On October 15, 1999, the Food Safety Authority issued a regulation that raised the temperature at which hamburgers were to be cooked by five degrees Celsius.
On the evening of Thursday May 11, 2000, David and Jean Benning took their only child Claire and three of her school friends to a hamburger restaurant for her seventh birthday.
Slick Joe’s is the fourth-largest hamburger franchise in Australia with 250 restaurants in four states. It is a subsidiary of a larger company that has just reported record profits, up 180% over the same period in the previous financial year.
Claire had a Cheeseburger Supreme at her party.
By 9pm, all the girls had been dropped back to their respective parents and David and Jean were pulling into their driveway.
As David and Jean were opening the front door, Claire started complaining of stomach cramps. Jean took her into the living room and sat with her for an hour before putting her to bed. The stomach cramps continued and at about 2am Claire had her first bout of diarrhoea.
At about 3am, David decided to take Claire to the hospital, where she was admitted immediately.
On Saturday May 13, another two children were admitted to the same hospital. Tests revealed that their illnesses were caused by E.coli 0157:H7, a virulent form of the normally harmless E.coli bacteria, which exists in about 3% of meat and poultry.
E.coli 0157:H7 is an intestinally related organism that causes haemorrhaging and seems to have evolved as a result of an E.coli cell having been infected with a bacterial virus. This virus produces a toxin called Shiga-like toxin (SLT). Consequently, this strain of E.coli produces this toxin.
The toxin causes severe damage to the cells that line the wall of the intestine. The damage is so severe that a victim not only loses water and salts, but blood vessels also are damaged, and haemorrhaging occurs.
In some cases, haemolytic uraemic syndrome (HUS) is involved, a condition characterised by kidney failure and loss of red blood cells. The condition is particularly dangerous to small children and may be lethal.
Over the course of Saturday May 13, 29 adults and 286 children report symptoms of stomach cramps and diarrhoea of varying intensity to their GPs. As a result of the interviews of victims it is established that 85% have recently eaten at Slick Joe’s restaurants in various suburbs in the city.
On Monday May 15, the Department of Health notifies Slick Joe’s corporate office of the possible link between the food-poisoning outbreak and their outlets.
On May 18, six-year-old Maria D Amico is admitted to the hospital suffering similar symptoms to Claire Benning. Maria had eaten a cheeseburger in a Slick Joe’s restaurant in a western suburb.
The company takes no action until the morning of May 19, when the executive group of Slick Joe’s parent company decides to send a team to the affected city to investigate.
Later on that day, the Department of Health issues a press statement saying that the outbreak of food poisoning is related to undercooked beef patties in Slick Joe’s hamburgers. Media outlets contact the parent company, but the official spokesperson states that no comment will be made until a full investigation of the allegations has been completed.
The investigative team reports back to the parent company’s CEO, Jeff Keaton, by 11pm, May 19, 2000. They recommend that all meat patties currently in stock be withdrawn and destroyed and that the cooking time for the patties be increased by 20 seconds. The recommendation is approved and all stores in the affected city are closed.
On the afternoon of May 20, with a new stock of beef patties sourced from another supplier and new cooking procedures, all stores are re-opened.
At 11am on Sunday May 21, Claire Benning dies of kidney and heart failure.
On Monday May 22, Jeff Keaton flies to the affected city. A press conference is held at the airport in one of the airline lounges at 9.30am. This is the first media comment from the company.
Keaton expresses sympathy for the victims of the outbreak, but defends the company methods and blames the State health authorities for not advising the company of the change in regulations.
Keaton also blames their meat supplier in the state for supplying them with suspect product. He takes no responsibility for the outbreak.
The State Minister of Health, the Honourable Stephen Berle, states in an interview at 3.40pm on the same day that the Department of Health had notified Slick Joe’s of the changes in regulations by a variety of methods on at least 10 occasions. Mr Berle says that he will be referring the matter to the Attorney-General to ascertain what action can be taken against the company’s directors and officers.
The next day, the chairman of Slick Joe’s parent company, Mr Peter Ryan, holds a press conference and acknowledges that the Department of Health had notified Slick Joe’s of the regulatory changes and states that he would be launching an investigation into the breakdown in procedures that had contributed to the tragedy.
Mr Ryan also advises that Mr Keaton is on leave until further notice and that the company will be initiating legal action against the beef supplier. Under intense questioning, Mr Ryan admits that the beef suppliers were not contractually obliged to test the meat.
