Trainwrecks: How Corporate Reputations Collapse And Managements Attempt to Rebuild Them

He has either been part of, or observed with an investigator's keen eye, many of the major disturbances in corporate reputation that have happened during the past thirty years...[and] has prepared numerous companies, and their leadership teams for the sort of day most hope never happens.

Douglas Reid, Queen's University School of

Business

Barr is the best pure communication strategist I ever met.

Peter Walford, Regional President,

Burson-Marsteller

Table of Contents

Foreword by Douglas Reid, Queen’s University School of Business

Should You Read This Book?

I. Problems, Crises And Trainwrecks

1. A Problem Is Not A Crisis

2. How Crises Start And (Usually) Grow

3. A World Of Pain: Life Inside A Crisis

4. The Dynamics Of Reputational Defence

5. Has The Advent Of Social Media Changed The Rules Of Crisis Management?

6. Crisis Management and Mismanagement: Two Inspiring Tales And Two Cautionary Ones

II. Preventing And Managing Crises

7. The Highest Form Of Crisis Management: Prevention

8. Disaster Knocks: How To Manage A Crisis

9. New Hope For The Dead? Recovery After A Trainwreck

III. The Trainwreck Diaries

10. Organizations At The Crossroads

11. When Perrier Lost More Than Its Fizz

12. Peter Pocklington Was Not The Antichrist

13. Funeral In The Woods: The Downfall Of MacMillan Bloedel

14. Funeral In Mississippi: The Fall Of The Loewen Group

15. Barbarians Inside The Gates

16. The Guts Of The Meat Business

17. There’s Dirt In Them Thar Hills

18. The Considerable Difficulty Of Reviving The Drowned

IV. And Now For Something Slightly Different

19. Thank You For Smoking — By The Dumpster

20. A Crisis Manager Looks Back

ISBN: 9781483507033

FOREWORD

Douglas Reid, Queens University School of Business

Every era needs and benefits from wisdom. The volatile, uncertain and complex world we live in today is no exception. Wisdom is valuable because it is different from fad. It is rooted in the deeper and more enduring patterns in the human call-and-response of life. Not knowing the details of fads can make one merely socially awkward; not being acquainted with wisdom can, at worst, be fatal.

John Barr has contributed meaningfully to the long literature of human wisdom by adding the volume that I hope that you have purchased and are about to read. Specifically, he is reminding us that reputation is fragile, and that the worst bruises to it result from errors of handling arising most often from hubris.

Hubris is one of the many wonderful Greek words and ideas that have found a welcoming home in the English language. Another, ostracism, has its roots in the ancient Athenian practice of ostrakismos. In Athens, there existed a custom that, after following a procedure that also included a vote, a citizen could be expelled for a decade. There was no due process, as we know it in the West, or even recourse to appeal. Banishment was therefore a function of opinion reflected in popular sentiment, though fully considerate of an individual’s record.

The modern practice of ostracism is more arbitrary and more rapid. It is carried out in the commercial marketplace, aided and abetted by images, stories, positioning, tweets, posts, and blogs. There is no formal procedure, no vote, and like Athens, no right of appeal for its object. Banishment may be temporary or permanent, and its duration is never known reliably till the tally sheets of modern capitalism affirm a return to a society’s fold.

Reputation is tried most acutely during a crisis. The public, weaned on confrontational television, competitive markets, and a fear-ridden international environment, are adept at turning friend into foe. In fact, often this decision seems to be made without the aid of deliberate thought, and becomes much easier when a tone-deaf corporation strains its humanity through a calculative mesh of liability before speaking.

Inured to carefully parsed words, but not always taken in by them, members of the public tip quickly into pro and con camps and let this be known electronically. Framed as a values violation, it is no surprise that a lifetime of quiet corporate achievement can be destroyed quickly. Worse, in retrospect, it was clear that almost every one of these incidents could have been avoided.

While most everything will be forgiven eventually, we no longer live in an era of thoughtfulness and reflection. This makes it impossible for any serious businessperson to gamble with reputation, or worse, construe it solely as a matter of liability and seek advice on its stewardship primarily from legal counsel.

That is why this book matters so much. It is a guidebook for action, written by an experienced hand. It addresses a subject that is, wrongly, often taken for granted because businesses focus so extensively on control that managers can become convinced that the scope of control includes the future. It does not. So building prepared minds and a resilient reputation are a proper focus of consideration for anyone leading an organization that he or she hopes to deliver, thriving, into that set of unknowns collectively called tomorrow.

