When people lose their jobs and there’s no acknowledgement, the potential for learning is lost…Ms. Bartz’s comments also served her own cause. She’s acting as if this is not her fault. She’s controlling the message.”

Homa Bahrami, a senior lecturer at Berkeley, said in published reports, “I would say this is going to become much more of a trend…the chief executive picks up the phone and tells the investors exactly what happened.”

I believe this is academic nonsense.

It’s no secret that Ms. Bartz and the board did not see eye-to-eye during her nearly two years at the helm. In fact, in an interview with Fortune magazine, Ms. Bartz described Yahoo’s board members as “doofuses.”

That is no excuse for what I believe is reckless behavior. While her actions may seem in vogue and fit her shoot-from-the-hip style, they have further damaged Yahoo’s reputation and negatively impacted the stock. That translates into real value taken out of investors’ pockets.

It appears that Ms. Bartz never fully grasped that a publicly-traded company is owned by the “stockholders,” not the CEO or its senior management. What about her fiduciary responsibility to investors? That responsibility includes how and when she communicates, not just matters involving the balance sheet.

Want proof that Ms. Bartz’s actions were selfish and misguided?

Just three days after her email blast, Daniel Loeb, a prominent hedge fund manager, revealed that he had become one of the company’s largest shareholders and called for a major board shakeup. Reports have now surfaced that an investment bank was retained to brief the board on various scenarios that could break up the company or put it up for sale.

As a result, the people on the board who are charged with trying to save the company are under even more intense scrutiny. How could anyone argue that this is helpful to shareholders?

Teaching Moments

This messy and unpleasant episode should put senior communications counselors on notice that the rules are changing when it comes executive departures. For the most part, CEO departures have been “sugar-coated” in how they are communicated. Either the CEO resigns, talks about spending more time with the family, or states that he/she is stepping aside to assure a smooth transition.

Email, the Internet, and social networking have their upsides. In fact, an entire new industry has been created to aid and expand the communications process. But there’s also a downside that should be addressed.

A company can inform and engage its employees through blast emails and social networking in an organized and controlled fashion, but that does not prevent a rogue employee, even a CEO, from turning the tables and embarrassing the board, thus causing concern in the marketplace and potential harm to the organization.

In-house public relations executives and outside counselors need to design and implement stronger contingency communications plans with their bosses and clients. When it comes to change in upper management, every possibility should be considered…including detaching the deposed executive from the corporate email system before it’s too late. No more courtesies to shoot off emails to former colleagues and wish them well.

In the end, part of being a CEO is knowing how to act professionally, both in good times and bad. It will be interesting to see where Ms. Bartz finds herself. I’m betting that no major corporation will want her as “captain” of their ship.

* * *

Richard E. Nicolazzo is managing partner of Nicolazzo & Associates, a strategic communications and crisis management firm headquartered in Boston, Mass.

Joe M. Grillo, a partner at N&A, contributed to this blog.

Apple Stands Alone In PR Savvy

2011-09-06T17:32:00.001-04:00

iPhone. iPad. iPod. iMac. iTunes.

Simple product names that have come to define the best technology company on the planet and embody the spirit of Steven P. Jobs, a man whose brilliant vision and personal touch with consumers has made him a living legend.

Most of the plaudits about Jobs focus on Apple - the value of the company’s stock, the insanely successful products, the constant innovation, the billions of dollars of cash in the bank, and the company’s ability to figure out where consumer markets are headed. I believe the organization also stands alone in one other critical category: Strategic communications.

In my view, never in the history of American business has such a pivotal CEO faced a life-threatening illness that has been so linked to company valuation. For what seems like an eternity, Apple has been Steve Jobs, and Steve Jobs has been Apple.

On Wednesday, August 24, 2011, all that changed when Jobs told Apple’s board of directors he was stepping down as chief executive. Using one of the oldest forms of communications in today’s universe of tools, he sent a straightforward letter to the board with no news media interviews granted. This is controlled strategic communications at its best. The dispatch is carried universally with key messages imbedded throughout the text.

The actual 143 words in Jobs’ letter are worth noting:

“I have always said that if there ever came a day when I could no longer meet my duties and expectations as Apple’s CEO, I would be the first to let you know. Unfortunately, that day has come. I hereby resign as CEO of Apple. I would like to serve, if the Board sees fit, as Chairman of the Board, director and Apple employee. As far as my successor goes, I strongly recommend that we execute our succession plan and name Tim Cook as CEO of Apple. I believe Apple’s brightest and most innovative days are ahead of it. And I look forward to watching and contributing to its success in a new role. I have made some of the best friends in my life at Apple, and I thank you all for the many years of being able to work alongside you.”

Jobs’ style of tightly-managed communications is part of a pattern that has been criticized at times, but is still effective in protecting his privacy and not creating a media circus surrounding his health. Many will recall his first major announcement in early 2009, when he said his dramatic weight loss was caused by a hormone imbalance. Just a week later, he announced a medical leave of absence for several months. In June of that year, a Tennessee hospital confirmed that Jobs had received a liver transplant. Once again, these communications were all written statements, with no interviews either from Jobs or the company.

This pattern of communications continued in January of 2011, when Apple announced Jobs was taking a medical leave of absence…this time not specifying a reason or how long he would be away. Questions were raised about the severity of Jobs’ health issues and its potential impact on the company’s stock, product development and business operations, but the company did not miss a beat. Some may have been frustrated with the lack of specificity and transparency, but there were no Apple missteps in the process.

Apple and Jobs also deserve praise for the way the transition to a new CEO has been handled. John Dvorak, noted tech columnist for MarketWatch, likely has it right: Lots of companies in Silicon Valley would love to hire Tim Cook. Given that Jobs is considered to be critically ill, handing over the title to Cook had to be done sooner rather than later. If something happened to Jobs while Cook was “acting CEO,” the job may have been up for grabs. This approach is crisp, clean, and clear-cut. Cook is the new CEO and Jobs has the new title of “Chairman.”

Keeping it Simple

Internally, Apple, which has more than 46,000 employees, also kept it simple. In an email to all employees, Cook’s 225-word message was a blend of cheerleading and a tribute to Jobs. The entire email is instructive in its carefully crafted composition:

“I am looking forward to the amazing opportunity of serving as CEO of the most innovative company in the world. Joining Apple was the best decision I’ve ever made and it’s been the privilege of a lifetime to work for Apple and Steve for over 13 years. I share Steve’s optimism for Apple’s bright future. Steve has been an incredible leader and mentor to me, as well as to the entire executive team and our amazing employees. We are really looking forward to Steve’s ongoing guidance and inspiration as our chairman. I want you to be confident that Apple is not going to change. I cherish and celebrate Apple’s unique principles and values. Steve built a company and culture that is unlike any other in the world and we are going to stay true to that — it is in our DNA. We are going to continue to make the best products in the world that delight our customers and make our employees incredibly proud of what they do. I love Apple and I am looking forward to diving into my new role. All of the incredible support from the board, the executive team and many of you has been inspiring. I am confident our best years lie ahead of us and that together we will continue to make Apple the magical place that it is.”

The orchestration of Jobs’ announcement is a perfect example of how to execute crisis management and general strategic communications by:

· Controlling the message

· Ensuring accurate and timely material news to all audiences simultaneously

· Maintaining brand, management, and corporate credibility

· Minimizing any damage to reputations of individuals involved

· Reducing the risk of future business problems

· Focusing on the future

This may appear easy, but in practice things can rapidly get out of control. Just look at what happened to Hewlett-Packard when it announced (simultaneously) that it was exploring “strategic alternatives” and might sell its dominant personal computer business, it was scrapping its new, much ballyhooed TouchPad tablet computer, and it was acquiring a British software concern for more than $10 billion. The stock plunged 20%.

This communications fiasco came about a year after CEO Mark Hurd was forced to resign in the midst of allegations of sexual harassment and expense account irregularities. The one-year decline in H-P’s stock price is more than 45%, while S&P’s 500-stock index gained about 3% over the same period.

On September 16, 1997, when Jobs rejoined Apple, the stock price that day closed at $5.48. Recently, it was trading at about $390.

Last week, London book makers offered odds on where Apple stock will end the year now that Jobs has resigned as CEO. If you’re curious, the odds are 5-1 that the price will be $400 or more. My view is that even if something happens to Jobs, nothing drastic will happen to the stock. The company is like an aircraft carrier. Even major competitors like H-P surrender if a rival product to Apple doesn’t sell. Although it might be difficult to imagine, Jobs’ DNA may be so ingrained in Apple that the company could get even better!

Jobs or no Jobs, it’s hard to foresee anything stopping a company that seems to have the best of everything…including a strategic communications team that knows exactly what it’s doing.

Joe M. Grillo, a partner at Nicolazzo & Associates, also contributed to this blog.

Buffett Flunks Crisis Management 101

2011-05-06T09:25:00.000-04:00

Candor is one thing, but appearing out of touch with the fact set is another.

How else to explain the reputational hit that Warren E. Buffett’s Berkshire Hathaway company has suffered in recent weeks?

Buffett, known as the “Oracle of Omaha” and one of the richest men on the planet, may be a brilliant investor, but when it comes to crisis management skills, he probably needs a serious refresher course.

By now, the story is well-documented. On March 30, David L. Sokol, 54, long considered a leading candidate to succeed Mr. Buffett, suddenly resigned from Berkshire Hathaway.

It seems that Mr. Sokol purchased thousands of shares in Lubrizol, a lubricant company, two months before Berkshire announced a $9 billion deal to acquire the outfit. As one might expect, when the Berkshire deal was announced, the shares shot up 27 percent over a two-week period. Mr. Sokol made a cool $3 million on paper.

Like most alleged insider cases, the circumstances of the stock purchases remain murky. If we’ve learned one thing from all the Wall Street shenanigans, it’s that it takes time and research to unravel the timeline and understand what really happened.

This emerging crisis should have immediately set off an alarm for Mr. Buffett to “hold his fire” when the news stories about the resignation began to break. In my view, that is crisis management 101.

