Envirostuff is a major supplier of unbleached cotton clothing, hats, bags and household items. It supplies mainly to commercial mainstream clothing retailers and a small number of fund-raising retail outlets associated with various environmental action groups.
Despite a good turnover, Envirostuff has only a small permanent staff supplemented by a number of casual or contract workers and relying on off-site pieceworkers for garment manufacture.
The Envirostuff brand was developed to tap into community environmental concerns. Unbleached cotton was chosen as a base material for its rustic appeal, but it produces trend conscious, cleverly designed high-fashion, high-margin items.
Significant effort has been invested in developing the brand. This is now bringing substantial rewards in fashion sales, although the smaller environmental stores are expressing concerns about the fashion philosophy. They would prefer simpler, longer lasting items than items designed to date so quickly. Envirostuff declined a request for a special discount to support the small environmental customers earlier in the year as these outlets represent an ever decreasing proportion of sales.
Some of these same stores have previously pushed for Envirostuff to change suppliers and use only organically grown cotton, but this was impractical both in terms of cost and the quantity produced. Some changes were made, however, to packaging and promotional materials to ensure they promote environmental concern without misleading.
It is currently a particularly busy time. The managing director is absent and has left you in charge. Envirostuff has a major order due, but three of your normally reliable casual workers have not signed on today.
A phone call from the union requesting an immediate discussion of their concerns has just come in. Fortunately they agreed to a meeting next week. Envirostuff’s employment approach has never rested easily with the unions, but things haven’t escalated as you are generally available and there are bigger companies for the union to pursue.
One of your machines has broken down and maintenance is having trouble fixing it. To make matters worse the ink reservoir ruptured during repairs, spilling expensive inks over the factory floor, making an unbelievable mess and damaging some completed stock. Staff were immediately redeployed to contain and clean up the spill; but some stock was lost as was much time while the area was washed out thoroughly.
Other distractions also are conspiring to eat up your time. Recently, media coverage of the genetic modification of foodstuffs has been intense, generating a lot of community concern. Several media reports mentioned that there are only a small number of genetically modified crops being grown in Australia, but you were surprised to hear that one of them is cotton. You have now had seven phone calls asking whether the cotton you use is genetically modified or not. You don’t think there is a problem, but you have been trying to find definitive information about it with little satisfaction so far.
This morning when you arrived you found graffiti on the company gate: “Envirostuff stuffs the environment” painted in huge letters right next to your corporate logo.
Fortunately, the managing director being away, he won’t see it. He would not have been happy. As founder of the business he holds the company’s image and profile dear, absolutely forbidding anyone else to speak publicly for the company.
He rang just now to check in before boarding his flight as he will be not be contactable for a couple of hours. You decided to tell him about the broken machine and the ink spill, but not about the graffiti. As soon as maintenance has fixed the broken machine, you must get them to paint over the graffiti.
Just as you hang up, you glance out the window to see a crowd gathering in the street near your logo and the graffiti on the gate. There seem to be a lot of people with cameras and microphones, as well as about a dozen in bright orange hazardous waste-disposal suits. One of the orange suited people is holding something up and pointing at the Envirostuff logo.
Your phone rings. It’s the media asking for your reaction to the allegations that Envirostuff is discharging illegal levels of effluent. You explain that you are unable to comment and that the managing director is unavailable for comment until his plane lands in about two hours.
When the gathering leaves, you decide that it might be more important to get rid of the offending graffiti than fix the broken machine and ask maintenance to do it right away. You leave an urgent message for the managing director to ring you as soon as he gets off the plane, hoping that he turns on his mobile phone before he leaves the terminal, in case the media are waiting. You try to concentrate on working out what you are going to tell him, but the telephone keeps ringing with more requests for comment.
You turn on the television just in time to see a promo for the news featuring a cleverly angled photograph of Fred from maintenance painting out the still legible graffiti. The corporate logo is prominent behind a clever headline: “Envirostuff cover up the damage”.
The managing director is still enjoying his flight when the full story goes to air.
Allegations of toxic levels of poisonous waste, not just in effluent from the site but also in clothing and other products, are made on air by the orange-suited protesters. “Envirostuff deliberately dump toxic waste in the creek where small children play,” an angry protester cries holding up a jar of colored water, the color of which you guess was caused by ink from the broken machine seeping into the nearby creek.
