MANAGING CRISIS PROJECTS

24.0 INTRODUCTION

Project managers have become accustomed to managing within a structure process such as an enterprise project management methodology. The statement of work had gone through several iterations and was clearly defined. A work breakdown structure existed and everyone understood his or her roles and responsibilities as defined in the responsibility assignment matrix (RAM). All of this took time to do.

This is the environment we all take for granted. Now, let's change the scenario. The president of the company calls you into his office and informs you that several people have just died using one of your company's products. You are being placed in charge of this crisis project. The lobby of the building is swamped with the news media, all of which want to talk to you to hear your plan for addressing the crisis. The president informs you that the media knows you have been assigned as the project manager, and that a news conference has been set up for one hour from now. The president also asserts that he wants to see your plan for managing the crisis no later than 10:00 PM. this evening. Where do you begin? What should you do first? Time is now an extremely inflexible constraint rather than merely a constraint that may be able to be changed. Time does not exist to perform all of the activities you are accustomed to doing. You may need to make hundreds if not thousands of decisions quickly, and many of these are decisions you never thought that you would have to make. This is crisis project management.

24.1 UNDERSTANDING CRISIS MANAGEMENT

The field of crisis management is generally acknowledged to have started in 1982 when seven people died after ingesting Extra-Strength Tylenol capsules that were laced with cyanide. Johnson & Johnson, the parent of Tylenol, handled the situation in such a manner that it became the standard for crisis management.

Today, crises are neither rare nor random. They are part of our everyday lives. Crises cannot always be foreseen or prevented, but when they occur, we must do everything possible to manage them swiftly and effectively. We must also identify lessons learned and best practices so that mistakes are not repeated on future crises that will certainly occur.

Some crises are so well entrenched in our minds that they are continuously referenced in a variety of courses in business schools. Some crises that have become icons in society include:

• Hurricane Katrina
• Mad cow disease
• The Space Shuttle Challenger explosion
• The Space Shuttle Columbia reentry disaster
• The Tylenol poisonings
• Nestlé's infant formula controversy
• The Union Carbide chemical plant explosion in Bhopal, India
• The Exxon Valdez oil spill
• The Chernobyl nuclear disaster
• The Three Mile Island nuclear disaster
• The Russian submarine Kursk disaster
• The Enron and Worldcom bankruptcies

Some crises are the result of acts of God or natural disasters. The public is generally forgiving when these occur. Crisis management, however, deals primarily with man-made crises such as product tampering, fraud, and environmental contamination. Unlike natural disasters, these man-made crises are not inevitable, and the general public knows this and is quite unforgiving. When the Exxon Valdez oil spill occurred, Exxon refused to face the media for 5 days. Eventually, Exxon blamed the ship's captain for the accident and also attacked the Alaska Department of the Environment for hampering its emergency efforts. Stonewalling the media and assuming a defensive posture created extensive negative publicity for Exxon.

Most companies neither have any processes in place to anticipate these crises, even though they perform risk management activities, nor do they know how to manage them effectively after they occur. When lives are lost because of man-made crises, the unforgiving public becomes extremely critical of the companies responsible for the crises. Corporate reputations are very fragile. Reputations that had taken years to develop can be destroyed in hours or days.

Some people contend that with effective risk management practices, these crises can be prevented. While it is true that looking at the risk triggers can prevent some crises, not all crises can be prevented. However, best practices in crisis management can be developed and implemented such that when a crisis occurs, we can prevent a bad situation from getting worse.

For some time, corporations in specific industries have found it necessary to simulate and analyze worst-case scenarios for their products and services. Product tampering would be an example. These worst-case scenarios have been referred to as contingency plans, emergency plans, or disaster plans. These scenarios are designed around “known unknowns,” where at least partial information exists on what events could happen.

Crisis management requires a heads-up approach with a very quick reaction time combined with a concerted effort on the part of possibly all employees. In crisis management, decisions have to be made quickly, often without even partial information and perhaps before the full extent of the damages are known. Events happen so quickly and so unpredictably that it may be impossible to perform any kind of planning. Roles and responsibilities of key individuals may change on a daily basis. There may be very active involvement by a majority of the stakeholders, many of which had previously been silent. Company survival could rest entirely on how well a company manages the crisis.

