Bates Library

Your Brand Disaster Toolkit

Posted on Tue, May 8, 2012 @ 02:27 AM

Excerpt from Discover Your CEO Brand by Suzanne Bates

Discover Your CEO Brand

What do Tiger Woods, Martha Stewart and Tony Hayward all have in common?  Their brands were marred (sometimes temporarily, sometimes permanently) by brand disasters—missteps that mushroomed into reputational nightmares.  In some cases (the iconic Martha comes to mind) they make a comeback, even enhancing their reputations.  Others never see redemption.   

Because your brand reputation is so valuable, you need to protect it—especially in times of crisis.  That includes good public relations.  Just remember that once you’re down the crisis road, PR is not a magic pill.  It is no substitute for doing things the right way from the start.  No amount of advertising and schmoozing with the media can fix a mess that you’ve allowed to spiral out of control.  The best insurance is to guard your reputation and your company’s reputation with every fiber of your being. 

While we all love a comeback, living through a crisis isn’t the easiest way to build a brand.  How do you avoid it?  My golden rule: First, do no harm to your reputation. Treat your brand like gold.  Then, understand how to react when there is a crisis.  Whether it is a self-inflicted wound or an unexpected event, you need to know how to react.  In this article, we’ll review my brand disaster toolkit strategies.  Mastering these principles—and living by them—is crucial to your success when communicating with the outside world.

 

Brand Disaster Toolkit Strategy #1: Apologize quickly. Demonstrate you mean it.

Bob Eckert, the chairman and CEO of Mattel, has publicly said he will never forget the way he spent his 53rd birthday, on August 14, 2008. He sat in front of a television camera in a conference room in Mattel's headquarters in El Segundo, California, delivering the same bad news over and over.  Mattel was recalling more than 18 million toys, the most in company history, because of lead paint and design flaws, and there could be more recalls to come.

Employees interviewed in the media indicated that the message Eckert delivered both to the public and to them was the same.  His e-mails, phone calls, and meetings emphasized one message – no matter what the impact on the company’s revenues, safety came first.  Mattel committed to fixing the toy problems and protecting children's safety no matter what.  According to news reports, Eckert, a father of four,  told his employees that Mattel would be a better company in the long run. After the fact, in Fortune Magazine, Eckert reflected on why the company had not only weathered the storm, but saw morale climb through the crisis.  “All around the world, we apologized to parents,” he told the magazine. “These were global recalls and whenever we had the opportunity, we wanted to apologize to parents and that included parents in China.”  Eckert also apologized to the Chinese who had taken the brunt of criticism for manufacturing errors that were not their responsibility.   

If you work in business long enough, crisis will test you.  Whatever your business or industry, things can and will go wrong.  The impact on your brand is determined by one overarching factor – how you respond.  You either react in a way that shows you and your company at your best, or your worst.  If the response is weak, defensive, or arrogant, the reputational damage will be far-reaching and impossible to control.  If, as in Mattel’s case, you handle it swiftly and adeptly, the damage will be minor, and you’ll come out of it a better company.  It’s rare to see, but many companies actually improve their image because of the way they handle crisis. 

Brand Disaster Toolkit Strategy #2: Remember that arrogance is the biggest brand-killer of all.

By the time British Petroleum announced the resignation of CEO Tony Hayward, he was already public enemy #1.  Hayward had been vilified as the face of the Gulf oil spill.  His words were only digging him a deeper hole. 

Arrogance did worse damage than the spill itself.  Hayward was a walking disaster.  Early on, he predicted the environmental impact was likely to be “very, very modest.”  Later, he quipped that he would “like his life back.” He took off to go yacht racing with his son while Gulf Coast fishermen wondered whether they’d ever be able to fish and support their families again.  As millions of gallons of oil tarred beaches from Texas to Florida, it was difficult to see Hayward as anything but detached, clueless,  out of touch and unrepentant about the incident.

Speaking to the U.S. Congressional Energy Committee, he proffered an unapologetic defense which only made lawmakers angrier.  He positioned BP as a “model of corporate responsibility, taking steps that most other companies could not have contemplated, let alone done.”  He would not have changed what BP had done or the role he had played.  One committee member accused Hayward of “kicking the can down the road."  

When you analyze the events as reported in the media, you don’t have to look far to get the drift.  The mistakes went on and on.  BP was unprepared.  Even worst-case scenarios can turn out well if you take responsibility and ownership.  To not do so, only makes people angrier.  That’s why you need a plan, a good team, and training for crisis management including media.  If you mess this up, it can take years to win back the trust of customers and the public.

