Archive for the ‘Crisis Management’ category

Has the World Gone Mad?

August 7, 2011

Psychology is an important component of marketing, and when the marketplace goes nuts, instability is sure to result. This seems to be what is happening now.

At least Rush Limbaugh told the truth when President Obama was elected. He said, “I want him to fail.” The problem with this logic is when the President (whoever he/she is) fails, the country and perhaps the world goes with it.

This seems to be the state that we are in now. Chicken Little might be deemed a realist given the current economic condition of the developed world.

Who’s to blame?

Perhaps the best answer is everyone, but certainly not equally. False equivalence does not solve any problems. Given Rush Limbaugh’s stated agenda, which the Tea Party and too many “conservative” republicans seem to be following, it seems that the right is wrong. Hiding under the banner of patriotism, which is too often disingenuous because people of different political beliefs can be just as patriotic, they have become doctrinaire and must have been absent from school when we learned that Americans are pragmatic and do not follow extreme doctrines. They also missed the lectures on macroeconomics. When monetary policy fails to get the economy going (interest rates are near zero now), fiscal policy (taxes and government spending) are most often required.

Americans have witnessed and been victims of extremism of all kinds, and have to date, rejected it in favor of the Constitution, which the founding fathers crafted with many checks and balances. Saying no to compromise is un-American. America has always been about pragmatism and compromise. Refusing to raise the debt ceiling to further an agenda that is not supported by the majority of the American Public, is un-American. Of course there is enough blame to go around.

Republicans and the Right. They are for no taxes on wealthy corporations and Americans (GE paid zero tax on $14.2 billion in 2010 income), de-regulation, and smaller government. They left out apple pie and motherhood. In principle aren’t we all for that? Didn’t all the stories teachers read us when we were kids end with “everyone lives happily ever after?” However, as we grew up, we learned the harsh realities that such happy endings are not automatic and are, in fact, rare.  We got deregulation and tax cuts. Where did that get us? I got a $200 check so I could pay many thousands more to the oil industry via higher gas prices. Of course, these higher costs are not limited to the price at the pump. Since just about everything is made or transported by energy, the prices of everything have gone up, and many say this is one of the primary causes of the sluggish economy. As for deregulation, didn’t that bring us the financial meltdown in 2008 which cost us the largest tax of all – high unemployment and $17 to $19 trillion in lost wealth. Thanks to deregulation, every other week another food item is recalled because of a Salmonella outbreak or we learn than an agency, such as the FAA, does not have adequate funding to keep us safe.

Democrats and the Left. They had a majority in Congress during Obama’s first two years. What did they do with it? Not enough. They let Republicans set the agendas rather than focus on rebuilding the economy and job creation. They did get a significant amount of legislation done, but they also did not hold the bankers accountable for the meltdown or its aftermath. The Fed is loaning money to banks at near zero interest rates so the banks would lend money to qualified small businesses and individuals. Are the banks doing this? No. They are loaning the money back to the Government at a higher interest rate, taking profit on the spread, and awarding themselves for their “ingenuity and management prowess” with huge bonuses. And, as Democrats so often do, they allow the Republicans and the right to reposition them — Obamacare (even though it closely follows Mitt Romney’s plan when he was Governor of Massachusetts), “Tax and Spend” Liberals (Bush ran two hugely expensive wars off the Balance Sheet), Bail-Outs and Stimulus (even though both were originated by the Bush Administration). Even though it is difficult to understand why, Republicans seem to be much better at marketing than Democrats. About all the Democrats have been able to do is call Republicans the “Party of No.” And, when the debt ceiling issue came up, the Republican right continued to say no, and moved the Democrats far off their position. Democrats need to learn to get tough and not be “wimps” every time Tea Party Republicans call their bluff.

Credit Rating Agencies. These are the guys that rated toxic assets triple A — causing a lot of people to buy these pieces of junk and get burned during the financial meltdown. Even so, the “holier than though” Standard & Poors just downgraded the credit rating of the US Government, which will place another tax on Americans via higher interest rates and a further slowdown in our already anemic economy. What’s really ridiculous about this rating is that the chances of the US Government failing to pay its bills is as close as you can get to zero.

Chinese Government. Even though they own a lot of US debt, the Chinese Government should not be lecturing us. They are contributing a lot to the economic turmoil around the world by artificially controlling their currency to keep prices of Chinese products low. We are their biggest and best customer, and we have trained a lot of their people. You don’t talk that way to a customer or a teacher that has helped you. Respect has to be mutual, and people that live in glass houses should not throw stones.

Europeans. I hope my friends in Europe do not take offense, but Europeans need to stop blaming the US for their problems. It is true that our financial meltdown has had repercussions for them, but their problems with high-debt countries has bad effects on us too. Also, when Bosnia was a problem in Europe, Europeans wanted us to fix it. When we did, they blamed us for intervening. Rather than spending our wealth defending Europe, perhaps they can use their wealth to defend us so we can complain.

