Session No. 22

# Course Title: Business and Industry Crisis Management, Disaster Recovery, and Organizational Continuity

# Session 22: Crisis Communication, Technological and Environmental Crises

## Time: 2 hr

**Objectives:**

1.  Discuss various image maintenance and restoration strategies that
    may be employed by an organization facing or in the midst of a
    crisis.

2.  In light of major industrial crises of the 1970s and 1980s, explain
    the impact of environmental and public safety concerns on public
    perception and that of the resulting policies, rule making, and
    legislation on business operations.

3.  Apply the material covered in the sessions on crisis communication
    along with the entire crisis management and organizational
    continuity model to the case study "LNG Release and Explosion."

**Scope:**

This session starts with a discussion of the Schwan's ice cream crisis
(1994) case study which describes Schwan's image maintenance and
restoration strategy and concludes the crisis communication-focused
segment of the course. The remainder of this session and the following
session will then shift emphasis to industrial and technological
disasters. The assigned readings from Barton and Lerbinger supplement
the class presentation and should be discussed. A case study covering a
liquid natural gas (LNG) release and explosion is provided, which will
be the subject of student written responses and class discussion in the
next session. Sufficient time should be provided for the students to
read the case study and ask any questions.

**Readings:**

*Student Reading:*

Barton, Laurence. 1993*. Crisis in Organizations: Managing and
Communicating in the Heat of Chaos.* Cincinnati, OH: South-Western
Publishing Co. Pages 38, 39, 49, 50, 75, 76, 159, and 160 and Chapter 5,
pages 121--149.

Lerbinger, Otto. 1997. *The Crisis Manager -- Facing Risk and
Responsibility.* Mahwah, NJ: Lawrence Erlbaum Associates. Chapter 5,
pages 90--109 and pages 286--289.

*Instructor Reading:*

Barton, Laurence. 1993*. Crisis in Organizations: Managing and
Communicating in the Heat of Chaos.* Cincinnati, OH: South-Western
Publishing Co. Pages 38, 39, 49, 50, 75, 76, 159, and 160 and Chapter 5,
pages 121--149.

Fink, Steven. 1986. *Crisis Management: Planning for the Inevitable.*
New York: Amacom. pages 168--189.

Lerbinger, Otto. 1997. *The Crisis Manager -- Facing Risk and
Responsibility.* Mahwah, NJ: Lawrence Erlbaum Associates. Chapter 5,
pages 90--109 and pages 286--289.

Mitroff, Ian I., and Pauchant, Thierry C. 1990. *We're so Big and
Powerful Nothing Bad Can Happen to Us.* New York: Carol Publishing.
Pages 103 and 104.

Mitroff, Ian I., Pearson, Christine M., Harrington, L. Katharine 1996.
*The Essential Guide to Managing Corporate Crises.* New York: Oxford
University Press. Pages 68--71.

Sellnow, Timothy L., Ulmer, Robert R., and Snider, Michelle. 1998. "The
Compatibility of Corrective Action in Organizational Crisis
Communication." *Communication Quarterly* \[on-line\]. Vol. 46, No. 1.
Start page 60. University Park, MD. Electronic form 8 pages.

**General Requirements:**

Complete the modified experiential learning cycle for objective 22.1 at
the conclusion of that objective, and for objectives 22.2 and 22.3 at
the conclusion of the class discussion in the next session.

Objective 22.1 Discuss various image maintenance and restoration
strategies that may be employed by an organization facing or in the
midst of a crisis.

Requirements:

Present the material by means of lecture and discussion as necessary.

The following questions are provided to stimulate discussion:

How do you feel about the position taken by tobacco companies concerning
the addiction to nicotine and the dangers of smoking? Is their strategy
of denial working?

> What are the lessons learned from this case study? Are they applicable
> to all organizations in all crisis situations? The strategy of
> shifting blame to others is obviously considered and used by
> organizations. What are the potential benefits and drawbacks of
> employing this strategy? If you were the president of Schwan's and the
> initial crisis had passed (it is now late March 1995 and sales have
> risen to pre-crisis levels), what would you do?

