It’s been quite a year for students of public relations and corporate brand management.

On 27 March we heard that Glaxo Smith Kline, the manufacturers of Ribena, had been fined $227,000 for misleading the public over the vitamin C content of their ready to drink formulation.

On 8 May we learned that the manager of a Subway outlet had fired a staff member for sharing her drink of Diet Coke with a distressed friend on her rostered break.

On 27 May we learned that the private investigators hired by the SOE Solid Energy to keep a watch on the Stop Happy Valley protest group had in turn hired a student to infiltrate the group.

On 1 June, the whole country became involved in the sad saga of Folole Muliaga and her death following the termination of her power supply by Mercury Energy.
Let’s look at how these events were reported by TV3.

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Whatever you think about the facts of these cases – and in the case of Folole Muliaga we have yet to hear the final determination from the Coroner – there can be no doubt this media coverage caused each business significant brand damage.

And we are not talking about small businesses here. Yet despite all their resources, each of them made some fundamental mistakes.  

The purpose of this presentation is not to mock these businesses or to pillory them for these mistakes. Heaven knows – there but for the grace of God go all of us.

But it is important to identify what went wrong. To hazard some guesses as to why they went wrong and to see whether there are any lessons for us all as PR practitioners and for the PR profession itself.

In so doing, I want to stress I have no knowledge whatsoever of what went on inside these organisations during their times of trial. Also it’s important to make it clear that they are not the only organisations this year that have taken strategic positions that have damaged their brands and the reputations of the individuals involved.

But let’s stick to Glaxo, Subway, Solid Energy and Mercury – they’re enough for one day.

All four companies have several things in common.

• First, they were faced with an event of their own making which was a major threat to their reputation and their ability to do business.

• Faced with the threat, three of the four attempted to justify their actions to the media. They accepted no blame, refused to apologise for their actions, and either directly or indirectly blamed someone else for what had happened. In the case of Glaxo, they just ignored the story and hoped it would go away.

• Yet from the perspective of news reporters and commentators, and I suspect nearly everyone in this room, each of the company positions were seen as indefensible soon after the stories broke.

• Yet inside these companies there was a different view and they set about defending the indefensible, until each of them was eventually forced into a humiliating U-turn or legal sanction.  

Let’s look at each of them in turn. Starting first with Ribena and Subway.

Three years ago, two 14 year-old secondary school science students tested Ribena RTD for Vitamin C and found none. Mystified by their findings, they approached the brand owner Glaxo Smith Kline and were fobbed off.  

That prompted them to approach Fair Go, who brought the topic to the nation’s attention. Even this didn’t slow the Ribena marketers down. They still kept promoting their RTD formulation as having four times the Vitamin C content of oranges.

This eventually came to the attention of the Commerce Commission which decided to prosecute the company for breaching the Fair Trading Act. Glaxo was fined $227,500 and ordered to spend $96,000 in corrective advertising.

It seems incredible that a company as large and supposedly sophisticated as Glaxo could be so cavalier with its brand. After all, in the world of fast moving consumer goods, reputation is everything.

This is particularly true of products sold in supermarkets. To get space on the shelf in the first place, you need to meet consumer expectations and regulatory standards. In practice this means most products on the shelf are of similar real quality to those of their competitors.

Retail success therefore depends on building a perception among consumers that your product is better than the rest. In New Zealand, Ribena has been highly successful in that – selling its cordials at a significant price premium over competitors like Barkers, Baker Hall and Jungle Juice which offer fruit drinks of similar juice content.
 
Glaxo put all this and more at risk. When an international brand is outed anywhere in the world for telling porkies, or for something else which indicates that its brand values are a lie, the story goes global. Especially if it is packaged up with a strong human interest angle – Ribena was outed not by a competitor, but two 14 year old school pupils.

As a result, the damage to Ribena’s brand here and to a lesser extent overseas will have been immense.  Sales in New Zealand following the judgement apparently crashed and some supermarkets had to special the product to move it off the shelves.