Books written by experienced practitioners have been critiqued in the past for being little more than a collection of war stories. To me this has been a puzzling line of attack: how else are we to learn about war, than from stories? (And, given the troubling incidence of conflict in the world, perhaps we need more stories replete with memorable if disturbing details so that nations find alternatives to war?)

Yet John Barr is far more than a yarn-spinner. He belongs to that breed of managers referred to as a reflective practitioner. The practitioner part gives you confidence that he knows what he’s talking about; the reflective part means that he can spot the patterns running between events and from them, synthesize wisdom.

John has either been part of, or observed with an investigator’s keen eye, many of the major disturbances in corporate reputation that have happened during the past thirty years. He has counseled senior executives who were venturing into new terrain – defending their organization’s reputation – as they did the hard work of identifying priorities, assessing trade offs, and delivering difficult news in a professional manner.

John has prepared numerous companies and their leadership teams for the sort of day that most hope never happens. His fingerprints lie, metaphorically, behind a number of well-known corporate mergers, potential disasters converted to viable competitive positions, and better prepared management teams of blue-chip companies.

Full disclosure: I worked for John for almost three years before I left to pursue graduate studies, and watched him perform under conditions where there was neither a lifeline call nor a re-do opportunity. In situations where decisions had to be right the first time – because there was no second time - John Barr was the one whose advice was sought, particularly when bad publicity was the least of the worries that his client had on a particular day.

That is why this book is worth reading, worth heeding, and worth acting upon.

Douglas Reid, Ph.D.

Associate Professor of Strategy and International Business

Distinguished Faculty Teaching Fellow

Queen’s School of Business, Kingston, Canada

SHOULD YOU READ THIS BOOK?

A note to executives and crisis managers

Often when there’s a crisis in the news, some expert warns business executives that a crisis could be just around your corner, that you should prepare and that you should keep the expert’s guidelines for crisis management handy just in case. (Or perhaps hire the expert).

If you’re like many executives you turn the page or flip the channel. Another consultant pitching his services, you think. I’ve got enough things to worry about. What’s the likelihood my organization will screw up or get in serious trouble?

You could be right. Many sectors of the economy almost never experience a major corporate crisis. And some companies that do have crises shake them off. Statistically, most businesses won’t see their reputations threatened by a crisis, at least this year.

Maybe it’s just good sense not to spend time and money analyzing the risk of a crisis or developing a crisis preparedness plan. I mean, what are the odds?

On the other hand: might there not be value in having a kind of crisis insurance policy on hand? I’m talking about a calm, objective analysis of your crisis risk and a plan to cope with bad news.

There is a way to answer that question that will require you to spend the next thirty minutes walking through a simple diagnostic instrument, or as we used to say, a test. It’s based on my thirty-year experience as a hands-on crisis manager as well as a study of several hundred corporate crises. I call it the Crisis Vulnerability Assessment, or CVA.

It isn’t a mathematical formula that can predict the likelihood and severity of a crisis down to two decimal places. It’s more like a sensor in your car engine, linked to a warning light on your dashboard, telling you that your oil pressure is dropping and if you don’t take remedial action soon, you could be in trouble.

What, Me Worry?

I totally understand anyone who is skeptical about crisis planning. The business world is full of bad things that could happen but usually don’t. But sometimes there is a fine line between healthy skepticism and wishful thinking.

You think: crises never happen to organizations like us. We’re not in a risky business.

You’re not in the nuclear power, airline, food or pharmaceutical businesses. Those people have crises. Your industry (or association) is boring, low-profile. What could go wrong? (All systems are working perfectly. Nothing could go wrong...go wrong...go wrong...

You may not be at risk. On the other hand, look around the news and you’ll notice some disturbing points.

• What could be safer and more politically correct than the yoga business? Yet leading yoga wear manufacturer Lululemon found itself under growing fire when the crotches in a new line of yoga pants proved to be see-through.

• Managing a long distance marathon didn’t seem like a risky enterprise — until terrorists bombed the Boston Marathon. And managing a public school system didn’t seem to require crisis preparedness — until Columbine and Sandy Hook schools were hit by terrorists.

