In the early 1700's Alexander Pope said "At every word, a reputation dies." Little could he have imagined the veracity of that statement as civilization hurtled towards the 21st century.
A month ago, "jelly beans" (okay, two words) were innocent pieces of candy, probably best known by Ronald Reagan's fondness for them. Now they are synonymous with corporate racism and the embarrassment of Texaco. Hardly a week goes by when some company's reputation doesn't suffer because of a word or a deed.
But for every reputation that dies, there's one that is enhanced and strengthened because of how it manages its words. Johnson & Johnson's reputation (and market share) increased after the Tylenol crisis, Intuit software received industry praise for how it handled a bug in its software which could have caused massive mistakes in tax preparation.
What we know is that the best you can hope for with any crisis is to come out with your reputation intact and minimize the extent of the coverage. To that end, The Delahaye Group developed a "crisis gauge" that tracks the extent of coverage over the first six weeks as one measure of how well or badly the company handled the crisis. We examined some well-publicized crises and found that the "good" examples immediately began to minimize their press coverage.
The "bad" examples actually made the crisis worse before the coverage eventually dropped off.
To help us learn from these examples, each month this column will examine two crises, one handled well and another handled poorly. Our "image patrol" will examine the impact of the crises on corporate reputation from three distinct audiences: customers, investors and employees.
In the following charts, on this page and page 8, we will look at Texaco's handling of its race discrimination crisis and at how Odwalla,the California based natural juice company, handled the outbreak of the E. coli strain bacteria in batches of their unpasteurized apple juice.
TEXACO
The facts: On November 4, 1996, a tape of a conversation held in the boardroom of Texaco Corporate was released to the New York Times. On the tape, senior managers discussed destroying evidence in a pending race discrimination lawsuit, referred to black employees as "jelly beans" and allegedly used what most media outlets referred to as the "n" word.
After the story broke, the CEO of Texaco, Peter Bijur, issued a public apology and vowed to "find out what's going on." Two days later, Texaco issued another statement denying the use of the "n" word, saying that in fact, they were talking about "St. Nicholas" - a reference to the Christmas holiday.
Fifteen days later Jesse Jackson called for a nationwide boycott of Texaco products. The day before the boycott, Texaco agreed to settle the lawsuit for a record $176 million.
ODWALLA
The facts: Odwalla is a $59.2 million regional leader in the natural fresh squeezed beverage market. Following the social marketing strategies of Ben & Jerry's Ice Cream and other new age food companies, Odwalla based its reputation on the organic purity of its products and its promotional efforts around the company's "social conscience".
The company went public this spring and is clearly positioning itself for national distribution. On October 30,1996, 10 instances of E.coli bacteria contamination were traced to tainted Odwalla apple juice. The unpasteurized apple juice was produced at their Dinuba, Calif., production plant. Apple juice is a basic ingredient of several Odwalla juices. Nine days after the story broke, a 16 month old girl died as a result of infection from the E.coli bacteria in an Odwalla apple juice product.
The incident has launched a national debate over unpasteurized juices that pits organic devotees against more traditional medical and food experts.
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TEXAC0 |
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| CRITERIA | GRADE | COMMENTS | ADVICE |
| Extent of coverage | F | Made matters worse by entire "St. Nicholas" discussion. | Get facts, listen to all evidence before opening mouth |
| Effectiveness of spokespeople | C | CEO was available and visible, but should have backed up his apology with direct action. | Actions speak louder than words |
| Communication of key messages | C | Other than being sorry, the only positive message was that many of the gas stations were in fact franchises and a boycott would hurt the station owners more than the company. | In this day in age, a company can't simply say it's sorry, and it's committed to "diversity"-it needs to back up that committment with specific action |
| Management of negative messages | D | Major messages that our analysts came away with was that Texaco was in fact a racist company. | If you can't change reality, say "mea culpa" three times, and tell us what you'll do differently next time. |
| Impact on customers | B | While not everyone would heed a call from Jesse Jackson, the notion of voting with one's pocket book is very popular these days. | Prove to Texaco customers that the company is changing by donating to a foundation that promoted diversity in the workplace. |
| Impact on investors | B |
Negative image is having a much greater impact on stock prices these days. Texaco's has recovered somewhat from day the news broke,
but it is still below its previous level. |
Reassure investors that the $176 million is a worthwhile investment in the future. Any minimization of the boycott's impact will only lessen credibility. |
| Impact on employees, prospective employees | D |
The message was loud and clear: white males only need apply. Only time will tell how long it will be before talented employees and prospective employees of different races feel welcome at Texaco. |
Again, actions speak louder than words; until the company has people of different races in the board room, "diversity" is only buzz-word deep. |
| Overall Score | D | They did just about everything wrong. The overall impact on credibility of the company, and the oil industry in general is in serious jeopardy. However, our charts show that the net outcome is a major change in the way corporate America will look at diversity programs, and now that the settlement has been announced, coverage has decline precipitously. | Walk your talk and lay low until you can back up your words with verifiable, credible results. |
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ODWALLA |
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| CRITERIA | GRADE | COMMENTS | ADVICE |
| Extent of coverage | B | Coverage was mostly regional until the first death occurred. They did the best they could under the circumstances. | Lack of prior national visibility helped. Follow up with reporters who covered Odwalla for the first time to ensure they understand messages. |
| Effectiveness of spokespeople | A | CEO was available and articulate. | Cultivate more internal "experts," particularly on the medical side to bolster "organic" arguments. |
| Communication of key messages | B+ | Company was consistently positioned as socially responsible, committed to organic processes. | Don't waver on commitments. |
| Management of negative messages | B+ | Needed more "proof"of why organic is better than pasteurized, otherwise sounds a bit too "fringe." | Stay involved in the debate; you're now one of the experts. |
| Impact on customers | B | No consumer likes to think that his favorite juice is poison, but the frequency of E.coli breakouts diffused the negative impact. | Continue to communicate committment to health of consumers. |
| Impact on investors | B | Stock recovered quickly. | Nothing like a little national exposure to help your stock price. |
| Impact on employees, prospective employees | A | Company appeared to be ethical, concerned and credible | Continue to communicate these messages through necessary outlets, such as the Web site. |
| Overall Score | A- | Hard to improve, considering the circumstances. | Clear up the pasteurization debate with nutritional evidence. Leverage national coverage to establish long-term relationships with reporters new to the company. |