Complete the modified experiential learning cycle at the conclusion of
this objective.

**Remarks:**

I.  The last two sessions have stressed the necessity for **openness and
    honesty** as essential factors in crisis communication.

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A.  Past research has shown that **public acceptance of responsibility**
    and the demonstrated willingness to undertake **corrective actions**
    in crisis situations can expedite an organization's effort to
    rebuild its legitimacy (Sellnow, Ulmer, and Snider p. 1, on-line).

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1.  One example is the 1986 **Chrysler odometer crisis** (Barton pages
    75 and 76), when CEO Lee Iacocca stepped forward and admitted that
    the practice of disconnecting odometers had occurred and apologized
    to the public.

2.  Another example is Johnson and Johnson's acceptance of
    responsibility in the **Tylenol crisis.** While stopping short of
    admitting guilt, Johnson and Johnson voluntarily spent millions on
    public notification and product recall.

> B. **Legal considerations** are, however, a real concern for corporate
> decision-makers and have caused organizational leaders to have
> "consistently denied wrongdoing, even in the face of overwhelming
> evidence to the contrary" (Sellnow, Ulmer, and Snider p. 1). One might
> conjecture that the decision to deny wrongdoing is at least partially
> based on the advice of corporate lawyers who are looking beyond the
> immediate crisis to longer-term legal ramifications.

1.  The **Ford Pinto** crisis (session 5) and the A.H. Robins **Dalkon
    Shield** crisis (Barton pages 49 and 50) provide examples in which
    wrongdoing was denied in the face of "overwhelming evidence to the
    contrary," and these denials backfired and severely damaged Ford's
    and A.H. Robins's reputations.

2.  **Ask the students,** How do you feel about the position taken by
    tobacco companies concerning the addiction to nicotine and the
    dangers of smoking? Is their strategy of denial working?

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II. Sellnow, Ulmer, and Snider's 1998 article "The Compatibility of
    Corrective Action in Organizational Crisis Management," published in
    *Communication Quarterly,* provides a case study of the **Schwan's
    Ice Cream salmonella crisis of 1994** and the effectiveness of
    Schwan's corrective action strategy as its primary form of crisis
    communication:

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A.  **Background.**

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1.  Schwan's Sales enterprises, Inc., was founded in 1952, and, by 1994,
    yearly revenues were between **\$1.2 and \$1.8 billion.**

2.  Part of Schwan's popularity is attributed to its **door-to-door
    delivery** of ice cream and other frozen products.

3.  An October 1994 outbreak (the largest of its kind in the history of
    the U.S.) of **salmonella poisoning** affected 224,000 in 35 states
    and was traced to bacteria-tainted Schwan's ice cream.

4.  On October 7, 1994, a Minnesota Department of Health epidemiologist
    indicated that there was a "very, very big **statistical
    relationship** between Schwan's ice cream and a widespread
    salmonella outbreak" (Sellnow, Ulmer, and Snider p.3). Testing began
    on October 8 with results expected on October 10. The test results
    confirmed the source of the widespread poisoning as Schwan's ice
    cream from its Marshall, Minnesota, plant.

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B.  Schwan's crisis **response.**

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1.  Schwan's had a **formal crisis management** plan but found it to be
    of limited use during the crisis. The magnitude and rapid spread of
    the crisis exceeded the scope of the existing plan.

2.  What Schwan's did have was a president, Alfred Schwan, who insisted
    that all crisis decisions be based upon the **central question,**
    "If you were a Schwan customer, what would you expect the company to
    do?" (p. 3).

3.  Upon notification of the statistical relationship on October 7,
    Schwan's immediately began a **voluntary recall** of all its
    products manufactured at the Marshall plant and started an
    investigation of the plant -- necessary first corrective steps.

4.  Rather than waiting for absolute confirmation of the cause (due on
    October 10), Schwan's held a **news conference** on October 8 in
    which Alfred Schwan stated, "The well-being of our customers is our
    very first priority at Schwan's, which is why we are willingly
    withdrawing our ice cream products from distribution and cooperating
    fully with government agencies" (p. 3). Schwan's also announced a
    refund policy on October 8.