People are willing to forgive almost anything except arrogance.  That is what made Hayward’s demise inevitable.  His behavior cast a long shadow over BP.  The millions spent on advertising to shore up their image was a waste.  Commercials depicting British Petroleum employees on the beaches talking about their commitment would be dismissed as “bought  and paid for.”  No amount of money would spin a positive story.   

Brand Disaster Toolkit Strategy #3: Imagine how it will look on the front page of the Wall Street Journal.

Jodie Fisher, an actress who made a career appearing in R-rated movies and on the NBC reality show “Age of Love,” may never have imagined her resume would include bringing down a major CEO.  But it happened August 6, 2010, when her ties to Hewlett-Packard CEO Mark Hurd were exposed, and HP’s board of directors forced him to walk.  This was astounding since Hurd was so highly regarded.  Forbes Magazine had him at number 16 on the list of the Top 25 Most Powerful People in Business.

What tipped the house of cards was a letter Fisher wrote to the company claiming sexual harassment.  The board investigated, concluding there had been no harassment, but there sure was a problem.  They said Hurd had violated company policy by falsifying expense reports in making payments for what? They didn’t know.  Hurd had concealed his relationship with Ms. Fisher.  

In August 2010, Hewlett-Packard CEO Mark Hurdwas forced to resign after actress Jodie Fisher wrote to the company complaining that the CEO had sexually harassed her.  The board investigated and concluded that there was no harassment… but there sure was a problem.  Hurd had violated company policy by falsifying expense reports at the same time he was ordering massive expense reductions to get the company on track.  Hurd had actually championed HP’s written standards of business, stating that employees should pose a simple test as they decide whether an action is appropriate:  “Before I make a decision, I consider how it would look in a news story.”  

Barrels of ink have been spilled telling the stories of the mighty who have fallen because they were engaged in unethical conduct.  To err is human, but one thing every leader must know is that there are no secrets.  His was a classic, self-inflicted wound.

Brand Disaster Toolkit Strategy #4: Take your lumps and move on.

Martha Stewart is perhaps the most prominent businesswoman of our time.  When she was indicted for lying to investigators about a stock sale, she was a successful magazine publisher, best-selling author, and daytime television personality.  Her programs were broadcast all over the world.  Her empire encompassed thousands of home furnishing and other products, sold through partnerships with companies including Sears and Macy’s.  

In 2004, when she walked into a West Virginia federal prison camp to serve her sentence, there was rampant speculation about the future of her company. By her own estimate, Stewart lost about $1 billion.  What was remarkable was her comeback.  Upon her release in 2005, she hit the talk-show circuit.  On Oprah, she shared stories of prison.  She was “delighted” when prison officials put her in charge of cleaning.  With good humor, she said, “I knew how to wax (floors). That was easy,” she told Oprah.  “The hard part was learning how to clean the waxer.  I had never really used a rug cleaner.”  

MSLO returned to profitability the year after Stewart’s release. She expanded her offerings at K-Mart to a line of ready-made home furnishings.  She announced new multi-year agreements with new partners for flooring products and wine.  Her interior paint line became available at Sears.  She published more books, and became a contributor on the Today Show on NBC.

When you start a company and name it after yourself, you must do everything in your power to protect your brand.  No entrepreneur with his or her name on the door can afford to underestimate reputational risk.   How did Martha Stewart manage to stem the loss and perhaps become more admired?  She faced the music, did her time, and moved on.  The public admired her for it.

 Brand Disaster Toolkit Strategy #5: Tell the truth.  It will come out anyway.

If ever there were a case study in bungling crisis management, it was the first year after Tiger Woods’ sordid, tangled personal affairs came to light.  On his way to becoming the greatest golfer in the history of the game, Woods stumbled badly.  From the moment he crashed his Cadillac Escalade at Thanksgiving, he couldn’t get it right.  As tawdry details about multiple affairs came to light, he was silent, then he lied, and then, no one believed him.  His golden reputation went into a freefall. 

Sponsors pulled TV commercials and print ads, although at first it was painful for them to pull the plug.  Woods was the most powerful endorser on the planet.  But the story was so big, and so out of sync with the carefully constructed, disciplined, family-man reputation he had built, that Woods’ image finally fell apart like a house of cards.   This wasn’t just any athlete caught in the crosshairs.  Woods’ brand was “perfection,” helping him become the highest paid and best-known sportsman in the world.   

Woods’ wife Elin Nordegren divorced him.  By early 2011, Procter and Gamble did not renew their contracts with Woods.   Endorsements with Accenture and AT&T, reportedly worth $35 million, were gone. Nike stood by him.  But the damage was done.  Eventually Tiger became golf-focused, the hubbub quieted, and the public didn’t care so much.  He became a curiosity.  It remains a mystery whether he can make a comeback or not.  But you have to wonder what might have happened if he had just come clean early on. 

