Now comes the news that former FBI director Robert S. Mueller III will conduct a probe into how the National Football League handled (or mishandled) evidence as it investigated domestic violence claims against former Baltimore Ravens running back Ray Rice.
NFL Commissioner Roger Goodell, the man on the hot seat for initially only giving Rice a two-game suspension for knocking his wife out cold in an Atlantic City casino elevator, says Mueller “will have full access to all NFL records.”
One might ask what choice did Goodell have?
It’s clear that the NFL office poorly managed the Rice case and is suffering fallout from all sides. Fans, political leaders, advocates for curbing domestic abuse, the National Organization of Women and a host of others are outraged with Goodell’s punishment.
Some have called for Goodell to resign, but the so-called “man behind the shield” has no intention of stepping down. At this point, unless some of the influential owners drop their support, or a major advertiser (like Bud or Chevy) pull their ads, it’s likely the commissioner will retain his job. After all, he’s tied to a money making machine that grosses $9 billion a year, with much of that money going to the owners.
From a communications standpoint, it appears Goodell violated rule number one of crisis management: he neglected to obtain the facts before taking action against Rice. According to press reports, he saw the first video of Rice’s girlfriend being dragged from the elevator, but (despite asking a number of times) Goodell never got the second video from the casino’s security staff.
The credibility of that stance ended abruptly when the Associated Press reported that a law enforcement official in Atlantic City sent a video of what happened inside the elevator to an NFL executive five months ago. The official interviewed by the AP played a 12-second voicemail form an NFL office number confirming the video had arrived. Subsequently, ESPN reported that Rice had told the commissioner he hit his wife in the elevator.
While Goodell may have thought going on the PR offensive in a CBS interview would silence some critics, the tactic backfired because it appears all the facts were not in. Given the fluid nature of the situation, he might have been better served with a written statement. There’s also the problem that CBS is a business partner of the NFL, paying hundreds of millions to broadcast games. If it turns out, in fact, that Goodell had seen the video, his job is or should be gone.
Code of Conduct Seemingly Ignored
In my view, the root of the NFL’s problem lies not in the Ray Rice incident, but the blatant disregard for the league’s Code of Conduct. Posted on the NFL Players Association website, it’s clear and direct: “All persons associated with the NFL are required to avoid conduct detrimental to the integrity of and public confidence in the National Football league. This requirement applies to players, coaches, other team employees, owners, game officials and all others privileged to work in the NFL.”
How big is the problem?
Incredibly, only three days after Goodell created a new policy against domestic violence on August 28, San Francisco defensive end Ray McDonald was arrested and accused of felony domestic violence. The new policy imposes a six-game unpaid ban for first-time offenders and up to a lifetime ban for second-time violators.
A detailed database compiled by USA Today shows 713 arrests of NFL players since 2000. Nearly 100 of these have been for domestic violence. That’s a lot of arrests for a league with 1,800 active players each year.
The NFL’s history of punishment is uneven at best. Sometimes players were suspended for a game or two. Sometimes charges were reduced, which also reduced the severity of the punishment. On other occasions, charges were dropped and players’ names cleared.
It seems obvious that the league’s enforcement of its code of conduct is broken. Had Rice been in trouble for abusing drugs rather than abusing an actual human being, his suspension would seemingly have been more severe based on several recent punishments levied by the NFL against other players.
Cleveland Browns wide receiver Josh Gordon is the most recent and high-profile case of just how imbalanced the NFL's reaction is toward domestic violence versus marijuana -- a substance that's rapidly being decriminalized around the nation. Gordon was handed a season-long suspension after testing positive for marijuana during the offseason, his second drug violation. He's currently waiting to appeal the suspension.
Domestic violence and drug abuse are not the only problems impacting the league. The other elephant in the room is player concussions. Recently, a federal judge granted preliminary approval to a landmark $675 million settlement that would compensate thousands of former players for concussion-related claims.
Yet, the drumbeat continues. Barely a week goes by without a star player being sidelined with a concussion. In effect, injuries and cognitive disorders continue unabated. According to published reports, the NFL knew about the long-term effects of concussions but was not proactive in addressing a major player health issue.
Still, when one looks at the total picture, the NFL is not all bad. The NFL Foundation, a non-profit organization representing all 32 teams, focuses on a wide range of important issues. For 2014, the foundation has committed $45 million to USA Football to support health and safety efforts.
In recent years, the foundation has also instituted programs to fight childhood obesity and battle breast cancer. Grants amounting to $10 million each year are also donated to organizations such as the Boys & Girls Clubs of America and the American Heart Association.
Agent of Change
As a business, the financial success of the NFL is beyond question. In fact, despite the reprehensible conduct of players toward their wives and girlfriends, women continue to support the league (the NFL publicly states that 47% of its fan base are women).
However, as history has proven, nothing is invincible. I suspect that unless the NFL cleans up its act, over time, the popularity of the sport will decline. Violence in the sport will never be eliminated, but the conduct of players must change. According to some experts, when it comes to separating aggressive and violent behavior on the field from life, the lines might be fuzzy at best. The league needs to hold itself and all the people associated with it to a higher standard of behavior and conduct.
What the league is facing is a systematic failure of policies and practices that have contaminated the sport. Conduct -- in particular drug abuse, domestic violence, and other off-field antics -- have become a cancer. Instead of placating owners and protect players, Goodell can be an “agent of change.”
It’s fine that a former FBI director is going to probe the Ray Rice fiasco, but the league needs to step back and look long and hard at the bigger picture. Whether it’s by bringing in experts or establishing some type of blue ribbon panel, the concept is to identify and address major issues before they explode in public.
