LESSONS LEARNED - REGAINING PUBLIC CREDIBILITY FOLLOWING A DAMAGING SITUATION

LESSONS LEARNED #2

REGAINING PUBLIC CREDIBILITY FOLLOWING A DAMAGING SITUATION

How a Relatively Simple Product Problem in Europe Turned Into an Avoidable Career-Defining Moment for the Chairman of Coca-Cola
By James E. Lukaszewski, APR, Fellow PRSA

As Published in PBI Media LLC's PR News, February 28, 2000

Copyright © 2000, James E. Lukaszewski. All rights reserved.

Experience teaches a powerful pattern of operational decision making and corporate behavior that can quickly restore credibility in damaging situations. A positive, rational, response strategy, coupled with seven key operational steps, is required to begin promptly rehabilitating trust and credibility. All seven steps need to be completed in a prescribed order. It is their order and the velocity of action that make the approach so strategically powerful.
The response strategy is: first, resolve the problem itself; second, deal with those most directly affected and victims; third, answer employee questions and help employees understand what's going on; fourth, involve those indirectly affected, neighbors, colleagues, partners, government officials; lastly, accommodate the self-appointed, self-anointed including critics, the media, competitors with a point of view, and public commentators. Action within minutes of crisis recognition is crucial.
The Coca-Cola European contamination scare, which occurred during the last half of 1999, is an excellent example of what happens when this established set of steps is ignored, delayed, or short circuited. Rule #1 of crisis management is that virtually anytime there is a threat to people's health and safety - whether the situation occurs in South Africa, south Boston, Trinidad, or Toledo - a full scale, no-holds-barred response is required. The bigger the brand, the more powerful and prompt the response has to be. A useful way of analyzing and learning lessons from situations like Coca-Cola's is to do what I call an "expectations analysis." Simply stated, this is an approach that compares what a directly affected public, constituency, or victim group expects to the company's proposed or actual behaviors. This analysis produces some self-evident lessons in both crisis management and crisis communication management.

COMMUNITY/VICTIM/PUBLIC
EXPECTATIONS COCA-COLA'S RESPONSE

1. Candor: Outward recognition, through promptly verbalized public acknowledgement (or outright apology), that a problem exists; that people or groups of people, the environment, or the public trust is affected; and that something will be done to remediate the situation.

No acknowledgement at first. Coke appeared to be unconcerned that hundreds of children were made ill and that its product was the probable cause.
Chairman/others finally take notice 14 days after the first warning that incidents occurred.

2. Explanation (no matter how silly, stupid, or embarrassing the problem-causing error was): Promptly and briefly explain why the problem occurred and the known underlying reasons or behaviors which led to the situation (even if we have only partial early information). Also talk about what you learned from the situation and how it will influence your future behavior. Unconditionally commit to regularly report additional information until it is all out, or until no public interest remains.

Coke's response was always in terms of quality - that quality was the #1 issue. Since quality was never higher, it was unlikely that there was a problem with the product.
Coke claimed these were isolated incidents.
Coke said drinking the tainted soda could cause headaches, nausea, and cramps, but didn't present any health risk.

3. Declaration: A public commitment and discussion of specific, positive steps to be taken to conclusively address the issues and resolve the situation.
The head of Coke's French packaging and distribution unit stated, "It has been formally established that the drink itself is without fault. Its quality is irreproachable."
There were problems with mold, a coating on some of the shipping flats, and other issues.

4. Contrition: The continuing verbalization of regret, empathy, sympathy, even embarrassment. Take appropriate responsibility for having allowed the situation to occur in the first place, whether by omission, commission, accident, or negligence.
Coke issues a formal public apology on June 22, seven weeks following the first incidents of illness.
Coke's real commitment to resolving the issues comes more than five weeks after the initial series of illnesses.
CEO Ivester's July 1 letter to shareholders begins "You have likely heard about . . . [Coke] is focused on quality, customer confidence, . . ."
Coke made no early mention of compensating those who became ill.

5. Consultation: Promptly ask for help and counsel from "victims," government, and from the community of origin - even from your opponents. Directly involve and request the participation of those most directly affected to help develop more permanent solutions, more acceptable behaviors, and to design principles and approaches which will preclude similar problems from re-occurring.
Coke blamed uncooperative bottlers; advice the company got from government; and media that blew the problem out of proportion.

6. Commitment: Publicly set your goals at zero. Zero errors, zero defects, zero dumb decisions, and zero problems. Publicly promise that to the best of your ability situations like this will never occur again.
Coke warns investors that "second quarter earnings will be hurt due to temporary product withdrawals . . . some losses covered by insurance . . . the worst is behind us," said Ivester.