Instead, what happened? In a statement the same day, Mr. Buffett said, “Neither Dave nor I feel his Lubrizol purchases were in any way unlawful. He has told me that they were not a factor in his decision to resign.” Mr. Buffett went on to say that Mr. Sokol’s “contributions have been extraordinary.”

For a man with such acclaimed business acumen and successful track record of strategic investment decisions, this unfortunate episode was an unfathomable rookie mistake for Mr. Buffett. How could someone with his stature simply accept Mr. Sokol’s word that there was no self-dealing involved? Did Mr. Buffett really think that Mr. Sokol would say he was guilty of insider trading?

If he was practicing disciplined crisis management, what Mr. Buffett should have said was: “Mr. Sokol has resigned from Berkshire Hathaway. We will immediately begin a comprehensive review of the circumstances surrounding his resignation, including recent stock trades, and report our findings to the public and authorities as soon as possible. We will also cooperate with any regulatory investigation that might ensue.”

Mr. Buffett has since explained himself, but I’m not buying it. In a business column on May 3 in The New York Times, Mr. Buffett was quoted as saying, “I felt that if I’m laying out a whole bunch of facts that are going to create lots of problems for him for years to come, that I also list his side of the equation in terms of what he’d done for Berkshire.”

The Times column also quoted Mario Gabelli, a nationally-acclaimed investor and major shareholder in Berkshire, as saying the Sokol episode was “irrelevant” and derided it as “a good story for the media.” Mr. Gabelli also said he, like Mr. Buffett, simply cares about the company’s cold, hard numbers.

While I agree that financials are always paramount, I disagree that this episode means nothing to the reputation of Mr. Buffett and his company. What Mr. Sokol did may not ultimately be proven to be “technically” wrong, but anyone with a sense of fair play realizes that it does not pass the smell test.

New Legs to the Story
Unfortunately for Berkshire, the Sokol mess erupted just a month before the annual meeting, a time when senior executives at any company are most exposed. Instead of quieting down, negative media coverage ticked up several notches, with both sides contradicting each other.

On April 27, a report issued by the audit committee of the Berkshire Board accused Mr. Sokol of misleading the company about his personal stake in Lubrizol. “His misleading incomplete disclosures to Berkshire Hathaway senior management violated the duty of candor he owed the company…Mr. Sokol may have failed his fiduciary duty under the law of Delaware.”

What a stark turnaround from Mr. Buffett’s initial comments.

Things got even uglier when Mr. Sokol’s lawyer, Barry W. Levine, got involved and disputed many major assertions in the audit report. “…Mr. Sokol had told Mr. Buffett ‘twice, not once’ about his ownership of Lubrizol shares before Mr. Buffett began discussions with the company.”

A more stunning revelation was the audit report stating that, “Mr. Buffett and the company did not have the full story in March.” This begs the question: Why would Mr. Buffett make the statements he made without knowing all the facts?

I believe Mr. Buffett’s apparent knee-jerk reaction to this issue and the subsequent fallout has tarnished his pristine reputation.

I continue to be shocked at the apparent lack of crisis management planning in some of the world’s largest companies. It wasn’t that long ago that Tony Hayward, the disgraced BP chief, said publicly, “The company’s contingency plans were inadequate and we were making it up day-to-day.”

Berkshire Hathaway, a company that generated nearly $18 billion in cash from operations last year and currently has more than $38 billion to spend on future acquisitions, erred badly in communicating its reaction to what has become a major scandal.

What happens next isn’t clear, but according to published reports, the Securities and Exchange Commission is already investigating Mr. Sokol’s trading. In fact, we now know that Mr. Buffett called the SEC himself and laid out the pattern of trading.

Berkshire Hathaway may face lawsuits from shareholders who want Mr. Sokol to forfeit his trading profits because of the negative publicity and damage to the company’s reputation. And the audit report said the company is considering whether to pursue “possible legal action against Mr. Sokol to recover any damage the company has sustained, or his trading profits.”

In the final analysis, the lack of a coherent and well-planned crisis communications strategy is what’s most surprising.

Mr. Buffett is fond of saying: “Lose money for my firm, and I will be understanding. Lose a shred of reputation for the firm, and I will be ruthless.”

Still, even in his latest interview with the Times, Mr. Buffett has not publicly taken Mr. Sokol to the woodshed. It may be the only way to truly end this chapter and move on.

Betrayal cannot go unanswered.

Joe M. Grillo, partner at Nicolazzo & Associates, contributed to this blog.

Time for BP's Hayward to Fade Away

2010-11-12T16:23:00.000-05:00

So now he’s back.

Tony Hayward, former disgraced BP chief, agreed to be interviewed for a BBC2 documentary that aired on Nov. 9. And to think we thought we had heard the last of one of the biggest corporate punching bags in the past 20 years.

Check out these gems from his first major interview since the Gulf debacle: “…I’d have done better with an acting degree.” “You know it’s difficult to hate a company, it’s much easier to hate an individual.” “…the company’s contingency plans were inadequate and we were making it up day-to-day.” “BP was not prepared to deal with the intensity of the media scrutiny it faced.”

These fresh quotes from the man who botched Crisis Management 101 with earlier comments like: “I want my life back” and “The amount of oil which leaked into the Gulf was relatively tiny compared with the very big ocean.”

Maybe it was the relative comfort of speaking to a London journalist that prompted Hayward to get back into the fray. After all, he was demonized and vilified in the United States and abroad until he resigned back in July. So why speak to any reporter? It just relives a very ugly chapter in BP’s corporate history.

Personally, I find Hayward’s latest remarks about as off-the-wall as his earlier statements. Does he really think “acting lessons” are necessary to manage a crisis or that a company can’t be hated as much as an individual? He is living on another planet.

Even worse, admitting that the company was unprepared for a disaster is outrageous for an organization the size of BP that explores and drills for oil and gas in some of the most adverse environments on the planet.

Once again, this points out the need for contingency crisis communications planning. Remarkably, despite all the environmental catastrophes in recent years, major companies around the world seem completely unprepared to effectively plan for and manage a significant crisis. They spend most of their time and energy focusing on financial performance and operating results, which is what they get paid for.

However, in my view, fiduciary responsibility goes far beyond the numbers. A company has a moral obligation to ensure that its top executives use best practices in corporate governance…and that includes crisis management.

Top communications executives (and even trusted outside counselors) need to be part of the senior decision-making process. From many years of experience, I have come to realize that the strategic communications team often “gets its marching orders” after major corporate decisions have been made. This thinking is fundamentally and strategically flawed.

Questionable Communications Skills

A geologist by training, the former BP CEO has a strange knack for off-the-cuff quotes. At his last board meeting, he reportedly said his experience “…was like stepping out from the pavement and being hit by a bus.”

At the time, he also described BP’s response to the oil spill as a “model of what corporate social responsibility is all about.” Tell that to the people of the Gulf who suffer the consequences of this massive leak and will continue to find oil in their vast ecosystem for decades.

One has to wonder if BP has ever heard of presentation and media training. For years, this training has been widely available for CEOs and senior executives willing to invest the time and energy in the process. Communications skills “can” and “should” be taught to executives at companies, both large and small. It’s not rocket science.

Ever since the Deepwater Horizon killed 11 workers, knocked billions in value off BP’s share price, and brutalized a corporate reputation already tarnished from previous accidents in the U.S., hundreds of thousands of words have been written to scrutinize and analyze the company’s crisis response.

Some of the best minds in communications and academia have argued that, because of the nature of the calamity, no crisis plan could have saved BP. Having practiced crisis management for more than three decades, I disagree.

One needs to remember that BP already had a questionable industry track record, including a deadly 2005 explosion at its refinery in Texas City (15 dead), the near-sinking of one of its flagship rigs a few months later, and the huge oil spill from a ruptured pipe in Alaska in 2009. If these problems at the operating level had been appropriately addressed, the Gulf incident may have never occurred.

The Gulf disaster also sits juxtaposed against BP’s decade-long rebranding campaign to position itself as a public-spirited, environmentally sensitive, green energy enterprise. Hayward, who took over as head of exploration and production for BP in 2003, stated in earlier interviews that he “promised to refocus the company and change the culture, emphasizing safety.” In more recent years, many ads depicted BP as “safe and competent.”

BP simply blew it. The company was unprepared to communicate effectively in today’s frenzied media environment. As a spokesperson, Hayward failed the basic tests of crisis management. He did not take responsibility (not to be confused with blame) for the company’s actions. He then magnified the continuing onslaught by developing the communications strategy on the fly and allowing the crisis communications process to manage him instead of taking charge, developing an agenda, establishing goals, and bringing the situation under control.

In my mind, there is no legitimate excuse for Hayward’s poor performance. If you’re an international oil company, you must have a CEO and senior management team that can effectively manage a disaster and steer the company’s public comments in a direction designed to mitigate the inevitable negative consequences. This is not acting or reacting, but working from a disciplined approach to strategic communications and crisis management that can and will make a difference in protecting an entity’s brand and reputation before irreparable damage occurs.

Management Expertise is Key

Why is it that Bob Dudley, the American who took over for Hayward, had much better luck in implementing a communications strategy and has at least been able to calm the waters? Part of the reason is that he does not shoot from the hip or try to be flippant and cute. Instead, he’s taken a more thoughtful, measured, and strategic approach.

Even before he officially took over, Dudley was quoted as saying, “If we continue to meet our obligations, then over time people will say this was a good corporate citizen responding to an accident that has been a wake-up call to the entire oil and gas industry. If we ensure this does not happen again, then maybe we can restore our reputation in the U.S.”

In an October 2010 story on the guardian.co.uk website, Dudley was described as “….intelligent and unflappable. Nothing, nobody could get him angry. He never said anything bad about anybody. Bob can keep focused on the issue at hand when mayhem is breaking out all around.”

Sounds like a new tune from a distinctly different breed of corporate executive. Perhaps BP should have let Dudley manage communications in the U.S. from the beginning instead of parachuting Hayward in.

It will likely take years before we can accurately assess the true damage done to BP’s brand and reputation. Earnings have suffered and the long-cherished dividend has been suspended. But these are financial benchmarks. Only time will tell if the damage, mostly self-inflicted, will heal so that BP is once again viewed as a responsible company practicing good corporate governance and citizenship.

