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-- Jon Harmon

BP keeps paying through the nose, but will the public stop holding its nose at BP?

Add another $4.5 billion today to the total of still-accruing costs to BP for its massive Gulf of Mexico oil spill in 2010.  That’s the amount BP agreed to pay the U.S. government in its guilty plea to criminal charges connected with the deaths of 11 off-shore rig workers as well as the not-insignificant matter of lying to Congress.

The $4.5B is on top of the rapidly evaporating $20B in trust funds the oil company set aside to clean up the mess and to compensate the communities and individuals for property damages. All told, the company has booked $38.1B to cover the costs of the spill. But costs may very well exceed that figure; the settlement reached today specifically does not cover fines stipulated by the Clean Water Act that could reach as high as $20B (the Act calls for fines of $1,100 to $4,300 per barrel spilled; multiply the upper figure in that range by five million barrels of oil spilled).

There truly aren’t many companies that could absorb such massive penalties and continue to do business. And, of course, BP’s very deep pockets are a contributing factor in the magnitude of damages assessed to the company. At some point you have to wonder, how much is enough? Still you won't find too many in the public feeling sorry for the mammoth oil company. Next to the Wall Street “banksters” who collectively deserve much of the blame for the financial credit markets meltdown that precipitated the Great Recession, BP has few peers as a poster-child for corporate malfeasance, though Bernie Madoff deserves a special Dishonorable Mention in the “individual” category.

So it is that even after BP settles all of its criminal and civil legal obligations, it must continue to make progress on the rehabilitation of its reputation. Are oil and gas customers who have stayed away from BP in the after-math of the oil spill satisfied with the fines and penalties assessed the company and in the clean-up and restitution efforts that are now largely complete?   

And, finally, are they convinced that BP is a different company now, committed to doing the right thing against a triple-bottom line accounting (people, planet, profit)?

A crisis is an opportunity to demonstrate an organization’s values, or to reevaluate its values. Criminal actions that led to the oil spill and the death of the rig workers came out of a company needing to revaluate its values, as did the well-documented missteps of BP Chairman Tony Heyward, “winner” of Force for Good’s 2010 PR Disaster of the Year. Since then, the company has demonstrated a new value system that can genuinely be applauded: a dedication to the cleanup and restoration of the Gulf shores, and a humility in acknowledging its culpability and its responsibility to make things right.

—Jon Harmon

 

Facebook needs to step up its transparency

Ironic though it may be, the world's largest social network (with a misson "to make the world more open and connected") needs to step up its commitment to transparency.

As I write this post, Facebook stock is down another 7% today to $27.50. That's a 28% drop from the $38 IPO price two weeks ago, and an even harder fall for the retail investors who got in at between $40 and $42 a few minutes after the stock went public.

Meanwhile, Mark Zuckerberg who at IPO instantly became the 29th richest person on earth according to Bloomberg's Billionaire Index has fallen off the list completely, even as he and his new bride have tried to enjoy their honeymoon. There have been cries for Zuckerberg to end the honeymoon early and make a statement, just say something! to calm investors.

Others have sensibly pointed out that an abrupt end to the Zuckerberg honeymoon might indicate panic and further unsettle investors. The optics around a message can be as important as the message itself, particularly if you really have nothing new to say.

More to the point, Facebook's executive team needs to step up to the realities of being a publicly traded company. That means quickly addressing accusations that insiders and participating bank partners knew a lot more than was public concerning falling revenue projections. Investor lawsuits have already been filed, the SEC is kicking off an investigation and Congressional hearings clearly are coming soon (expect a circus act of grand-standing Congressmen salivating at the opportunity of grilling Zuckerberg on behalf of aggrieved investor constituents).

“Facebook was not originally created to be a company,” Zuckerberg wrote in a letter to potential investors that was part of Facebook’s filing. “It was built to accomplish a social mission — to make the world more open and connected.”

It's a fantastic thing to have an aspirational mission--it's what drives employees to greatness. But you also have to have a steadfast commitment to integrity in everything you do, including how material information is shared. Zuckerberg needs to return to work Monday totally committed to unearthing and releasing true and complete answers to the accusations. And he needs to commit to conduct open investor webcasts regularly, assuring that his new bosses, stockholders big and small, receive the information they are entitled to.

