The Noggin Blog

2018: The Year in Corporate Crisis

Posted by The Brain on Dec 20, 2018 3:00:00 AM

 

It’s December, and the new year approaches. But before we usher in 2019, let’s take a look back on the year in corporate crisis.

And what a year it was, chockfull to bursting with some of the worst public relations crises in recent memory. So why sift through the carcass? Well, we think there’s plenty to be gained from digging through the post-mortems to learn what went wrong and how companies can do better in the future. 

Roseanne@2x

  • The cancellation of “Roseanne.” The revival of popular 1990s sitcom, “Roseanne” was one of the biggest entertainment stories of the first half of the year. The reboot premiered to critical acclaim and blockbuster ratings, both of which held steady over the course of its eight-episode run, leading ABC to greenlight another, longer season.

    That season will forever remain in the writer’s workshop. While the show was in pre-production, “Roseanne” creator and titular lead, Roseanne Barr, unleashed a Twitter rant, widely viewed as racist.
    The response from the entertainment community was swift and punishing. ABC immediately cancelled the reboot. A number of other media companies, including Viacom, pulled the plug on syndications of the original shown. And Barr’s own talent agency, ICM, dropped her as a client.

    A Barr-less spinoff, “The Conners” debuted later in the year to solid, if unspectacular ratings.

  • Verizon throttles unlimited data during California wildfire. In the telecom world, unlimited doesn’t always mean unlimited once you take a look at the fine print. Big carriers often throttle so-called unlimited data plans once customers reach a certain threshold. Inconvenient for everyday consumers, sure, but a public safety risk when the customer in question is a fire department responding to one of the largest fires in California’s history.

    Such was the case with the Santa Clara County Fire Department: during the Mendocino Complex Fire, Verizon throttled the department’s unlimited data account.

    When fire officials reported the throttling, which slowed data rates to a crawl in the midst of operations, the carrier indicated that County Fire had to switch to a costlier data plan to (once again) enjoy faster speeds. The department eventually upgraded its subscription – and Verizon lifted the throttle – but not before first turning to another Internet Service Provider as well as personal devices.

    The spat made headlines when the County Fire Chief used correspondence with the carrier in a declaration supporting a challenge to the repeal of net neutrality. Verizon later apologized for a mistake in communication with the Fire Department but denied that the situation had anything to do with net neutrality.

  • Starbucks tries to not get burnt. Starbucks is the heavyweight in the coffee business, the biggest chain by far. More than that, though, the company has staked its reputation on being a socially-conscious brand, the “third place” for people to meet up after home and work.

    That’s what made the next incident so damaging. Starbucks employees at a Philadelphia chain location called 911 to report a trespassing complaint on two African American men. The two were waiting for a third to conduct a meeting. They hadn’t purchased a beverage but asked to use the restroom. Employees insisted that the restrooms were for paying customers only and eventually asked the men to leave. When the men didn’t, the employees called the police. The eventual arrest of the two when they again refused to leave was recorded. And the video went viral in the midst of a larger conversation on implicit bias.

    Starbucks knew it had to act quickly to stanch the backlash. The company immediately put out an apology on Twitter. CEO Kevin Johnson later personally apologized for the “reprehensible incident.” And Starbucks took the extraordinary measure of closing all of its 8,000 stores down for one afternoon to hold racial bias training.

  • The Cambridge Analytica Facebook scandal. Exiting the heated 2016 U.S. presidential election, things were looking good for Cambridge Analytica. Backed financially by a family of politically-connected billionaires, the British political consulting firm and data company had just seen its most high-profile client, Donald Trump, pull off an upset for the ages. Cambridge Analytica, in particular, was being singled out for plaudits.
    Oh, how things change. In March The New York Times reported that Cambridge Analytica had improperly obtained Facebook information on up to 87 million (yes, million) people.

    If those revelations weren’t bad enough, video also came out of senior Cambridge Analytica executives confessing to bribing and entrapping politicians (with prostitutes,) as well as conducting secret shady campaigns through a network of shell companies and sub-contractors.

    For the company, already ensnared in special counsel Robert Mueller’s investigation into Russian interference in the U.S. presidential election, the cascading ethical and legal questions proved too much. Cambridge Analytica and its parent company, SCL called it quits this May.