• Fashion wear manufacturer Joe Fresh enjoyed a growing reputation until the public learned that its clothing was manufactured in a Bangladesh factory that collapsed, killing more than a thousand workers.

In today’s corporate world, a crisis can strike almost any business. Even those that seem most insulated.

You think: even if trouble hits, lots of organizations have crises and seem to work it out.

Some organizations are smart and resilient enough — or lucky or slippery enough — to survive crises with minimal damage. ExxonMobil earned infamy for its catastrophic oil spill in Prince William Sound, Alaska; years later it’s still the world’s largest and most successful oil company. Some of America’s biggest banks were blamed for the 2008 financial crisis — but most of them are still standing, their finances are improving and none of their CEOs went to jail.

On the other hand, there’s a growing list of organizations that underwent a crisis and didn’t survive. Some were well-known companies, like Tycho, Bear Stearns, Lehman Brothers and Enron. Some are now forgotten: Perrier, Loewen Group, XL Foods and Peanut Corporation of America. Not just names. Also places where thousands of people lost their jobs and millions of people lost their savings.

So before you get too comfortable I suggest you ask: if the unthinkable happened, could your organization take a crisis in its stride and suffer no major reputational injury?

Let’s cut to the chase. Is there an objective, empirical way to measure your organization’s crisis risk and decide whether this book is worth reading? I’m talking about a methodology, based on real trends and the experience of crisis managers — not scare stories — for preventing a crisis or managing one that does take place, so that it doesn’t destroy your reputation.

For a number of years I worked on such a methodology. I pored through my personal experience as a crisis manager and then reviewed actual corporate crises over the past thirty years to see how it might work. On the strength of that I identified the key elements of a Crisis Vulnerability Assessment — the five variables that determine your organization’s exposure to crisis risk:

1) The sector you operate in;

2) Your public profile or visibility;

3) Your exposure to capital markets;

4) Your involvement in or link to sensitive public issues; and

5) Your capacity to deflect criticism and ride out a storm. Or what I like to think of as your armor plating.

There are different forms of armor plating:

• Market dominance. Think of those U.S. banks that were too big to fail.

• Moral authority. Could any scandal seriously damage Berkshire Hathaway as long as Warren Buffett is in charge? Unlikely.

• Passionate following. At least as long as Steve Jobs was alive, Apple was Teflon-coated when it came to criticism. Part of the reason: the passionate loyalty of Apple owners. Think Monsanto. The bête noire of environmentalists the world over. But as long as it enjoys the passionate loyalty of its farmer customers, it seems criticism-proof.

• Your ability to find cover. For example, membership in an industry association that will speak on your behalf.

• Indispensability. Certain occupations — one thinks of firefighters and medical doctors — enjoy a reputation for importance and irreplaceability; and

• Crisis preparedness. An organization with a well-thought-out and tested crisis preparedness plan has a greater ability to manage its way through trouble without reputational damage.

Your vulnerability to a crisis is computed by adding the first four factors and dividing the sum by the fifth. Think of it as a formula:

Of course this isn’t a real formula. It’s more what Einstein used to call a thought experiment.

Calculate Your Vulnerability

Use a scale where 1 = Low and 10 =High to assign a value to your company’s score against the first four risks. Then divide the sum of that score by your capacity to deflect damage, and you will have a rough measurement of your company’s crisis risk exposure. Organizations with a low score have a reduced risk of a serious reputational crisis. Organizations with a higher crisis vulnerability risk score have a heightened risk of a serious reputational crisis and should think seriously about crisis planning.

You can calculate your crisis vulnerability right now on the back of an envelope. If you want to work it through, there are detailed instructions in Appendix 1.

Here’s a quick, useful rule of thumb to determine whether you need to take the test. Ask whether your organization has any kind of crisis preparedness plan and whether it has been tested, ideally in a simulation. If the answer is no, I urge you to apply the formula.

If your organization could be at risk of a significant crisis, I hope you will consider reading the rest of this book. Even if it isn’t, you may find this book a useful addition to your management reading just for pure human interest since there are few topics more interesting than how other people got into trouble.

And who knows? Someday it may help save your bacon.

A note to students of business management or public relations

At some point in your studies you may become interested in crisis management as it applies to businesses or not-for-profit organizations.

There are a number of academic studies of crisis management. Some links to them are below. This book is not intended to replace academic studies, but rather to complement them with an honest inside look at how crisis management works in practice. Think of it as applied research drawn from