- Jon Harmon

How can Facebook and JP Morgan win back your trust?

It wasn't supposed to happen this way.

Facebook launched perhaps the most anticipated IPO ever and instead of the moonshot many expected, it fizzled like a rocket from North Korea--and has since completely imploded. First, Facebook executives made a decision shortly before the IPO launched to increase the number of shares floated, greatly increasing the odds that demand wouldn't keep up and the share price would fall. Then, the big day came. The stock price initially went up by about 10 percent, as individual investors finally got their chance to buy a piece of the dream, but within hours the share price was plummeting. As Facebook stock continued to sink on its second and third day, allegations arose that Facebook insiders (and execs at Morgan Stanley, the underwriter of the IPO) had revised revenues projections downward but didn't inform the market at large. Now the SEC is investigating and the inevitable investor lawsuits have been filed. The prospect of a protracted legal battle has become a thick cloud hanging over Facebook the Stock, a discouraging prospects that will continue to dampen enthusiasm in the investment for some time to come.

Meanwhile, J.P. Morgan has become the poster child for a new chant from the Occupy Wall Street crowd: "We told you so." Just when you thought the Big Banks had been chastened by the near collapse of the world financial markets followed by massive bailouts of those deemed "too big to fail," JPM announces a multi-billion-dollar loss from speculative trades in risky derivatives, the same stupidity that led to the financial meltdown in the first place. The so called "London Whale" trades undermined JPM CEO Jamie Dimon's case that banks should be freed from Dodd-Frank regulations enacted following the bank bailouts. Dimon went from the financial industry's most persuasive advocate to being perceived as the very embodiment of the "Bankster" the Occupy crowds would like to burn at the stake.

So what can Facebook and Morgan do to win back your trust? That's the subject for my next few posts. Your ideas welcome!

-Jon Harmon

When should you ignore the lawyers and apologize?

When is an apology helpful? When might an apology prove damaging?

A PR pro who is aiming to repair damage to trust and reputation will likely give you different answers to these questions than a lawyer aiming to limit liability. In many, if not most cases, reputation trumps liability. It’s better to sincerely apologize and attempt to move forward in restoring trust in your organization than to stubbornly remain silent. Losing in the court of public opinion can prove more damaging than losing in a court of law. And refusing to apologize may even prove harmful in the courtroom, perhaps leading an unsympathetic judge or jury to pile on punitive damages to what they see as an unrepentant offender.

Keeping this in mind, I offer the following two-question test to help you decide when an apology is in order, courtesy of Eric Zorn in today’s Chicago Tribune. (Zorn brings up the subject because of criticism Republican presidential candidates have directed at President Obama following his apology to the people of Afghanistan for the inadvertent burning of some copies of the Koran. Regardless of your own political views, Zorn’s simple test is helpful to the corporate communicator deciding whether to push back against the lawyers and recommend a public apology be extended.)

1. Did you (or those who represent you or answer to you) do or say something that caused discomfort, or worse, to others?
2. Would you undo this act if you could?

A “yes” to both of these questions indicates an apology is almost surely in order. Note that the harmful act need not have been deliberate; and if it was indeed unintentional, you clearly should mention that fact in your apology.

Note also that your social responsibility, if not your legal accountability, often extends beyond your own company and its employees—your dealers and even your suppliers may be considered part of your extended organization in the eyes of the public. A socially responsible company holds its dealers and suppliers to the same ethical standards it follows itself.

Finally, Zorn reminds his readers not to offer one of those mealy-mouthed non-apologies that includes caveats like “… if anyone was offended” or is written in a non-accountable passive voice: “mistakes were made.”

And finally I offer these Force for Good posts from the past on the still-pertinent issue of the apology:
When is an emotional apology just too much?

When is an apology a better response than trying to argue the merits of your behavior?

How long do you have to be sorry?