Crises can occur within any company, irrespective of the size. The larger the company involved in the crisis, the greater the media coverage. Also, crises can occur when things are going extremely well. The management guru, Peter Drucker, noted that companies that have been overwhelmingly successful for a long time tend to become complacent even though the initial assumptions and environmental conditions have changed. Under these conditions, crises are more likely to occur. Drucker called this “the failure of success.”

Crisis management is now an integral part of training programs on professional responsibilities for project managers. This encompasses dealing with a multitude of stakeholders, being honest with the news media and the clients, and demonstrating a sincere concern for morality and ethics in project management.

Before discussions on the role of the project manager, it is important to examine the lessons learned from previous crises. What is unfortunate is that most of the lessons learned will come from improper handling of the crisis.

24.2 FORD VERSUS FIRESTONE

Product recalls are costly and embarrassing for the auto industry. Improper handling of a recall can have an adverse effect on consumer confidence and the selling price of the stock. Ford and tire manufacturer Firestone are still suffering from the repercussions of their handling of a product recall in 2000–2001.

In August of 2000, Firestone recalled 6.5 million tires in the United States, primarily because of tread separation problems on Ford Explorers [sports utility vehicles (SUV)]. The problems with the tires had been known several years earlier. In 1997–1998, Saudi Arabia reported tread separation on the SUV Explorer. In August 1999, Firestone replaced the tires in Saudi Arabia. In February 2000, Firestone replaced the tires in Malaysia and Thailand, and in May 2000, the tires were replaced in Venezuela.

Initially, it was believed that the problem might be restricted to countries with hot climates and rough roads. However, by May 2000, the U.S. National Highway Traffic Safety Administration (NHTSA) had received 90 complaints involving 27 injuries and 4 deaths. A U.S. recall of 6.5 million tires took place in August 2000.

Ford and Firestone adopted a unified response concerning the recall. Unfortunately, accidents continued after the recall. Ford then blamed Firestone for flaws in the tires and Firestone blamed Ford for design flaws in the SUV Explorer. The Ford–Firestone relationship quickly deteriorated.

The finger pointing between Ford and Firestone was juicy news for the media. Because neither company was willing to accept responsibility for its actions, probably because of the impending lawsuits, consumer confidence in both companies diminished, as did their stock prices. Consumer sentiment was that financial factors were more important than consumer safety.

Ford's CEO, Jac Nasser, tried to allay consumer fears, but his actions did not support his words. In September of 2000, he refused to testify at the Senate and House Commerce Subcommittee on tire recall stating that he was too busy. In October of 2000, Masatoshi Ono resigned as CEO of Bridgestone, Firestone's parent company. In October of 2001, Jac Nasser resigned. Both executives departed and left behind over 200 lawsuits filed against their companies.

1. Early warning signs appeared but were marginally addressed.
2. Each company blamed the other leaving the public with the belief that neither company could be trusted with regard to public safety.
3. Actions must reinforce words; otherwise, the public will become nonbelievers.

24.3 THE AIR FRANCE CONCORDE CRASH

On July 25, 2000, an Air France Concorde flight crashed on takeoff killing all 109 people on board and 4 people on the ground. Air France immediately grounded its entire Concorde fleet pending an accident investigation. In response to media pressure, Air France used its website for press releases, expressed sorrow and condolence from the company, and arranged for some financial consideration to be paid to the relatives of the victims prior to a full legal settlement. The chairman of Air France, Jean-Cyril Spinetta, visited the accident scene the day of the accident and later attended a memorial service for the victims.

Air France's handling of the crisis was characterized by fast and open communication with the media and sensitivity for the relatives of the victims. The selling price of the stock declined rapidly the day of the disaster but made a quick recovery.

British Airways (BA) also flew the Concorde, but took a different approach immediately following the accident. BA waited a month before grounding all Concorde flights indefinitely, and only after the Civil Aviation Authority announced it would be withdrawing the Concorde's airworthiness certification. Eventually, the airworthiness certification was reinstated, but it took BA's stock significantly longer to recover its decline in price.