And has the company learnt any lessons? I don’t know, but a couple of months ago when I checked out Ribena on the net I discovered that one of the company’s UK spokespeople was still in denial. He was quoted as saying the problem was simply due to the testing of old stock on NZ supermarket shelves.

In the case of Subway, a Dunedin franchisee decided to sack a staff member for sharing a glass of Diet Coke with a distressed friend – an act it deemed to be theft.

The employee was on her rostered break, she was entitled to have a glass of Coke ‘on the company’ and had an unblemished employment record. The worker was not told that the meeting with her boss was a disciplinary meeting, so she wasn’t able to get advice beforehand or to arrange to have a support person with her

On the face of it the employer was not only acting outside New Zealand employment law but outside the bounds of what most people would consider fair and reasonable.

Now, if this scenario had occurred at a fish & chip shop in George Street, none of us would have heard about it. But this story was about a multi-national business – a household name in 85 countries – treating an employee in a way that was seen by the media and the public at large as being unfair to the point of absurdity.

Within hours the story had traveled worldwide, leaving Subway floundering to pick up the pieces. Otago University students held a spontaneous protest march and demonstration outside the Dunedin store, and bloggers started  calling for a NZ-wide boycott of all Subway stores.

The response of Subway was to wash their hands of the situation, stating that the Dunedin outlet was only a franchise. As for the franchisee himself, he went to ground, leaving the union, the bloggers and the demonstrators to make the running.

Now if you go to the Subway website, you will find that the website exists not to tell you about tasty, wholesome Subway sandwiches. It largely exists to sell franchises.

When you buy a Subway franchise you get the store livery, menus, the benefits of nationwide promotion and all the other things which come with a franchise. But  that’s not really what you are buying. You’re buying a brand and the values that come with it.

Like all brand values, these are in effect promises to the consumer.

You won’t find any Subway ads which promise you that their sandwiches will be free of bugs and contamination. But it’s nevertheless a bedrock implied brand promise. And in a society which increasingly demands ethical behaviour of prominent businesses, there’s also an implied promise that Subway is environmentally and socially responsible.

This means that when Subway said the sacking was a matter for an individual franchisee, they were in effect saying that their brand values didn’t include respect for their employees, let alone New Zealand employment law. What then did this mean for their brand? And would the response have been the same if a Dunedin consumer had found a dead mouse in their 12 inch sub?

Keeping promises and ’walking the talk’ are probably the most basic rules of reputation and brand management. Yet two multi-nationals blatantly breached those rules and then, when they were exposed, went into denial.

What should they have done? Like all businesses in the public arena, they needed a plan which identified potential risks to their reputation and how they would be handled if the worst came to the worst.

As businesses involved with food, such a plan would have to include product contamination, as a result of a breakdown in quality assurance or sabotage. It would need to include corrupt or illegal practices by managers or employees. And it would also have to cover breaches of society’s expectations.

These include environmental – such as waste generation and disposal. Social –  particularly those relating to the treatment of employees, minority ethnic groups, the disabled and so on.  And of course legal, like complying with Fair Trading laws.

Such a plan would be linked into the businesses’ quality assurance and marketing programmes, which should at their core include an expectation that the business will meet and endeavour to exceed the minimum standards laid down by the law in the country in which they are operating.

I am sure that Glaxo and Subway have QA and marketing standards which the expect their franchisees to comply with. But they clearly didn’t have risk management plans, or if they did they were buried in a drawer somewhere.

Why? I suspect it is because the Glaxo Smith Kline and Subway operations in New Zealand are very small stations at the end of very long branch lines.

Glaxo employs more than 100,000 people in 117 countries and its main focus is pharmaceutical marketing. A tiny operation selling Ribena in New Zealand clearly won’t rate on the head office radar in London, UK – but in the age of the Internet it should.

