By Helio Fred Garcia  

The Year of Living Self-Destructively 

Crises in 2007 had several common themes, and reinforced three fundamental crisis management principles:

• Many crises are self-inflicted. Even when a crisis arises elsewhere, most of the harm to an organization’s reputation, operations, and financial condition results from bad handling of the crisis.

• Most reputational harm comes not from the severity of the crisis itself, but from the timeliness and quality of the response. It isn’t what happens to you that kills you; it’s what you do about it. In the words of the Wall Street Journal reporter Ron Alsop, from his book The 18 Immutable Laws of Corporate Reputation, “flailing around and looking helpless aren’t inspiring to your stakeholders.”

• Organizations and leaders can be forgiven when things go horribly wrong. But they won’t – and can’t – be forgiven if they’re seen not to care that things went wrong. Creating the perception of indifference is the most common misstep in the immediate aftermath of a crisis. Attempts to rationalize away a crisis don’t work, and only make matters worse.

First up, a rare quick recovery from a self-inflicted crisis.

Apple of my i

Apple, Inc. In late June Apple launched its much-vaunted iPhone. The 24/7 news coverage featured hundreds of Apple enthusiasts sleeping on streets overnight or longer so that they could be among the first to own what loyalists called the “Jesus Phone.” The product was a big hit, and soon approached one million units sold in the US alone.

About two months after the launch Apple announced it was cutting the price of the higher-end phone by $200. Expecting applause, Apple instead received vitriolic feedback from its most loyal customers. Apple CEO Steve Jobs responded quickly. In an open letter to customers, he acknowledged receiving hundreds of angry e-mails from customers. He defended the price cut and noted that early adopters are used to the price of new products dropping quickly, but also acknowledged that Apple needed to take care of its early customers while aggressively seeking new ones. He announced a $100 store credit for early buyers who did not receive a rebate. Finally, he apologized for disappointing some Apple customers.

The fury died down, and iPhone sales continued to grow.

Read Steve Jobs’ apology letter

Apple’s quick pivot helped prevent further harm.

Other organizations weren’t quite as nimble. Below, a compendium of missteps, including delay, denial, and even delusion, that caused self-inflicted harm in some of the most visible crises of 2007.

Compound Indifference

  The Logos Institute Award for the Worst-Handled Crisis of 2007 goes to Eastern Michigan University and its then-president John A. Fallon. Although this crisis did not get national headlines (but did get some national coverage), it is a rare look at an organization and leader making misstep after misstep, and denying it until it was too late.

For a more complete account of this crisis and lessons to be learned from it, see our article on it.

On December 15, 2006 the body of Eastern Michigan University student Laura Dickinson was found in her dormitory room. It was clear from the crime scene that the death was probably a homicide; her body was found lying face up on the floor, naked from the waist down, legs spread, a pillow over her face, and her undergarments and keys were missing. Later that day the county medical examiner determined that the death was suspicious, and that “foul play” was a possibility.

Both the head of campus security and the vice president of student affairs were made aware that homicide was suspected by law enforcement authorities, but they didn’t tell others, including EMU president John Fallon.

The next day President Fallon released a statement that read, “At this point, there is no reason to suspect foul play. We are fully confident in the safety and security of our campus environment, and our campus officials will remain vigilant in ensuring safety for all members of our campus community." The university made a similar assurance to Ms. Dickinson’s parents. Neither the head of security nor of student affairs corrected that erroneous information, publicly or privately.

The same week the university security office wrote a draft incident report that was circulated to the student affairs office. After some staffers asked about the graphic descriptions of the crime scene, the VP for Student Affairs ordered that the draft report be shredded. As a result, no-one else knew about the report or that it had been destroyed.

On February 23, 2007, an EMU student was charged with Ms. Dickinson’s rape and murder.

Given the disparity between the initial, and never-corrected, reassuring reports and the arrest of a fellow student, the university community expressed outrage.

The university gave mixed and confusing accounts for the disparity. The University Board of Regents ordered an independent investigation by a law firm, which concluded that the college had mishandled the incident from beginning to end.

The Regents chair posted a note on the university’s website along with both an executive summary and full text of the report. His posting said:

“The findings are clear: This University got it wrong. What happened was unacceptable. We know that many members in our community felt a breach of trust and deep anxiety because of the University's failures. On behalf of the Board, I apologize and pledge that the safety of our students, and the well-being of the entire campus community, is of paramount importance... We will make the changes necessary to better inform and protect our community."