1. Air France and British Airways took different approaches to the crisis.
2. The Air France chairman showed compassion by visiting the site of the disaster as quickly as possible and attending a memorial service for the victims. British Airways did neither, thus disregarding their social responsibility.

24.4 INTEL AND THE PENTIUM CHIP

Intel, the manufacturer of Pentium chips, suffered an embarrassing moment resulting in a product recall. A mathematics professor, while performing prime number calculations on 10-digit numbers, discovered significant round-off errors using the Pentium chips. Intel believed that the errors were insignificant and would show up only in every few billion calculations. But the mathematician was performing billions of calculations and the errors were now significant.

The professor informed Intel of the problem. Intel refused to take action on the problem, stating that these errors were extremely rare and would affect only a very small percentage of Pentium users. The professor went public with the disclosure of the error.

Suddenly, the small percentage of people discovering the error was not as small as originally thought. Intel still persisted in its belief that the error affected only a small percentage of the population. Intel put the burden of responsibility on the user to show that his or her applications necessitated a replacement chip. Protests from consumers grew stronger. Finally the company agreed to replace all chips, no questions asked, after IBM announced it would no longer use Pentium chips in its personal computers.

Intel created its own public relations nightmare. Its response was slow and insincere. Intel tried to solve the problem solely through technical channels and completely disregarded the human issue of the crisis. Telling people who work in hospitals or air traffic control that there is a flaw in their computer but it is insignificant is not an acceptable response. Intel spent more than a half billion dollars in the recall, significantly more than the cost of an immediate replacement.

1. Intel's inability to take immediate responsibility for the crisis and develop a crisis management plan made the situation worse.
2. Intel completely disregarded public opinion.
3. Intel failed to realize that a crisis existed.

24.5 THE RUSSIAN SUBMARINE KURSK

In August of 2000, the sinking of the nuclear-powered submarine Kursk resulted in the deaths of 118 crewmembers. Perhaps the crew could never have been saved, but the way the crisis was managed was a major debacle for both the Russian Navy and the Russian government.

Instead of providing honest and sincere statements to the media, the Russian Ministry of Defense tried to downplay the crisis by disclosing misleading information, telling the public that the submarine had run aground during a training exercise and that the crew was in no immediate danger. The ministry spread a rumor that there was a collision with a NATO submarine. Finally, the truth came out, and by the time the Russians sought assistance in mounting a rescue mission, it was too late.

Vladimir Putin, Russia's president, received enormous unfavorable publicity for his handling of the crisis. He was vacationing in southern Russia at the time and appeared on Russian television clad in casual clothes, asserting that the situation was under control. He then disappeared from sight for several days, which angered the public and family members of the crew, indicating his lack of desire to be personally involved in the crisis. When he finally visited the Kursk's home base, he was greeted with anger and hostility.

1. Lying to the public is unforgivable.
2. Russia failed to disclose the seriousness of the crisis.
3. Russia failed to ask other countries for assistance in a timely manner.
4. Russia demonstrated a lack of social responsibility by refusal to appear at the site of the crisis and showed a lack of compassion for the victims and their families.

24.6 THE TYLENOL POISONINGS¹

In September 1982, seven people died after taking Extra-Strength Tylenol laced with cyanide. All of the victims were relatively young. These deaths were the first ever to result from what came to be known as product tampering. All seven individuals died within a one-week time period. The symptoms of cyanide poisoning are rapid collapse and coma and are difficult to treat.

On the morning of September 30, 1982, reporters began calling the headquarters of Johnson & Johnson asking about information on Tylenol and Johnson & Johnson's reaction to the deaths. This was the first that Johnson & Johnson had heard about the deaths and the possible link to Tylenol.

From the start, the company found itself entering a closer relationship with the press than it was accustomed to. Johnson & Johnson bitterly recalled an incident 9 years earlier in which the media circulated a misleading report suggesting that some baby powder had been contaminated by asbestos. But in the Tylenol case, Johnson & Johnson opened its doors. For one thing, the company was getting some of its most accurate and up-to-date information about what was going on around the country from the reporters calling in for comment. For another, Johnson & Johnson needed the media to get out as much information to the public as quickly as possible and prevent a panic.

