Thomas Perryman highlights some of the worst corporate apologies and how businesses can prepare for future catastrophes.
It's the sort of scandal that tabloid editors dream of, one that exposed murky liaisons between press, police and politicians, and rapidly developed into arguably the fastest moving and most multifaceted corporate crisis ever.
The hacking of voicemail messages by News International to get an edge on exclusives occurred for years on an industrial scale. Government ministers, celebrities and royalty were among the several thousand reported victims, but the revelation that one of them was a 13-year-old murder victim made it as toxic as it was despicable.
Once the world's biggest selling English-language newspaper, News of the World would not report the events that followed. It was closed, unable to survive this scandal of its own making. Owner Rupert Murdoch, long feared and courted in equal measure by politicians of all hues, was now in the dock, sitting before them and the world's media. In words unimaginable just a week before, he interrupted his son and intoned his mea culpa: "This is the most humble day of my life."
The pure theatre that followed is now corporate history. After the marathon pauses and the monosyllabic answers came the 'humble pie' thrust into Murdoch the Elder's face - courtesy of comedian Jonnie Marbles - and the immediate slam-dunk-style head-slap courtesy of Murdoch's wife, Wendi Deng. The public and media were banished from the committee room leaving only the Murdochs, their lawyers and their PR advisers.
What was going through their minds? Not the Murdochs' minds, but those of the PR and legal advisers seated behind them. Did they for a moment consider the parallels with the Deepwater Horizon crisis and the fate of BP's erstwhile CEO Tony Hayward? Or those of Tiger Woods and UK bank bosses? Or the succession of corporate giants, from Sony to Johnson & Johnson, who have, with varying degrees of success, also said sorry? How many CEOs would be confident being at the helm in a comparable situation? How many would know how and when to use the 'S' word?
Hitting the fan
While the term 'crisis communications' will be nothing new to readers of Chief Executive Officer, the demands CEOs face when the proverbial hits the fan have increased inexorably in recent years. News goes viral now, not later. Public opinion forms and changes more quickly than ever before. Rumours become facts in minutes, not days. The public are more sceptical and intolerant of any hint or indication that a business is attempting to camouflage the truth.
Never before has that vital interplay between legal counsel, PR advisers and the ultimate decision-maker - the CEO - been so important. Indeed, if the crisis turns into a catastrophe, the only way to salvage the company's reputation may be to undertake that most visible demonstration of a break with the past: a new CEO.
Any doubters of the ramifications of such a catastrophe need look no further than BP or News International. BP shares were trading at 650p before the Deepwater Horizon crisis of 2010. Nearly 18 months on, they're still down a third at a sluggish 460p. Its reputation tarnished, the company faces billions in liabilities. Only time will tell if the company needs to be broken up.
News Corporation has been hit from all angles. Its bid for full control of BSkyB, the UK's dominant satellite broadcaster, was to be a transformative moment for the company. It was, but for all the wrong reasons as its forced retraction put News Corp's future European operations in question. Shares volatility, together with criticism of the performance of Murdoch and his son James in the parliamentary committee, have increased unease among shareholder groups and independent directors.
Four Rs in apology
While effective corporate apologies are invariably situation-dependent, they all share the same four key elements:
- recognition: publicly recognising the gravity of the crisis
- responsibility: leaders taking personal responsibility to manage the crisis
- regret: expressing regret on behalf of the company
- remedy: outlining the steps that the company is taking, and will continue to take, to redress the situation.
Unfortunately for many business leaders the first 'R' is less of a first step and more of a hurdle. Count among them Messrs Hayward and Murdoch. Disastrously, BP initially denied that Deepwater Horizon was 'a significant event' - the oil slick was said to be from the rig, not a ruptured pipe.
Similarly, in his first interview about the hacking scandal engulfing News Corp, Rupert Murdoch argued that the crisis had been handled "extremely well in every way ... [making merely] minor mistakes." Worse still, he compounded this error by making the comment in a tame interview to one of his own stable of newspapers - The Wall Street Journal. This only guaranteed the opprobrium of every other media outlet. This was right out of the 'Tiger Woods School of Media Training', a man whose own mea culpa was delivered to a select group of journalists. No surprise that those not invited were not entirely flattering in their subsequent reporting. A crisis is no time to grant media exclusives.
In 2005, the image of the most powerful CEO of all, President George W Bush, peering out of a window of Air Force One at the damage wrought by Hurricane Katrina below was a public relations disaster. While the image said nothing of the efficacy of central government relief efforts, perception is reality. Here was the most powerful man in the world, distant and detached from his people when they needed him most.
Be they republican or democrat, his successor was not going to make the same mistake, and sure enough there was no flyby from Obama with the BP disaster.
Ironically, Tony Hayward was quick to understand that he needed to be both busy and be seen to be busy. But, as previously mentioned, BP had already lost considerable credibility for having massively understated the scale of the disaster. This was exacerbated by his misunderstanding, or perhaps underestimating, of the media.