7. Restitution: Find a way to quickly pay the price. Make or require restitution. Go beyond community and victim expectations, and what would be required under normal circumstances to remediate the problem. Adverse situations remediated quickly cost a lot less and are controversial for much shorter periods of time.
"One day soon every Belgian will get a free, ice cold Coca-Cola to help forget about a health scare related to the famous soft drink," Coke Chairman M. Douglas Ivester promised.

Epilogue: Just as the contamination episode began to fade from view at the end of 1999, it was revealed that Coca-Cola might test a pricing scheme that would raise the price of the soft drink in certain circumstances when its "marginally utility," according to Ivester, was more valuable (like during hot weather). Who needs enemies?
The Big Lesson: Despite months of embarrassment and gaffs culminating in the "surprise" resignation of Coke's chairman, the soft drink's loyal customers appeared as committed to the drink as ever. The dramatic changes now going on at Coke would have far less visibility had the European situation been handled more positively, promptly, and conclusively. Reputation is created from the inside out. Senior managers must be able to recognize and proactively prevent the predictable risks and threats that arise from time-to-time. Active daily management of the company's identity, especially when obvious social, ethical, and reputational risks are involved, is one of the principal responsibilities of the most senior managers. Minimizing this responsibility can redefine careers when bad things happen.
James E. Lukaszewski, APR, Fellow PRSA, is a specialist in managing tough, touchy, sensitive situations for very large businesses and organizations worldwide. He teaches crisis management strategy at New York University's School of Continuing and Professional Education where he is an adjunct associate professor.

COMMUNITY/VICTIM/PUBLIC EXPECTATIONS	COCA-COLA'S RESPONSE
1. Candor: Outward recognition, through promptly verbalized public acknowledgement (or outright apology), that a problem exists; that people or groups of people, the environment, or the public trust is affected; and that something will be done to remediate the situation.	No acknowledgement at first. Coke appeared to be unconcerned that hundreds of children were made ill and that its product was the probable cause. Chairman/others finally take notice 14 days after the first warning that incidents occurred.
2. Explanation (no matter how silly, stupid, or embarrassing the problem-causing error was): Promptly and briefly explain why the problem occurred and the known underlying reasons or behaviors which led to the situation (even if we have only partial early information). Also talk about what you learned from the situation and how it will influence your future behavior. Unconditionally commit to regularly report additional information until it is all out, or until no public interest remains.	Coke's response was always in terms of quality - that quality was the #1 issue. Since quality was never higher, it was unlikely that there was a problem with the product. Coke claimed these were isolated incidents. Coke said drinking the tainted soda could cause headaches, nausea, and cramps, but didn't present any health risk.
3. Declaration: A public commitment and discussion of specific, positive steps to be taken to conclusively address the issues and resolve the situation.	The head of Coke's French packaging and distribution unit stated, "It has been formally established that the drink itself is without fault. Its quality is irreproachable." There were problems with mold, a coating on some of the shipping flats, and other issues.
4. Contrition: The continuing verbalization of regret, empathy, sympathy, even embarrassment. Take appropriate responsibility for having allowed the situation to occur in the first place, whether by omission, commission, accident, or negligence.	Coke issues a formal public apology on June 22, seven weeks following the first incidents of illness. Coke's real commitment to resolving the issues comes more than five weeks after the initial series of illnesses. CEO Ivester's July 1 letter to shareholders begins "You have likely heard about . . . [Coke] is focused on quality, customer confidence, . . ." Coke made no early mention of compensating those who became ill.
5. Consultation: Promptly ask for help and counsel from "victims," government, and from the community of origin - even from your opponents. Directly involve and request the participation of those most directly affected to help develop more permanent solutions, more acceptable behaviors, and to design principles and approaches which will preclude similar problems from re-occurring.	Coke blamed uncooperative bottlers; advice the company got from government; and media that blew the problem out of proportion.
6. Commitment: Publicly set your goals at zero. Zero errors, zero defects, zero dumb decisions, and zero problems. Publicly promise that to the best of your ability situations like this will never occur again.	Coke warns investors that "second quarter earnings will be hurt due to temporary product withdrawals . . . some losses covered by insurance . . . the worst is behind us," said Ivester.
7. Restitution: Find a way to quickly pay the price. Make or require restitution. Go beyond community and victim expectations, and what would be required under normal circumstances to remediate the problem. Adverse situations remediated quickly cost a lot less and are controversial for much shorter periods of time.	"One day soon every Belgian will get a free, ice cold Coca-Cola to help forget about a health scare related to the famous soft drink," Coke Chairman M. Douglas Ivester promised.