Subway is in a similar position. As indeed are literally hundreds of multi-national organisations with marketing arms in New Zealand. Apart from the very largest of them, few of them have a New Zealand board or a corporate relations manager.

Their local managers are generally sales people, for whom corporate affairs is something which happens in London, Lyon, or Moline Illinois or wherever head office happens to be. Invariably these people see PR as market support press releases -- a bit of free advertising to support their brand advertising.

So what should be done about this situation – or do we leave all these multi-nationals with branch offices in New Zealand to keep making mistakes that threaten their brand values?

Most of these organisations have large advertising budgets. So there is a potential for the PR Institute to make presentations to the major advertising agencies so that account managers understand that PR is more than press releases; that it has an important role to play in maintaining the credibility of the brands they promote.

No amount of advertising will fix a brand which no longer makes a positive emotional connection with consumers, or where the brand promises have are perceived to be lies.

Of the two brands, the greatest impact will have been on Ribena. Glaxo allowed the debacle to be dragged out over three years.

In Subway’s case, within a week of the story breaking the franchisee went into negotiation with the sacked employee and her union and everyone involved agreed to shut up. The company didn’t fess up publicly, which would have helped, but having made a bad start someone must have convinced Subway that they had to settle with the employee and close the issue down.

Deprived of oxygen, the fire under the story went out, the news stories ceased and the bloggers went onto something else.

Among those something elses was the news that Solid Energy’s security contractors had planted a spy in the Save Happy Valley protest group – a decision which will have done nothing for the already perilous image of coal mining and the long-term ability of the company to trade.

Nor will it have been a pleasant time for chief executive Don Elder and his board who, after defending their position in the media, were given a bollocking by SOE minister Trevor Mallard.

Coal mining is one of those industries which a government which has green aspirations would prefer not to be reminded about. But coal is essential for power generation, brings in valuable overseas funds and is a major employer on the West Coast – Labour’s historical heartland.

Industrial intelligence – or spying to use the emotionally-charged term preferred by the media – also has a place in modern business practice. It’s not illegal, assuming it doesn’t involve phone tapping or logging into State secrets, but many find it distasteful.

But if there is a threat to the viability of a business – such as staff raiding the till, or protestors lying down in front of your bulldozers or setting free your battery hens – a firm may well be justified in setting up a covert video camera in the hope of catching them in the act, or better still, to prevent them doing it in the first place.

Most members of the public would accept this, but planting a spy is probably seen as going too far – possibly because it involves deceit and betrayal.

For the company however, the thought of the protesters being betrayed was probably the least of their concerns.

Hadn’t Solid Energy already spent $35 million on the relocation of the endangered snails the protesters were concerned about? Hadn’t they endured repeated trespassing by the protesters at the mine site and at their head office? Hadn’t the protestors chained themselves to the railway line to Lytellton, blocking their coal trains? Hadn’t they dug up the company’s front lawn and shut down their presentation at a conference in Auckland.

Surely the board and management had a duty to protect the company’s assets from the sometimes illegal and always disruptive actions of protesters? If this involves  putting a spy into the protest group, why not?

Well, the use the words of Aussie PR writer Gerry McCusker, quoted in the DomPost, planting a mole looks dodgy. Pointing to Solid Energy’s media statements at the time, McCusker says the company had clearly decided to play hard ball, but in his view while a company might want to talk tough, but it is probably better to talk conciliatory.

Another unnamed PR person quoted in the same article says corporates should strive to occupy the high moral ground and SOEs probably even more so. When dealing with extremists in any protest movement, leaders and managers need to have thick skins.

Fighting fire with fire could be damaging to the business in the long run and destroy trust. A business should lay out its case with honesty and clarity and be seen in the face of great provocation to be acting with integrity. That’s more likely to win hearts and minds.

To which I would add that SOEs and public companies are generally seen by the public as Goliaths – the protestors as idealistic Davids. Even as they decry the protestors for being unwashed weirdos there’s always a part of the public psyche that wants David to win.