Unfortunately, today organizations do nothing until something happens that they can’t ignore, at which time they are forced to cobble together a response under deadline pressure. In short, that’s what happens in the NFL.
The accepted excuse is that Goodell works for the 32 owners, so why would he do anything dramatic to upset the apple cart? If he’s up for the challenge, Goodell has a chance to stand up for the best long-term future of the league, its owners and players to be an agent of change.
Unless there is institutional change, the NFL’s PR nightmares will continue. The names of the players will change, but the individual situations will inflict more reputational and brand damage on a league that has seemingly become too powerful and more focused on profit instead of players and their loved ones.
They say “a fish rots from the head down,” so now is the time for the commissioner and owners of the league’s teams to take on a leadership role in changing a culture and climate that is apparently out of control and in desperate need of reform.
In my view, without major changes, the goodwill and huge public and fan support the league has enjoyed for decades will erode over time.
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“In this age, in this country, public sentiment is everything. With it, nothing can fail; against it, nothing can succeed. Whoever molds public sentiment goes deeper than he who enacts statutes, or pronounces judicial decisions.”
Those words, delivered by President Abraham Lincoln more than 150 years ago, ring as true as the day they were uttered when it comes to the recent Market Basket fiasco.
The public battle between what turned out to be the “good” (Arthur T. Demoulas) and the “bad” (Arthur S. Demoulas) played out a bit like the legendary feud between the Hatfields and McCoys.
In reality, my view is that “Arthur T.” won a public victory due to a well-orchestrated strategic communications campaign that was likely a year in the making.
It’s well-known in the community that Arthur T. retained a public relations firm months before he was fired by the board. This explains, at least in part, how his supporters were able to hit the ground running almost from the moment the controversy exploded on the scene.
Normally, a fired CEO doesn’t literally shut down a company. In fact, the opposite is true. When CEOs are ousted, employees fearing for their own jobs put their heads down and go back to work. Not so in this case.
How was Arthur T. so successful in getting his job back (even if it cost him $1.5 billion)?
On July 12, a few days after Arthur T. was fired, employees at a Market Basket store in Burlington, Mass. started the ball rolling by stuffing shoppers’ bags with a pamphlet entitled “We are Market Basket and We Need Your Help.”
Based on news reports, two days later, executives at Market Basket headquarters in Tewksbury began organizing for Arthur T.’s return, posting signs at the executive offices and issuing a “non-negotiable demand” that he be reinstated. Next, in a scene that would be repeated again and again, thousands of employees rallied outside company headquarters. The TV images were striking and powerful.
Arthur S. and his forces then made what I believe was a critical strategic mistake: they fired eight employees who spearheaded the protests. Not only did this galvanize employees, it moved the protests to the stores. Managers loyal to Arthur T. posted his picture in aisles that were stripped bare of many groceries.
For the next several weeks, employees, customers and their families set up camp outside stores in Massachusetts and New Hampshire and continued a highly- focused and unrelenting communications campaign. Their message and goal was clear: bring back Arthur T. or we stay out of stores.
Supply Chain Cut
The Arthur S. camp was put in a corner when the chain’s warehouse employees refused to accept deliveries from vendors and distribute those goods to Market Basket stores. This became a critical part of the strategy because protestors knew no one wants to shop in a store that has many empty shelves.
Things cascaded even further downward for Arthur S. when customers fully supported the employees. In a few days, Market Basket stores once bustling with activity looked like ghost towns. These images, along with the ongoing rallies at headquarters and throughout the entire chain, shaped public opinion in a way that Lincoln would understand.
In another strange twist, vendors got into the act. One vendor, who provided Market Basket with tons of fish, was overpaid by $400,000 after weeks of erratic payments from management. He went public and stated that, in essence, the company was out of control and he would no longer be a supplier. Other vendors soon followed suit and the paralysis was amplified.
In the end, a perfect storm of strategic communications forces swept over the Arthur S. group like a tidal wave. While the group managed to get some feelers from other possible buyers, negotiations did not appear to progress.
Arthur T. had a brilliant strategy: make a few public statements and let his “ambassadors” carry the message on the streets, at the stores, in the newspaper, on radio and TV, and on social media. His picture became synonymous with the uprising…he took on a messiah-like status.
Space limits a discussion of all the business and communications issues involved in this unprecedented situation. One can be certain that the Market Basket controversy will soon be the subject of many business school case studies.
That said, here are a few business and communications lessons that were learned:
As reported, Arthur T. was allegedly self-dealing on a number of real estate transactions at great cost to Arthur S’s side of the family. Despite those dealings, and often times making unilateral decisions, it’s never a good idea to fire someone on the way to “Sainthood” like Arthur T. If Arthur S. and his group really wanted to sell the chain, they could have sold it right out from under Arthur T. because they had legal control of the company.
Operational contingency planning should never be overlooked. It was clear from the outset that Arthur S. never had a backup plan to deal with a warehouse shutdown. His camp completely underestimated the power of employee, customer and vendor loyalty. To say that they totally miscalculated public opinion would be an understatement.
Have a contingency communications plan in place. Arthur S. never managed communications. Instead, he let communications manage him. At one point, he brushed off a TV reporter who asked a simple question...a classic example of not being prepared or following a “no comment” driven strategy.
While it may seem appropriate at the board level, a legally-driven strategy like the one that Arthur S. deployed doesn’t always play out publicly. With human emotion, sympathy, and down-to-earth blue collar principles at stake, public opinion often rules the day.
Now, Market Basket stores are rapidly getting back to full operation. However, in my view, the messy dispute has changed the company forever. With a reported $1 billion in debt, Arthur T. can no longer manage the business like a feudal kingdom. He’ll have a different board with different motivations. He’ll have to be accountable for his management decisions and actions.
