Managing A Crisis

It’s funny how some things stick with you throughout your life, no matter how long ago you experienced them. One of the most memorable quotes I ever heard came from a representative of Pepsi-Cola Co. at a 1997 seminar on crisis management. “When I talk about dealing with a crisis, I’m talking about when you go through one,” said the speaker. “Because, unfortunately, the reality is you probably will.”

I was vividly reminded of this comment during my winter month travels. Like many of you, I was flying to one of the winter ag equipment shows during this year’s infamous Valentine’s Day snowstorm, which severely hampered air travel across much of the country. The most notorious example of the delays this caused involved JetBlue, which spent the better part of two weeks trying to work its way through a serious crisis with customers, employees, and shareholders. The jury is still out whether the company will ultimately overcome this incident.

During my time in the beverage industry, I remember two high profile crisis management incidents taking place. One involved the discovery of benzene in bottles of Perrier sparkling water in 1990. The other concerned the alleged finding of hypodermic needles in cans of Diet Pepsi in 1993. In the long run, both provided important lessons in how to handle (and not to handle) a crisis. First, let’s review Perrier.

When the benzene was found in bottles in North Carolina, the company spent several days denying there was a problem (and even accusing the U.S. authorities that did the testing of having a French bias). Once convinced of the problem, Perrier spent several more days shifting from explanation to explanation before finally issuing a product recall of 160 million bottles.

On the other hand, Pepsi immediately acknowledged the Diet Pepsi problem, investigated, found evidence of a hoax, and spent the next few weeks rebuilding the brand’s image.

This led to Pepsi developing what it called a Crisis Management blueprint. It spelled out the “seven deadly sins” of crisis management. These were chaos (no one taking charge), poor communication, having multiple point persons, lack of trained back-ups, making assumptions, making accusations, and neglecting day-to-day business during the emergency.

To avoid these missteps, Pepsi suggested the following seven solutions:

1). Clearly define lines of authority.
2). Plan an appropriate order for contacting accounts and employees.
3). Appoint one person at each location as the primary point person.
4). Train back-ups to step in when the primary person is unavailable.
5). Make decisions on facts only.
6). Perform disciplinary action through appropriate channels.
7). Day-to-day operations should continue as normal.

As a measure of the effectiveness of these steps, consider the fact that Diet Pepsi can be found in any store in America today. The same can’t be said for Perrier.

With retailers entering their busiest time of year, the chance for a crisis is there. It would wise to heed Pepsi’s warning and plan ahead, incorporating some of these crisis management steps into your operations. As Perrier proved, businesses are easy to ruin if management mishandles a crisis.

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