Before you’ve had time to take that in, a woman appears on screen to describe suffering a severe reaction to wearing an Envirostuff tee shirt. “I wore their tee shirt bush walking once and suffered a dreadful reaction: tiredness, headache and the most severe itch you could ever imagine. That was three years ago and I have never recovered. They shouldn’t be allowed to do this to people.”
“They don’t listen to their customers. They refused to use organically grown cotton when we asked them to and now they are probably even using genetically modified cotton drenched in pesticides,” claims the manager of one of their small environmental fund-raising outlets. “We promise we won’t be stocking Envirostuff again.”
Back in the studio, the announcer comments that the company has a history of mistreating its workers, according to union officials. “We tried to talk to them again today, but they are always too busy,” the union official says.
The announcer looks meaningfully at the camera and concludes the story: “We contacted Envirostuff, but they refused to make any comment on the allegations, saying only that the managing director was unavailable.”
What would you tell the managing director when he calls in? What could have been done to handle today’s situation better? What early warning signs could Envirostuff have recognised in order to be better prepared? What key management systems, policies or decisions could have protected Envirostuff?
This case study was developed by Kerrie Mullins-Gunst, a Melbourne-based expert in Risk Negotiation. It is taken from a seminar she offers called Create a Crisis in an Evening. For a free copy of Kerrie’s checklist “Seven things you need to do before a crisis hits you” fax your contact details to (03) 9859 3924
Craig Stevens is a director of Stratcom Communique Australia, one of Australia’s largest independently owned communications consultancies. A former journalist and ministerial press secretary with over 24 years experience, Craig specialises in reputation management, issues and crisis management, government relations and corporate communications.
This looks like a case of a small business having grown to the stage where new systems and structures are necessary, but the founder is too close to daily operations to design and implement the required systems. It also seems that he has given senior personnel neither decision-making authority nor clear responsibilities. The result is that a number of simultaneous but distinct issues have merged into one big problem and no systems are in place either to assess their potential consequences or to deal with those consequences.
A band-aid response
Given the nature and urgency of the situation, the MD should be fully briefed on the current situation and the series of events leading up to the protest and news report. He should receive a full report of the situation facing Envirostuff. This will involve determining the validity of the allegations, their source and key stakeholders involved. The acting manager should offer recommended actions, as she has witnessed the development of the whole situation.
Although the outcome for Envirostuff and the damage caused to the company’s reputation was the result of the acting manager’s poor decisions, the real blame lies with the company for inadequate planning and management development.
A thoughtful response
The MD should have been immediately informed of the graffiti and priority given to briefing him as the crisis developed. The company’s credibility will be at risk if the MD arrives at the airport unaware of the situation and is confronted by media.
The acting manager needs the authority to call on key personnel to assist in the management of the situation. If she had involved key employees, she would have been in a better position to delegate and prioritise tasks.
Senior management should have formed a “crisis response” team. Depending on organisational structure, the team could have consisted of the public affairs or communications manager, environmental production experts, and the human resources and industrial relations managers. This team would be responsible for identifying potentially damaging issues before they became public and for researching the issues relating to their specific areas of expertise and reporting their findings to senior management.
Response to media inquiries must be immediate and, in the absence of the MD, a nominated spokesperson should have been authorised to issue a statement. The initial message would have highlighted Envirostuff’s commitment to the environment, assured stakeholders that the company was shocked by the allegation, and that it would be conducting a full inquiry into the incident. The “no comment” statement suggests that the company has something to hide.
A number of events have coincided upon which the media have built a “sensationalised” story.
An issues-management team would have identified the issues before they became a problem.
The early warning signs include:
- Concerns raised by the small environmental retailers. Although this group represents only a small proportion of the total, their support of Envirostuff’s product is important to the company’s positioning.
- Union dissatisfaction with Envirostuff’s HR/IR performance. The human-resources department was aware of this problem and yet no steps were taken to improve and strengthen relationships.
- Media stories on genetic modifications of foodstuffs and reports that cotton is one of a small number of genetically modified crops being grown in Australia. Obviously issues developing in the industry have the potential to affect company operations.