On May 27, 2000, Maria D Amico dies of HUS.
In the two weeks following the announcement of the deaths of the two children, sales plummet by 40%. Shares in the parent company fall from $17.30 to $8.76 and the ASX suspends trading.
In the second half of the financial year, the company reports a $30.3-million loss.
In July 2000, the State Attorney-General launches proceedings against the directors of the company, following a comprehensive investigation.
What caused the management breakdown in Slick Joe’s parent company and what can be done to avert a similar breakdown in the future? How did the company handle the crisis and what should it have done to minimise damage to the company’s reputation?
Proposed solution #1
Kevin Corcoran is managing director of Corporate Risk Solutions Pty Ltd, a specialist consultancy firm offering crisis and risk-management services, public-affairs training and management systems. A former head of a government-owned corporation, Mr Corcoran has had 15 years experience at the senior management and executive levels in high-risk government operations. Mr Corcoran is a Fellow of the Australian Institute of Management.
Two factors led to the crisis: an inadequate system of ensuring regulatory compliance and the lack of a comprehensive risk-management program.
There were no systems to ensure that procedures were implemented to comply with new regulations prescribing the temperature to cook hamburger patties. Slick Joe’s parent company (and by default Slick Joe’s itself) was not aware that the State Food Safety Authority had issued new regulations.
It is essential to have systems in place to enable identification of changed requirements and new legislation. Companies should also ensure that all employees or franchisees are aware of the new requirements. Slick Joe’s failed on both counts.
As part of their risk-management process, the company should develop a compliance program, endorsed by the board and executive management. The board should appoint an executive with authority to ensure that the systems are planned, implemented and managed. Compliance must be included in business unit managers job descriptions. A procedure is needed for reporting deficiencies in compliance.
The company needs to review its liaison with the regulatory authorities, and put in place a complaints-management system, complemented by a record-keeping system able to provide information on the company’s compliance activities.
For those risks that have no controls, there should be a crisis-management plan.
All compliance failures need to be investigated and rectified. One possibility is to use a board committee that includes a non-executive director to ensure that the board is kept briefed on compliance performance. Compliance staff and area managers would be responsible for any rectifications.
The compliance program needs to be underpinned by training and education and supported by the board and management for full and honest reporting of deficiencies. This requires a culture of rewarding the messenger.
There also needs to be an ongoing review program. In Australia, AS 3806:1998, has been developed to guard against the compliance problems Slick Joe’s experienced. Information on the standard can be obtained from your quality assurance certification organisation.
If Slick Joe’s had either failed to assess the risks associated with ground beef or chosen to tolerate the risk of not testing the meat, the company’s risk management was inadequate.
The Australian standard for risk management (AS/NZS 4360:1999) provides an excellent framework for companies to assess their day-to-day operations.
Slick Joe’s could also have implemented the preventative food-safety system HACCP (Hazard Analysis Critical Control Points).
Slick Joe’s and its parent faced a crisis of skewed management values complicated by inaction and incompetence. The company didn’t have systems to ensure compliance with regulations.
A crisis-management plan would have alerted senior management that something was wrong. The management response would have followed tested pre-determined steps to allow them to gain control of the situation.
Put simply, a crisis-management plan:
- Shields an organisation by ensuring its response to a crisis is driven from the top.
- Ensures a multi-disciplinary strategic approach.
- Enables the company to recover to a stronger position than before the event.
The first step to effective crisis planning is to ensure that the plan is sponsored at the most senior levels of an organisation. If it is a company-threatening crisis, the CEO and the board must be involved in framing strategies. Otherwise, any plan devised will be ignored.
The second step is to identify crisis-reduction strategies. High-probability, extreme-consequence risks are identified, the consequences examined and controls implemented. The deciding factors on the implementation of controls are generally the cost of implementation and the organisation’s appetite for risk.
Crisis-management planning is for those risks for which there are no controls or the controls cost too much.
The third step is the preparation of the crisis management plan: what should be done, when and by whom. The crisis-management team and the alert-triggers or warning systems that need to be put in place must be identified.
The fourth step regards communication. This will help prevent the head in the sand approach, taken when a company hopes the crisis will somehow disappear. This empty hope merely damages a reputation further.
The fifth step is to develop plans for organisation and reputation recovery.
The final step is to develop the systems to support the crisis-management plan, to develop and deliver the training necessary to key participants and to test the plans in scenario-based exercises.