My hunch is that change will come slowly. In the near term, Arthur T. has stated the company is not going to cut employee benefits, nor is it likely to cancel the 4% off storewide discount that runs for the rest of the year. What happens in 2015 and throughout the rest of the decade may be a different story.
Putting legacy issues aside, Arthur S. may have actually outsmarted his cousin. He separated himself from the public fray. He likely ended up with hundreds of millions of dollars more in his pocket (my guess is that other potential acquirers offered far less than $1.5 billion for the chain). He no longer has to deal with Arthur T., whom he intensely dislikes and does not trust. And, he’s young enough to live a lifestyle most of us can only dream about.
So for now, one has to ask who the “real” winner was in all this. It’s an interesting question to ponder.
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Ever since March 8, when Malaysian Flight 370 went missing, the world has stood by trying to absorb the despair and sadness among the families and friends of the 227 passengers and 12 crew members who have now been declared lost at sea.
In a world of instant communications, the images from Malaysia have been strikingly painful to watch. The video of a Chinese woman being dragged out of a room while screaming about the loss of her son will forever be imprinted in the hearts and minds millions of people who care about humanity.
For anyone who manages communications, what has been equally striking is the way the Malaysian government and Malaysian Airlines have executed their crisis management plans (if they had them).
Surely, these entities have been confronted with extraordinary circumstances. With the families of the victims perched on their doorstep and hundreds of journalists pounding away for answers, government authorities and airline executives had to respond.
However, the manner in which they communicated created a circus-like atmosphere that became every bit as explosive as jet fuel. The daily press briefings, which became the major avenue for communicating in Kuala Lumpur, quickly became media feeding frenzies.
Hishammuddin Hussein, Malaysia’s defense minister and acting minister of transportation, became an instant media source. From afar, particularly in the U.S. where most of the population is wired, he appeared unsure of himself and lacking key facts to support his statements. Malaysian Prime Minister Najib Razak added to the mystery with confusing statements that shifted from day to day.
Malaysian officials faced a barrage of criticism over perceptions that their search efforts were woefully disorganized and that they were issuing conflicting statements/information to a world audience. It was apparent they were way behind the information curve in revealing crucial new data. At times, efforts were so poorly managed that other countries were distributing satellite information without coordination with Malaysian authorities.
The bizarre nature of the story was also complicated by the actions of other countries. For example, 10 days after the jetliner disappeared, Thailand’s military said it saw radar blips that might have been from the missing plane but didn’t report it “because we did not pay attention to it.” In all, 26 countries joined the search to “find a needle in a haystack.”
Finally, on March 25, 17 days after the jetliner disappeared, Razak told the world in a late-night televised briefing that a new analysis of satellite data showed the plane went down off the western coast of Australia…far from any possible landing site.
Texting Causes Uproar
Malaysia Airlines, itself caught in a web of tangled communications, compounded the situation when it abruptly announced that it had to “assume beyond any reasonable doubt that MH370 has been lost and that none of those on board survived.”
Incredibly, those words came in the form of a text message sent to the missing flight’s passengers’ family members in advance of an official statement from Malaysia’s prime minister. So much for coordinated crisis communications.
Even these events are murky. Malaysia Airlines claimed a representative for the company told the assembled families in person, and that phone calls and SMS messages were sent to relatives who were not in the family-support center.
No matter, what the world perceived was that families were notified by text, a cruel, cold-hearted means of communications. The image of a family member reading a blistering statement against Malaysian authorities is another one that will stand the test of time.
The crux of the statement was vicious: “…From March 8, when they announced that MH370 lost contact, to today, 18 days have passed during which the Malaysian government and military constantly tried to delay and deceive the passengers’ families and cheat the whole world…Malaysian Airlines, the Malaysian government and military are the real executioners who killed them (the passengers and crew).”
The airline also did a poor job of protecting the families from the media invading their privacy. In China, where the flight was to land, airline officials struggled at first to provide sufficient information for relatives or help buffer them from the media who pushed TV cameras, iPhones and microphones in their faces for comment. Put another way, officials in charge let the media’s tail wag the dog and “drive the information train.”
While it’s difficult to put oneself in the shoes of the Malaysian authorities, it appears they violated two cardinal rules of crisis management.
First, they communicated without the facts. Instead of waiting for concrete information on the fate of the plane, the government disseminated facts and figures that were neither verified nor correct.
Second, the people in charge did not speak with one voice. The airline followed one protocol, while the government went in another direction. On top of that, the Malaysian military had its own agenda. As difficult as it may sound, these groups should have issued one joint statement per day. This would have created an environment of “speaking with one voice.” Instead of creating clarity, they created confusion.
In the United States and other industrialized countries, aviation administrators manage air tragedies. Typically, trained managers and spokespersons deliver information factually and calmly.
In the case of the Air France jet that crashed in the Atlantic Ocean in 2009, communications was more fact driven and streamlined. The French did have a much better idea of the plane’s location when it went down, but the loss of life in that incident was no less significant than Flight 370.
In the end, it may be that the real problem is the secretiveness bred by the Malaysian ruling party’s 56 years of uninterrupted years in power. What is billed as a “democratic Monarchy,” may be closer to a semi-autocracy.
From a crisis management standpoint, the takeaway is clear: don’t comment on rumor and speculation. Simply report the facts.
Joe M. Grillo, partner, contributed to this blog.
He said it himself: “There’s going to be more stuff that comes out.”