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a.  The article refers to Schwan's initial actions as having a
    **"bolstering"** (propping up and supporting) effect.

b.  Also, Schwan's earned legitimacy by taking actions consistent with
    the values of the community it served. The immediate recall and
    public statement of concern emphasized that Schwan's counted the
    customers' well-being as **a top priority.**

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5.  Schwan's route drivers began the process of collecting recalled
    products and personally explaining refund procedures. Drivers
    expressed their regret and apologized to Schwan's customers, a
    corrective action referred to as **"mortification"** in the article.

6.  A **toll-free hotline** was established on October 9 with real
    people responding rather than pre-recorded messages. Over the
    duration of the crisis, hundreds of thousands of calls received a
    personal response, further allowing Schwan's to express its regret.

7.  A letter from Schwan's to customers offered to pay **diagnostic
    medical exams** for anyone who consumed Schwan's products and was
    experiencing the symptoms of salmonella poisoning. In total, between
    30,000 and 35,000 customers submitted claims for this diagnostic
    service.

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a.  The offer to pay for a medical examination did not absolve Schwan's
    from **liability** but did provide customers the ability to
    immediately evaluate their situation without personal expense,
    rather than having to pay the bills and then await a lengthy
    investigation and litigation.

b.  From a purely **financial perspective,** Schwan's realized that they
    would eventually have to pay medical claims in the future, but more
    importantly, the offer provided a means of image restoration with
    greater impact than compensation paid out as the result of a legal
    mandate.

c.  This action did not entirely stop victims from seeking compensation
    for their illness and duress. Schwan's established a **settlement
    scale** for those wishing to settle directly and mailed claim
    information to over 100,000 customers. Litigation from class-action
    suits still continued at the time the article was written.

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8.  Beyond these initial actions that helped contain the magnitude of
    the crisis, Schwan's also enacted and publicized **corrective
    actions** designed to eliminate future crises, thereby restoring and
    possibly building its social legitimacy.

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a.  On October 21, the **source of the poisoning** was determined --
    raw, unpasteurized eggs transported by an independent trucking
    company that was contracted by Schwan's to transport pasteurized
    ingredients to the Marshall plant. The salmonella bacteria were not
    killed when the truck's tanks were cleaned between shipments.

b.  This determination upheld the fact that Schwan's had done nothing
    illegal leading to the crisis -- accordingly, a strategy that could
    then have been undertaken was to publicly **shift all blame** to the
    trucking company and insist that they take corrective actions and be
    held liable.

c.  Instead, Schwan's decided to **invest in new facilities** to
    repasteurize all products before final packaging, and, until the new
    facilities were available, to institute a "test and hold" policy
    whereby all products would be tested for salmonella and held until
    the test proved negative. Additionally, once the repasteurizing
    facilities were opened, Schwan's instituted a policy of
    repasteurizing all incoming ingredients as an additional safeguard.

d.  In the **longer term,** Schwan's announced its decision to procure
    its own fleet of tanker trucks that would transport only Schwan's
    products.

e.  These decisions further emphasized the value placed on **customer
    safety** by Schwan's, and the fact that it did not launch a public
    relations campaign that attempted to shift the blame was not lost on
    their customers. The error of the independent trucking firm was
    reported by the media and realized by the public, thus shifting some
    of the blame in their eyes without Schwan's pushing the issue.

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9.  The corrective-action strategy chosen by Schwan's was obviously
    successful, as evidenced by the **return of ice cream sales** to
    precrisis levels within five months.

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C.  **Implications** of the Schwan's crisis response.

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1.  Schwan's "prompt emphasis on correction as a dominant strategy for
    crisis management is **not typical**" (emphasis added; p. 5).
    Several factors, which might not be present in other organizations,
    contributed to their choice and implementation of this strategy.