BP’s ongoing nightmare began with its decision to put the wrong person out front from the beginning. It is clear that, by his own admission, Hayward was simply unprepared. His latest interview proves once again that hubris and unbridled arrogance will continue to cost BP dearly, both on and off the balance sheet.

In my view, if Tony Hayward is prudent, he should quietly fade into the sunset.

Richard E. Nicolazzo is Managing Partner of Nicolazzo & Associates, a strategic communications and crisis management firm headquartered in Boston, Massachusetts.
Joe Grillo, Partner, and Linda Harvey, Director-Client Services, contributed to this blog.

Toyota Needs to Find Communications “Throttle”

2010-03-15T14:00:00.000-04:00

By Richard E. Nicolazzo

Remember that old Toyota corporate advertising theme: “Oh, What a Feeling?” I’ve got a new theme for the company: “Oh, What a Fiasco!”

There must have been long faces in Toyota’s executive suites when a California man held a press conference to tell the world that his Prius accelerated out of control on a freeway. From the air, it looked like a bad “OJ” moment.

To make matters worse, the California “runaway” occurred only 12 miles from where a deadly crash last year sparked the initial scrutiny into Toyotas. That incident, which keeps finding its way into the national media along with the 911 call, resulted in the death of a former California highway patrol officer and three members of his family.

Just a day later, the crash of another Toyota Prius in New York caught the attention of federal regulators after the driver said the car accelerated on its own, lurched down a driveway, across a road and into a stone wall. Ouch.

When you add it all up, with more than 50 deaths apparently linked to deadly accidents, the Toyota situation has turned into the tsunami of all product recalls.

The numbers prove it: 745,000 Priuses built from 2004 to 2009 recalled; six million other Toyotas in the U.S. and some eight million worldwide recalled; 85,000 lost sales over the past two months.

On top of that, a report in the Wall Street Journal said that the financial impact on Toyota from the global recall could total more than $5 billion over the next year because of increased incentive campaigns, litigation costs and big marketing dollars.

One could certainly make the case that Toyota took its time addressing the issue. In the past decade, at least 3,306 Toyota and Lexus drivers nationwide have reported instances of sudden acceleration, according to the latest numbers from Safety Research & Strategies, Inc., a Rehoboth, Mass. company that monitors safety issues for attorneys and plaintiffs in civil complaints, government agencies, and other clients.

To put it bluntly: The smoking gun was there for a long time.

Catch 22 Situation

What makes the Toyota crisis particularly challenging is the never-ending onslaught of bad news.

When you look at the crisis playbook, what Toyota has done deserves general praise: The company stood up and took responsibility for the vehicle defects.

First, Toyota took the extraordinary step of suspending the manufacture and sale of eight of its most popular models because of the unresolved mechanical flaw in the gas pedal assembly. The lines were not restarted until all the defective parts were destroyed and more testing took place. Additionally, dealers could not sell these models on lots until repairs were made.

To Toyota’s credit, this was a big step in beginning to align itself with consumers rather than protecting its corporate image.

In rapid order, Toyota issued official recalls, brought its senior executives to testify before Congress, placed full-page ads in major metro newspapers, made its top U.S. executive available for interviews, communicated with its dealers, gave those dealers cash to repair vehicles as soon as possible, and even staged a press conference in California to refute an ABC story that showed a tachometer near its red-line when the car was in “Park.”

On the sales side, the company has been aggressive in supporting its dealer network. New Camrys are on sale for as little as $179 a month; the Lexus brand is promoting discounted lease offers; and zero-percent loans are commonplace.

The real Catch 22 is how Toyota moves on from what can only be described as a product and reputational nightmare.

With its long-term credibility and brand at stake, I believe the company needs to continually assess its “communications throttle.”

For example, on the same day the Prius went out of control in California, Toyota was running customer testimonial ads in major markets that talked about the “safety and reliability” of the brand.

In my view, this is pushing the throttle too hard at a time when it remains unclear if Toyota truly has the fix for defective vehicles. Here in the Boston market, I saw a video news clip of the runaway Prius on the California highway followed by a commercial about Toyota’s reliability. The juxtaposition does not work for Toyota.

For the time being, the company should provide customers with relevant information about how to deal with an unexpected event or acceleration of a vehicle they manufactured. They should also consider providing customers with hands-on training about how to deal with a problem when it surfaces. For example, they should consider conducting seminars and distributing instructional videos depicting how a consumer should manage these related problems when they surface.

If Toyota wants to address safety and reliability, it might be better off sending a letter directly to the homes of vehicle owners. This would avoid the clutter on TV, radio and the Internet that continues to sting the company.

Adding to its operational and communications woes, Toyota is now being victimized by people who crash their cars and blame it on unintended acceleration. Although expensive and time consuming, Toyota should inspect every vehicle involved in a crash and extract data from the “black box” installed in vehicles to record the condition of the engine, brakes, accelerator and other components at the time of an accident. Otherwise, it risks being blamed for hundreds of accidents that likely have nothing to do with gas pedal or floor mat problems.

Some Brands Come Back

What happens to a brand in a crisis is always hard to predict. Audi, the last major car company to deal with unintended acceleration, was moribund in the U.S. for nearly a decade, but has made a great comeback. Better engineering and slick marketing have rejuvenated the brand, and it’s now stronger than ever.

About a year ago, Domino’s Pizza was the target of a disgusting video prank that looked like it would seriously damage the brand. But the company recently announced solid 2009 results and an increase in same store sales for the 64th consecutive quarter.

In other cases, such as Arthur Anderson, Lehman Brothers and Bear Stearns, the enterprises collapsed.

Despite negative media coverage since late January, there may be some early signs that Toyota can weather the storm. In February, the company’s U.S. market share slipped to 12.7% from just above 14% the previous month. All-in-all, not that significant a drop. Despite the equally negative press about the Lexus brand, sales are up 5% so far in 2010.

Analysts have predicted Toyota will report a profit of more than $800 million when it announces year-end results at the end of March, reversing a loss for 2008.

What next year holds is anybody’s guess.

In the final analysis, the pressure to get this issue behind the company falls on Toyota’s engineers. It doesn’t take a rocket scientist to see that, despite the floor mat and pedal recalls, there is likely something else wrong with the inner workings of Toyota vehicles.

If the problem is in the electronics, Toyota has backed itself into a corner by publicly announcing that either the floor mats or pedal assembly are defective. Admitting an electronics problem is probably unthinkable because it could mean replacing the entire car…a scenario that could create a major financial crisis for even a company this size.

Like most major recalls, the problem seems to emanate from poor product design, engineering flaws, sloppy manufacturing, problems in distribution, or a host of other factors unrelated to strategic communications.

At Toyota, the crisis management team is left to deal with the fallout, somehow rebuild brand integrity and loyalty, and continue to drive sales for its massive dealer network. This is a Herculean task.

Meanwhile, anybody driving one of these vehicles would be well served to take it slow, learn how to put the vehicle in neutral at highway speeds, and shut the engine off in sequence.

It could save their lives.

Joe Grillo, partner, contributed to this blog.

2009-07-28T15:38:00.004-04:00

PRESIDENT VIOLATED CRISIS MANAGEMENT RULE #1

By Richard E. Nicolazzo

Rarely does a news story cause a crisis for three separate entities at the same time, but that’s just what happened when Harvard professor Henry Louis Gates Jr. was handcuffed in his home and hauled off to the Cambridge, Massachusetts city police department.

The events of July 16, while still a bit fuzzy, have nevertheless sparked another national debate on race relations in America, even involving (or should I say entrapping) President Obama.

At first, the incident wasn’t much of a story, only appearing four days after the arrest as an item on the Harvard Crimson website. It didn’t take long for the local, regional, national and international news media to uncover the nasty details of the tête-à-tête between Gates and Cambridge police Sergeant James Crowley, the officer who made the decision to arrest the professor on disorderly conduct charges.

Given Gates’ lofty status, the viral nature of the story immediately engulfed the police department and the professor in a crisis situation…both parties talking way too much and, at least initially, digging themselves in deeper.

As if that wasn’t bad enough, President Obama fanned the flames when, at the end of a press conference on health care reform, he said police “acted stupidly” in arresting Gates, and noted that black and Hispanic men are still arrested disproportionately.

Report Cards

Breaking things down, what’s almost inconceivable is that the President would finish last of the three parties in managing the crisis.

Cambridge police deserve a solid “B+” for the way they responded. First, Sergeant Crowley stood up and logically explained the events and protocol that was followed before he took out his cuffs.

He received solid support from Cambridge Police Commissioner Robert Haas and the police union. In each case, this group responded only after learning and digesting the facts.

The city made another excellent decision when it reached out to convene a group of nationally recognized experts to help determine what lessons officials can learn from the arrest.

Gates, accustomed to the spotlight, apparently couldn’t resist responding to media inquiries. Not only did he respond by phone and email, he made himself available to cameras while vacationing at his Martha’s Vineyard summer home.

I’d grade him no better than a “C-“ because he let his emotions get the best of him. Not only did he criticize the police, he quickly let it be known that he might bring suit. He also went for Sergeant Crowley’s jugular, accusing him of making up the facts in the police report. Even at this point, Gates and Crowley disagree about what happened.

In my view, the Gates angle of the story could have evaporated rapidly if the professor had released one written statement and ended it at that. It may take some time to sort out, but in the end his contentious remarks may damage his reputation.

Low Mark for the President

The big surprise in all this is President Obama. How can you grade him anything but a “D-.”

When a reporter asked him about the incident, instead of declining comment on an arrest that had nothing to do with a major healthcare policy initiative, he stepped right into the fray, uttering the stupidity remark that caused an instant firestorm.

Sorry Mr. President, but this can’t be chalked up to a rookie mistake. You’ve been immersed in a high stakes media environment for nearly two years. You’re surrounded by a top-flight team of advisers and confidants who are supposed to be guiding you in managing communications.

Surely, given the race card issue that was being played out across the country, someone on your staff must have cautioned you to be aware of a trick question and not fall into a trap? Not so, it appears.