-Jon Harmon

Rocket scientists provide sweet vindication for Toyota

Sweet vindication. That's what Toyota is feeling today, but they're smart enough not to gloat.

A study by the National Highway Traffic Safety Administration and the space agency NASA released today finds no electronic defect in more than 3,000 complaints against Toyota alleging sudden acceleration.

Toyota recalled more 8 million vehicles worldwide in 2009 and 2010 to fix two mechanical defects--sticky accelerator pedal assemblies and floor mats that could trap the accelerator pedal in the down position. But critics continued to call for further investigation into possible glitches in the electronic throttle control that could cause the cars to unexpectedly speed up. 

Toyota certainly dragged its corporate feet and stonewalled at the early stages of what became a full-blown crisis. Customer complaints were ignored. Not surprisingly, Toyota's intransigence deepened the crisis. 

But sometime last  February, the company astutely changed its crisis management strategy to go to extraordinary lengths to demonstrate a renewed commitment to customer satisfaction and safety. At the same time, Toyota went "all in" in taking a hard-line fiercely denying that there could be an electronic defect at the center of the storm.

It was a monumental gamble. What if NHTSA and NASA today issued a report finding an electronic bug? The company would be excoriated for failing to fix the problem 12 months ago, and would face enormous liability for any accidents that had occurred during those 12 months.

As it is, Toyota has been vindicated. Sure, the plaintiff lawyer shills will continue to cry foul and call for further investigation. But really, after people who literally are rocket scientists have painstakingly reviewed case after case, interviewed thousands of drivers and examined thousands of vehicles, plus conducted numerous experiments--can anyone really doubt their verdict?

- Jon Harmon

Getting tough against nuisance suits without losing public compassion

(Continues from previous post.)

In the early-1990s, Ford Motor Company senior executives decided to get tough against what they considered nuisance suits. Ford had a well-earned reputation among plaintiff attorneys for being an easy mark. Once the trial lawyers have you pegged as a company that doesn't have the stomach to take cases to trial, word gets around that money is to be made filing cases against you. Nothing like the sound of cash registers ringing to bring out lawyers looking to make some easy money even when the facts in their cases have not the slightest basis for a plaintiff verdict. Vehicle accidents are caused by a variety of factors, and few of them are caused by vehicle failures -- that's why they are called accidents. Each year more than 40,000 people are killed in vehicle crashes on American roads and highways. Each one of those accidents is a true and terrible tragedy for the family involved. And in the majority of those accidents, a wrongful death lawsuit is filed against a vehicle manufacturer, generally without much basis.  

And Ford was especially targeted for litigation. The company earned its reputation among lawyers as an easy mark when Henry Ford II ran the place. The grandson of the founder, the "Deuce" ran Ford from 1945 until his retirement in 1979, and continued to set the tone as a Board member until his death in 1987. HFII did not trust journalists and he especially did not like negative press coverage. He went to great lengths to avoid it, including settling even the most winnable cases where the accusations against Ford were totally ill-founded. As a natural consequence, the cases against the company multiplied.

I had just returned to Dearborn from a two-year assignment with Ford of Canada and had been assigned responsibility for legal and labor issues within the Ford Corporate News Bureau. I was to help communicate the much tough stance the company had begun to take against nuisance suits. But we still wanted to be seen as respectful, compassionate and empathetic to our customers who had been involved in tragic accidents.

So we did two things: We made sure we clearly and concisely expressed empathy in the same sound bite that we would state our primary objection to the charges made against Ford, ensuring that this dichotomy (empathetic to the victim but resolute in defense against baseless claims) came through to the public even in edited form. Secondly, we succeed in a couple of prominent placements in lawyer publications that would quickly be noticed by our legal adversaries. This included a cover story in American Lawyer in 1995 (unfortunately, the magazine's web archives only go back to 2000, so I can't provide the link, but this indepth story certainly can be found on Lexis/Nexis) which focused on Ford's aggressive new legal strategy. Ford's top litigator, Jim Brown, did not mince words when he described the company's determination to stand firm against baseless charges. 

It didn't long for word to get around the trial lawyer circuit that Ford was no longer an easy mark. This saved the company tens of millions of dollars and actually reduced its exposure to negative legal stories in the general press.