Jerry Remy, who is probably the most popular Red Sox broadcaster in modern history, has decided to come back to the booth after being on a leave of absence since his son Jared was arrested and charged with murdering girlfriend Jennifer Martel in August.
In a heartfelt meeting with a select group of reporters, Remy positioned his decision as one that was made after long, deliberate thought. For sure, he came across as genuine, compassionate, and sensitive to the Martel family that has lost so much.
In some respects, the move came as a surprise as Remy admitted he had spent the past few months assuming he wouldn’t return. At the urging of his wife and three close friends, though, he began to reconsider after the holidays.
Still, there was a hint of some uncertainty in his comments: “I had two main concerns – obviously, what the public would think, and whether I could be myself. My answers at the time were no…I just couldn’t find a reason to come back. I just couldn’t find it.”
For sports fans, Remy’s return will likely be just fine. As “president” of the so-called “Red Sox Nation,” he enjoys a celebrity status that many players don’t have. Having his name in neon lights on popular local restaurants also adds to the public persona.
But what about his reputation and legacy with the general public locally, regionally and nationally? Is Remy taking a public relations gamble?
Based on the facts and circumstances in this case, I’d say yes. Here’s why.
Although Jared Remy’s trial is scheduled to start in early October, more details about the brutal murder will come out. As we’ve seen from the Aaron Hernandez case, lawyers enter the discovery phase of a trial and sometimes make motions that require the accused to be in court.
Unlike the recent Bulger trial, which was not open to cameras, all Jared Remy’s appearances and the trial itself will be televised live from Massachusetts Superior Court. This creates video that can be transmitted instantly on TV networks and social media. A story on the murder of a woman could be juxtaposed against an important Red Sox game.
Broadcasting baseball is unique among all TV work. With 162 televised games over nearly seven months, a broadcaster like Jerry Remy will be on air for more than 600 hours. For those who see Remy as the father of an accused murderer, that time represents a constant reminder of the heinous act that has been committed.
Remy’s decision to return to the spotlight also impacts two other key parties: the Red Sox organization itself and NESN. Granted, Remy, the Red Sox and NESN had nothing to do with the alleged murder, but in the eyes of many the interplay between the parties is yet another reminder of a horrendous tragedy.
Another issue likely to unfold in public view is the custody battle over five-year-old Arianna Remy, who is the daughter of the murder victim and Jared Remy. Martel’s parents, along with their son and his wife, are hoping to gain custody, as are Jerry Remy and his wife, Phoebe. As this plays out in court, more scrutiny will be focused on Jerry Remy at the same time he’s broadcasting games.
Baseball His Life
One can certainly understand why Remy would like to get back to work. His life has been devoted to baseball, as a player for 10 years and 26 years on TV. Baseball is his “comfort” zone.
However, his son is not charged with a petty crime: it’s murder.
No one can predict with certainty what will be in the hearts and minds of the hundreds of thousands of people who watch Remy during the Sox season. In a sense, that’s just the problem.
By being on the air, it may be difficult not to think about how Jennifer Martel was killed in cold blood. Or, to speculate about what might happen at Jared’s trial, or Remy’s five-year-old granddaughter who will now grow up without a mother.
Isn’t watching a baseball game supposed to be about escaping from the real world?
In my view, by being on the air so much, Remy’s years and years of goodwill may erode. In the final analysis, is it worth the possible public relations hit?
Time will tell.
Joe M. Grillo, partner, contributed to this blog.
When managing a crisis, dealing with the news media can spell the difference between success and failure.
While there is no perfect solution when dealing with the news media, there are steps one can take to increase the chances of success.
In most cases, individuals and corporations in a crisis think of the news media as the enemy. They fear inaccurate and distorted reporting will contaminate the environment into which they are trying to communicate.
In reality, the opposite may be true.
Given the speed that news travels, communicating a message via the media is critical. Think about a food recall. What better way to notify consumers about bad food on the shelf than releasing the affected product name/codes to the media and having it blazed across the Internet in seconds?
While media relations is not “science” (in fact, it’s been called “black art”), there are workable techniques that apply universally. Here are a few to consider when you’re under the gun:
Don’t Hide. In reality, there is no escape from the news media. One way or another, the story is likely to appear. Even if you don’t have the answers right away, return calls and let the media know you’re addressing the matter.
Tell the Truth. Misleading the media will damage an institution’s brand, reputation and credibility. If for some reason (such as advice from legal counsel) it’s inappropriate to respond to a specific question, declining comment is okay.
Avoid “No Comment.” Twenty years ago, the “no comment” response held some water. Not so today. Times have changed to the point where the public equates “no comment” with stonewalling and hiding. Even in the worst situation, there is something that can be said. Remember, in a crisis reporters are under intense pressure to “get the other side of the story.” Not addressing the issue could lead the media to inaccurate reporting.
Be Consistent. In a time of confusion, there is a tendency to have “too many cooks in the kitchen.” It’s best to identify a single spokesperson that is well versed on the issue and will clearly articulate a response. In a major crisis, the spokesperson could be the CEO.
Respond in Writing. Some reporters do not like it, but it’s sound practice to put your response to the media in writing. This maintains consistency in messaging and avoids the trap of saying something that can be misquoted or misconstrued. If there are follow up questions, deal with them on a case-by-case basis.
Correct Mistakes. As soon as stories appear, review them with a critical eye. It’s your responsibility to make sure the media has it right. If something is inaccurate, point it out immediately. Otherwise, you run the risk of it being picked up by other news media outlets and used incorrectly over and over again. Keep in mind that reporters live by the creed of “accuracy.”