The chairman of Johnson & Johnson was James Burke, 57, a 30-year veteran of Johnson & Johnson. Mr. Burke had to protect the company's image, allay fears that the public may have in the use of Tylenol products, and work with a multitude of stakeholders, including government agencies. Burke decided to be the spokesperson for the media and personally take charge of the crisis project at Johnson & Johnson.

Burke had several options available to him on how to handle the crisis. Deciding which option to select would certainly be a difficult decision. Looking over Burke's shoulder were the stakeholders who would be affected by Johnson & Johnson's decision. Among the stakeholders were stockholders, lending institutions, employees, managers, suppliers, government agencies, and the consumers.

The consumers had the greatest stake in the crisis because their lives were on the line. The consumers must have confidence in the products they purchase and believe that they were safe to use as directed.

The stockholders had a financial interest in the selling price of the stock and the dividends. If the cost of removal and replacement, or in the worst-case scenario of product redesign, were substantial, it could lead to a financial hardship for some investors that were relying on the income.

Lending institutions provide loans and lines of credit. If the present and/or future revenue stream is impaired, then the funds available might be reduced and the interest rate charge could increase. The future revenue stream of its products could affect the quality rating of its debt.

The primary concern of the government was in protecting public health. In this regard, government law enforcement agencies were committed to apprehending the murderer. Other government agencies would provide assistance in promoting and designing tamper-resistant packages in an effort to restore consumer confidence.

Company management had the responsibility to protect the image of the company, as well as its profitability. To do this, management must convince the public that management will take whatever steps are necessary to protect the consumer.

Employees have the same concerns as management but are also somewhat worried about possible loss of income or even employment.

Whatever decision Johnson & Johnson selected was certain to displease at least some of the stakeholders. Therefore, how does a company decide which stakeholders' needs are more important? How does a company prioritize stakeholders?

For Jim Burke and the entire strategy committee, the decision was not very difficult—just follow the corporate credo. For more than 45 years, Johnson & Johnson had a corporate credo that clearly stated that the company's first priority is to the users of Johnson & Johnson's products and services. Everyone knew the credo, what it stood for, and the fact that it must be followed. The corporate credo guided the decision-making process, and everyone knew it without having to be told. The credo stated that the priorities, in order, were:

1. To the consumers
2. To the employees
3. To the communities being served
4. To the stockholder

When the crisis had ended, Burke recalled that no meeting had been convened for the first critical decision: to be open with the press and put the consumer's interest first. “Every one of us knew what we had to do,” Mr. Burke commented. “There was no need to meet. We had the credo philosophy to guide us.”

Some people believed that James Burke almost single-handedly saved Tylenol, especially when Wall Street believed that the Tylenol name was dead. Burke had courageously made some decisions against the advice of government agents and some of his own colleagues. He appeared on a variety of talk shows, such as the Phil Donahue Show and 60 Minutes. His open and honest approach to the crisis convinced people that Johnson & Johnson was also a victim. According to Johnson & Johnson spokesman, Bob Andrews, “The American public saw this company was also the victim of an unfortunate incident and gave us our market back.”

Both Johnson & Johnson and James Burke received nothing but accolades and support from the media and general public in the way the crisis was handled. A sampling of opinion from newspapers across the United States includes:

• Wall Street Journal: “Johnson & Johnson, the parent company that makes Tylenol, set the pattern of industry response. Without being asked, it quickly withdrew Extra-Strength Tylenol from the market at a very considerable expense . . . The company chose to take a large loss rather than expose anyone to further risk. The anti-corporation movement may have trouble squaring that with the devil theories it purveys.”
• Washington Post: “Though the hysteria and frustration generated by random murder have often obscured the company's actions, Johnson & Johnson has effectively demonstrated how a major business ought to handle a disaster. From the day the deaths were linked to the poisoned Tylenol . . . Johnson & Johnson has succeeded in portraying itself to the public as a company willing to do what's right regardless of cost.”
• Express and News (San Antonio, Texas): “In spite of the $100 million loss it was facing, the company . . . never put its interests ahead of solving the murders and protecting the public. Such corporate responsibility deserves support.”
• Evening Independent (St. Petersburg, Florida): “The company has been straightforward and honest since the first news of the possible Tylenol link in the Chicago-area deaths. Some firms would have tried to cover up, lie or say ‘no comment.’ Johnson & Johnson knows better. Its first concern was to safeguard the public from further contamination, and the best way to do that was to let people know what had occurred by speaking frankly with the news media.”
• Morning News (Savannah, Georgia): “Tylenol's makers deserve applause for their valiant attempt to recover from the terrible blow they have suffered.”

1. On crisis projects, the (executive) project sponsor will be more actively involved and may end up performing as the project manager as well.
2. The project sponsor should function as the corporate spokesperson, responsible for all crisis communications. Strong communication skills are therefore mandatory.
3. Open and honest communications are essential, especially with the media.
4. The company must display a social consciousness as well as a sincere concern for people, especially victims and their families.
5. Managing stakeholders with competing demands is essential.
6. The company, and especially the project sponsor, must maintain a close working relationship with the media.
7. A crisis committee should be formed and composed of the senior-most levels of management.
8. Corporate credos can shorten the response time during a crisis.
9. The company must be willing to seek help from all stakeholders and possibly also government agencies.
10. Corporate social responsibility must be a much higher priority than corporate profitability.
11. The company, specifically the project sponsor, must appear at the scene of the crisis and demonstrate a sincere compassion for the families of those injured.
12. The company must try to prevent a bad situation from getting worse.
13. Manage the crisis as though all information is public knowledge.
14. Act quickly and with sincerity.
15. Assume responsibility for your products and services and your involvement in the crisis.

24.7 NESTLÉ'S MARKETING OF INFANT FORMULA

During a crisis, corporations have an obligation to demonstrate social responsibility, hopefully, without any impact on the profitability of the firm. During the past 40 years, laws, guidelines, and codes have been enacted; not only to show how this social responsibility can be applied, but also to make sure it is done ethically and without any harm to society. But what happens if the guidelines, codes, and laws are nonexistent? What happens if the corporation truly believes that they are doing good service for humanity, but at the same time part of society believes that an injustice has occurred? Such was the case at Nestlé's where corporate management emphatically believed that they were doing a good service for humanity with the distribution of infant formula to Third World nations. However, infant mortality, estimated to be in the thousands, occurred in Third World nations as a result of Nestlé's aggressive marketing campaign.

Nestlé's entrance into the infant formula industry was derived from a desire to increase profitability and gain a greater market share. Nestlé began developing and marketing its infant formula in the 1920s, when infant formulas were proven to be nutritionally better than condensed milk for the baby and a successful alternative to breastfeeding. Nestlé first entered the Third World markets in Brazil and had expanded over the next 50 years into approximately 20 additional Third World markets. It is important to note that Nestlé never intended that the infant formula serve as a replacement for breast milk, but rather as a supplement.

The product, itself, was of high quality and nutritionally superior to other alternatives in processed products. The product could meet a nutritional need as a supplement to breastfeeding and as a second-best alternative when women were unable or unwilling to breastfeed. Therefore, the product could be socially useful. The product, itself, was not the problem, but rather the misuse of the product. The probability of product misuse was greater for some consumers than others. In this specific case, it was the low-income and low-educated consumers in Third World countries that Nestlé was targeting and who were the most vulnerable.

The product is nutritiously beneficial for the infant only if it is mixed with water and fed through clean and sterile bottles, and stored in refrigerators. Many consumers in Third World countries could not meet these product requirements. Many of these poor consumers did not have access to clean and drinkable water. They sometimes used the main water supplies, rivers or lakes, which were also used for laundry and bathing. They did not have the funds to afford fuel required for boiling water. Sanitary facilities and disposal systems were often undeveloped and contaminated. An unsanitary bottle or liquid can produce harmful infections to the infant. Some parents in Third World countries were illiterate and not fully able to follow product directions. Mothers did not properly mix formulas or follow correct sanitary procedures. Their lack of financial resources also restricted them from purchasing additional needed formula, causing mothers to dilute the formula mix to make the formula stretch further.