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a.  First, Schwan's had the **financial capability** to immediately
    implement a recall and pay medical expenses without hesitation. Such
    expenditures could completely destroy less financially sound
    organizations.

b.  Second, the nature of **salmonella poisoning impact** is well known.
    The effects are short-lived and medical costs could be accurately
    forecasted. In many health-related crises (e.g., asbestos, smoking,
    radiation exposure, implants), the impact and total costs are not
    fully known for years, which can discourage immediate compensation
    for fear of long-term liabilities.

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2.  Combined, the resources available to the organization and the nature
    of the crisis have a great effect on the **utility of corrective**
    actions as a crisis management strategy.

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D.  The **conclusions** of the case study and article.

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1.  The article starts with a statement that "more than **6,000**
    newsworthy organizational crisis events are reported annually by the
    Institute for Crisis Management" and that "management, either
    through poor judgement or criminal acts is the cause of these crises
    in the majority of cases" (p. 1). and concludes with the statement
    that "There is little to indicate that the number of organizational
    events leading to a crisis will diminish in the near future" (p. 7).

2.  The Schwan's case provides an example of how an organization can use
    a strategy of **accepting responsibility** for resolving and
    correcting a crisis situation to maintain and/or regain its
    legitimacy with the public. This strategy does not come without
    financial risk, however. Legal considerations and implied admissions
    of guilt cannot be ignored.

3.  The article does conclude through the case study and other research
    that, "Although it cannot be determined absolutely, it appears that
    organizations that demonstrate responsibility and legitimacy with
    their stakeholders have a **greater opportunity to recover** from a
    crisis" (emphasis added; p. 7).

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III. **Ask the students,** What are the lessons learned from this case
     study? Are they applicable to all organizations in all crisis
     situations? The strategy of shifting blame to others is obviously
     considered and used by organizations. What are the potential
     benefits and drawbacks of employing this strategy? If you were the
     president of Schwan's and the initial crisis had passed (it is now
     late March 1995 and sales have risen to precrisis levels), what
     would you do?

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A.  Schwan's **recovery strategy.**[^1]

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1.  Schwan's recovery efforts focused on **recouping its losses,** to
    the maximum extent possible, from two suppliers of its ice cream mix
    and the hauler of the mix by "suing the hell out of the folks."

2.  Schwan's settlement with these three companies were not publicly
    revealed, but Schwan's original claim was in excess of **\$200
    million.**

3.  The **claim** covered costs associated with the product recall,
    disposal of the ice cream, the value of the ice cream destroyed, the
    loss of sales of other products, and more than \$15 million in
    personal injury claims.

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B.  **Public image building.**

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1.  From this crisis, Schwan's adopted a publicized **"zero incidence"**
    policy on food contamination.

2.  Schwan's also has **"a myriad of initiatives"** to prevent
    contamination, some of which predated the salmonella crisis, and
    continues to "raise the bar" on food safety.

Supplemental Considerations:

Sellnow, Ulmer, and Snider's article provides excellent references and
describes other image restoration strategies and their relationships
with one another. Recommend that the instructor read this article if it
is available. Katz's article is cited solely for its factual content,
and it is not listed for instructor reading. By discussing the questions
in section III, you have essentially completed the modified experiential
learning cycle for this objective.

Objective 22.2 In light of major industrial crises of the 1970s and
1980s, explain the impact of environmental and public safety concerns on
public perception and that of the resulting policies, rule making, and
legislation on business operations.

Requirements:

Present the material with lecture and discussion as necessary.

Complete the modified experiential learning cycle for this objective at
the conclusion of the class discussion in the next session.

**Remarks:**

I.  **General** considerations:

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A.  Increased development and use of technology generally increases the
    **risk to the environment.** Public awareness and concern for these
    mounting risks have grown along with the increased applications of
    technology. As with risk communication, public perception of risk to
    and impact on the environment greatly affect business decisions and
    actions related to the environment (see the *Brent Spar* case
    study).

B.  Several **technological disasters (crises)** of the last two decades
    have generated tremendous public concern, resulting in pubic
    policies, rules, and legislation that affect entire industries:

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II. **Major Technological Disasters.**

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A.  **Three Mile Island** (TMI), March 1979 (Barton pages 38 and 39). A
    series of equipment failures, compounded by operator errors, brought
    unit 2 of TMI close to meltdown. Radiation was released on the day
    of the original incident and again two days later. All levels of
    communication following the incident were flawed, contributing to
    the resulting crisis.