Educate. Don’t assume media (reporters, editors, broadcast producers, columnists, bloggers, etc.) know your industry. With editorial cutbacks rampant across all media, often times a reporter will get assigned a story that involves unfamiliar subject matter. It’s your responsibility to make sure the press has the facts and understands your business.
Keep a Log. In a full-blown crisis, things get hectic fast. Keep a detailed log of everyone from the media who calls noting the source, date, time-of-day, nature of the call, key questions, and any necessary follow up. Update the list daily and distribute a copy to senior management.
Ask for Outside Help. Individuals and companies of all sizes are often overwhelmed by a crisis. If necessary, contact outside crisis communications counsel. Getting help from experts can be invaluable as events unfold.
In the final analysis, dealing with the media in a forthright manner is a critical part of crisis communications management. You’ll still need multiple techniques to reach all your audiences, but the media still plays a major role in shaping how the public (and many of our key audiences) will perceive how the crisis is viewed.
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On December 19, just six days before Christmas, Target disclosed it was a victim of one of the biggest credit card breaches on record.
Twenty-five days later, the company finally came out from under the weeds and took full-page ads in major newspapers across the country to apologize.
The obvious question is why did it take more than three weeks to get this detailed advertising message to its customers and other key constituents?
According to Target, 110 million customers were affected. When something like that happens, time is of the essence. The ad copy is crisp, clean and on message. However, in my view there is no reason it should have taken so long.
And why did it take so long for Target Chief Executive Gregg Steinhafel to give his first live interview? Speaking on CNBC, Steinhafel said, “We’re going to get to the bottom of this. We’re not going to rest until we understand what happened and how that happened.”
Couldn’t the CEO have said this on camera right after the cyber breach disclosure? It’s not exactly like he revealed any secrets. In fact, the interview was lacking in significant content.
It’s also interesting that the retailer chose newspapers to communicate the Target story. Social media gurus are running around the country telling senior management that newspapers are dying. In effect, the tactic Target used is right out of the standard crisis communications playbook.
Reputations are Taking a Hit
Target has become the poster child for data breaches, but it’s not the only retailer to be slammed by cyber thieves. Recently, Neiman Marcus confirmed that its customers are at risk after hackers breached the Dallas company’s servers and accessed the payment information of those who visited its stores. JC Penney and TJX are two other retailers that have been hit hard.
From a public relations standpoint, there is no question these companies are suffering reputational damage. Some stores, like Target, will see sales declines while others, like TJX, bounced back. However, consumers are savvy when it comes to judging who they are doing business with. As these data breaches play out and investigations continue, perceptions are formed that will last for years.
Real numbers on reputational damage are hard to measure. However, billion-dollar companies are certainly commissioning research to gauge customer reaction and probably ask them bluntly: “would you shop with us again.” For now, this research is being closely held within the executive suites. Somewhere down the line, pieces of it may be revealed in Wall Street presentations as companies explain earnings misses and lost revenue.
A number of years ago, PR giant Burson-Marsteller surveyed more than 650 global executives on the topic of restoring a reputation after a crisis. The research concluded that it takes a company an average of 3.2 years to recover from a damaging incident like the one at Target. Incidentally, only 5% of those surveyed said that updating websites and using social media were effective tools in a crisis.
The reality is that there is no quick-fix.
The root cause of most public relations nightmares is usually found in operational failures. The case of data breaches is no exception.
Major retailers -- most of which are publicly traded companies -- are profit and earnings driven. The cost of security, which is not cheap, is a hit to the bottom line that some businesses are not willing to absorb.
Avivah Litan, a security analyst at Gartner, blames (in large part) the so-called magnetic strip payment system, which she says is significantly more vulnerable than systems used by other countries around the world, which have smart chips embedded in credit cards.
In addition to increasing costs for security, businesses also must manage rapid innovation. David Burg, head of cybersecurity at PricewaterhouseCoopers, has been widely quoted as saying, “As we use more and more technologies to collaborate among businesses, or to connect with consumers using mobile devices, what you have is an attack surface that keeps increasing in size and complexity.”
In the end, though, this is no excuse for companies that ask for our personal data. Target, for example, asks customers for their Social Security number when issuing their “REDcard.” The customer gets a 5% discount, but provides their Social Security number. Unless companies get their act together, there will be an erosion of trust among customers who sign up for these perks. Already, people are considering using cash and checks to make purchases.
Congress Takes Notice
As a nation, we question the need for excessive government interference in our lives, but what choice do we have when industry can’t or won’t protect us.
On the same day Target ran its massive ad campaign, Democratic lawmakers called for a Congressional inquiry into the hacking of credit card and debit card data. The request to the Financial Services Committee of the U.S. House of Representatives piggybacks on a similar move by Senate Democrats days earlier.
“It is incumbent upon our Committee to explore whether industry data protection standards are appropriate, and examine whether heightened regulatory standards are needed to more effectively protect consumers,” the Committee said.
Senate Banking Committee leaders also confirmed they are planning a hearing on data security issues in late January.
So far, the financial loss to consumers has been minimal because large retailers like Target have said customers have zero liability from the breach. There is still a loss of time for the consumer who has to sign up for credit monitoring and sometimes get reimbursement from their credit card companies. But ultimately these costs will be passed on to the consumer in the form of higher prices.
For companies like Target, the reputational damage is incalculable. Maybe now, budgets for security will expand to put systems in place that make cyber theft a lot harder.
One thing is clear: what’s being done to date is simply not good enough.
Joe M. Grillo, partner at Nicolazzo & Associates, contributed to this blog.
Stepping up and taking responsibility is the right thing to do in a crisis, but Gov. Chris Christie’s unprecedented, 107-minute press conference was so far over the top that it defies logic.