For a man who prides himself on self-discipline, President Obama has seemingly caught “slip-of-the-tongue disease.”

In recent months, he had to apologize after joking that his bad bowling skills might qualify him for the Special Olympics. A joke about Nancy Reagan holding séances forced him to call her and make amends.

He sparked more debate when he said college football should adopt a playoff system, picked North Carolina to win the NCCA basketball tournament, and said he liked Michael Jordan over Kobe Bryant.

In the Gates incident, Obama, to his credit, made a conciliatory gesture to help mitigate the crisis when he invited the Harvard scholar and the police officer to share a beer with him at the White House.

Nevertheless, the President still violated the number one rule in crisis management: Never speak before you have the facts.

While we can only speculate about Obama’s future comments, I sense moving forward we may see a more guarded Commander in Chief.

Richard E. Nicolazzo is managing partner of Nicolazzo & Associates, a strategic communications, crisis mangement and public relations firm headquartered in Boston, Massachusetts. Joe Grillo, a partner in the firm, contributed to this commentary.

# # #

2009-07-07T12:39:00.002-04:00

THE “CSMO’s” TIME HAS COME

By Richard E. Nicolazzo

Welcome to the world of social networking and social media, where the numbers are staggering.

MySpace, 263 million users. Facebook, 200 million. Tagged.com, 70 million. Flixster, 70 million. Classmates.com, 50 million. Twitter, 25 million. LinkedIn, 40 million.

And that doesn’t take into account YouTube, which although not technically a social networking site, can attract upwards of 100 million hits on a single video.

Years ago, public relations executives focused on major newspapers that had circulations of hundreds of thousands and network TV news broadcasts that had millions of viewers. Nowadays, those numbers seem like they’re from the Jurassic age.

Things have moved at such a warp speed that major corporations (both public and private), the government, and organizations of all shapes and sizes cannot afford to be passive about how stories play out in print or broadcast media.

For better or worse, the action has moved online.

New Breed of Communications Executive

While the social networking craze now dominates strategic communications discussions and educational workshops, it’s actually not a new phenomenon.

Many believe social networking began to flourish as a component of business Internet strategy in early 2005 when Yahoo launched “Yahoo! 360°”. Later that year, News Corporation bought MySpace. Since then, various social networking sites have sprung up catering to different languages and countries. Wikipedia now estimates there are 200 sites on the global scene.

During the past 20 years, we’ve seen a litany of executive titles at the top of the communications ladder. On the corporate side, we’ve migrated from director of communications, to senior VP, to VP of corporate communications, to chief communications officer, to executive vice president. In the agency business, the top officer is now commonly known as managing partner.

In my view, we have now clearly reached the point where a new communications title should be established: “Chief Social Media Officer (CSMO).”

The words “social media” are critically important in this title because that is where a new generation of “reader-viewers” is headed. It’s no secret that newspaper and magazine readership is plummeting and other traditional forms of media such as TV and radio are reducing editorial staffs, thus potentially compromising their coverage.

We have suddenly entered a new universe where the meaning of “media” is being re-engineered. Are you skeptical?

CyberAlert, Inc., a fully-automated news monitoring and tracking service in Stratford, Conn., offers these products: CyberAlert 4.0, Blog Squirrel, CyberAlert VDO, and Netpinions. Collectively, they monitor 35,000 online news sources, 5 million daily blog entries, 200 online video sharing and news sites, and 100,000 online message boards, forums, and news groups.

And just recently, PR Newswire unveiled a social media monitoring tool to measure discussions and mentions across blogs and message boards. The service claims to track more than 20 million blogs, millions of forum posts and 30,000 online news sources, including videos.

Journalism is Evolving

In past decades, journalists served as the filter between information flowing from an organization and what ended up in print or on the air. While laudable in its purest form, this dynamic is changing at lightning speed.

In its last survey on media relations practices, Bulldog Reporter/TEKgroup International reported that about two-thirds of journalists use social media to research stories.

Almost 38 percent of journalists now say they visit a social media site at least once a week as part of their reporting. And approximately 20 percent receive five or more RSS feeds of news services, blogs, podcasts or videocasts every week.

Anyway you look at it, the “CSMO” needs to create alerts for negative mentions that could provide critically valuable time if a response is needed before a situation spirals out of control.

One recent example comes to mind.

In April, Domino’s Pizza was caught somewhat flat-footed when a disgusting YouTube video prank depicted two employees in North Carolina putting nasal mucus on sandwiches and putting cheese up their noses.

While the company had some early indications that the video was spreading on websites and blogs, the corporate PR group was likely not prepared nor empowered to move quickly and fight back. At the time, a spokesperson for Domino’s said, “…Right now, it (the video) is on web sites and blogs. It’s not on ABC, CNN or USA Today.”

Two days later, when the company posted its own YouTube video and apology on its website, an estimated 1 million people had already seen the original. The damage was done. In this case, one can only imagine how much business was lost over the 48-hour period, not to mention the impact on brand integrity and customer loyalty.

Given the inherent viral nature of social networking and social media, it’s not likely that anyone can totally predict or control future abuses. What can be controlled is early detection and immediate response. That’s why any company that does not have the proper safeguards, monitoring systems and response teams in place to deal with the blazing speed of the Internet may find themselves “Internet lightning victims.”

As time has proven, more often than not it’s not the crisis itself that does the damage, but how management is prepared to respond.

Richard E. Nicolazzo is managing partner of Nicolazzo & Associates, a strategic communications, crisis management and public relations firm headquartered in Boston, Mass. Joe Grillo, a partner in the firm, contributed to this commentary.

# # #

2009-04-16T16:58:00.006-04:00

Message to Domino’s: Contingency Planning Still Rules the Roost

Just over a century ago, The Boy Scouts of American adopted a motto that is as poignant as ever: “Be Prepared.”

It may sound old-fashioned, but the disgusting video prank that damaged the Domino’s Pizza brand once again proves that major companies are not spending enough time on contingency crisis communications planning.

How else can you explain the comments of the company’s spokesperson when asked about a YouTube video that depicted two employees in a North Carolina store putting nasal mucus on sandwiches and putting cheese up their noses?

The spokesperson, Tim McIntyre, told the website ragan.com, “…Right now, it (the video) is on web sites and blogs. It’s not on ABC, CNN or USA Today.”

So what? The damage had already been done.

By the time Domino’s posted its own YouTube video and apology on its corporate web site, an estimated 1 million people had already seen the original.

Worse than that, the social media phenomenon Twitter helped spread the YouTube video like wildfire. Things got so bad that Domino’s (once again about 48 hours after the first video appeared) had to create its own Twitter account.

Like it or not, social media explosions like this one can quickly cause real loss of business. BrandIndex, a daily online consumer brand perception service, reported that Domino’s “buzz score” had dropped significantly from April 10 to April 14.

While it may be too early to assess the long-term damage to the Domino’s brand, one could imagine a scenario whereby hundreds of thousands of consumers call Pizza Hut instead of Domino’s. The lost revenue in just a few days could amount to millions, or even hundreds of millions.

Some Things Never Change

Having practiced crisis communications for more than 30 years, I continue to be astounded at the lack of real, in-your-face contingency communications planning.

I’m not talking about the kind of planning that results in a binder on a shelf containing the names of top company executives who should be contacted in a crisis. Or a boiler-plate crisis communications checklist posted on a company’s Intranet. Or even the availability of a company spokesperson who can speak to the media.

In case after case, it’s not what is said when the house is burning, but what has been done to prevent the fire in the first place.

The Domino’s flap is particularly troubling in that the company had not likely prepared for a YouTube or Twitter scenario. If it had, the responding video from the president would have been posted on day one, not 48 hours later. Similarly, the Twitter account could have gone live within hours of the YouTube video.

Even more puzzling is a New York Times story that indicated the company learned about the original video the day after it appeared, but decided not to respond aggressively, hoping the controversy would subside. “What we missed was the perpetual mushroom effect of viral sensations,” said the Domino’s spokesperson.

This is another indication that Domino’s – and likely hundreds of other major companies – have not adequately addressed contingency communications planning as it relates to social media flare-ups.

While online media will continue to evolve, moving faster and faster in the weeks, months and years ahead, nothing is likely to replace the need for contingency planning that stays ahead of the curve.

As I have been espousing for years, a company’s best communications talent (and outside counsel whenever necessary) needs to have a seat at the table right next to the CEO. Still, in too many cases, the crisis is handed to the spokesperson without the benefit of a rock-solid crisis communications contingency plan in place.

Old School is New School

Companies should not let new mediums like YouTube, Facebook, Twitter, MySpace, and other yet-to-be-invented services intimidate them. Instead, they need to focus on the fundamentals of sophisticated contingency communications planning. Here’s a checklist of processes to consider:

As part of the risk management process, appoint a “brand-threat” team charged with the responsibility of monitoring online sites, broadcast and print media 24-7. Have a system in place to direct problems right to the CEO.

Explore organizational vulnerabilities. Get the company’s top five executives in a room and discuss three to five worst-case scenarios. Hold nothing back.

Develop a written plan, one with situation analyses, objectives, strategies, key audience definition, key messages, implementation tactics, and social media protocols.

Establish a crisis team that includes senior management, communications and legal counsel (inside and outside), marketing, customer service and other key executives.

Maintain transparency. We are long beyond the days when a company in crisis can say “no comment.” Your customers and others demand answers. What is said should have its roots in the crisis communications plan.

Invest in training. There is still no real substitute for media training and presentation training. Top executives and spokespersons need constant refresher courses. In a crisis, the CEO might need to post a YouTube video within hours.

Stay current. Today’s lightning-fast information environment demands a mix of young, mid-seasoned, and veteran communicators. There’s nothing like a “20-something” to know what’s hot.

Pay for measurement. Don’t assume that your message is getting through and mitigating brand damage. There is no shortcut to quantitative analysis. The nation’s top polling firms can deliver results in 24 hours.

As time has proven, no company is fully immune to a crisis. But remember, more often than not it’s not the crisis itself that does the damage, but how well management responds.

Truth be told, in our free-speech online society there is no way to truly stop people from pulling stupid stunts like the one that bashed Domino’s.

