Chapter 7. Crisis Management

The Point: By creating a comprehensive crisis management plan that addresses not only how to prepare for crises, but how best to deal with them as they are unfolding and beyond, an organization will be better able to manage the fallout when disaster strikes. The manner in which the sports industry has handled crises resulting from player indiscretions and league-wide decision making, as well as other matters beyond its control, sheds light on how businesses of all sizes should or shouldn't approach crisis management.

By the time "it" hits the "fan" it's too late. "It," in this case, is a crisis, and "fan" refers to sports fans not the proverbial fan.

Before the era of televised sports and the 24-hour-a-day sports news programming that it spawned, sports crises and the fallout they caused received far less attention than they do today. For most sports fans (who remain the sports industry's ultimate customers), crises had been limited to long bathroom lines at the stadium or the inability to get a ticket for the big game.

Today's world of televised sports is known as much for its highlight reel and associated "play of the day" clips as it is for the overriding spirit of athletic competition. More than 40 years ago ABC's legendary broadcaster Jim McKay "spanned the globe to bring you the constant variety of sport" during Wide World of Sports. Sports fans were treated to "the thrill of victory and the agony of defeat."

Today, fans are still treated to both the thrill and the agony of sports so brilliantly captured by Wide World of Sports, albeit more quickly. The immediacy and prevalence of all media, including sports on cable TV and via the Internet, has helped increase the enjoyment for most fans.

It has also vividly changed how the sports world deals with crises. Crises tend to be of two types those that occur with no warning and those where ample warning exists. NASCAR and racing fans worldwide were immediately and extraordinarily affected by the crash that claimed the life of the sport's icon, Dale Earnhardt. MLB is seemingly in a perpetual crisis, a predictable one brought about by strained labor relations and ongoing economic woes. NASCAR's handling of its "breaking news" crisis differed from the way MLB handles its ongoing crises because, among other reasons, issues of timing, leadership, and organizational structure are different.

The critical distinction to be made between the two types of crises is that, like MLB's always simmering crises, its management not only knows about the pending crisis before it reaches the public, but is likely responsible for it due to its action or inaction. Conversely, and unbeknownst to NASCAR's management beforehand, millions of fans watched in horror on live television as Earnhardt's black #3 GM Goodwrench car struck the wall, killing him, on the final lap of the 2001 Daytona 500.

As vividly and unbelievably tragic as the Earnhardt crash was, it was not the first time large TV audiences were made aware of a disaster unfolding before their very eyes. This infamous distinction belongs to the 1972 Munich Olympics.

As the Vietnam War continued, unrest in the Middle East persisted, and race relations in America remained tense, the Olympics returned to Germany for the first time since Nazi Germany was home to the Games in 1936. Dubbed "The Olympics of Serenity," the Munich Games became a misnomer six days before they concluded when eight Arab terrorists stormed into the Olympic village donning track and field sweat suits, wearing ski masks, and carrying weapons in their athletic equipment bags. They broke into the apartment housing Israeli athletes, killing two of them and taking nine hostages in hopes of exchanging them for 200 jailed Palestinians and two prolific German terrorists.

At 6 a.m. on the morning of September 5, ABC announcer Jim McKay came on the air and said, "The Olympics of Serenity, have become the one thing the Germans didn't want them to be, the Olympics of terror." [1]

[1] Tomase, John, "Recallin the Olympics of Terror," The Eagle-Tribune, September 16, 2001.

Throughout the day, McKay and ABC broadcast the day's only event by providing updates on the situation. After almost a full day of negotiations, the terrorists took the athletes by helicopter to a Munich airbase, where they hoped to fly them to the Middle East. However, after German sharpshooters shot three of the terrorists, the remaining terrorists killed all nine athlete hostages.

Eighteen hours after McKay first went on the air, the weary and emotionally drained announcer delivered the following statement, "We've just gotten the final word," McKay said. "You know, when I was a kid, my father used to say, 'Our greatest hopes and our worst fears are seldom realized.' Our worst fears have been realized tonight. They have now said that there were 11 hostages. Two were killed in their rooms yesterday morning. Nine were killed at the airport tonight. They're all gone." [2]

[2] Ibid.

International Olympic Committee (IOC) President Avery Brundage had to take immediate action. The committee arranged for a makeshift memorial service at the Olympic stadium the next day, and Brundage announced that the games must continue. Thirty-four hours later, the Olympics continued, but not without some questioning whether the games should have been postponed indefinitely. Due to the events of September 5 and 6, the Olympics were forever changed. Among other changes, Olympic security dramatically increased and access to the athletes' village was and continues to be severely restricted.

Equally high-profile crises happen in the business world every day, devastating some organizations and inflicting no long-term damage on others.

Johnson & Johnson, for example, barely lost a step when an employee slipped cyanide into one of its strongest brands, Tylenol, killing seven people in 1982. The company quickly found the source of the tampering, recalled 31 million bottles of the painkiller at the cost of $100 million, and developed more tamper-resistant tablets and bottles. Along the way, Johnson & Johnson aired TV commercials explaining what happened, enabling the company to regain its market share within a year.

Jack in the Box, the fifth-largest hamburger chain in America, also handled a crisis well in 1993 when bacteria found in its burgers killed three children. At first, some franchise owners didn't realize the seriousness of the impact, but most of them understood it when sales dropped dramatically.

Jack in the Box didn't close all of its restaurants, a response that would have been similar to a sports league postponing its games. Instead, it sought to become the leader among fast food companies in food preparation. Jack in the Box convinced microbiologist David Theno to join the company and become vice president of quality assurance and product safety. Theno immediately began implementing a program. Within weeks, Jack in the Box restaurants had installed an entirely new cooking system. Hamburgers that were once tossed on the grill by human hands were now placed on the grill with the help of sanitized tongs.

Jack in the Box was required to compensate hundreds of people directly and indirectly affected by the bacteria as part of the company's agreeing to settle a class action lawsuit by paying $44.5 million. However, thanks to real changes in the organization, Jack in the Box whose stock had dipped to around $3 a share in the wake of the incident has consistently sold for more than $20 a share in recent years and was able to celebrate its 50th anniversary in 2001.

To minimize the potentially devastating effects on a company, its employees, and shareholders, organizations must be proactive in crisis management. Although certain readily identifiable circumstances lead to self-inflicted corporate crises, such as poor security or corrupt accounting practices, no one can predict with great confidence when a crisis will occur.

Senior management is paid to manage (potential) crises on a daily basis. Any event that materially influences a business's revenue and expenses, stock price, or competitive position will not only impact the financial bottom line, but will also measurably affect the organization's brand name.



On the Ball. What You Can Learn About Business from America's Sports Leaders
On the Ball: What You Can Learn About Business From Americas Sports Leaders
ISBN: 013100963X
EAN: 2147483647
Year: 2003
Pages: 93

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