Had Slick Joe’s and its parent had risk and crisis-management plans in place, they could have minimised damage cause by the crisis and recovered market share. Their executives and directors would also have been in a position to demonstrate to a court that all that could have been done was done.
Proposed solution #2
Robina Xavier, lectures in crisis communication for Queensland University of Technology’s School of Communication. She has worked as a consultant in crisis communication and issues management for 12 years and is a senior adviser to The Phillips Group.
Although no off-the-shelf solution exists for management problems, three basic propositions guide any crisis response: take control, take responsibility, and take corrective action. In any crisis situation, the response must be related to the level of damage caused. When death is involved, the strongest response is needed.
If you don’t take control of a crisis situation early, or be seen to take control, you let others dictate the agenda. Slick Joe’s management showed no sense of control, waiting almost a week before setting up an internal investigation and even longer before making a public comment.
If your business is food provision and there is even a hint that something is wrong with the food, no other issue is so important that it could distract management. Inaction left Slick Joe’s on the back foot when it came to the public unveiling of the issue.
The delay, once discovered, could also destroy the public’s trust in Slick Joe’s commitment to the safety of its customers. Whether you were affected or not, you would resent the fact that you and your family were put at risk. When the health of your customers is at risk, nothing else matters. When those customers are children, the stakes could not be higher.
A crisis team should include communication advisers and legal counsel as the two need to work together to find a suitable position for the organisation to take that demonstrates public responsibility while reducing legal liability.
In assessing whether a company should take responsibility for a crisis, we need to focus on the perceptions of its stakeholders. People make judgments depending on whether the cause of the crisis was internal or external to the company, and whether the company’s management had some way of influencing the cause. If the cause is perceived as internal and that management could have controlled it (i.e. cooked the meat longer or at a higher temperature), stakeholders will hold the company responsible. Therefore, its response must recognise this position and try to build positives for the organisation.
Instead of taking responsibility, Keaton pursued a distancing strategy, trying desperately to blame everyone except his organisation. This strategy should only be attempted if the company is only minimally involved in the crisis, which was clearly not the case here.
By blaming the meat supplier, Keaton failed to recognise the relationship that develops between a customer and the organisation from which the purchase is made. Slick Joe’s customers trusted that when they ordered a hamburger, it would be prepared in a safe manner. Their contract of trust is with Slick Joe’s, not Slick Joe’s suppliers.
Taking corrective action
The third point relates to dealing with what has happened and ensuring it doesn’t recur. Companies make mistakes. Ideally, we have systems that stop them happening in the first place. But once they are made, all we can do is show we understand how it happened and what we are doing to prevent it happening again. By doing this, the company attempts to win forgiveness of the public. It does this remediation (helping victims), repentance (asking forgiveness) and rectification (taking preventative action). It also brings closure to victims (who know what happened) and non-victims (who want to know that it won’t happen again).
By blaming others, Slick Joe’s lost the opportunity to show what they were doing. The parent company should have begun an investigation as soon as the Health Department contacted it. It would have had the results of its internal investigation and perhaps have changed the poor practices even before the issue became public.
To rebuild confidence it needs to advise customers of the steps it has taken: destroying stock, changing cooking practices, retraining staff on health standards.
It needs to think about the effect on its franchisees and their employees. All operators will suffer from a loss of business and consumer confidence and need to be supported. Employees may need to be counselled and they will also have to answer customer inquiries about the crisis and product safety. Links with the Health Department must be rebuilt, seeking guidance in reform.
Lastly, the company needs to assist customers and their families who suffered. The company will be judged by the public on its response to this group of people more than on any other factor.
One strategy is to ask the people affected what assistance they would like rather than trying to impose a solution. In a similar American case, the company involved set up a fund for the victims to cover hospital and other costs. It also started a foundation in memory of the customers who died to research the medical condition that led to their deaths.
When the crisis hit, Slick Joe’s should have immediately launched an investigation, changed its practices, made the strongest statement of sympathy possible at the first opportunity, taken responsibility for its role, advised consumers and the Health Department of the actions it had taken, and offered assistance to those who had suffered.
Before the crisis hit, Slick Joe’s should have thought about the risks it was exposed to and developed contingency plans that integrated operational and communicative responses. It should have researched past crisis cases in its industry sectors. It is better to learn from someone else’s mistake than your own.