Yes, Christie had to control the damage from revelations that his administration ordered the revenge-closing of traffic lanes at the George Washington Bridge, but standing behind a podium for nearly two hours and taking shots from a media mob is poor crisis management and exhibits incredibly poor judgment.
Droning on for what seemed like an eternity, it’s almost as if the governor thought he could talk the scandal away. The State House charade was so long that reporters started repeating their own questions. And where did that podium come from? He looked like a witness being interrogated by a prosecuting attorney in a court of law.
Christie, appearing somber and contrite, fielded more than 90 questions. Things got so bad that at one point a reporter asked a question about a news story that had just broken as the governor was talking. This is but one problem with responding to a massive crisis when all the facts are not available.
Given the uncertainty about where this mess will end up, this situation called for a public appearance by the governor. However, given the fluid nature of an ongoing investigation, Christie should have limited the event to 10 minutes and passed out a tightly worded three-paragraph statement.
By doing what he did, the governor tossed himself into an ocean full of man eating political sharks and blood-thirsty national media.
The tactic of a protracted appearance also tries to position Christie as the victim. He claims (and it better be true) that he had no advance knowledge of the lane closures and was embarrassed and humiliated by the bizarre episode. But does the victim approach really hold water? In my view, the people traveling in New Jersey who got stuck in traffic for hours are the real victims.
There are many reasons why Christie should have kept the press conference short and sweet. Here are a few:
* Before the event unfolded, the United States attorney in New Jersey had begun a preliminary inquiry into the lane closing. Who knows where that will end up?
* Just down the hall at the N.J. State House, a former Christie associate who was actually involved in the lane closings was “taking the fifth” before Democratic legislators investigating the matter. In some cases, people refuse to testify when they have something to hide.
* The State Assembly had made it known the day after the press conference it was going to release an additional 900 pages of documents turned over by a high school friend of Christie’s who worked at the Port Authority. How could the Christie administration predict what might come out in those documents?
* The email documents that were released the day before the press conference were heavily redacted. How could Christie and his staff be assured that the non-redacted emails would not surface?
Bad Judgment Call
Based on the facts reported by The New York Times and other national media, it appears Christie had an opportunity to get ahead of the story before the bombshell emails hit the press.
A month ago, officials from the Port Authority of New York and New Jersey, who run the bridge, said the lane closings had delayed EMT vehicles and were conducted “abruptly, secretively and against the authority’s protocols.”
About the same time, according to Christie, the governor gathered his staff and asked them if anyone had anything to do with the closings. They all reported that “there was no information other than what we already knew.”
This is where Christie should have smelled a “rat” and ordered an immediate top-to-bottom review of the entire matter. If he had taken this step proactively before any additional public disclosure, he would have been on the record indicating he had taken the appropriate steps to address the issue aggressively. This would have also put him in control of the situation.
Instead, the emails hit the press and the dam burst.
A Political Disaster
At this point, Christie has cleaned house and thrown everyone under the bus who he believes had anything to do with the scandal. For those who see the glass as half full (and if it’s really true that the governor had no idea what was happening) the public might eventually forgive him. This will be particularly true for die-hard Republicans who think Christie is the party’s best choice for the 2016 presidential nomination.
In my view, given all the moving pieces in this quagmire and more shoes that are likely to drop, these events are a political disaster for Christie. Does anyone really believe that when the Presidential primary season rolls around the American public will have forgotten these images?
Christie is governor of a heavily populated, congested state that is often portrayed as corrupt. The governor did nothing to shake his image as a bully when he quipped at the press conference, “Politics ain’t bean bag, OK?”
That type of insensitive response will never play on the campaign trail in states like Iowa and South Carolina where Christie will need primary victories to be considered as a viable Presidential candidate.
Based on his crisis communications management to date, the question remains: does Chris Christie have the political and intellectual gravitas to be considered for the highest office in the United States?
In the final analysis, when all the facts are in, the court of public opinion will decide Christie’s fate.
Joe M. Grillo, partner, contributed to this blog.
As the nation marks the one-year anniversary of the mass shooting that killed 20 first graders and six educators at Sandy Hook Elementary School in Newtown, Connecticut, it has become apparent that heads of schools have one of the toughest communications jobs in America.
From elementary schools, to high schools, to prep schools, to colleges and universities, safety has become the number one priority. And the concern is not just coming from the parents who send their children to these schools. It’s everyone who’s on campus: students, administrators, teachers, support staff, security guards, visiting alumni, etc.
Instinctively, schools are spending large sums of money upgrading and enhancing a wide range of security systems. Just recently, the University of Massachusetts Amherst announced plans to spend more than $2 million to beef up dormitory security. In Florida, the School Boards Association proposed spending $100 million in security measures. While it’s difficult to pin down an exact estimate, my sense is that in 2013 more than $1 billion will be spent on improved hardware and software.
While these enhanced security systems will help prevent unwanted intruders, it’s unlikely they will be a panacea to the problem. In conjunction with the anniversary of the Newtown tragedy, NBC News reporters visited school buildings in the New York area and gained easy access. In New York City, a WNBC reporter walked into seven of 10 schools without being challenged. At one school, the reporter was able to bypass a metal detector, roam the hallways, and enter a gym full of students.
Communications Planning Lacking
Recently, counselors in Nicolazzo & Associates’ Education Group Practice have visited more than 20 prep schools and colleges in New England to meet with school heads and discuss another important facet of preparedness: contingency communications planning. What we’ve learned is that while schools conduct table-top mock drills and maintain simple “crisis contact lists,” few have specific, written contingency crisis communications plans in place.
Why are these plans necessary?