All of these forms of product misuse caused serious and fatal health effects to infants. Consumers in Third World countries were provided with Nestlé products that could not be used properly. The environmental restrictions, along with improper resources and guidance made it a very risky market for Nestlé to target unless consumers were provided with a basic understanding of sanitation and nutrition. Nestlé failed to assure this type of awareness and more importantly, faulted in providing social responsibility.

As word spread about the tragic events of infant formula occurring in Third World countries, many critics started to raise their voices and demand changes in Nestlé's marketing practices. Eventually, a boycott group formed and obtained large-scale support from the medical profession and the clergy. The boycotters never questioned the quality, need, and importance of the infant formula. The boycotters were simply opposed to the aggressive marketing campaign in Third World nations. Nestlé maintained its original position that it was doing a good deed for society, but public opinion sided with the boycotters. Eventually, Nestlé conceded to the demands of the boycotters.

The following lessons can be learned from the Nestlé crisis:

1. Nestlé's actions were not representative of company demonstrating social responsibility. Its actions may have been legally correct, but they were also morally and ethically incorrect.
2. Nestlé should have used the media to its advantage rather than attacking the media. That made the situation even worse.
3. Nestlé remained in a state of denial over the crisis and refused to accept accountability for its actions. As a result, the media relentlessly looked for “skeletons in the closets,” found some, and reported the results to the public.
4. Nestlé assumed that the public was ignorant of the magnitude of the crisis.
5. The longer the crisis remains in the public's eye, the greater the tendency for the company to be portrayed as a villain rather than as a victim.
6. Because of Nestlé's inactions, the size and influence of the boycott grew.
7. Nestlé eventually ran out of options and the corporate image became tarnished because of inactions.
8. Nestlé neglected to realize the importance of demonstrating a concern for people during the crisis.

24.8 THE SPACE SHUTTLE CHALLENGER DISASTER²

On January 28, 1986, the Space Shuttle Challenger lifted off the launch pad at 11:38 AM. Approximately 74 seconds into the flight, the Challenger was engulfed in an explosive burn and all communication and telemetry ceased. Seven brave crewmembers lost their lives. Following the accident, significant energy was expended trying to ascertain whether or not the accident was predictable. Controversy arose from the desire to assign, or to avoid, blame. Some publications called it a management failure, specifically in risk management, while others called it a technical failure.

The following lessons were learned from the Challenger disaster:

1. The crisis was created by a poor organizational culture.
2. There were significant early warning signs, which if addressed, could have avoided the crisis. They were ignored.
3. The chain of command insulated managers and executives from bad news.
4. Management refused to listen to workers who were pleading for help.
5. There was a questionable concern for human life indicated by the pressure to maintain the schedule at all costs.

24.9 THE SPACE SHUTTLE COLUMBIA DISASTER³

On February 1, 2003, the Space Shuttle Columbia began its reentry into the Earth's atmosphere. The shuttle relied upon the heat-resistant materials and the heat shield to protect it from the heat-producing friction encountered during reentry. Unfortunately, a problem occurred and the shuttle disintegrated during reentry into the atmosphere, killing its seven-person crew.

A Columbia Accident Investigation Board was convened to address the accident. Seven months later, the board released its findings. The technical cause of the accident was traced to liftoff, where a large piece of fuel tank insulation dislodged and hit and damaged the heat-resistant tiles on the leading edge of Columbia's left wing and punched a hole. The metal components on the shuttle melt at about 2000°F. The heat-resistant ceramic tiles melt at about 3000°F. The tiles prevent the 10,000°F reentry heat from penetrating the vehicle. During reentry, the heat was then able to penetrate the left wing, eventually melting part of the internal structure of the wing causing it to collapse, and resulting in the shuttle tumbling out of control during reentry.