All that would change with the Ford-Firestone crisis of 2000-01, but that's another story.

- Jon Harmon  

It's not easy to be feared AND loved

There's an age-old debate, often lampooned in popular culture but not so easy to answer: Would a leader rather be feared or loved?

Best short answer: To be feared by one's enemies; to be loved by one's people and by other fair-minded folk; to be respected by all.

That's true for Presidents pondering what to do about terrorists. But it's also may be true for corporate leaders pondering litigious adversaries.

Shortly after Barack Obama is sworn in Tuesday as the 44th U.S. President, he is likely to make good on his promise to announce the closure of the military prison at Guantanamo Bay, Cuba. But he won't be in a hurry to actually close the base. He must confront the sticky issue of what to do with prisoners who undoubtedly are unrepentant, blood-thirsty terrorists but who have been denied due process and, in some instances, tortured in the search for intelligence to keep the nation safe. Releasing them would be crazy; trying them in U.S. courts would be fruitless. It's a lot easier to condemn in a political campaign than to govern wisely. Obama faces the difficult path of showing the world that the United States will staunchly defend human rights even those of killers who have no respect for others' human rights while also demonstrating a hardened-steel resolve against those who use fear and intimidation to advance their twisted agendas.

Likewise, those in power in Israel have been confronted with difficult choices in how best to deal with rocket-launching Hamas in Gaza. As it has so many times in the past, Israel has chosen a hard line, seeking its enemies' fear over the approval of its neighbors and others in the world community. This is both understandable and tragically unwise. Understandable in that so many Arab leaders clearly would prefer that Israel cease to exist. And tragically unwise in that the long-term battle for peace and prosperity in Israel will be waged in the hearts and minds of non-Israelis. Israel has waged war ruthlessly in Gaza, including the shelling of the U.N. compound, hospitals and mosques (places from which Hamas has fired rockets with cruel calculation that innocent casualties of Isreali counter-strikes will produce priceless outrage among Arab states and sympathy for Hamas in the world community at large). 

Shifting gears away from war to the corporate front, a similar difficult choice is faced by companies defending against ill-founded lawsuits. It is not uncommon for a corporation to be sued by plaintiffs who have undergone truly tragic losses but whose claim against the company's product is entirely specious. The difficult row to hoe is to express empathy and concern for the customers' injuries or losses but to also express steel-willed resolve to trial lawyers that the company will aggressively defend itself in court. Rolling over to settlement demands to avoid an entirely unpleasant trial risks painting your corporation as an easy mark for nuisance suits in the future.

(to be continued next post)

- Jon Harmon  

Crisis Communications Lessons Learned the Hard Way

Yesterday I participated in a “PR University” panel discussion on crisis communications. For an hour and a half, we covered a wide waterfront in a fast-moving, informative session. Here are a few take-aways from my part of the discussion, centering on the Ford-Firestone tire crisis of 2000-01.

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Worst mistake: Taking too long to see the issue through the eyes of our customers. Rigorous examination of accident statistics and accident reports, tire tests and vehicle dynamics testing consistently showed that the Ford Explorer behaved in the real world at least as safely as any similar-sized SUV would have under similar circumstances, and that the propensity for certain Firestone tires to rip apart suddenly was causing the epidemic of crashes, many of them deadly.

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“It’s a tire issue,” we kept saying, as we shot down one theory after another about how the Explorer might somehow be shredding its tires or that its stability had been knowingly compromised during its development.

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But that missed the point. Our customers hadn’t wandered into a Ford dealership and said, “I want a new car; anything is fine as long as the tires are Firestones.” No, they had bought an Explorer from Ford and expected that all its equipment, including its tires, would perform safely. Put another way, a customer buying a hamburger from McDonald’s who finds a rancid pickle in his sandwich doesn’t blame Vlassic or whoever made the pickle; he expects McDonald’s to sell him a perfectly edible and complete hamburger, and that's where he'll take his complaint.