American Public. Too many view themselves as innocent by-standers in the financial and government messes in which we find ourselves. We are not innocent by-standers. Someone in our ancestral line took great risks to come to America to make a better life for us, and we need to take advantage of the opportunities they afforded us. Too many of us are letting those ancestors down by not educating ourselves on the issues and making wise choices when we vote. Many have died for the right to be free and vote. Too many of them would be shocked at how susceptible to sound bites and rhetoric many of us have become. We need to understand economics and history. The financial meltdown and the standoff in Congress on the debt ceiling should not have happened. It did, and we put the people in office that are responsible. We need to learn from that and take corrective action.

Yes, there is a lot of blame to go around, but real leaders do not point fingers, they identify and fix problems. That’s what we need, and that’s what we should be striving for. We should not be hoping that the President from whatever party should fail. We should be helping that President to succeed because we are in the boat that will sink if he doesn’t.

Ira Kalb is president of Kalb & Associates, an international consulting and training firm, and professor of marketing at the Marshall School of Business at University of Southern California (USC). He has won numerous awards for marketing and teaching, authored ten books and over 60 published articles, created marketing inventions that have made clients and students more successful. Various media frequently interview him for his expertise in branding, crisis management and strategic marketing. Follow him on Twitter.

image courtesy of flickr user, KAZVorpal

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The High Cost of News Corp’s Growing Scandal

July 16, 2011

As the proverb goes, those that live by the sword die by the sword. This is what seems to be happening to News Corp. – the company that owns the now defunct News of the World tabloid accused of hacking voice mails of murder and terrorism victims and bribing police. Celebrities that have had their lives turned upside-down by tabloids must be smiling at the escalating misfortunes of the News Corp. empire.

At the first hint of this scandal, News Corp. has seemed inept at reacting to, and containing, the damage.

Procedures to contain damage

To properly contain image damage when there is a crisis, companies should follow the Fact or Rumor Procedures. If true, the fact procedure advises you to…

  1. Admit (what you did wrong)
  2. Apologize
  3. Limit the scope (put the transgression in perspective)
  4. Propose a solution so it will not happen again.

If not true, the rumor procedure advises that you should…

  1. Not publicize the rumor
  2. Promote the opposite
  3. Provide proof for support of your promotion in Step 2.

Damage not contained

In this case, without following either procedure, Rupert Murdoch quickly closed down the News of the World tabloid that has been operating in England for 168 years. He presumably did this to contain the image damage to his News Corporation empire that stretches around the world. However, when you so quickly shutter a business that has been part of the cultural fabric for so long, suspicions will arise that there must be a lot more scandal to surface. Instead of containing the damage, News Corp.’s rapid action to close the business did just the opposite.

As a result, the British Parliament and Scotland Yard have gotten involved. The US Congress and the FBI are also investigating allegations that News Corp. employees hacked the phones and emails of victims of the 911 terrorist attacks.

Giving further credence to the suspicions of a more widespread scandal, Les Hinton, a close confidant of Rupert Murdoch for 52 years and CEO of News Corp.’s Dow Jones division, resigned. This resignation came on the heels of the announcement that Rebekah Brooks, CEO of News International and Editor of News of the World under Hinton, did the same. Update: News reports from Britain say that Ms. Brooks was arrested.

More suspicions have been raised

Unlike most major newspapers, the News Corp.-owned Wall Street Journal failed to feature the scandal on its front pages. This is quite amazing given the fact that this is a major business story that is of great interest to the Wall Street Journal’s target audience. Avoiding the coverage calls into question the Journal’s editorial independence and only fuels more suspicion of the what News Corp may be hiding.

Resulting financial damage

As the scandal grows, so does the financial damage. Since news broke of the hacking of a murder victim’s voice mail in Britain, News Corp. shares have tumbled 13% according to Bloomberg Business Week. Additionally, as reported in the Wall Street Journal, shareholders are suing News Corp. for “…an egregious collection of nepotism and corporate governance failures, with a board completely unwilling to provide even the slightest level of adult supervision.” The scandal has also caused the Company to drop its $12.6 billion bid for full control of British Sky Broadcasting Group.

Expenses related to this scandal are expected to mushroom since News Corp. has hired criminal defense lawyer Brendan V. Sullivan Jr. of the D.C. law firm Williams & Connolly  (he was the attorney for Oliver North during the Iran-Contra scandal). It also retained Edelman, the world’s largest private PR firm, to help it manage its reputation as the scandal continues to unfold.

Lessons to be learned

For marketers and company executives there are numerous lessons to be learned from this unfolding scandal.

  1. As Google says in their mantra, don’t do evil.
  2. Proper policies need to be put in place.
  3. Once effective policies exist, employees need to be supervised from top to bottom to insure that they follow them.
  4. At the slightest hint of scandal, the company needs to contain the damage by employing the relevant fact or rumor procedures before the sparks turn into conflagrations.
  5. Companies that live by the sword have a high risk of dying by the sword.

Can News Corp.’s image be fixed? If so, what do you think the Company needs to do to fix the growing damage to its reputation?

Ira Kalb is president of Kalb & Associates, an international consulting and training firm, and professor of marketing at the Marshall School of Business at University of Southern California (USC). He has won numerous awards for marketing and teaching, authored ten books and over 60 published articles, created marketing inventions that have made clients and students more successful. He is frequently interviewed by various media for his expertise in branding, crisis management and strategic marketing. Follow him on Twitter.

image courtesy of flickr user, DonkeyHotey