While the dislodged insulation was the technical or physical cause of the accident, the Accident Investigation Board concluded that NASA's culture was equally at fault for the accident, and that NASA's culture was a detriment to safety. These conclusions stated that NASA had relied on past success as a substitute for sound engineering. NASA maintained organizational barriers preventing the communication of critical safety information, and stifled professional differences of opinion.⁴ In particular, the board identified attitudes at NASA that were “incompatible with an organization that deals with high-risk technology.”⁵

The board also concluded that management of the Space Shuttle Program demonstrated a strong resistance to new information and technologies that may have been able to prevent the disaster. They also failed to develop a simple contingency plan for a reentry emergency. “They were convinced, without study, that nothing could be done about such an emergency. The intellectual curiosity and skepticism that a solid safety culture requires was almost entirely absent.”⁶

While these conclusions were damaging to NASA's credibility, there were still more damaging conclusions. Many of the critical issues addressed by Columbia's Accident Investigation Board were also identified 17 years earlier by the Presidential Commission investigation the Space Shuttle Challenger disaster. Lessons learned from the Challenger disaster had not been fully implemented some 17 years later.

The following lessons were learned from the Columbia disaster:

1. Risk planning was virtually nonexistent.
2. There were no contingency plans for several of the high-risk portions of the space flight.
3. There was a silent safety program in place.
4. There was a poor transfer of knowledge, particularly lessons learned, from the Challenger disaster.

24.10 VICTIMS VERSUS VILLAINS

The court of public opinion usually casts the deciding ballot as to whether the company involved in the crisis should be treated as a victim or a villain in the way they handled the crisis. The two determining factors are most often the company's demonstration of corporate social responsibility during the crisis and how well they dealt with the media.

During the Tylenol poisoning, Johnson & Johnson's openness with the media, willingness to accept full responsibility for its products, and rapid response to the crisis irrespective of the cost were certainly viewed favorably by the general public. Johnson & Johnson was viewed as a victim of the crisis. Nestlé, on the other hand, was viewed as a villain despite its belief that it was doing good for humanity with its marketing of the infant formula.

Table 24-1 shows how the general public viewed the company's performance during the crisis. The longer the crisis lasts, the greater the tendency that the company will be portrayed as a villain.

TABLE 24-1 PUBLIC VIEW OF COMPANY PERFORMANCE

Crisis	Public Opinion View
Tylenol poisonings	Victim
Nestlé and the infant formula	Villain
Challenger explosion	Villain
Columbia reentry disaster	Villain
Exxon Valdez oil spill	Villain
Russian submarine, Kursk	Villain
Ford and Firestone	Villains
Concorde: Air France	Victim
Concorde: British Airways	Villain
Intel and Pentium	Villain

24.11 LIFE-CYCLE PHASES

Crises can be shown to go through the life cycles illustrated in Figure 24-1. Unlike traditional project management life-cycle phases, each of these phases can be measured in hours or days rather than months. Unsuccessful management of any of these phases could lead to a corporate disaster.

Most crises are preceded by early warning signs or risk triggers indicating that a crisis may occur. This is the early warning phase. Typical warning signals might include violations of safety protocols during technology development, warnings from government agencies, public discontent, complaints from customers and warnings/concerns from lower-level employees.

Most companies are poor at risk management, especially at evaluation of early warning signs. Intel, the Nestlé case, and the shuttle disasters were examples of this. Today, project managers are trained in the concepts of risk management, but specifically related to the management of the project, or with the development of the product. Once the product is commercialized, the most serious early warning indicators can appear and, by that time, the project manager may be reassigned to another project. Someone else must then evaluate the early warning sings.

Early warning signs are indicators of potential risks. Time and money is a necessity for evaluation of these indicators, which preclude the ability to evaluate all risks. Therefore, companies must be selective in the risks they consider.

The next life-cycle phase is the understanding of the problem causing the crisis. For example, during the Tylenol poisonings, once the deaths were related to the Tylenol capsules, the first concern was to discover whether the capsules were contaminated during the manufacturing process (i.e., an inside job) or during distribution and sales (i.e., an outside job). Without a fact-based understanding of the crisis, the media can formulate their own cause of the problem and pressure the company to follow the wrong path.