What happened at Penn State is a good example. By burying their heads in the sand and not dealing with the Jerry Sandusky matter, the university suffered a major reputational blow when the news media discovered the former coach was a serial child molester. From that point on, Penn State was forced into a defensive crisis communications mode. No matter what was said, millions of Americans will continue to associate the university with deviant sexual behavior.
While no one can dispute the need to spend money on better hardware and software security systems, I believe it’s equally important that institutions get their communications plans together before a crisis occurs. Here’s a primer on what schools need to do to ensure that they can effectively manage communications in a crisis:
Explore institutional vulnerabilities. Gun violence is one kind of crisis that can put a campus in panic. Sexual harassment, rape, inappropriate student-teacher relationships, lawsuits and cheating scandals are just a few others. School leaders need to assess the worst-case scenarios in their individual situations.
Establish communications goals and objectives. No matter what the incident, some goals and objectives are universal. Schools will always need to demonstrate that leadership is responding swiftly and decisively, and protecting the institution’s brand and integrity.
Develop strategies. People involved in a crisis often confuse goals, objectives and strategies. A goal or objective is the end result you’re trying to achieve, while strategies determine how you’re going to get there. When schools in crisis don’t have a strategy, the crisis manages them. This reactive approach does not usually work out very well.
Identify Key Audiences. Remember: it’s not just the news media. Schools have many internal and external audiences that must be kept informed in a crisis. Before something happens, leadership needs to decide who will communicate to each specific audience and what the core message will be. Message consistency will be critical.
Social Media Considerations. The unstoppable rise of social media has dramatically diminished response times for managing a crisis. What often took a day or more now requires real-time responses within hours and, depending on the nature of the incident, even minutes. Social media is powerful, but not without risk. Schools need to make sure they have fact-based information before responding or issuing statements via social media.
Write a plan. This is essential. I can’t count the number of times in my career that I’ve been called into a crisis where there is no plan. Starting from ground zero in the middle of a crisis places an unnecessary burden on school leadership. It’s a recipe for making poor decisions and executing inconsistent communications. In most cases, schools need outside help in developing a comprehensive plan. It’s a complex process that demands experienced talent to produce.
Regrettably, violence on school campuses is not going away. In the future, I predict part of the selection process for sending a child to a school will be that institution’s adherence to safety protocols and its ability to communicate in a crisis.
Schools that mismanage communications will do so at their own peril.
Joe M. Grillo, partner, contributed to this blog.
Like an unstoppable freight train, the rate of hospital realignment in Massachusetts is racing forward. Some recent headlines:
* The state Public Health Council approved a change of ownership application making Jordan Hospital of Plymouth part of Beth Israel Deaconess Medical Center (BIDMC).
* Partners HealthCare System unveiled a regional strategy, acknowledging for the first time it has signed an agreement to acquire Hallmark Health in Medford and Melrose. Earlier in the year, it acquired Cooley Dickinson Hospital in Northampton, and is also waiting to hear if it can acquire South Shore Hospital.
* Tenet Healthcare’s purchase of for-profit Vanguard Health Systems means it will now control Saint Vincent Hospital in Worcester and the MetroWest Medical Center hospitals in Framingham and Natick.
* Winchester Hospital’s board signed a letter of intent to affiliate with Lahey Health, the parent organization of Lahey Clinic.
* BIDMC, Lahey Health, and Atrius Health, a Newton-based consortium of Harvard Vanguard Medical Associates and five other doctors groups, told employees they are in preliminary talks to form an alliance that could create one of the largest physician groups in Massachusetts.
The realignment statistics over the course of the past three years are staggering.
According to information compiled by the Massachusetts Hospital Association, between 2000 and 2013, there were 41 major actions among the state’s hospitals.
Their research shows 18 holding company affiliations, 14 acquisitions, 6 conversions, 2 contractual affiliations, and 1 full merger. In the last 10 years, the number swells to 147 actions.
On top of everything, hospitals have had to deal with the impact of the new Affordable Care Act, most often referred to as “Obamacare.” Now in the midst of an era of shrinking government reimbursement levels and mounting pressure to reduce prices for medical services, the state’s hospitals are showing financial strains.
As this dizzying pace of consolidation has consumed enormous amounts of senior management’s time, one of the most important elements of change – strategic communications – has been, in my view, woefully neglected.
Among the complaints I’ve been hearing: employees are uncertain about the long-term future of their jobs, pensions and benefits; community groups fear that consolidation will take away the “community feel” of the institutions they have supported for decades; patients are uncertain if they can continue to receive care in the community and not be shipped to larger hospitals that have been on merger and acquisition binges; benefactors are skeptical about the future of local foundations that were created to ensure that donations remain in the communities served by respective hospitals.
What can and should be done?
I suggest hospital boards and senior managers embark on a five-step process:
1. Core research. Hospitals need to conduct baseline research to determine, specifically, what concerns are top-of-mind among employees, patients, and key community leaders. Budgets permitting, focus groups should be included.
2. Situational reviews. With this research in hand, hospital CEOs should budget time with their boards to review the data and ensure that they remain market focused and relevant in an ever-changing healthcare delivery world. In fact, a board sub-committee on communications should be formed. Everyone in the room should agree on the “situation analysis.”
3. Plan development. The top communications officer at the hospital should develop a comprehensive strategic communications plan with clear objectives, strategies, key audiences, key messages, implementation tactics, timetables, and means of measurement. This is not a “publicity” effort, but a strategic document that gives voice to the institution’s business objectives.
4. Direct communication. At the outset of plan execution, the CEO and board should directly communicate with every household in the hospital’s service area. The expense is worth it. Mailing a letter or brochure to the homes of families in the community is a highly effective way of delivering an unfiltered message. In short, the information should cover where the hospital has been, where it is today, and where it’s going.