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The take-away from that experience: Your company will be judged by the totality of its products, regardless of where they come from, and in today’s world of greatly increased expectations of a corporation’s social responsibility, your company will be judged by the actions of your suppliers as well as your own. So don’t think your obligations end with the morality of your own operations; if one of your Tier Two or even Tier Three suppliers is profiteering from slave labor overseas, for example, it’s your crisis, too.

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Best practice: We truly did many things well as we dealt with an avalanche of media calls every day for weeks on end. But one aspect of media relations that I’m particularly proud of is how well my team and I quickly acquired a deep understanding of the many technical issues involved.

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I can still recall without looking at any notes our answers addressing the changes made in Venezuela and Australia to stiffen the ride compliance of the Explorer to better satisfy customer needs in those countries – where rough roads and high-speed driving often go hand-in hand. And how those changes were portrayed as safety improvements to the vehicle’s suspension that had not been made in North America (where customers expect a comfortable ride); accusations by plaintiff attorneys looking to drive large settlements from Ford. And so many other accusations fed to the media that required a technical understanding of the vehicles and tires involved.

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With literally millions of Explorers being driven billions of miles each year under a huge range of conditions, crashes of nearly every foreseeable kind were inevitable. The fact that statistically drivers and passengers in Explorers were safer than the "average vehicle" (fewer fatalities per million miles) did not lessen the suffering of families losing loved ones, or the wrenching emotional impact of accident footage and photos. We did our best to be respectful of victims while vigorously defending the company and the brand against untrue accusations.

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We did our homework, listening carefully as our engineers explained principles of driving dynamics – what circumstances produce under steer or over steer, why a tread separation on a rear tire could often be more difficult to control than one on a front tire. And on and on. The small media relations team I led understood technical issues better than our adversaries. We had to – it’s easier to make an accusation that gets a journalist excited about a juicy story of willful neglect than it is to thoroughly and methodically disprove these theories. And when you’re dealing with dozens of media on deadline there is no room for error or lack of information.

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Every morning very early we would meet with the engineers and tire experts to increase our understanding of these technical issues. And we stayed together all day in a large executive conference room (which later grew to two, three and then four nearby conference rooms dedicated to managing the crisis), so that we could track down answers to the day’s new questions and accusations. At least once a day, we would take a break from everything and huddle together – PR people, engineers, customer service people, the ad hoc tire procurement team, the lawyers and a number of senior executives to go through a status update of every aspect of the crisis we were managing, including communications. And our media relations team would huddle periodically by ourselves to compare notes on the day's questions and to make sure we were consistent in the responses we each were making to the media.

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Post script: Yes, we made mistakes along the way. But our efforts to defend Ford’s reputation and the Explorer brand paid off. Higher gas prices and changing consumer tastes have taken the bloom off the rose for all mid-size SUVs in the past year or so, certainly including the Explorer. That tends to obscure the remarkable resilience of the Explorer brand in the first five years of this decade despite the unprecedented barrage of accusations in the national media for so many weeks in the summer and fall of 2000, and again in the spring of 2001.

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In a Sept. 5, 2002 Detroit News front page lead story headlined, ”Resilient Explorer rides high again,” Mark Truby reported that the Explorer had the previous month recorded its best sales month ever with 52,021, a record for any SUV that undoubtedly still stands today.

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“With the exception of Tylenol, which rebounded from an ugly package-tampering controversy,” Truby wrote, “it is nearly unheard of for a consumer product to pass through a blizzard of negative publicity and safety questions virtually unscathed.”

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That's something to be proud of, and it didn't happen without a lot of hard work.

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-- Jon Harmon

Media-Savvy Adversaries Changed Crisis Communications Forever

(First in a three-part series examining corporate crisis communications in the 21^st century.)

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Back in the 1990s, analysis of crisis communications centered on two archetypal case studies: the ’82 Tylenol recall (good) and the ‘89 Exxon Valdez oil spill (bad). The lessons learned from what Johnson & Johnson famously did well, and Exxon infamously did not, can be boiled down to: Respond quickly to a problem; express empathy and compassion for any injured parties; speak frequently to the media without speculating about anything before you’re absolutely sure, and institute a comprehensive remedy as soon as possible. 

