Ch. 16: Business Ethics and Crisis Management

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

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.”

The Societal Marketing Concept

Organizational Leadership:o Specify in the company’s mission

that ethical behavior and societal good are part of the mission;

o Create reward structures that allow and reinforce ethical behavior

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

Ethical Clashes

Individuals ultimately make choices; sometimes these choices conflict with their own values or self-perception

Bases & Sources of Ethics

Natural law Positive law Self-Interest

Considered Upon the Whole

Situational Ethics

Potential Ethical Problem Areas (1)

Product announcements

Product capability claims

Obtaining competitive information

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

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

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

Crisis Preparation: A Crisis Management Model

Layers of Pauchant and Mitroff’s Crisis Management Model

1. Character of the people in the organization – willingness to take responsibility and take corrective action

2. Culture existing in the organization – supports appropriate preparation and response actions

3. Organizational structure – crisis management structure in which all stakeholders are represented

4. 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).

Exhibit 16-5

Crisis Preparation

1. Establishing effective structures for planning and handling crises

2. Assessing the elements of the company’s operations that produce risks and reduce these risks

3. Plan procedures to follow as events occur

4. Inoculate negative public attention that will occur during a crisis

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

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

Media Relations During a Crisis

Give the media access

Tell the truth Be proactive Stay calm

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

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

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)

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

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.

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