FACING A CRISIS

As much as you'd like it to be otherwise, at some point the organization will face a crisis. It may be quite severe, such as an industrial accident that results in severe injuries or even deaths, or an environmental disaster for which the company is responsible. Crises are highly emotional because of their serious impact. It's human and completely normal to feel sadness, as well as compassion and empathy for those who are directly affected. When it comes to the response, however, such emotions as anger and fear must be minimized so that the organization can move forward swiftly. The way to do that is to return to the foundation put forth earlier in this chapter: the commitment to do the right thing and the knowledge that, no matter what the challenge, the organization will do the best it can. These ideas must be embedded in the mind-set and expectations of the entire organization. Then dealing with a crisis, no matter how upsetting on a human level, becomes straightforward.

In 2001, a dialysis filter product made in a Swedish plant owned by Baxter was blamed for fifty-three deaths in several countries. Suddenly Baxter's name was on the front page of newspapers around the world, and the company was accused of causing these deaths. As complicated and heart-wrenching as the situation was, our response was quite simple: we were going to do the right thing and do the best we could.

Immediately, we put together a team to uncover the cause of the deaths. Once we understood the facts, we accepted responsibility for the unfortunate events. We did not blame our suppliers or the previous owners of the dialysis filter manufacturer that we had acquired, nor did we blame the health ministries in various countries that set the regulations for how products are used. Even though only a small percentage of filters needed repair, we decided to shut down two facilities that made the filters and took a $189 million charge that reduced our earnings by that amount.

Baxter provided payment to families affected by the dialysis filter incident, and I met with the president of Croatia to apologize on behalf of the company for the deaths of twenty-three people in his country due to the dialysis filters. Moreover, on the basis of our findings, we briefed officials from the health ministries in each country where deaths occurred, and we informed our suppliers and competitors, just in case they were using materials or had manufacturing processes similar to ours.

We did not stop there. Baxter's overall results for the year exceeded our financial targets and were so strong despite the $189 million charge that the senior executive team would be eligible for bonuses. Nonetheless, I recommended to the Baxter board that they reduce my bonus by 40 percent, and my twenty senior executives agreed to cut their bonuses by 20 percent. Because patients had died on our watch, we felt this was the right thing to do.

The world, we knew, was watching us, not only the media but also our customers, suppliers, and the health care community at large. In an October 2002 article titled “Harry Kraemer's Moment of Truth,” Fast Company magazine captured the essence of the crisis and the choices that we faced. “How Baxter responded would leave a lasting imprint on the company's relationships with patients and doctors, with employees, and, of course, with investors. The episode would, for better or worse, open a window onto Baxter's corporate soul.”

Keep in mind that, at the time, Enron was capturing headlines. Any hesitancy or uncertainty on our part would therefore have not only cast suspicion on the organization but also added to antibusiness sentiment. Perhaps that is why Fast Company expressed such surprise at Baxter's response. “What did Harry Kraemer do? He did something that feels unusual—subversive, almost—in light of the air of mistrust and criminality that pervades big business. ‘When in the past nine months have you ever heard a corporate executive apologize?’ marvels William W. George, the recently retired CEO of medical-instrument maker Medtronic Inc. The answer: almost never.”¹

The Fast Company article was a source of pride for the team, and an affirmation that we had, indeed, done the right thing and the best we could. But to be perfectly honest, dealing with the crisis—human emotions aside—was fairly straightforward. Did we handle the crisis perfectly? No. Did we do the best we could? Absolutely. There was never a question, not even for an instant, about whether we would do the right thing. That is exactly what the fifty-two thousand Baxter team members around the world expected us to do. Had we deviated from that expectation, in addition to an external crisis we would have faced an internal meltdown.