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That simple formula remains good advice. But in the summer of 2000 a new dynamic emerged that changed crisis communications forever – media-savvy adversaries who could take control of the news cycle during an extended crisis. Befitting the first major corporate crisis of the new century, the Ford-Firestone tire recall  rewrote the corporate communicator’s playbook.

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Asked recently about the epic tire crisis for a "Thought Leader" piece in the Bulldog Reporter’s Daily Dog, I recounted the deluge of media inquiries we handled at Ford. For 14 straight weeks beginning in early August, the Firestone mess was a page one story nationally nearly every day. (It took the November Presidential election stalemate – remember those hanging chads? – to finally knock it off the front pages.)

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What kept the tire saga so hot for so long? Let's be clear: At the center of the media storm was the reality of a large number of tragic accidents attributed to Firestone tire tread separations, nearly all on Ford vehicles. How many? It's difficult to say, because there were literally tens of millions of similar Firestone tires on the road (in a series of recalls in 2000-01 Firestone and Ford recalled 27 million Firestone Wilderness tires). By early December 2000, the National Highway Traffic Safety Administration had attributed 148 deaths to accidents involving the suspect tires.

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(There is no way to speak or write about these tragic occurrences that is completely respectful of the people killed or injured in the accidents, and my analysis of the media dynamic is trivial in comparison.)

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Clearly other unique factors kept the crisis newsworthy as well, not the least of which was the strained relationship -- and eventually open warfare -- between two companies that had enjoyed a close relationship for nearly 100 years. And a Congressional hearing September 12 certainly kept things interesting. But what really stoked the media fires were daily leaks of seemingly damning internal Ford and Firestone documents by media-savvy plaintiff attorneys.

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Each day, the trial lawyers would take one of thousands of documents that were part of litigation already in progress against Ford or Firestone and fax it to a number of national news organizations along with a less-than-complete version of the story behind that particular document. Typically the story line would be that Ford had known about the tire defect years earlier, or had cut corners in the safety testing of the Explorer sport utility vehicle. Invariably, these allegations did not pass muster when one considered other related facts conveniently left out by the plaintiff attorneys. And the narrow focus on some particular aspect of the product development process judged in hindsight obscured the Explorer's overall safety record which was better than most other vehicles on the road.

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Each afternoon my cell phone and pager would erupt as journalists from a dozen or so news organizations would be calling, all chasing the same story. Often the story the plaintiff attorney had concocted around a carefully chosen portion of a document fell apart when you read the context of the entire document. We became pretty nimble at rebutting the various partial truths and outright fabrications being fed to the media.

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Most of the national media were reasonably fair and diligent in working to understand the complexities of each issue. But some would not let additional facts get in the way of the juicy stories they'd been fed by the plaintiff attorneys (who clearly were motivated by the scent of big, big money). The TV news networks were the worst. They'd contact us after the piece was in the final stages of production for the evening newscast; they'd just kept a short slot for our sound bite response. So much for any ability to shape the direction of the piece.

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Aside from our continued frustration with network television, our communications team grew increasingly adept at mitigating the damage from these daily leaks. So the trial lawyers changed tactics. Instead of feeding several journalists the same story each day that we could quickly refute, or at least balance, they began faxing a unique story lead to each of several journalists each day. That meant we'd have to track down "the rest of the story" for several different issues simultaneously, each for a national journalist on deadline. Meanwhile, other members of our public relations team would be answering dozens of inquiries from other journalists chasing stories from previous days. Needless to say, we kept updating our massive Q&A to include each new allegation and our response.

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The trial lawyers were able to generate this continuous stream of story ideas because they collaborated with each other and with a number of attorney resource groups, which had also become quite media savvy. With disarmingly benevolent names like safetyforum.com and the Center for Auto Safety, these resource groups often are portrayed as unbiased sources of information when in fact they are another piece of the litigation profit machine.

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Next post: Consumer-generated media presents a new frontier for an adversary stakeholder web. Are you ready for an all-out assault on your company's reputation?

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- Jon Harmon