Read the Regents chair’s memo and the report of the independent investigation into the incidents at EMU

President Fallon kept quiet for 12 days before acknowledging the university’s failure to manage the aftermath of the murder. The faculty held a no-confidence vote, and recommended that he be dismissed.

He addressed a meeting of the Board of Regents on June 18, 2007. He acknowledged mistakes and apologized:

“I concur with [The Board of Regents] Chairman… who, in releasing the results of the report a week or so ago, stated that the University “got it wrong” in the aftermath of Ms. Laura Dickinson’s death. We did get it wrong, shamefully so…To the Dickinson family, I say, my deepest sympathies again go out to you. Laura’s death was nothing short of tragic, and this University’s actions afterward compounded your pain. I am profoundly sorry for your loss.”

It was too little, too late. On July 15 the Board of Regents summarily dismissed President Fallon; the director of campus security and the vice-president of student affairs also lost their jobs.

The saga continues: In November the US Department of Education found that EMU violated federal campus safety laws by failing to alert students that a suspected homicide had taken place on campus. On the date when the Regents were set to announce the search for a new president, Mr. Fallon sued the Regents, claiming that he had been fired inappropriately.

Read the Department of Education report on violations of federal law

Read John Fallon’s lawsuit against the Regents

Below, runners up for mis-handled crises.

Nothing but the Blues

JetBlue. On Valentine’s Day, Wednesday, February 14, a massive ice storm hit New York, causing delays and cancellations at John F. Kennedy International Airport. By the next day, most airlines had recovered. But not JetBlue.

Once a small and aggressive carrier that took advantage of surplus landing slots at JFK, by February of 2007 JetBlue operated more JFK flights than any other airline. But its infrastructure and operations hadn’t kept up with growth. The next day, the airline assured passengers that all would be well, but couldn’t get most of its planes off the gate. The reason: It couldn’t find its flight attendants and pilots, and its booking system was overloaded, so pilots and flight attendants couldn’t get through to dispatchers. Thousands of passengers were stranded that Thursday; thousands more on Friday.

By Saturday the airline called a moratorium on flights out of JFK, hoping to clean up the backlog. It promised to be up and running on Monday. But Monday it had to extend the moratorium another day. It took more than a week for JetBlue to get back to a normal flight schedule from JFK. The airline soon announced a “Customer Bill of Rights” that in reality was merely a menu of refunds passengers would receive for delayed or cancelled flights in the future – less a bill of rights than a promise of compensation for future errors. In mid-May, JetBlue founder and CEO David Neeleman was moved out of the CEO position.

Read JetBlue’s Customer Bill of Rights

See JetBlue’s apology

From Tragedy to Farce

Federal Emergency Management Agency (FEMA). In its first major post-Katrina disaster, all eyes were on FEMA when the California wildfires hit in mid-October. Would FEMA continue to demonstrate the tragic incompetence that was on view in New Orleans in 2005? In the end, FEMA came through the wildfires well. The media and pundit consensus seemed to be that FEMA had gotten it just about right.

Then FEMA pulled defeat out of the jaws of victory. It called a press conference to trumpet its success, with just 15 minutes notice. A handful of reporters called into an audio feed of the press conference, in listen-only mode. But no journalists showed up at the press conference itself.

Instead of canceling, or of converting the listen-only call to a telephonic press conference, FEMA decided to go ahead with the in-person press conference. Since no real reporters were present, FEMA staffers pretended to be reporters. They sat in the reporters’ chairs, and asked questions of FEMA’s Deputy Administrator, Vice Admiral Harvey Johnson.

Watch the fake press conference

When the story broke, FEMA became the subject of ridicule. FEMA’s boss, Homeland Security Secretary Michael Chertoff, called the fake press conference “one of the dumbest and most inappropriate things I’ve seen since I’ve been in government.”

Read the FEMA Director’s statement about reforms in the wake of the fake press conference

The press conference was held the day before the scheduled departure of FEMA’s external affairs director for a better job in the government: John P. “Pat” Philbin was scheduled to start the following week as chief information officer for the National Intelligence Director, who headed the nation’s intelligence apparatus. When Mr. Philbin arrived for work Monday, he was told that the job offer had been withdrawn.