Brand Disaster Toolkit Strategy #6: When the storm starts brewing, don’t just keep sailing in the same direction.

In 2000, Robert Nardelli was a top-three finalist to replace Jack Welch at GE, the most-anticipated CEO changing of the guard in American business history.  When he lost the job to Jeffrey Immelt, he weighed offers and chose Home Depot, which was growing faster than any retailer in history, even Wal-Mart.  Somehow, Nardelli managed to mess it up.  In spite of his initial success, he eventually destroyed his brand with employees, customers, shareholders, and even the public, becoming a symbol of greed, arrogance and extravagance.

Nardelli had a hardline, numbers approach.  Home Depot was a folksy, down-home retailer.  Their founders had created a culture of “loving the customer.”  Nardelli poured $1 billion into new technology like unmanned, self-checkout aisles.  So while the company generated reams of data to measure everything that happened, what it didn’t measure was the disconnect with customers.  Accustomed to friendly service, they couldn’t find anybody in the store to help.

The final nail in the coffin was Nardelli's public negotiation to win a whopping compensation package.   As Home Depot’s stock was stagnant, he was collecting $124 million, not including stock options.  In the background, Home Depot was among 200 companies caught backdating stock options, prior to  Nardelli’s arrival.  He was cleared of any wrongdoing associated with this.  However, shareholders were now out for his head.  The board tried to trim his pay, with no luck.  So they finally said goodbye.  Published reports said employees were texting each other with smiley-face symbols.

Had Nardelli been judged on the numbers only, his job might have been safe.  His metrics-driven leadership might have been seen as an overall positive.  But the biggest issue was his loss of perspective.  No matter what, he kept sailing in the same direction, tone-deaf to critics, who would ultimately seal his fate. 

Brand Disaster Toolkit Strategy #7: Without a reservoir of goodwill, one crisis will bring you down.

Politics is a rough and tumble game.  Business people who enter the political arena often get bruised.  You can earn your stripes on the corporate battlefield and still be unprepared for a political campaign.  Such was the case when Meg Whitman ran as the Republican candidate for California Governor in 2010.

 When B-list attorney Gloria Allred called in the TV cameras and her client, Nicky Diaz, came forward with a tearful complaint, there was a healthy amount of skepticism about her claims of mistreatment when she nannied for Meg Whitman and her husband.  With the news breaking a month before the election, Whitman’s staff pointed out that Allred was buddies with Democratic candidate Jerry Brown.

However, things quickly went south when it was discovered that Whitman’s husband, Griffith Harsh, had apparently signed a document that showed he had been informed that the nanny’s social security number didn’t match her name.    

Diaz claimed she was terminated in a “cruel and heartless way” in 2009 when she came forward to ask the candidate and her husband for help obtaining U.S. citizenship.  Her story about spending nine years shuttling their kids around, doing extra chores, and cleaning up their 3,700 square foot home was a headline grabber.  It wasn’t the first time Whitman had been accused of employee mistreatment.  She reportedly paid a $200,000 settlement to Young Mi Kim, one of her former e-Bay employees, after allegedly cursing her and shoving her in a conference room.    

Whitman lost the election.  What was interesting was that “Nanny-gate” wasn’t the only reason cited.  Whitman had reportedly spent close to $175 million of her own money on a losing campaign.  Her willingness to throw money at the campaign was out of sync with her promise to bring fiscal accountability and cut spending.  As a result, many critics thought she snatched defeat from the jaws of victory.  “Meg Whitman had the kind of resources most candidates only dream of, and she was a political outsider in the quintessential anti-incumbent year,” said Arnold Steinberg in an op-ed piece. 

 The issue proved something that is always true for leaders in politics and business.  If you fail to build goodwill, any issue can bring you down.  She hadn’t built trust with the voters to begin with, so when Diaz showed up on the scene, she was unable to fend off a challenge from an opponent who had been considered weak.  It’s hard to weather a crisis when you don’t have a reservoir of trust already built up.

 

With their words and actions, CEOs are always communicating with the outside world.  For better and worse, the CEOs brand is tied to the company’s brand.  For all leaders, credibility is like a bank account: If you keep making deposits to build your balance, an occasional withdrawal in the form of bad economic news or product problems won’t be disastrous.  The right balance of preventative measures and responsive, responsible reaction can even turn potential brand disasters into opportunities if they are handled expertly.

Tags: External Communication, Book Excerpts