Would it make any difference if Solid Energy was a corporate and not an SOE? Yes, but only a matter of degree. In my view, putting a spy into a protest group is very much a last resort, whether for an SOE or a public company.

The State Owned Enterprises Act, Section 4, requires SOEs to exhibit a degree of social responsibility by having regard “to the needs of the community in which it operates.” This is in addition to the SOEs’ mandate to be good employers and to be as profitable and efficient as comparable privately owned businesses.

There is no such requirement for public companies, but in my view most successful NZ public companies see social responsibility as part of their commitment to being good corporate citizens.

That said, I believe there is one deciding factor which makes Solid Energy’s decision to hire a spy the wrong one. As an SOE, Solid Energy is owned by the Crown and is ultimately accountable to the government – so what it does is by extension a reflection of the policies and values of the government of the day.

So the ultimate test for the company before planting its mole was to ask itself whether this would be acceptable to the public if the government did the same thing? … assuming of course that terrorism isn’t a factor.

The answer to that question in the view of media commentators, the Prime Minister, and Trevor Mallard was quite clearly, no, with the end result that Solid Energy was forced into a humiliating public U-turn

That said, I must emphasise that these issues are very difficult to manage.

In the heat of the battle, with managers wanting to go out and physically attack the protesters, it is very hard for a PR professional to stand their ground and be insistent that their cool, calm, rational counsel should be accepted.

Our final example for today is another SOE. This time, Mighty River Power and its trading subsidiary Mercury Energy.

I’ve already mentioned the requirement for SOEs to act in a socially responsible manner. In addition, under the Electricity Commission’s Guidelines electricity retailers are expected to have minimal disconnections when dealing with low income customers and to ensure that customers with health and/or disability issues have a process for identifying themselves, complemented by a protocol between retailers and social agencies.

When the Muliaga tragedy first came to public attention on a Tuesday, Mercury Energy was made aware that a customer had died following the disconnection of their power to what was described at the time as an oxygen machine. The sum involved was trivial and the company would have very quickly discovered that while the customer was in arrears, money was being drip-fed into the account.

The exact cause of death was unknown – and still is. The facts surrounding the conversation that took place between the disconnection agent and the victim were in dispute. And the role of other family members was also unclear.

The media went into a frenzy of what some have described as shroud-waving – using the tragic death of Mrs Muliaga to create a picture of a hapless New Zealander being victimized by one of those heartless utility companies which everyone loves to hate.

Helping the Muliagas to communicate their case was one Brenden Sheehan, an Australian trade unionist with real media skills who happened to be a member of the extended family.

So what did Mercury do?  

Chief executive Doug Heffernan was thrown into the media mosh pit. He said Mrs Muliaga’s death was unfortunate. He was sorry it had happened. And he quibbled over whether it was Mercury or the disconnection contractor who was responsible for what happened when the power was turned off.

In short, he was sympathetic. But he went to great pains not to admit to any possibility that Mercury and its procedures might have contributed in some way to Mrs Muliaga’s death.

Over the next two days, the public became increasingly polarized, with the consensus of media and political opinion firming against Mercury, while a sizeable minority of talkback callers and newspaper letter writers blamed the whole situation on the Muliagas.

Meanwhile Heffernan -- presumably acting on legal advice -- was steadfast in not admitting any possible fault by Mercury in its disconnection procedures or in the way the company had dealt with the family.

Nevertheless Heffernan recognized one of the maxims of crisis PR, that at times of human tragedy the boss has to front-up, and on day three he wrapped himself in tapa and went to the Muliaga family home with his chairperson Carole Durbin to offer the company’s condolences, as well as a koha of $10,000 for funeral expenses.

This visit, which involved a wait in the full view of the public and media outside the Muliaga house for a couple of hours, must have been excruciatingly embarrassing.