On the Internet They Don’t Know You’re A Dog

 Whole Foods Market. In one of the many documents involved in the US Federal Trade Commission’s antitrust suit to try to stop the merger between Whole Foods Market and Wild Oats, it was revealed that the Whole Foods CEO John Mackey had been posting messages under an assumed identity on a Yahoo! message board for more than seven years. Using the name Rahodeb (an anagram of his wife’s name), Mackey had consistently praised Whole Foods while slamming its competitors, including Wild Oats.

The story of Whole Foods’ CEO’s surreptitious posting made the front page of the Wall Street Journal and provoked a media frenzy.

Read the Wall Street Journal front-page story

The company got a reputational black eye; what had once been seen as somehow different from traditional companies now was just another corporate cipher in the money-making business. Whole Foods has since changed its posting policy; Mr. Mackey has gone silent, and the Securities and Exchange Commission is investigating his postings.

Read Whole Foods Market’s press release about the conclusion of their internal investigation into the postings

Losing Face

Facebook, the popular social networking site, introduced a new feature called Beacon in the fall of 2007. Beacon was intended to let users share information from other partner sites with users’ Facebook friends. For example, if someone bought movie tickets on Fandango, the purchase would show up on the Facebook News Feed for that person’s friends to see.

Facebook didn’t appreciate the privacy issues that Beacon triggered. The design of Beacon put the burden on users to opt-out on a purchase-by-purchase basis, but the opt-out procedure was not readily transparent and was difficult to follow. So if users ignored the opt-out notice, Beacon assumed consent and notified the user’s friends about the purchase. In addition, Facebook didn’t allow a universal opt-out option. It also seems to have misrepresented the feature to advertisers, who got caught in the crosshairs when an outcry arose. Facebook initially apologized and made some adjustments, but didn’t go far enough. Without a universal opt-out, critics were still concerned. Instead of responding to users’ concerns, Facebook said that when users tried the system they’d be convinced, and put the burden back on them.

Users and critics pushed back on the paternalistic attitude, and a number of partner sites walked away from Beacon. On December 5, Facebook finally added a universal opt-out function. CEO Mark Zuckerberg (age 23) wrote on his blog, “ We've made a lot of mistakes building this feature, but we've made even more with how we've handled them. We simply did a bad job with this release, and I apologize for it.”

Read Mark Zuckerberg’s apology on his blog

It still isn’t clear whether Facebook has gone far enough. Certain information from partner sites is still being sent to Facebook, even if users opt-out. Facebook says that it deletes such information, but the practice doesn’t seem to benefit users at all; only advertisers and the company.

Dead Men Walking

A classic New Yorker cartoon shows a high government official at his desk, the Capitol dome in his window, speaking with a staffer. The caption: “The mark of true leadership is knowing when to resign in disgrace.”

See the cartoon at CartoonBank

2007 showed an array of prominent people who seemed to miss that message.

Alberto Gonzalez. US Attorney General Alberto Gonzalez, President Bush’s close friend and former lawyer, got into hot water when his statements about the firings of 8 US attorneys were contradicted by documents and former staffers.

In senate hearings, and following a press conference, Attorney General Gonzalez continued to lose public support. A New York Times editorial in late April noted, “If Attorney General Alberto Gonzalez had gone to the Senate yesterday to convince the world that he ought to be fired, it’s hard to imagine how he could have done a better job….”

Even his allies in the Senate had a hard time defending the attorney general. The Times editorial pointed out, “Even the most loyal Republicans on the Senate Judiciary Committee found it impossible to throw Mr. Gonzalez a lifeline. The best (one) could do is mutter that 'I think that you’ll agree that this was poorly handled…' (another) led Mr. Gonzalez through the names of the fired attorneys, evidently hoping he would offer cogent reasons for their dismissal.”

Read the New York Times editorial on Mr. Gonzalez’ Senate testimony

Despite losing his political viability with the Senate and remaining the subject of intense criticism, Mr. Gonzalez hung on for months, while morale within the Justice Department plummeted and while the politicization of the department remained front-page news. He finally resigned in the late summer.

