Ch. 16: Business Ethics and Crisis Management

1. Ch. 16: Business Ethics and Crisis Management

2. Value Image • Formed in individual or prospective customer’s minds, based on all of their impressions of the organization • Derives from how the organization interacts with its customers, suppliers, employees, community, – all points of contact • Impression is not necessarily “first-hand” but can be fact, rumor, urban legend, etc. • Treating stakeholders ethically translates to a positive value image

3. The Societal Marketing Concept • As well as being market sensitive, company must deliver satisfaction to customers while being considerate of societal well being • Goal: Improve life quality. Includes company’s social responsibility, citizenship, role in the “greater scheme of things.”

4. The Societal Marketing Concept • Organizational Leadership: • Specify in the company’s mission that ethical behavior and societal good are part of the mission; • Create reward structures that allow and reinforce ethical behavior

5. Ethical Clashes • Clash of ethical standards among stakeholders • Clash of ethical standards at different levels of the organization • Clash of individual ethical standards and the organization’s performance standards

6. Ethical Clashes • Individuals ultimately make choices; sometimes these choices conflict with their own values or self-perception

7. Bases & Sources of Ethics • Natural law • Positive law • Self-Interest Considered Upon the Whole • Situational Ethics

8. Potential Ethical Problem Areas (1) • Product announcements • Product capability claims • Obtaining competitive information

9. Potential Ethical Problem Areas: (2) Ethically problematic activities that usually grow out of a creeping commitment to do what is seen as necessary to compete or to achieve value for stockholders • Paying bribes • Charging an exorbitant price for your product when in short supply • Taking unearned marketing allowances • Posing as a prospective customer to obtain competitive information • Creating an unfair advantage, for one distributor over another

10. Crisis Management • Ethical behavior is intertwined with the occurrence and the management of crises • Problems arise from less than stellar ethical choices or ethical conflicts • A robust value image that involves social capital built up through a strong ethical theme in the company’s culture • Inoculate against crises • Resolve issues regardless of cause

11. Crisis Preparation • Some crises can be avoided through careful preparation • Some incidents and accidents will still occur, but can be contained with foresight and good coping systems • Some incidents and accidents inevitably become crises, no matter how much preparation is done

12. Crisis Preparation: ACrisis Management Model Exhibit 16-5 Layers of Pauchant and Mitroff’s Crisis Management Model • Character of the people in the organization – willingness to take responsibility and take corrective action • Culture existing in the organization – supports appropriate preparation and response actions • Organizational structure – crisis management structure in which all stakeholders are represented • Plans and mechanisms for dealing with crises – crisis management team has fully prepared plans, disseminated them, and trained people in key roles Source: Thierry C. Pauchant and Ian I. Mitroff, Transforming the Crisis-Prone Organization: Preventing Individual, Organizational, and Environmental Tragedies, (San Francisco: Jossey-Bass, 1992).

13. Crisis Preparation • Establishing effective structures for planning and handling crises • Assessing the elements of the company’s operations that produce risks and reduce these risks • Plan procedures to follow as events occur • Inoculate negative public attention that will occur during a crisis

14. Plan for Stages of a Crisis (1) • Early buildup period • The organization goes through a preparation period if early signals perceived • If signals have not been picked up, the crisis will be triggered by some event • If the organization has been able to prepare for, but not prevent a crisis, a trigger will occur that creates an incident or accident

15. Plan for Stages of a Crisis (2) • A period of intense activity and public scrutiny will ensue • Following the crisis • The organization may take follow-up actions and may go through a period of serious learning

16. Media Relations During a Crisis • Give the media access • Tell the truth • Be proactive • Stay calm

17. Media Relations During a Crisis:Pre-Crisis Stage • Make sense out of incoming data • Avoid wild speculation (by yourself and others), so reactive stance toward media at this time

18. Media Relations During a Crisis:Triggering Event/ Intense Crisis Stage • Respond quickly, backed by effective action • Both communication and action will be anticipated prep is well done • Limit points of contact for consistent, focused message • Value network partners may assist • Company may have to accept blame, make apologies, and “fix” things

19. Media Relations During a Crisis:Aftermath Stage • Begin repair of the company’s image (time consuming process) • Thoroughly debrief, learn from experience • Value Image can be sustained/ repaired if organization maintains ethical approach • Reinforce management, employees they have done the right thing(s)

20. Minor Crisis • Same approach for handling minor or everyday issues that can erode public image or confidence • Preparation and avoidance are preferred over having to handle each problem as a one-off • Reoccurring incidents indicate a structural solution rather than a band-aid

21. Crisis in a Small or Startup Company • Special case – they have only begun to anticipate what problems can occur, what risks exist. • Little or no experience with media interaction. • Utilize Public Relations firm with values consistent with the company’s • Set in writing the young company’s philosophy for handling public adversity.

22. Preparing for Crisis Vs.Marketing Entrepreneurially • Potential Conflict • Risk taking in entrepreneurial marketing is taking manageable financial risks • Minimizing risks in crisis planning is more about minimizing non-financial risks