Finally, after four days, Mighty River’s chair Carole Durbin said what should have been said from the beginning.

That no-one should have to die because of an unpaid power bill. That the company apologized for anything that it had done or had failed to do which might have contributed to Mrs Muliaga’s death. That it would find out what happened and make sure it never happened again.

It was a fulsome apology. But such was the delay in delivering it, it did little to quell the media maelstrom, with the TV3 reporter you have just heard asking whether the apology was just PR spin.

Given the circumstances of the death and the fact the family had an adept spokesman putting its case, Mercury and Mighty River were always going to find this crisis hard to handle.

But they made things worse for themselves, by refusing to make a meaningful apology or accept any possible liability for four days. But worse was to come.

A week or so later it was reported that Mr Muliaga had contacted Mercury several weeks before his wife’s death to pay off the outstanding account in instalments. But Mercury refused to deal with him because the account was in his wife’s name. And at the time she was in hospital.

This sort of nonsense infuriates consumers. But most significantly it meant Mercury was clearly in breach of the Electricity Commission’s guidelines for dealing with low income customers and those suffering ill-health or disabilities. This also put them in breach of the requirement in the SOE Act to operate in socially responsible way.

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To wrap up, lets look at some of the common elements in the Ribena, Subway, Solid Energy and Mercury crises and see what we can learn from them.

There are several maxims of risk management which need to be observed if an organisation is to have survive a public crisis with its reputation and its brands intact.

1.    Vision/mission/values

Organisations need clearly defined reasons for being other than just making money. It is crucial that everyone knows what the business they work for is all about, what is expected of them as employees and the values they are meant to aspire to. Having them up front on the website means customers and clients will expect these standards of the organisation too.

2.    Strategic Plan/Risk Management

If the organisation’s vision and values are to mean anything they must be reflected in everything the organisation does and says.

This means that every time the organisation’s strategic, business and marketing plans, human relations policies and operating procedures are updated; they must be tested against the organisation’s vision, mission & values.

The Strategic Plan must also have input from someone with Strategic PR skills so that potential risks to the reputation of the organisation and its products are identified. Elements of this analysis need to be included as an over-riding consideration for line managers to take into account when preparing their plans and policies.

For example:

• Did Glaxo require their Ribena marketing manager to tick a box stating that all claims made in their proposed advertising campaigns could be substantiated, along with references to the relevant research?

• Do Subway’s guidelines for franchises include HR policies which require compliance with employment law, along with a requirement to take advice before disciplining or dismissing employees?

• Before planting a mole, did Solid Energy test their decision against their own mission and values and the values of the society in which they operate?

• In the case of Mercury Energy, are all divisional managers required to affirm that their plans and policies are consistent with the company’s vision and values, and comply with the SOE Act, Electricity Commission Guidelines and other legislation?

3.    Surviving a crisis
 
Regardless of your planning and quality procedures, which will hopefully reduce the risk of a crisis occurring, crises will happen. Managers will be sloppy and ignore head office policies. Staff will steal. Planes will crash and protestors will do everything they can to discredit your organisation and disrupt its operations.

Surviving these crises when they occur will always be challenging and stressful. But the following tips will help.
    
a.    Anticipate/plan/train

Identify what could go wrong and develop a contingency plan for each scenario. This includes both PR and operational elements. A factory fire clearly will involve different operational responses to a case of product contamination.

The comms plan for each scenario should include draft media statements. Initially a holding one which will be required while the facts of the event are established.

Don’t be put off by managers who say a crisis won’t happen here. When crises happen, Murphy’s law applies, they tend to go wrong in the worst possible way.

Spokespeople need to be identified and trained. Don’t assume the boss will be around when the factory blows up. Have at least two back-ups.

Keep the scenarios and contingency plans up-to-date and revise them at least annually – ideally when everyone is updating their business plans and drafting their budgets.  

 
b.    Crisis time
   
• Bring your crisis management team together.