Failing to stick to his key messages, stating, "I'd like my life back" and taking part in a yacht race a day after appearing in a congressional hearing, was naive. This, coupled with his accent and the media rechristening of BP as British Petroleum, meant that he was soon cast in the role as Hollywood baddie.
Elton John may have sung that "Sorry seems to be the hardest word", but it would make a fitting chapter title in a PR textbook. There are three reasons why expressions of corporate regret are often delayed and ineffective.
The first is the personal/psychological dimension. Apologising does not always come naturally to many leaders in any sphere, be that business, sport or politics. Leaders are by definition the antithesis of shrinking violets, and in the still largely alpha male world of CEOs, 'sorry' is seen by too many as a sign of weakness.
Second, a strong sense of loyalty develops in many organisations. This is an aim of any CEO, but it can become very unhelpful if it evolves into a siege mentality during a crisis. Any decision - especially whether to apologise or not - must be based on an emotion-free evaluation of the facts, not tribalism.
Third, and most important, is the inherent tension between legal and communications objectives. Stereotypically small 'c' conservative and cautious by nature, a legal team's raison d'etre is to protect a company against legal action at all costs, and at a time of crisis it may confuse and conflate sorrow with liability.
Communications teams passionately argue the opposite: that it's about long-term trust, not culpability. No trust equals no custom equals no company. There is no simple solution to this, but clearly the structure of the organisation must maintain a healthy balance of influence between divergent views. While the days of PR professionals being a mere adjunct to the real decision-makers are largely gone, the threat of legal action can momentarily lead to business leaders overlooking the most important asset of any organisation big or small: their reputation.
Possibly the most clichéd and damaging style of apology is an import from the world of politics. The 'I'm sorry if you are upset' apology eagerly employed by politicians from Washington to Sydney was this year elevated almost beyond parody by a UK cabinet minister when he said, "Sorry if what I'm setting out to do hasn't communicated itself".
The danger of a disconnect between the sense of regret and the reality, and between words and actions, is not uncommon. Rupert Murdoch's apology sounded sincere, but it did not sit well with News Corp paying the legal fees of former employees convicted of hacking.
Similarly, UK banking executives had hoped an apology in a parliamentary hearing would stem negative headlines, but they seemed unable to explain why they were apologetic. The result? They appeared indignant and arrogant. Cue damning headlines: "We're so sorry for ourselves" and "The most pathetic apologies in history". The lesson is a simple one: never apologise for the sake of apologising alone.
PR activities can therefore never operate in isolation. They must be central to the fourth element of an effective apology: remedying the crisis. The revelation in April that the personal data and credit card details of a reported 77 million Sony PlayStation Network customers may have been stolen by hackers ranked as one of the largest data losses in history.
Yet while Sony initially faced a barrage of negative publicity for being ponderous in acknowledging the gravity of the situation, it received higher marks for how it got back onto the front foot: customers were offered free access and complimentary downloads. This, together with the strong image of a line of executives bowing deeply at a press conference, was a powerful and ultimately positive image. Sincere regret and remedy can regain trust if coupled with compensation packages, especially if the company in question has a reputation for quality and - critically - if it can demonstrate that the crisis was a one-off.
The crisis that befell Johnson & Johnson (J&J) in 1982 is regarded by many as the textbook example of how to respond to a crisis. Tragically, seven people from the Chicago area died, poisoned by Tylenol pain relief tablets laced with cyanide. Yet at the height of the crisis, speculation was rife that hundreds of people across the US might have been victims. In stark contrast to the drip-drip responses above, J&J stood out for the speed with which it acted.
From recognition of the problem through taking responsibility and expressing regret to remedying the situation, the company's attitude was the same: act on the basis of worst-case scenario. A massive, high-profile nationwide recall, together with a public information campaign and warnings for medical personnel meant that no one could be in any doubt that the company was putting its customers before its profits.
What could have been an existential threat to J&J had its action not been as swift, informative and, above all, honest and transparent caused no long-lasting damage to the company. Sales rebounded within 12 months and they duly won plaudits from the media, politics and business world.
Rather than being at best mere wordsmiths and at worst exponents of a dark art, PR advisers must therefore be a voice for good corporate governance and ethical business. But while arguing that the corporate reputation must never be compromised for short-term gain - however lucrative that may be - they must also manage expectations of the limits of PR, for no problem can ever be simply 'PR'ed away.
All organisations should prepare for the, as Donald Rumsfeld put it, 'unknown unknown'. This crisis prevention will depend on respective budgets and the results of a risk audit, but its value, together with a thorough crisis management plan cannot be underestimated.
Get this right and crises need not be feared - not least by CEOs - for he or she who successfully navigates the corporation through a crisis can only enhance their reputation. And one thing is for certain: they won't be short of job offers.