A better plan, though, might have averted what amounted to a lynching by social media.

Joe M. Grillo, senior vice president, contributed to this blog.

2008-11-20T13:34:00.008-05:00

President, Congress Must Call for a 90-Day Subprime Loan Moratorium

By Richard E. Nicolazzo

Whatever the country is doing to solve the subprime loan mess just isn’t working. I believe the time has come to start thinking outside the box.

The crisis, born from the bursting of the U.S. housing bubble, has passed through various stages exposing poor regulatory framework, unscrupulous lending, and a pervasive weakness in the global financial system.

Despite the July 2008 passage of the Housing and Economic Recovery Act and recent actions by lending giants such as Citi, JPMorgan Chase, and Bank of America to modify billions of dollars in mortgages, the housing meltdown appears to be worsening.

The Congressional Budget Office had projected during the summer that the so-called “Hope for Homeowners” legislation would allow about 400,000 troubled homeowners to switch their risky loans for conventional 30-year fixed rates with much better terms.

Early results have been troubling. The government received only 42 applications in the program’s first two weeks and, according to the Federal Housing Administration, only 20,000 applications are expected by a year from now.

Consider some other sobering statistics recently compiled by First American CoreLogic, a market research firm quoted widely on the subject:

Nearly one in five U.S. mortgage borrowers owe more to lenders than their homes are worth.
About 7.63 million properties, or 18 percent, had negative equity in the previous month.
Seven hard-hit states (Arizona, California, Florida, Georgia, Michigan, Nevada, and Ohio) had 64 percent of all "underwater" borrowers.

To make matters worse, the Bush administration, Treasury Secretary Paulson, Fed Chairman Bernanke, and the FDIC continue to squabble about how to get direct aid to homeowners. You might call it political “analysis paralysis.”

The FDIC has a plan to provide a federal guarantee to share in any losses on modified mortgage loans, but the White House has opposed it. The FDIC estimates the plan could help prevent some 1.5 million foreclosures.

Sheila Bair, FDIC chair, was blunt in recent comments: “Today, the stakes are too high to rely exclusively on industry commitments to apply more streamlined loan modification.”

Bold Action Needed Now

While definitive statistics are hard to come by, most estimate the value of U.S. subprime mortgages at more than $1 trillion, with approximately 16 percent of this amount in the adjustable rate mortgage (ARM) category.

Why haven’t regulatory and Congressional efforts begun to turn the tide?

My sense is that the whole system needs time. When you dissect the residential mortgage lending industry, you find a complex web of regulations, paperwork, federal guidelines and other impediments that prevent the process from working smoothly. Anyone who has ever applied for a home mortgage can appreciate the challenge.

The time for more bold action is now.

Immediately, the president and Congressional leaders should call for a voluntary 90-day subprime loan moratorium. Lenders holding the mortgages would be asked to grant borrowers the three-month reprieve and stop all foreclosure actions. If voluntary actions don’t work, Congress should step in and enact legislation.

Designed to work as a cooling-off period, the moratorium would address the immediate need for homeowners to “catch their breath” and work with lenders to restructure their loans.

Eligibility would follow along the lines already established by Congress for the Housing and Economic Recovery Act:

The loan must be on an owner-occupied principal residence.
The homeowner must have a monthly payment greater than at least 31 percent of the borrower’s total monthly income, as of November 1, 2008.
The Borrowers must certify that they have not intentionally defaulted on an existing mortgage, and did not get the loan in the first place by fraudulent means.
No one with a criminal record could take part in the moratorium.

The moratorium would not be intended as a bailout or as a reward for families who bought homes they couldn’t afford. Instead, it would keep people in their homes.

Rescues Can Work

While the problem is massive and highly complex, history proves radical thinking can work. The 1975 rescue of New York City comes to mind.

With the city $12 billion in debt, financier Felix Rohatyn was brought in by the mayor to set up an entity called the Municipal Assistance Corporation. It raised money selling bonds backed by sales of tax receipts and stock transfer taxes. The goal was to revive the city’s economy while balancing the budget. It worked.

Although no silver bullet exists to solve the subprime loan mess and general downturn in housing, a 90-day moratorium on subprime mortgages is something homeowners and the country desperately need.

While policy makers in Washington continue their debate, homeowners continue to suffer.

Richard E. Nicolazzo is president and CEO of Nicolazzo & Associates, a strategic communications and crisis management firm headquartered in Boston, Massachusetts. Joe M. Grillo, senior vice president, contributed to this commentary.

2008-11-12T15:54:00.004-05:00

NEXT FOR OBAMA: 'EXPECTATION MANAGEMENT'

“Public sentiment is everything. With public sentiment, nothing can fail; without it, nothing can succeed."
— Abraham Lincoln, Lincoln-Douglas Debate, 1858

Now, a week after the election, Barak Obama the great “campaigner and orator” must become Barack Obama the great “communicator” as he attempts to rebuild confidence and trust with the American public and the world.

After capturing more than 64 million popular votes and thrashing John McCain, 365-162, on the electoral scorecard, Obama assumes what is arguably the toughest job on the planet.

Like a new chief executive officer who steps into a multibillion-dollar company on the precipice of business collapse, our new president, with no real executive experience, has to manage two wars, protect the U.S. from terrorists, rebuild a staggering economy and fulfill all the other campaign promises he’s made during the past year.

In the world of communications, one might call this entering the realm of “expectation management.”

Let’s be realistic: PR executives like me (and hundreds of others who frequent this website) like to drive the argument that communications is at the heart of any successful endeavor. It’s never been more real.

Rick Stengel, Time magazine managing editor, may have put it best recently when he said, “Obama’s main job is to be communicator-in-chief.”

The millions of Americans who voted for Obama, and even the 53 million who voted for McCain, will likely show patience as the new president gets his feet on the ground and tackles an agenda that is similar to Franklin D. Roosevelt arriving in the capital in the depth of the Great Depression.

Early indications are that Obama and his new chief of staff, Rahm Emanuel, get the picture. On November 7, only three days after the vote, Obama held a press conference. What better way to start directly speaking to the public?

Three days later, Obama and his wife met at the White House with President Bush and the First Lady. Even though the visit – the earliest in recent presidential history – did not produce major policy statements, it stands as a symbol of our democracy and underscores the importance of communication between the man on the way in and the man on the way out.

People Respond to Structure

Obama can take a page from the modern crisis communications playbook:

Develop a situation analysis encompassing the short-term problems that must be addressed immediately;
Establish goals and objectives that are achievable;
Define the audiences;
Develop key messages and positioning strategies that will resonate with the public (no spin);
Execute tactics; and
Measure results along the way through reliable polling.

It’s this “structure” or “framework” that can create order from chaos. With this communication plan, Obama “takes control” of the situation and establishes that he’s at the helm with a steady hand.

This process should manifest itself in bite-size messages that the public can easily absorb. Taking small steps is the strategy for success. Past presidents have described the cocoon-like effect that occurs when the commander-in-chief gets into the Oval Office.

No human being can deliver everything at once. Obama must tackle the problems one by one and lay out a clear, concise strategy to deal with each. One way to describe it would be “breaking the bubble” and creating a dialogue with the American people.

News Media is Not the Enemy

Today’s blazingly fast media environment takes skill and sophistication to master. So far, Obama’s troops seem on top of their game. No candidate has used TV, radio, print, online, and cell phone media better than Obama. His administration should keep the same tempo.

Working the news media game is also critical. Jon Friedman, who writes the popular Media Web column for MarketWatch.com, suggests Obama loosen up a bit from this point on.

The best way to deal with potential adversaries is to embrace and listen to their concerns. Those who were around at the time must remember the way President Kennedy quipped along with those that opposed him. In more recent times, Ronald Reagan and Bill Clinton had great karma with the media.

The key point is to create an environment where a message can be delivered (without clutter) directly to the American public.

With the benefit of more than 35 years in the business of strategic communications, I offer the new president some short and long-term recommendations to become the “great communicator”:

Unlike previous presidents who focused on radio, Obama should consider monthly TV addresses to the nation on Sunday nights at 8:00 p.m. My hunch is there will be plenty to talk about every 30 days. At a minimum, cable channels are likely to broadcast Obama’s full remarks.
Maximize email communications. The Obama campaign has amassed the email addresses of millions of supporters who can be reached almost immediately. This communications tool creates awareness, understanding and ultimately builds public support for his policies and legislative initiatives. On a frequent basis, his administration should dispatch policy updates and general progress on his initiatives. On election night, Obama’s email message to supporters included the line, “…We have a lot of work to do to get our country back on track, and I’ll be in touch soon about what comes next.”
Maintain an active website between now and inauguration day on January 20, 2009. http://www.change.gov/ has already been established as a gateway for the transition. It is clean and simple to navigate. The trick now is to keep the site fresh.
Embrace the so-called new media. Four years ago, it would have been unthinkable for a president to appear on Facebook or be part of the LinkedIn generation. Now, it seems almost essential to be part of these communications channels. Here again, a message can be emailed and reach each key audience at minimal cost.
Conduct “Town Hall” meetings. While not a breakthrough idea, this format is the right tactic at the right time. The administration could pick a town somewhere in America and get the president out to connect directly with the public. This creates a dialogue with the American people…not just one-way communication.

Nobody can easily predict how things will turn out for the new commander in chief.

As Leon Panetta, the former White House chief of staff who has been advising the transition team, said, “Mr. Obama has little choice but to put his arms around the chaos and make the decisions that involve pain and sacrifice up front.”

In my view, proactive communications and expectation management will play a major role and help define Obama’s success and presidency.

Joe M. Grillo, senior vice president at N&A, contributed to this blog.

# # #

2008-08-12T13:47:00.005-04:00

Clintons In Danger Of Ruining Legacy

Bill and Hillary Clinton, two people with just about the largest egos in America, are in danger of ruining their legacy of political leadership and as stalwarts of the Democratic Party.

They may not realize it, but the Clintons are in crisis management mode as the nation turns its attention to the Democratic National Convention in Denver on Aug. 25-28.