5. “Town Hall” meetings. Depending on the size of the individual hospital’s service area, open “town hall” meetings should be organized. If, for example, a hospital covers 12 towns, a meeting should be held in each community. The CEO and board chair should make a presentation and, once again, reinforce the messages that support and give voice to the business objectives.
6. Benchmarking and measurement. As part of Step 1 (Core Research), hospitals should include questions that focus on organizational perception by key audiences. The strategic communications plan should address which of these perceptions needs to be changed. After a year of plan execution, another survey should be conducted to measure what progress had been made. This is the only sure-fire way to know if the plan is working.
In the months and years ahead, we’re likely to see more Massachusetts hospital closures, mergers, acquisitions, alliances, partnerships and affiliations.
No matter what paths these institutions take, strategic communications planning and execution should be a top priority.
After all, if the people who work at, and are served by the hospital, don’t understand the story, how can these organizations continue to provide the services the community needs and remain economically viable.
Now that JPMorgan Chase is on the verge of reaching a $13 billion civil settlement over
the bank’s questionable mortgage practices leading up to the financial crisis,
the time has come for CEO Jamie Dimon to relinquish his role as chairman.
The total penalty, which would resolve an array of federal and state investigations,
includes $9 billion in fines and would very likely provide about $4 billion in
relief for struggling homeowners.
This latest news comes on the heels of the bank admitting wrongdoing to settle an
investigation into market manipulation involving the bank’s trading loss in the
so-called “London Whale” episode and pay a separate $100 million settlement.
Fighting hard to preserve his legacy, Dimon is attempting through negotiations with the
government to put an end to complex legal troubles that have engulfed his firm
since May 2012 when the bank announced a $2 billion trading loss (a figure that
eventually ballooned up to $6.2 billion).
In return, Mr. Dimon is looking for assurances that JPMorgan Chase would be protected from
future expensive litigation. Whether he gets it or not, I believe it’s a safe
bet to say that Dimon is no longer the king of banking on Wall Street.
Paying billions to the government will not get the bank completely out the woods.
Press reports have indicated that Attorney General Eric Holder will not give
the bank a non-prosecution agreement on the criminal side. That means the
Justice Department is free to continue its investigation of JP Morgan Chase, and
eventually prosecutors will have to decide whether or not to charge any
executives at the bank.
In the larger context, that is not good news for shareholders.
So far, likely due to an overall strong operational performance, Mr. Dimon has held
onto his main job as CEO and kept his chairmanship. However, there are some
rumblings from JPMorgan Chase-watchers that are speculating at some point he
will have to step down as chairman although he won strong shareholder support
on the issue this past May.
Other storm clouds are appearing on the horizon.
In a recent note after the D.C. meeting, John McDonald, analyst at Bernstein Research,
pointed to “reputational damage that could impact both the bank’s business
prospects and stock valuation.”
His worst-case estimate of the bank’s legal exposure is $31 billion, or around $10
billion more than the bank has set aside. That could be $31 billion the bank
won’t have to use for all sorts of initiatives such as lending, hiring, branch
expansion, and a return to shareholders in the form of dividends.
If these estimates are close to accurate, why should Dimon remain as CEO and chairman?
Even before the trading loss, the bank was in the spotlight over a series of mortgage
backed securities issued between 2005 and 2007 and accusations it manipulated
energy markets in California and Michigan.
On the numbers front, a loss was reported in the third quarter as a litany of legal
and regulatory problems forced the bank to disburse more than $9.2 billion in
litigation-related fees. Despite Dimon’s apparent cult personality of Wall
Street, that’s a hit to the bottom line that should concern the board and every
For the quarter, the financial services giant posted a loss of $380 million, or 17
cents per share, compared with net income of $5.71 billion, or $1.40 per share,
a year earlier. It was the first quarterly loss since Dimon became CEO.
So far, the impact on shareholders equity has been minimal, which may explain in part why
Dimon continues to hold both positions. At this writing, the stock was hovering
around $54 a share, close to the 52-week high of $56.93 and up 23% for the year.
Last November, the stock traded as low as $38.83.
No Longer a “Tempest in a Teapot”
While praised for stepping up and taking responsibility for the massive trading loss,
things have gone downhill from there. At first, when rumors hit Wall Street,
Dimon said it was a “tempest in a teapot.”
Dimon’s reputation was further sullied in May 2013 when a report by the U.S. Senate’s
Permanent Subcommittee on Investigations found that the bank’s top risk manager
had called warnings about the trading loss “garbage.”
For CEOs, producing revenue growth and profits are typically at the top of the list, but
increasingly risk management is gaining importance. Maybe that’s why Dimon
wrote, in a September 2013 memo to employees, that the bank had increased
spending on internal controls by about $1 billion this year and dedicated more
than $750 million to address concerns from regulators. Dimon also stated that some 5,000 employees have been assigned to compliance activities.
Functions Should be Separate
In my view, given what’s happened at the bank, Dimon simply does not deserve both titles. As
outstanding as he is, he has demonstrated that he cannot effectively manage all
aspects of an enterprise as large as JPMorgan Chase.
Even if the bank was squeaky clean, a case can be made that it’s about accountability. The
operator (CEO) should be running the business and the board should essentially
oversee all activities (including risk management).
While there is uncertainty about whether a final deal will be made with the government and
what that deal will ultimately cost, changes on the board are likely, and there
will be a new board chair of JPMorgan Chase.
As time has proven, no one is irreplaceable or larger than the enterprise they
represent…not even Jamie Dimon.
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