The third life-cycle phase is the damage assessment phase. The magnitude of the damage will usually determine the method of resolution. Underestimating the magnitude of the damage and procrastination can cause the problem to escalate to a point where the cost of correcting the problem can grow by orders of magnitude. Intel found this out the hard way.

Figure 24-1 Crisis management life-cycle phases.

The crisis resolution stage is where the company announces its approach to resolve the crisis. The way the public views the company's handling of the crisis has the potential to make or break the company.

The final stage, lessons learned, mandates that companies learn from not only their own crises but from how others handled their crises. Learning from the mistakes of others is better than learning from one's own mistakes.

Perhaps the most critical component in Figure 24-1 is stakeholder communications. When a crisis occurs, the assigned project manager may need to communicate with stakeholders that previously were of minor importance, such as the media and government agencies, and all of whom have competing interests. These competing interests mandate that the project managers understand stakeholder needs and objectives and also possess strong communication skills, conflict resolution skills, and negotiation skills.

24.12 PROJECT MANAGEMENT IMPLICATIONS

While it is true that every crisis has its unique characteristics, there is some commonality that can affect project management. Some implications for project management include:

1. Leader of the Crisis Team: It is important to understand who will be leading the crisis team. It is quite rare that a project manager will be given the responsibility to manage a crisis team, at least with our definition of a crisis. Many of the decisions that need to be made are not those made by project managers when performing their normal duties. The project sponsor will most likely assume a dual role and be the leader of the project team as well as acting as the sponsor. As in the Tylenol case, it is common for the CEO to assume primary responsibility for managing the crisis team. The leader of the crisis team must have complete authority to commit corporate resources to the project. The project manager, as we know it, will function in an assistant project manager capacity.
2. The Crisis Committee: In time of crisis, there should exist a crisis committee composed of the senior-most levels of management. The crisis committee should also have multifunctional membership. Project managers and assistant project managers will then report to the entire membership of the committee rather than to a single sponsor.
3. Crisis Communications: The leader of the crisis team will be the primary spokesperson for the crisis and ultimately responsible for all media communications. The media cannot be ignored and has the power to portray the company as either a victim or a villain. The senior-most levels of management, especially those executives with professional communication skills, must perform crisis communication with the media. It is essential that the corporation speak with one voice, accompanied by swiftness, honesty, openness, sincerity and compassion for the victims and their families. Information must not be withheld from the public. Withholding information from the media with the excuse that the information is incomplete may be viewed as stonewalling the media.
4. Stakeholder Management: The crisis team must identify all of the parties affected by the crisis. This includes bankers, stockholders, employees, suppliers, customers, top management, government agencies, and the like. Each stakeholder can have a different interest in how the crisis is resolved, such as a financial, medical, environmental, political, or social interest. The crisis team must also be willing to ask for help from external agencies such as the FBI, Environmental Protection Agency, Federal Emergency Management Agency, and the Red Cross. The assistance of these external stakeholders can be invaluable.
5. Assume Responsibility: The company must accept responsibility for its actions (or inactions) immediately, and without being coerced into doing so. This will most likely fair well with the media.
6. Response Time: In every crisis, there is usually a small window of opportunity where quick and decisive action can limit or even reduce the damages. Another reason for a quick response is because of the media. The longer the company takes to act, the greater the likelihood the media will look upon the company unfavorably.
7. Compassion: The respect for people is mandatory. It is essential that the company expresses and demonstrates compassion for all injured parties and their families, irrespective of who was actually at fault for the crisis. The emotions of the victims and their families can be expected to run high. The public expects the company to demonstrate compassion. This also includes being on the scene of the disaster as quickly as possible. Delaying a visit to the crisis scene may be viewed as a lack of compassion or, even worse, that the company is hiding something.
8. Documentation: Because of the multitude of legal issues that may be encountered during a crisis, most of the decisions made will need to be clearly documented. The project manager and the associated team members should possess strong writing skills.
9. Capture Lessons Learned: Crisis can occur without warning. Companies are expected to capture lesson learned from both internal and external crises. This includes the examination of risk triggers, developing risk management templates, and perhaps even a corporate credo.