From the perspective of strategic communications, politics can be a strange business. Day-in, day-out, dozens of strategists likely huddle with the Clintons to chart their next moves in the face of the Democratic Party nomination of Barack Obama and his run for the White House.

One wonders, though, are the Clintons focused on shaping their legacies, or are they interested in retaining the spotlight just to feed their egos? At stake are not just their roles at the convention, but also how history will judge them as political leaders and how Hillary will be positioned for the future.

Shaping one’s legacy is no simple matter. From the corporate world, we have the example of Jack Welch, former CEO of General Electric. Through skillful management of his legacy, Welch is now arguably more popular then ever.

At the other end of the spectrum, Dick Grasso, former head of the New York Stock Exchange, may have won his case in the court of law, but the court of public opinion is another matter. Most people view him as a greedy Wall Street type who walked away with tens of millions of dollars he didn’t deserve.

Speaking Roles Coming Into View

The Democratic National Convention is heating up for Bill and Hillary Clinton. Bill will speak on the third night before an address by the yet-to-be-named VP candidate, while Sen. Clinton is expected to speak on the convention’s second night.

Meanwhile, recent comments from the two leave one wondering if they will articulate the party line at the convention or create party divisiveness.

During a trip to Africa, Mr. Clinton said (for the record) “…you can argue that nobody is ready to be president,” and he learned a lot in his first year on the job. That remark, which made headlines across the country and throughout the world, could be viewed as tepid and unenthusiastic. Why didn’t he just say Obama was qualified?

Hillary, speaking about the same time during a Web chat, insisted she’s sincerely behind Obama after someone asked whether she truly was supporting him or was “just saying what you have to?”

In a video, Sen. Clinton seems to be inviting more dissent from her supporters at the Democratic Convention when she says, “…I’ve made it very clear that I’m supporting Obama, and we’re working cooperatively on a lot of different matters. But delegates can decide what they want to do on their own; they don’t need my permission.”

As The New York Times pointed out in an Aug. 8 analysis, having one Clinton, let alone two, hover over you during a Presidential campaign can be trying. Just ask Al Gore.

Some may recall that the Gore campaign tried to keep Mr. Clinton out of the limelight at the L.A. convention in 2000, giving him a speaking role on Monday night. But Mr. Clinton arrived the previous Friday and was the toast of the town for nearly three days leading up to his speech.

What might the Clintons have up their sleeves for Denver?

It’s hard not to see that, so far, the Clintons are all about being the Clintons. If they disrupt the convention and further split the party, John McCain is likely to win. For their part, the Clintons risk being despised by the Party for years to come.

Rx to Protect Their Legacy

The Clintons should, of course, speak at the convention. After all, Bill is a former president and Hillary (by her own count) captured 18 million votes in the primaries. However, what they need to understand is what they say and how they say it will have a direct impact on their reputations and legacy.

History tells us that it only takes a few pointed comments to the national media to create a lasting impression (“Read my lips: no new taxes”, George H.W. Bush, 1988 Republican National Convention). Based on more than 30 years’ experience counseling politicians, corporate executives and individuals trying to manage their reputations, I’m offering a few sound bites for the Clintons.

For Mr. Clinton:

“…Barack Obama has the skill, commitment and ability to lead the Democrats back to the White House.”

“…People say Obama is a celebrity. What’s wrong with that? Leadership has many qualities. Understanding what the electorate wants and needs wins elections.”

“…I’ve dedicated my political life to the Democratic Party. Obama shares the fundamental ideals that have made the Party great. I hope every Democrat and Independent voter rallies behind him and elects him President.”

For Sen. Clinton:

“…This is not the time to talk about what happened during the primary campaign. It’s time to turn the page. The people have spoken and I’m doing everything in my power between now and November to get Obama elected.”

“…I was honored to have 18 million Americans cast their ballots for me in the primaries. I urge those same voters, along with Independents, to cast their ballots for Obama.”

For almost two decades, the Clintons have captured and maintained a major presence in the American political landscape and dialogue. They have accomplished much, but there comes a time to elevate the political discussion and demonstrate true leadership. If their real goal is to help the Democratic Party regain the White House, they must abandon the hubris.

These actions would help solidify their legacy as two of the most remarkable political leaders in America.

Joe M. Grillo, senior vice president at Nicolazzo & Associates, contributed to this blog.

Roger's World: Let There Be Doubt

2008-01-09T10:21:00.000-05:00

As bizarre as it may sound, Roger Clemens and his legal team may have devised a good strategy in reputation management – they just got off to a late start.

Clemens’ battle with Brian McNamee, his accusatory former trainer, has played out a bit like the one-on-one showdowns that routinely occurred when the Rocket was facing a tough batter on the mound.

McNamee told federal and baseball investigators that he injected Clemens with performance-enhancing drugs from 1998 through 2001. His statements ended up in the now infamous Mitchell Report released in December.

Almost instantly, Clemens reputation, which he points out is the result of 25 years of hard work, went “poof.” In today’s media-crazed communications environment, that’s apparently all it takes.

The episode illustrates an important strategy when it comes to reputation management: if you have the slightest inkling that someone is about to attack you, make some early moves to counter the impact before it hits the press.

In this case, Clemens told a 60 Minutes audience that he was unaware that McNamee was going to testify against him. He also admitted he declined to meet with Mitchell report investigators “as did a lot of other players.”

Bad move. As Roger must know from his career on the diamond, playing “catch up” has always been difficult at best.

While they may not have known the specifics, Clemens and his lawyers -- and for that matter every sports fan in America -- knew the report was going to be publicly released.

In my view, to help mitigate the impact, Clemens should have volunteered to speak with the investigators and deny steroid use. He could also have brought McNamee’s motives into question before the report became public.

In this way, Clemens could have set the tone from the outset -- right in the contents of the report. He may have gained more control of the outcome.

Despite angry statements of denial, a video news release, the interview with Mike Wallace on 60 Minutes, a defamation lawsuit against his accuser, an agreement to testify before Congress, and a taped phone conversation with McNamee, Clemens is being roasted in the court of public opinion.

“He-Said-She-Said” Defense

The water-cooler talk says Clemens is guilty, but in reality, will anyone ever be able to prove it in a court of law?

Clemens has seemingly taken a page from the executive playbook in which a lover often boasts about a lurid affair with the CEO. The CEO retorts that there are no witnesses and the “he-said-she-said” defense works.

While appearing way out of the ordinary, Clemens’ super-aggressive communications strategy could actually put doubt in the minds of some fans and even casual observers about his innocence or guilt.

At this juncture, no witnesses have come forward to corroborate that McNamee injected Clemens with performance-enhancing drugs.

Also, to date, no one has come forward to admit they provided Clemens with steroids or needles.

No major league player has validated McNamee’s claims against Clemens. Nor has Major League baseball.

To be sure, this could change in a “New York minute.” If so, Roger Clemens has a major credibility and reputation problem.

On the other hand, one has to consider that Clemens is not currently the subject of any criminal investigation. Unlike Barry Bonds, who allegedly lied under oath, Clemens has not been called testify before a federal grand jury.

Clemens’ lawyers are likely aware that the statute of limitations has expired on illegal actions that may have occurred more than seven years ago.

Some observers think Clemens will trip himself up when he testifies before Congress on January 16 because he’ll be under oath.

But realistically, what can happen? He’s already stated publicly what he plans to tell Congress. NcNamee, who is also expected to testify, will likely repeat what he told baseball investigators.

The net result of all this will bring us right back where we started: Clemens’ word and credibility against McNamee’s.

For sure, Clemens’ arrogance and even childish behavior has made him and his career another “victim” of the baseball steroid controversy.

However, unless some new facts come to light, there will always be some lingering doubt about the truth.

In the world of Roger Clemens, that may be the all-time-great legacy he so desperately wants to defend.

Joe M. Grillo, a senior vice president at Nicolazzo & Associates, contributed to this blog.

Oprah Does It Right

2007-11-09T09:10:00.000-05:00

Most love her and some despise her, but no one can question Oprah Winfrey’s crisis management skills.

Faced with an ugly abuse scandal at her school for disadvantaged South African girls, Winfrey stepped up in a major way and apologized to these young women on a world stage.

Only hours after an accused dormitory matron appeared in court near Johannesburg, South Africa, Winfrey spoke openly and from the heart in a video news conference aired by satellite and posted on the Internet.

Sounding more like an embattled chief executive officer than America’s television talk-show sweetheart, Winfrey articulated all the right emotions by coming across as outraged, sensitive, caring and human.

Looking straight into the camera, the diva said, “She wept for half an hour when she heard about the abuse. A horrible situation has been uncovered and rooted out. The buck always stops with me.”

In what can best be described as a “take charge” attitude, Winfrey promised to “clean house,” starting with the headmistress of the school. She also admitted the screening process was inadequate and officials at the school had told students to “put on happy faces” and not complain to her.

Going even further in the court of public opinion, she helped detail the investigation that led to an arrest. “One of the most devastating, if not the most devastating experience of my life,” she said.

Winfrey knows what it’s like to be a victim (she was molested when she was four and raped when she was nine). Now that she has the power to do something about it, she acted swiftly and decisively.

The school mess is a crash landing from all the media fanfare that occurred back in January when celebrities like Nelson Mandela, Mariah Carey, Tina Turner, and Spike Lee helped open the $40 million school.

Textbook Crisis Management

Granted, Winfrey is about as media savvy as they come, but still, she exhibited textbook techniques and expertise in how to handle a modern-day crisis. Consider some of the key elements at work:

• She got her facts straight; she traveled to South Africa and worked with police and a noted child psychiatrist. She then kept silent until officials concluded their investigation.

• Her well-timed press conference controlled the message before it began to control her.

• By using satellite and Internet technology, she ensured timely and accurate dissemination of critical information to her key audiences.

• She used candor to help maintain her stature and credibility.

• By acting quickly, she likely minimized damage to her standing as a television personality, businesswoman, entrepreneur, and courageous pioneer in helping the world’s disadvantaged.

• Designating herself as spokesperson, she spoke for the school with a single, powerful voice.

• She was truthful, didn’t hide from the media, and answered all the difficult questions.