Paul Wolfowitz. Former Deputy Defense Secretary Paul Wolfowitz became president of the World Bank in 2005. His long-time girlfriend was a staff member of the World Bank, and the relationship was well-known and fully disclosed. Mr. Wolfowitz’ appointment was resisted by the staff of the bank, primarily for his role in the planning for and executing the US invasion and occupation of Iraq.

Soon after he joined the bank, Mr. Wolfowitz announced that his strategic priorities were to eliminate corruption and enhance transparency of nations to whom the World Bank provides financial support. But some bank employees focused instead on what they considered his autocratic management style and his perceived failure to follow recommendations of long-time bank professionals. The World Bank Staff Association mobilized, and alleged that Mr. Wolfowitz had engaged in deception about favorable treatment for his friend, the female subordinate. A staff blog called worlfowitzmustresign.blogspot.com urged staff members to write the board urging the president’s dismissal, and even provided a template:

“Dear Mr/Ms__. I am writing to you as a (_nationality_) staff member concerned about the revelations of wrongdoing on the part of our President. I believe that the President’s behaviour mires the Bank in sleaze and corruption, and seriously compromises the Bank’s credibility and its ability to fulfill its mandate. If our president is not capable of acting with transparency and accountability, how are we as staff supposed to promote good governance and anti-corruption among our clients? I support a call by the Board for Wolfowitz’s resignation. Yours sincerely, Staff Member’s Name_.”

Read the wolfowitzmustresign blog

Mr. Wolfowitz hung on for months, all the while the subject of intense media scrutiny long after it was clear he could not remain in charge. When he finally was forced to resign in May, the blog made its final post and was discontinued: “Mission (Actually) Accomplished! We are retiring. Good luck finding a successor.”

A Stance that Gets Wider and Wider

Senator Larry Craig. One public figure who has yet to learn when to resign in disgrace is US Senator Larry Craig (R-ID). Long identified with “family values” and with a voting record that consistently opposed gay rights, Senator Craig pleaded guilty to disorderly conduct after being arrested in a June sting operation in a Minneapolis Airport public restroom.

The story was published in late August in the Capitol Hill newspaper Roll Call. On September 1, Senator Craig said he intended to resign from the Senate on October 1.

Watch Senator Craig’s press conference

Read Senator Craig’s statement announcing his intention to resign

Several days later he changed course, saying that he would contest his own guilty plea, and that he would consider staying in the Senate if he succeeded in getting his plea thrown out. A Craig spokesman confirmed that the Senator would not finish his term unless the court overturned his conviction. In late September a Minnesota judge heard Senator Craig’s request; in early October the judge denied Senator Craig’s motion to withdraw his guilty plea. Senator Craig vowed to remain in office, despite his earlier announcement that he would resign.

Read Senator Craig’s statement that he would remain in the senate despite the judge’s ruling

In early December, the Idaho Statesman newspaper published accounts of four men who agreed to be identified who say they have had sexual relations with Senator Craig, plus several other men who declined to be identified out of fear of retaliation. As of this writing Senator Craig is still in office.

Read the Idaho Statesman story about men who claim to have had sex with Senator Craig

Stepping on Message

Senator Joe Biden. Senator Joe Biden (D-DE) formally declared his candidacy for the Democratic Party nomination for President of the United States in February. In a discussion after the announcement, Senator Biden characterized his competitors for the nomination. Referring to Senator Barak Obama (D-IL), Senator Biden said, “I mean, you got the first mainstream African-American who is articulate and bright and clean and a nice-looking guy. I mean, that's a storybook, man.”

Watch the video of Senator Biden’s statement about Senator Obama

The quote set off a firestorm of media coverage and public criticism, including from former African American candidate for President Rev. Al Sharpton. As a result of the misstep, Biden spent his first week as a candidate walking back from the quote rather than putting forward his own vision of what he would do as president and why the electorate should prefer him. He continues to run well behind many of the other candidates.

Lessons for Leaders: Step Up and Avoid Self-Inflicted Harm

As these examples (and dozens of other 2007 crises that weren't profiled here) demonstrate, effective leadership is a key to getting through a crisis intact.  

Effective crisis response provides a competitive advantage; ineffective response creates a powerful competitive disadvantage.  But many leaders who are otherwise given credit for vision, strategic focus, and discipline preside over undisciplined responses to crises, often at great risk to their career and their organization's future.

For more on leadership and crisis response, see our article in the January/February 2006 issue of Strategy & Leadership.

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