October 2004 Mfg.Trust

Mfg.Trust is a monthly feature of the
            NCMS InfraGard Manufacturing Industry Association
                        Infrastructure assurance for manufacturers
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This month – SUCCESSFUL CRISIS MANAGEMENT
Lessons from Merck & Co. and Baxter Healthcare

See the Resources Page for this Story 

Editor's Preface:

Information technology (IT) has become crucial to many organizations in ways that would have unimaginable 25 years ago. Integrating IT has had many benefits for manufacturers but there are also added risks to be managed.

What happens when one of these “risks” turns into a crisis? If a computer virus, server crash, or hacker intrusion threatens to damage your credibility with customers and suppliers how can you save your reputation? Companies must prepare for “when” rather “if”a crisis will occur. Planning before a crisis can help prevent damage to a company’s reputation and fiscal health.

This is the first article in a two-part series on Crisis Management. This article presents some crisis management results from history and a distillation of lessons learned. Next month we will discuss what you can do to achieve a significant reduction in risk to your manufacturing business environment through use of disciplined planning and preparation for incontrollable events.

As usual, the Resources page that accompanies this article offers a rich information set for more study. See http://trust.ncms.org (Publications Index tab). Further, NCMS offers an excellent Virtual Learning Series in Crisis Management by David Cid. You can learn more at http://products.ncms.org/critical_incident_management.htm
 

Editor

PREPARING FOR INCONTROLLABLE EVENTS

Historical Lessons
Lessons from Tylenol 20 Years Ago

Frances Hesselbein, chairman of the board of governors of Drucker Foundation, wrote in her Leader to Leader article (See Resources Page) that:

“Probably the most positive and successful example of managing a crisis with total success is the way James E. Burke and Johnson & Johnson handled the Tylenol crisis in the early 1980s. When it was over, Jim Burke was an icon and Johnson & Johnson a celebrated corporation. His is a case study of what happens when a corporate leader -- guided by the beliefs and values that define the culture of a great corporation -- communicates with clear and forthright messages, reassuring the public and the people of the corporation.

Today, despite predictions at the time that Tylenol was a fatally wounded brand, it is still one of the top-selling over-the-counter drugs in the country. John Joseph of the Wharton Center for Leadership and Change says, "Johnson & Johnson's corporate credo -- overseen by top management but mastered by all -- steered the company successfully through its Tylenol crisis in 1982 and continues to serve as a compass by which the organization guides itself today." Johnson & Johnson's management of the Tylenol crisis continues to be the standard against which many observers measure crisis management.

Lesson - Communicate with clear and forthright messages.
Lesson - Reassure the public and the people of the corporation.

Modern Lessons from Vioxx and kidney dialysis filters

Last month, Merck & Co. voluntarily withdrew the drug Vioxx from markets around the world. The Wall Street Journal reported:

“Merck sought to manage the crisis by implementing an existing crisis communications team. They were open about what they know... They brought top people in to lend veracity to their message. They continue to share news facts as they become available… To maintain faith in its crisis management experts say that Merck must continue to make prompt disclosures of any additional information about Vioxx, good or bad.”

Harry M. Jansen Kraemer Jr., former chairman and CEO of Baxter International Inc., addressed similar issues in the same way in 2001. Several patient deaths were possibly linked to certain Baxter kidney-dialysis filters manufactured in a plant in Sweden. Baxter executed a world wide recall of the filters. Mr. Kraemer ensured that Baxter responded by communicating the facts to users as they became known through national advertising campaigns, direct patient contact and meetings with their physicians. The company then continued to provide updates to renal patients and their physicians via an existing hotline.

Merck’s global withdrawal of the drug Vioxx – along with extensive media appearances by Chief Executive Raymond V. Gilmartin and key members of the company's board – exceeded the norm and paralleled Baxter’s response.

Lesson – Maintain faith with employees and the public. Make prompt disclosures, good or bad.
Lesson – Speak with one voice.

“Merck also sought to manage its worst crisis ever by summoning an existing crisis-communications team. "We put our plan into action," said Joan Wainwright, vice president for public affairs. The drug maker shared drafts of Vioxx-withdrawal materials with a public-relations firm that specializes in crisis management. The firm, which she declined to identify, offered minor changes.”

Lesson – Plan in advance.
Lesson – Be prepared in advance. Form a crisis communication team.
Lesson – Consider objective, outside expert help as part of your plan.

Preparation is Crucial

Frances Hesselbein points out that “Crisis management is not a discipline to be learned on the job, in the midst of the storm. It must be learned and practiced when there's not a cloud in the organizational sky. Now, more than ever, examples of crises badly managed underscore the imperative of preparing for a crisis that may lie ahead, that may never happen, that even so must be anticipated by responsible, effective leaders.”

“There are too few outstanding examples of leaders who understood the imperative, who prepared the organization for an emergency, who instilled values that would support a powerful and ethical response, and who -- when the crisis hit -- led from the front and communicated in an open and powerful way. These few prepared when the sky was blue and took costly action -- a wise investment, actually -- that protected the public and, in the end, the good name and the future of the enterprise.”

“A crisis management team needs to undertake a study of every possible crisis that could hit the organization, and develop a scenario for the response to each one. This list of possible crises coupled with the responses required for each takes time and investment, but it is the best disaster insurance we can have. This study is kept in desks, on computers, in easy reach of every member of the crisis management team. Once the plan is ready, the training and preparation for implementation takes place.”

Conclusion

Every aspect of crisis decision making is improved by planning and preparation. The examples cited in this article show that successful crisis management IS possible.

Next month we will discuss what you can do to achieve a significant reduction in risk to your business environment through use of disciplined planning and preparation.

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