Winfrey’s decisive and swift actions stand in stark contrast to some recent crises, including some I have blogged on.

Mattel, the big toy company, is still digging out from massive recalls of toys made in China. When asked by journalists why it took the company so long to announce the recall, the CEO said, “…the company discloses problems on its own timetable because it believes both the law and the U.S. Consumer Products Safety Commission’s enforcement practices are unreasonable.”

Hardly reassuring.

TJX Cos., a national retailer, continues to deal with the aftermath of a security breach that exposed millions of customer credit and debit card numbers. The company waited a full month to go public with the information.

When Bank of America had some computer tapes stolen, it waited two months to notify customers. Even the U.S. government waited several weeks before disclosing someone had walked off with a government-owned laptop computer containing Social Security information for 25.6 million U.S. citizens.

To be sure, there are problems that need to be solved at Winfrey’s school. The six victimized girls, aged 13-15 and a 23-year-old, are receiving mental health counseling and have the support and care of their friends.

Scrutiny of the school’s operation will continue for some time, but, in my view, Winfrey has taken command and set the tone for remedial action.

In her own intimate style, Winfrey said, “I am prepared to do whatever is necessary to make sure the Oprah Winfrey Leadership Academy for Girls becomes the safe, nurturing and enriched setting that I had envisioned. It will become a model for the world.”

Once again, she has proven her mettle in a tense, emotionally-charged situation that would test anyone’s communications skills. If she ever gets tired of TV, crisis management counseling might be in the offing.

Joe M. Grillo, senior vice president at Nicolazzo & Associates, contributed to this blog.

Keeping Don Imus on the Air Wasn't Worth the PR Hit

2007-04-13T14:59:00.000-04:00

This time, even Don Imus’ loyal listeners couldn’t save him. As the old adage goes, “there’s many a slip between the cup and the lip.” In this case, it was an aging radio shock jock who had probably been around the same block too many times.

Like most national media firestorms, this one started with an inflammatory comment that should have never been made. When Imus said the Rutgers women’s basketball team “had tattoos and was a bunch of nappy-headed hos” the outrage began and continued unabated for more than a week.

Initially, Imus acted out a script right from the crisis communications playbook. He apologized on the air. He made himself available for interviews with major media outlets so he could apologize again. He apologized on the Today Show. He went on Al Sharpton’s radio talk show to confront the racist issue and, what else, apologize again. He then offered to meet with the Rutgers coaches and players in private, which he did on the same day he was fired.

Despite all the mea culpas, there were early signs that, this time, genuflecting before the national altar of public repentance was not going to work. The shouting was just too loud.

Public Image Counts

Sponsors of shows like Imus’ are often careful not to stifle the talent or try to dictate editorial content. After all, if you handcuff the host and take away the entertainment value, the program becomes just like any other talk show. That can actually hurt ratings.

To be fair, Imus has a soft side. He has demonstrated a consistent commitment to raise funds for charity and donate his time to good causes. Each year, more than 100 sick children are brought to his ranch for visits hosted by him and his wife. Ironically, his last day on the air was devoted to a charity radio-a-thon.

Exactly one week after the on-air gaffe, MSNBC announced it was dropping Imus’ morning program after a succession of advertisers suspended sponsorship of his cable TV simulcast.

The pressure on MSNBC was building after seven major advertisers – including top sponsors Sprint Nextel Corp. and GM – dropped their ads for the show. Imus has also lost ad support from American Express, Procter & Gamble, Bigelow Tea, Staples Inc., and drug maker GlaxoSmithKline.

Jeannie Tharrington, a spokesperson for Procter & Gamble seemed to have it right when she told The New York Times: “We have to first think about our consumers. So anyplace where our advertising appears that is offensive to our consumers is not acceptable to us.”

On day eight of the simmering controversy, CBS radio announced it was canceling Imus’ nationally syndicated show, which had been a long-running mix of tasteless rhetoric and political commentary.

Initially, Leslie Moonves, CBS president and CEO, suspended Imus’ show for two weeks. In the end, the rising tide was simply too much even for an industry tough guy like Moonves (his company also owns the MTV and BET cable networks).

Money or Morality

Imus’ program, which drew an estimated two million viewers and listeners each day, had become a cash cow for his bosses. It was reported that his program generated in excess of $20 million in annual revenue for CBS Radio and the flagship New York radio station, WFAN. The press also reported that when ad revenue for affiliates and MSNBC were figured in, the amount exceeded $50 million.

One could argue that, at the beginning, his bosses at CBS actually gave him a break. Why wait to suspend him? Why wasn’t he taken off the air immediately? By allowing him to remain on the air for several days after the derogatory, racist remark, he had a chance to defend himself and seek whatever sympathy he could muster.

In my view, we continue to witness episodes like this because the institutions that enable this type of behavior refuse to take stock of their moral compass.

Look at the major organizations involved in Imus’ show: CBS Radio produced it. WFAN in New York City was the flagship station. Westwood One nationally syndicated the show. MSNBC simulcasted the show on its cable channel, and MSNBC is part of NBC Universal, which is owned by the conglomerate General Electric Co.

Every entity involved here should rethink what type of shows it puts on the air and the quality of the people it hires. By creating the forum, the enablers have allowed Imus and others to become iconoclastic, irreverent symbols of political incorrectness.

Shock jocks, in particular, are bred to be rude, inconsiderate, arrogant, egotistical, crass and bitter. They’ve typically survived by taking cheap shots at politicians, entertainers, athletes and dozens of others in the public eye.

Imus is not alone in this category. Names like Rush Limbaugh, Bill O’Reilly, Howard Stern, Ann Coulter, Al Sharpton, Opie and Anthony, Jessie Jackson, and Doug “Greaseman” Tracht come to mind.

While many of the targets have bulls eyes painted on their heads because of who they are, people like the young, high-achieving student female athletes on the Rutgers basketball team did not deserve to be made fun of by an over-the-hill jock who liked to pick the bones of his victims clean.

We can agree that free speech is a fundamental right of all Americans. However, for someone like Imus, who has a national platform, using the public airwaves to impose his outrageous and twisted views on his listeners crossed the lines of fairness, taste, propriety, and common sense.

Maybe this episode will make institutions think twice about creating programming and promoting people who make a living by offending others.

JetBlue Lives Its Own Valentine's Day Massacre

2007-02-23T10:34:00.000-05:00

For JetBlue, it must have seemed like the second coming of the infamous St. Valentine’s Day Massacre when Al Capone knocked off seven of Bugs Moran’s men.

February 14, 2007 will likely go down as the worst day in JetBlue’s history. Thank God no one was hurt in this mess.

I guess one can give JetBlue Airways president David Neeleman some credit: within a couple of days, he stepped up and took responsibility for the stunning meltdown his airline experienced in New York City and around the country.

Taking a page from the current playbook on crisis management, Neeleman, his voice cracking a bit, told the national news media he was “humiliated and mortified” by the massive breakdown that hobbled the airline’s operations for nearly a week.

He then pledged to institute a voucher system that would increase in value according to the length of the delay. The airline has also unveiled a “customer bill of rights” that will compensate passengers for slip-ups and ensure that they don’t find themselves trapped for hours on planes waiting to take off or trying to return to a gate.

Crisis experts – me included – can probably agree that by taking the bull by the horns Neeleman and his low-cost carrier will stop thousands of customers from defecting to other airlines. In today’s business environment, admitting mistakes has proven effective in rebounding from a crisis.

On the other hand, JetBlue gets an “F” for not having a crisis/operational management plan in place that could have avoided this fiasco in the first place. Shockingly for a CEO, Neeleman admits as much.

He told The New York Times his company had an emergency control center full of people who didn’t know what to do. Why weren’t they better prepared and sufficiently trained?

There were flight attendants sitting in hotel rooms for three days who couldn’t get in touch with their own company. Where was the communications protocol?

In a revelation that really stings, he admitted pilots were emailing him and saying, “I’m available, what do I do?” Why couldn’t he answer?

Neeleman said the crisis, which led to about 1,000 cancelled flights in five days, “…was the result of a shoestring communications system that left pilots and flight attendants in the dark…” Isn’t this confirming a major failure on management’s part?

Penny-Wise, Pound Foolish

While it’s going to take a while to determine how much business JetBlue loses down the line, the immediate costs are staggering. On network television, Neeleman said the tab to reimburse passengers could cost the airline $30 million or more.

Wall Street will also likely punish the stock in the short-term. The damage to JetBlue’s brand is also likely to be huge. Some customers are already grumbling “they’ll never be back.”

One can speculate what would have happened if JetBlue had spent $1 million on a rock solid crisis management and training plan that could have been deployed at a moment’s notice.

Most CEOs I know would be happy to spend a million to save 30 times that, but surprisingly few CEOs are willing to invest the necessary resources to institute the right crisis avoidance policies and procedures.

In many crises, outsiders like myself often have to speculate what kind of contingency plans a company has in place. For the most part, these plans are highly confidential and only signed off on by top senior management.

This case is different.

The CEO himself admits JetBlue had neither the people or the plans in place to deal with a perfect storm like the one that hit on Valentine’s Day. Candor was the only way out.

A media darling for most of its seven-year existence, JetBlue now finds itself in the cross hairs of its employees, customers, the FAA, airport personnel, consumer advocates and Congress.

This episode once again proves that strategic communications and crisis management plans are fast becoming the model that American businesses must adapt to survive in a crisis and retain brand and management integrity.

Increasingly, institutions are being judged not by the crisis itself, but by how the crisis is managed. Time and time again, we are witnessing major business crises in which institutions seem unprepared for the worst.

Time will tell if JetBlue becomes the poster child for how not to do it. Meanwhile, the crisis management planning business just got a major shot in the arm!

Joe M. Grillo, a senior vice president at Nicolazzo & Associates, contributed to this blog.

Security Breaches: Lack of Communication is Giving Consumers the Shaft

2007-02-20T10:41:00.000-05:00

Has anyone noticed a disturbing pattern in security breaches at major U.S. companies?

Due to slow – and even deliberate – delayed communications, consumers are getting the shaft.

