Companies beset by ethics flaps and hounded by the media are using an increasingly necessary marketing discipline: crisis communications.
Boeing Co. is among the many companies that have needed large doses of crisis communications recently. Last Monday a simmering scandal at the aerospace giant finally boiled over with the resignation of Phil Condit, the companyâs chairman-CEO.
That move followed the firing of CFO Mike Sears and Darleen Druyun, VP-deputy general manager of Missile Defense Systems, whom Sears was alleged to have recruited when she was a U.S. Department of Defense employee involved with a $17 billion aerial tanker deal with Boeing.
But even after Conditâs resignation, bad news kept coming at Boeing. On Tuesday, the Defense Department announced that it was reviewing the aerial tanker agreement. Boeing may have been caught unaware by the news and declined to comment, which seemed to violate the primary tenet of crisis communications: stay ahead of the news.
"The first rule is always be out front," said Joe Marconi, author of "Crisis Communications: When Bad Things Happen to Good Companies." "When a company learns of a problem in the making, you should get out there first even when you just think you have a problem."
Boeing, of course, isnât the only b-to-b organization to find itself in the bullâs-eye of a scandal in the past year. Tyco International, WorldCom (which now goes by MCI) and the New York Stock Exchange have all fought scandals with crisis communications with varying degrees of success.
In naming Conditâs successorsâformer Hewlett-Packard Co. CEO Lewis E. Platt as non-executive chairman and Harry C. Stonecipher as president-CEOâBoeing sent the message that it wanted to placate the Pentagon. On the day of his hiring, Stonecipher told The Wall Street Journal that his "No. 1 priority is to restore our reputation with that huge customer called the U.S. government."
In keeping with the crisis communications emphasis on openness, Condit and Stonecipher were made available via conference call to major news organizations. The changes, especially Conditâs agreement to fall on his sword, were carefully placed in the context of being in the best interests of Boeing.
In a statement, Condit said, "Boeing is advancing on several of the most important programs in its history, and I offered my resignation as a way to put the distractions and controversies of the past year behind us, and to place the focus on our performance."
Crisis marketing expert James E. Lukaszewski, however, contends Boeing didnât go far enough in dealing with its ethics problems. A believer in crisis marketing principles with fire-and-brimstone conviction, Lukaszewski said Boeingâdespite establishing an Office of Internal Governance (which has responsibility for ethics) and demanding the jobs of several employeesâhasnât taken full responsibility as an organization for the ethics lapses. "The worst is yet to come," he predicted.
Tycoâs quiet strategy
Tyco International, where former Chairman-CEO L. Dennis Kozlowski resigned in disgrace in June 2002, also took quick steps to distance the company from former employees.
Within two months of Kozlowskiâs resignation, Tyco hired a new CEO, Edward Breen, who came from Motorola, where he was president-COO. In its recent marketing communications, Tyco has used the strength of the current management team as a means to stress the strength and viability of the company.
For instance, in an ad that was created by Hill, Holliday, Connors, Cosmopulos and ran in The New York Times and elsewhere in October, Tyco highlighted that executives from General Electric Co., Siemens and other corporations had recently joined Tyco. The headline read, "We signed on because we believe Tyco has a bright future."
Last week, Tyco ran another ad created by Hill Holliday. Appearing in The Wall Street Journal and elsewhere; its headline read, "This is what the 260,000 employees of Tyco did yesterday." Body copy detailed the medical equipment, security systems and other products the company makes. The ad seemed timed to offset the negative publicity flowing from Kozlowskiâs trial.
Gary Holmes, exec VP of Robinson, Lerer & Montgomery, a public relations firm handling Tycoâs crisis communications, confirmed that Tyco is essentially ignoring the media circus of Kozlowskiâs trial. When asked if Tyco was keeping silent in the hopes that time might encourage the public to forget, he replied, "Exactly."
Other observers, however, said Tycoâs constituents remember too well. "What they have to do is rebrand the company," said Jim Gregory, CEO of branding consultancy CoreBrand. "I donât think they can do it with the existing name. Itâs been too much in the news for too long."
MCIâs mea culpa
Like Tyco and Boeing, MCI eventually got a new management team in the wake of its crisisâ$7.1 billion in improperly reported earnings before interest, taxes, depreciation and amortization, which eventually led to bankruptcy proceedings for the company.
But the installation of Michael D. Capellas, who left a post as president-COO at HP to become chairman-CEO of MCI in late 2002, distanced the company from its past, as did several crisis marketing decisions.
Throughout, MCI strived to stay ahead of the news by creating a proactive crisis communications network with its various constituencies, including its business customers. The effort was centered on the companyâs Web site, where a "Restructuring Information Desk" was created to keep employees, customers and the media updated on the progress of the companyâs reorganization plan, which was approved by a bankruptcy judge in October.
To keep its 250 largest business customers in the loop, MCI went a step further. With breaking news, MCI established what Ron McMurtrie, VP-marketing, termed a "calling chain," in which the companyâs top executives would call its largest customers to keep them apprised of the latest information from MCI.
Perhaps most important, however, was the ability of the company to replace WorldCom with the powerful sub-brand: MCI. "They made a smart move in going back to the old name, which wasnât tainted in the way the WorldCom name was," said Al Ries, chairman of branding consultancy Ries & Ries.
"It was important to the employees because it boosted their morale," McMurtrie said. "It was important for our customers because when you are bringing the WorldCom name and its association with all of those bad things, itâs hard to justify to management to do business with a company with those things associated with it."
NYSEâs compensation crisis
On Aug. 27, when the New York Stock Exchange announced that chairman-CEO Richard Grassoâs contract had been renewed through 2007, the press release contained the revelation that he had accrued $139.5 million in "deferred compensation and savings and retirement plan benefits."
There had been an internal debate at the NYSE about how to release that figure, said Robert Zito, NYSE exec VP-communications. Some argued that it should be included in the NYSEâs annual report, due for release in March 2004, but those arguing for complete transparency eventually won out.
The initial outcry that greeted the press release was what Zito expected, but he thought the fact that the money had been accrued over Grassoâs decades of employment at the NYSE would ensure that the clamor would die out quickly. "What wasnât anticipated was the tone of the SECâs response," Zito said of the Securities and Exchange Commissionâs request for more information.
That fueled the public fury, which seemed to burn brighter because of previous scandals about the enrichment of executives. On Sept. 17, Grasso announced his resignation, and the NYSE was soon able to gain a semblance of control over the story, especially with the appointment of John Reed as interim chairman and his restructuring of the organization.
"We moved the dialogue away from what happened at the New York Stock Exchange to what the New York Stock Exchange was doing moving forward in improving its corporate governance," Zito said.