Learning the hard way
The crisis Envirostuff faces highlights several inefficiencies within the organisational structure.
A team approach is appropriate for responding to a crisis. Under the guidance of a senior manager, a team of support staff needs to be assembled to develop a response. A formal procedure to achieve this involves the development of an issues and crisis management plan.
This plan would highlight:
- Key personnel to be involved in the decision-making process and the development of the response strategy.
- Media liaison officers.
- A protocol for responding to media inquiries.
- A generic procedure including specific steps on how to deal with situations.
An important element of communications and issues management is media, government and issues monitoring to ensure early identification of developments and emerging issues.
Emphasis should be placed on monitoring emergent trends in the fashion industry and analysing how these will affect Envirostuff’s positioning.
As in every organisation, the employees are the eyes and ears of the company, and a process that encourages staff feedback and reporting directly to management should be developed. Ultimately, employees are a company’s greatest asset and must be recognised as important contributors. Union involvement may indicate employee dissatisfaction, which in turn must be affecting productivity.
Envirostuff should consider adopting a “management by walking around” philosophy: seeing company operations from an employee perspective as a means to better understanding staff requirements.
Jeff Bergman is a director and principal consultant of Bergman Voysey & Associates Pty Ltd, a specialist consulting firm that offers risk management, business continuity planning and information technology services. He is a chartered accountant, certified information systems auditor and certified quality analyst with post-graduate qualifications in business data processing. His knowledge, skills and over thirty years of professional experience ensure his ability to provide a practical approach to the application of theoretical concepts. Jeff has been a guest lecturer to information system security and risk-management post-graduate students at the University of New South Wales for more than 10 years and recently ran the post-graduate course for the first semester of 1999.
Envirostuff’s difficulty is an instance of Murphy’s Law: “If something can go wrong, it will, and at the worst possible moment.” It looks like an impossible situation, but it helps to remember that there are no problems, only challenges.
The immediate task at hand is damage control.
There are a number of actions to take before the managing director calls in:
- Compile a list of the day’s incidents and, together with other key staff, prioritise the issues as to the likelihood of further deterioration and the possible consequences of each. This list will be handy when relating things to the managing director.
- Have maintenance fix the broken machine and request someone to get a sample of the creek water in order to establish whether the jar of colored waste water shown on television was indeed caused by the ink from the broken machine. If such turns out to be the case, have an environmental specialist look into the matter.
- Contact and send a written request to the Department of Agriculture and the CSIRO to provide a definitive statement as to whether the cotton used at the site is genetically modified or not.
- When the managing director calls in, tell him there has been bad publicity about Envirostuff “stuffing the environment” (whether he already knows of not), tell him the facts and go through the assessment with him. He will then be in a better position to decide how to handle the crisis.
Matters could have been handled better and more promptly on this day. For example:
- Having maintenance repair the broken machine as a top priority.
- Confirming in writing to the union the meeting for next week.
- Leaving the graffiti.
Environmental issues are a hot item and always attract a lot of media attention. Therefore Envirostuff should have acted immediately upon the appearance of any sign of trouble. Such signs would include:
- Union requests for discussions of their concerns.
- Environmental concerns from customers and stores.
- Genetically modified crop issues.
- Media sensitivity.
To manage better in the future, the company should implement the risk management standard (AS/NZS 4360:1999). The risks they should assess include environmental, market, financial, legal, technological, human-resources, media sensitivity, security, and occupational health and safety.
Using a structured business analysis technique, these risks need to be assessed as to the likelihood of their occurrence and the likely consequences attendant thereon. Risk-control measures should then be taken. If risk-control measures are absent or ineffective, plans should be drawn up immediately to redress the situation.
The organisation should also identify and analyse scenarios similar to the case study. These analyses will enable management to be aware of and prepare for similar contingencies as well as identify weaknesses and suggest recommended actions.
A crisis management team should be established, and response plans and procedures developed. Incidents should be logged and prioritised (by assessing likelihood and consequences).
A media policy should be developed and a media liaison (other than the managing director) be appointed and trained.
Liaison persons should also be appointed to liaise with unions, stores and customers. Discussions should be documented.
The risk-management process will enable Envirostuff to understand its risks and vulnerabilities, and establish ways to mitigate these. Awareness is half the battle.