The most recent case flared up in mid-January when TJX Cos., a Framingham, Mass. retailer that runs T.J. Maxx, Marshalls, Home Goods and other stores, disclosed a data theft that exposed millions of customer credit and debit card numbers.

Like several past instances, consumers were NOT notified right away. In the case of TJX, the company waited about a month. A couple of years ago when Bank of America had some computer tapes stolen, it waited two months to notify customers.

Even the U.S. government waited several weeks before disclosing someone had walked off with a government-owned laptop containing Social Security information for 25.6 million U.S. citizens.

Corporate executives, government investigators, and legal counselors have been postulating that the communication gap exists because it gives the authorities time to catch the bad guys.

This may sound good on paper, but it doesn’t do much for the consumer.

I’m in agreement that the ultimate objective is to catch these thieves and throw the book at them. However, companies are bucking a clear trend: the customer (in this case the consumer) comes first.

Take a closer look at the TJX case.

According to a report in The Boston Globe, a New Bedford, Mass. city employee said $6,700 in charges suddenly appeared on his Visa card in January of 2007. It’s the same credit card he used while shopping at a T.J. Maxx store last December.

Does TJX really think it utilized the right communications strategy by waiting a month to tell this consumer about the breach? If you were this shopper, what would you think about TJX?

Could it be that TJX did not want to announce the breach in December because it would have severely impacted its Christmas sales?

My 30-plus years experience in strategic communications tells me this dynamic must change.

By waiting to tell the consumer about breaches, companies are risking major damage to their reputations and brands and even a substantial drop in sales.

While it’s true that banks and other credit card issuers usually pick up the tab for bogus charges, there is still a huge psychological impact on the consumer. People whose personal data is stolen feel violated.

It may be gradual, but the American public is going to stand up against this behavior and demand to know right away that someone has stolen their financial data. At some point, it seems logical that consumers will organize boycotts against companies that compromise their personal data.

To make matters worse, some companies are making security breach announcements without solid contingency communication plans in place to deal with the fallout.

At the risk of picking on TJX, the company seemed disorganized when the story broke. People complained that they got the run-around from customer service hotlines and the CEO was unavailable for comment.

Finally, after more than two weeks, the company took full-page ads in newspapers saying that it was sorry for the inconvenience to consumers and it was doing everything in its power to correct the problem.

If the company had a good contingency communications plan in place, it would have called for a letter like this to be written within a matter of days. Why wait? It looks like the company is hiding something.

I believe there is an Rx to contain – and even fix – this problem. It involves work on the front end and the back end.

On the front end, organizations holding the data need to build more secure systems to protect consumer information. This will involve more capital spending on encryption, security software, and other various IT tools.

On the back end, state and national political leaders need to introduce legislation that compels companies to notify consumers within five days of a security breach. There will be opposition, but it’s the right thing to do.

Meanwhile, all of us continue to hold our breath until the next security breach is announced…and we wonder if our financial data will be compromised along with our credit standing and privacy.

Communications Failed H-P

2006-10-04T14:09:00.000-04:00

For many years, I have been espousing the concept that senior communications professionals -- such as vice presidents of corporate communications or investor relations -- should be ex-officio members of boards of directors in major publicly traded and many private companies.

The Hewlett-Packard fiasco that has unfolded before the eyes of a stunned business world (and even Congress) once again proves the point.

Time and time again, we see boards making enterprise-wide decisions that blow up in their faces. A good example is the recent rash of cases involving the back-dating of option grants. Apple Computer comes to mind.

My last blog entry talked about the communications mess at RadioShack. The H-P debacle is worse.

I have no doubt that Patricia Dunn, former H-P board chairwoman, was genuine in her concern about board leaks to the press.

No one likes to see sensitive and confidential corporate information plastered on the front page of The New York Times or The Wall Street Journal.

What remains clear to me, though, is that even the savviest corporate executives and many board members are lacking in what I call “communications awareness and common sense.”

Far too often, decisions are made at the board level that will negatively impact a company or institution. Unfortunately, in most cases, communications experts are typically brought in to deal with flawed business decisions and strategies after these decisions have been made and the damage done.

Over the course of my 30-year career, I have been called many times by general counsels and senior corporate communications officers who need assistance because a senior management or board-level decision has backfired.

In many cases, I have been told, “…what we did was legal.” My response is usually something like “…that may be so, but is what you’re doing right, and how will these actions be viewed by your key audiences?”

Still, you hear reports of senior executives and board members telling their corporate communications officers to “just stonewall the press.” In some cases, this strategy is effective, but misrepresenting the facts simply never works. Ultimately, the truth comes out.

Ms. Dunn, even without the help of PR folks, continues to create her own story. In her testimony to Congress on September 28, she said she was given ironclad assurances of the legality of the methods used in the company investigation and that the word “pretexting” – impersonating people to obtain their records – never cropped up in the conversations.

I subscribe that Ms. Dunn, the rest of the board, the CEO, and the legal folks would have been well served to have a thoughtful and market-savvy communications executive at the table.

If they did, that person could have told them that any one of the roads they were contemplating would be like driving a car off a cliff.

A good communications counselor - inside or outside the company - could have advised Ms. Dunn what was happening at H-P was wrong, and if the news media ever got wind of any kind of questionable corporate snooping, public exposure of this behavior would create a major corporate scandal.

Would that counsel have stopped the clandestine operation? If the communications professional had ex-officio status, I contend there is a good likelihood that better judgment would have prevailed. Instead, the company charged ahead and the investigative methods used by H-P spiraled out of control.

In the final analysis, H-P’s reaction to the leaks was born of paranoia. Board politics – and even leaks – have been part of our business culture.

Clearly, it’s the fiduciary responsibility of board members to keep the proceedings of their meetings private and confidential. However, leaks are not the end of the world. In fact, sometimes leaks can actually help a company. In many cases, these leaks do not damage the company’s business or reputation. In the specific case H-P, the company seemed to be doing a nice job of increasing its market share and generally improving its business prospects.

Further, the current scandal has not affected H-P’s stock price. According to Damon Darlin of the New York Times (Sunday, October 1, 2006), “By any measures, the company so far has escaped any serious damage. Its stock, about the only visible barometer of public perception other than retail sales and late-night talk-show jokes, is as strong as it was before the spying operation was revealed in early September. The stock closed on Friday at $36.69, close to its 52-week high of $37.25, almost unchanged during a month of unrelenting reports of detectives obtaining personal phone records, rooting through garbage, following directors and journalists – spying on one while at Disneyland – and planning to infiltrate newsrooms with spies masquerading as janitors or clerks.”

Wall Street now looks at three criteria for publicly traded companies: growth, earnings and governance.

While H-P may still have a powerful and colorful history, this chapter of corporate behavior will become the poster child for poor corporate governance that appears to have occurred at the highest levels.

The story isn’t over, and how H-P responds going forward will have far reaching implications for its future.

In my view, a good communications professional could have told the board about the implications of its decision-making right at the beginning.

And if the board had listened, H-P wouldn’t be where it finds itself now.

RadioShack Adds Insult to Injury

2006-09-10T09:35:00.000-04:00

One can only wonder how bad it is to be working these days at RadioShack headquarters in Forth Worth, Texas.

On August 30, the company notified about 400 workers that they were being dismissed immediately as part of planned job cuts.

So what’s the big deal? Companies lay off hundreds – even thousands – of employees all the time.

RadioShack, in what has to be one of the biggest communications blunders of all time, told the employees they were fired by “e-mail.” You read that right, “pink slip e-mails.”

The action follows an announcement earlier in the month in which the company said it would eliminate jobs, mostly at headquarters, to cut expenses and improve its long-term position in the marketplace.

Already, RadioShack has closed nearly 500 stores, consolidated distribution centers and liquidated slow-moving merchandise to shake out of a sales slump.

If you’ve been following the news, you’ll recognize this as the same company that fired its CEO, David Edmondson, six months ago for fabricating part of his resume.

When news first broke of the latest fiasco, Derrick D’Souza, a management professor at the University of North Texas, was quoted in an Associated Press story as saying “he had never heard of such a large number of terminated employees being notified electronically.”

“If I put myself in their shoes, I’d say, ‘Didn’t they have a few minutes to tell me.’ “ He added that the move could be seen as “dehumanizing” to employees.

That has to be the understatement of the year.

Having spent more than 30 years in the business of public relations, strategic communications and crisis management, this goes down in my book as the most insensitive, callous, reprehensible misguided use of management power I’ve ever heard of.

Granted, new communications mediums have permeated all our lives. We search for jobs online, apply for them via e-mail, use company Intranets to change benefits packages, manage company pension portfolios, and use the Internet to work from home and the road.

But are we to assume that the normal progression of the medium is to fire employees by e-mail?

Long-standing research indicates that in any layoff situation the most important audience is the remaining employees. How a company dismisses employees directly impacts the future job performance and productivity of those who remain.

The Corporate Learning Institute, a team building organization that works with large for-profit companies, says, “Many companies are finding it necessary to restructure and this can have a negative impact on employee morale. Confusion and uncertainty among the people in any company will lead to low efficiency and productivity, dragging the entire organization down.”

With its ranks shrinking, RadioShack may have felt it did not have the human resources bandwidth to individually speak to each fired worker. Surely, no senior manager with even an ounce of heart could have thought this “e-mail pink slip” was a good idea.

There were certainly ways around it. The firm could have hired an outplacement firm to help. It could have spoken to employees in groups. It could have staggered the dismissals.

The hard work (preparing the severance packages and required termination documentation) was already done. It couldn’t have taken more than a few hours of time to speak to the employees in person.

Now, the company has poisoned the well. Morale at headquarters is likely to sink to a new low. Poor attitudes could easily penetrate to the retail level. Moving forward, recruiting good people is likely to be next to impossible.

This action cuts at such a raw nerve that I wouldn’t be surprised if some consumers boycott the stores.

Eventually, this uproar will fade from the news. RadioShack will trudge on, trying to turn things around as best it can. It will be interesting to see how this publicly traded company performs in the near and long term. No matter what happens, this company gets top billing in the communications hall of shame.

I’ll make one wager: if further cuts are needed, it won’t be done by e-mail.