    Things didn’t get much better for Facebook, either, especially after the social media giant announced a major security breach, involving some 30 million accounts.

  • Elon Musk’s tweets send Tesla’s stock scrambling. In a world of buttoned-up CEOs, Tesla chief executive, Elon Musk has always stood out for his colorful pronouncements and unique social media presence. 2018, however, would test the limits of the market’s indulgence of Musk’s idiosyncratic communication strategy.

    In an August tweet, Musk claimed he’d secured the funding to take the publicly-traded Tesla private. Musk, who had in fact been in talks with Saudi Arabia’s Public Investment Fund, hadn’t yet brought the matter up with his Board.

    The U.S. Securities and Exchange Commission (SEC) promptly started investigating. And sensing instability at the helm of Tesla, the markets panicked, sending Tesla stocks plummeting over the course of the summer.

    That was only a taste of things to come. A month later, Musk appeared on a podcast smoking a cannabis-laced cigarette on air. Tesla shares stumbled again.

    Musk would later be forced out of the Tesla chairmanship as part of a settlement with the SEC for his August tweets. He’d also have to cough up $20 million in fines and forfeit (some) control over his Twitter account.    

  •  Southwest’s broken windows. 2018 hasn’t been a great year for Southwest Airlines either. This year the airliner recorded its first passenger fatality under the most gripping of circumstances.

    In April, a Southwest flight suffered uncontained engine failure, causing shrapnel to spray throughout the cabin. Some of the debris shattered a window, pushing a nearby passenger through the opening. Though her neighbors managed to get her back in, the passenger eventually died from injuries sustained during the incident.

    Then, only weeks later, another one of its planes had to make an emergency landing due to a cracked window. No one died in that incident. But the toll to the airline’s reputation and bottom line were significant.

  • KFC runs out of chicken. The first KFC franchise opened its doors way back in the 1950s. Now the iconic fried chicken brand includes almost 20,000 locations in over 120 countries.

    However, this February, owners in the U.K. and Ireland would learn that it’s difficult to run an iconic fried chicken brand without the main ingredient. And that’s precisely what happened when KFC’s newly minted delivery partner, DHL caused a fried chicken shortage in the U.K. and Ireland. KFC closed 900 locations temporarily but recovered in the public eye after putting out a clever ad campaign.   

  • Beauty brand CEO goes rogue on social. Beauty startup, Deciem, itself the proud owner of a couple of lucrative sub brands, exited 2017 with makeup powerhouse Estée Lauder as a new investor.

    The new year would bring trouble, though. First, Deciem CEO, Brandon Truaxe fired his entire social media team and personally took the reins of the company’s Instagram account.
    The brand quickly came under fire for a series of controversial Truaxe comments on the social media platform, including replies to fellow posters, which even elicited a small boycott of Deciem products.

    If that weren’t enough, Truaxe also fired his co-CEO, Nicola Kilner who’d previously defended his statements in the press. After that, Truaxe got rid of his entire U.S. staff, only to later announce that he was ceasing business altogether and closing all Deciem stores, all the while alleging financial crimes.

    In October Truaxe himself was ousted. But perhaps things weren’t well with Truaxe all along? A November report in Canada’s Financial Post confirmed that Truaxe had been hospitalized for mental health issues in the past, and Truaxe himself admitted to drug use.

So what should we take away going into 2019? Well, first and foremost, social media matters more than ever. Companies invest tons in creating relatable, accessible, authentic brands, transmitted via their social channels, often in the voice of a charismatic executive. But as we learned this year, there’s such a thing as too much authenticity, and customers expect companies (and their CEOs) to uphold civic values while pursuing narrower business interests.

Another lesson: act fast and smart. Don’t let a bad situation fester. Starbucks and KFC won major kudos (and perhaps new followers) for quick, creative handlings of their respective corporate crises.

Finally, get serious about planning. Organizations might not be able to plan for every single crisis scenario, but they should plan for the most likely in their industry, i.e. a supply chain snafu if you’re a major food company or celebrity misbehavior if you’re an entertainment company. Looking to turbocharge your crisis planning in 2019? Download our introductory guide to crisis management planning.

 

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Topics: Crisis Planning, Crisis Plans, Crisis Management, Noggin Crisis


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