• Select your spokesperson. If the event has involved loss of life or other human tragedy this person should not be a line manager or a hired spokesperson, it must be someone from the top of the tree. Mercury did this well.

• Your over-riding objective is to get out of crisis mode and back to normal operation as quickly as possible, so that damage to the reputation of your business and your brands will be minimised. Communicate as fully and candidly as possible so that there are no loose ends for the media, politicians or bloggers to pick over.

• This will mean fessing-up if you’ve messed up. You must tell the truth. If you are uncertain of the facts, don’t blame others – accept full responsibility for finding out what went wrong and undertake to put it right. Mercury was spectacular in its failure to do this.

• Take ownership of all actions done in your name. Customers don’t know or care whether the person at the call centre, or cutting off the power, or filling your sub sandwich is an employee, a contractor or a franchisee. They represent Mercury or Subway and their actions reflect on your brand.

• Being candid, saying sorry and taking responsibility for finding out what went wrong and fixing it, will put most corporate lawyers into a funk. The reality is that if your organisation has done something illegal and acted negligently the facts will be determined in court. Saying sorry, it shouldn’t have happened, doesn’t make you guilty if you’re not.

How much less brand damage would Mercury have suffered if they’d been candid, taken ownership and said sorry right from the beginning.

If the lawyer objects, put them in their place. Tell him or her that you’ll take their PR advice when they starting taking your legal advice.

• Never forget the human element. Your organisation is perceived to be big, powerful and impersonal, your victims are seen as small. Everything you can do to show you are sympathetic humans too, will help.

Heffernan’s fronting up at the Muliagas was a superb example of this, undermined unfortunately by an unwillingness to fess up.

However don’t be too human. Media questions will be intrusive, persistence and sometimes crass. Your critics on talkback and blogs will accuse you of outrageous things.

Do not respond at their level. Address the facts, correct errors and be warm and sympathetic to victims. But leave your frustrations and anger at home.

Remember, when the TV camera is in your face that you communicating with the public, not with your adversaries.

One could write a book about risk and crisis planning – and some have – but we don’t have time to address all the elements here. But these maxims should stand you I good stead.

Finally I will close with some comments about the implications of all this for the PR profession as a whole.

1.  The media may criticise us for being spin merchants. But when a company fails to communicate well in a crisis the media immediately accuse it of having appalling PR or for having created a PR disaster.

In other words, our greatest critics may fall short of praising good PR, but they regularly tell us about the consequences of doing it badly or not at all.

2. Nevertheless PR suffers a crisis of relevance and status in many organisations. This makes it extremely difficult for PR managers to fulfill their most important roles – those of strategic overview, risk identification and mitigation, and reputation management.  

When everything turns to custard and the PR manager is brought into the crisis management team – only to find the chief executive panicking and the lawyer preaching denial – how does someone who is three notches down the food chain insist that their recommendations hold sway. You certainly need to be very sure of your position and endowed with a plentiful supply of self confidence.

3. To counter this, I believe that PRINZ needs to have an active comms strategy of its own, reaching out to all those who influence organisational management – from the Institute of Directors, to the management and commerce faculties in universities through to recruitment agencies.

As part of this process, there needs to be a new clarity about job titles.
Public relations is an all encompassing term which when translated into the medical context covers everything from the hospital orderly through to the brain surgeon. Our profession needs job titles that make it clear to the job candidate and the employer what a position entails. Clearly if you want someone to edit the staff newsletter and to keep the website up-to-date, you wouldn’t hire a strategist and vice versa.

Well that’s it for me. PR can be one of the most exciting occupations in the world, with huge challenges and a great sense of achievement when our strategies go well. However we still have a long way to go when it comes to winning acceptance among chief executives and directors of what we can offer their organisations.

Changing that situation is the personal responsibility of each of us. However there is an important role here for our national organisation doing some of the hard graft for all of us.