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1.  The Three Mile Island **incident escalated into an accident and
    major crisis** for General Public Utilities (GPU) Service
    Corporation (TMI facility owners), the government of Pennsylvania,
    the United States government, and the entire nuclear industry.

2.  While the accident was initially blamed on operator error, the
    Report on the President's Commission on the Accident at Three Mile
    Island (commonly referred to as the Kemeny Commission Report)
    concluded, **"A series of events** -- compounded by equipment
    failures, inappropriate procedures, and human errors and ignorance
    -- escalated (the accident) into the worst crisis yet experienced by
    the nation's nuclear power industry."[^2]

3.  The **Kemeny Report** went on to point out deficiencies in control
    room design, poor training and procedures, and a pervasive nuclear
    industry culture that ignored the opportunity to learn from previous
    experience.

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a.  Accompanying these deficiencies was a **lack of adequate planning**
    for a major accident, as revealed in the confused response and poor
    crisis communication.

b.  In the language of the **causal chain model** (session 10),
    interventions at multiple points, primarily at the basic or root
    causes, could have prevented the TMI crisis.

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4.  TMI and the Chernobyl (1986) disaster, together, have raised public
    awareness of the hazards posed by **nuclear power plants,** resulted
    in greatly increased government scrutiny and regulation, and
    reversed the rapid growth of the nuclear industry that marked the
    1960s and 1970s.

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a.  In great part due to **public reaction** to TMI in the United
    States, no nuclear plants have been ordered since 1978 and more than
    100 reactors have been canceled, including all those ordered
    after 1973. No units are currently under active construction.[^3]

b.  Today, nuclear technology provides **22%** of the United States's
    electric power, a portion argued as too small by nuclear proponents
    and too large by others.

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B.  **Bhopal, India,** December, 1984 (Lerbinger pages 92--94). Forty
    tons of the deadly chemical methyl isocyanate (MIC) were released to
    the atmosphere by the Union Carbide plant following a series of
    equipment failures and human errors. No alarm was sounded and the
    population was not prepared to react properly, even if warned of the
    release. The exact number of casualties was never determined.
    however, estimates place the number killed at over 3,000 (estimates
    range as high as 13,000) and the number injured at between 200,000
    and 300,000.[^4]

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1.  The **basic and immediate causes** of the disaster included improper
    training of personnel, lack of the required numbers of operators,
    poor procedures and improper operation, and even the securing of
    critical production and safety equipment.

2.  The **triggering incident** was the seepage of water into the MIC
    storage and can be traced back to the basic and immediate causes,
    particularly poor maintenance and training. Controls to mitigate the
    consequences and impact of the event were essentially nonexistent.

3.  Union Carbide's poor response to the crisis was absolutely
    predictable from the fact that it had **no crisis management plan**
    and two years after the crisis still did not (Fink p. 180). In
    general Union Carbide adapted a strategy of denial and placing blame
    on others (it claimed the disaster was the result of an act of
    sabotage) and was more concerned with the potential legal
    ramifications than the human suffering and destruction.

4.  in his 1986 book *Crisis Management,* Fink lists the **failures of
    Union Carbide** in the Bhopal disaster (p. 180).

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a.  It failed to **identify** the crisis.

b.  Having failed to identify the crisis, it was in no position to
    either **isolate or manage** it.

c.  It adopted a **"bunker mentality."**

d.  Its **crisis communications** were inadequate, misleading, and
    without credibility much of the time. It would not give information;
    it would not confirm, deny, or comment on "commonly accepted"
    information; it would not grant interviews.

e.  Its **investigative team** revealed findings that had been available
    in the media for months.

f.  The **inconsistencies, inaccuracies, and retractions** became the
    rule rather than the exception.

g.  Had the company **practiced crisis management,** it would have seen
    that the cost of intervention was far less than the cost of
    litigation.

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5.  The Bhopal disaster, coupled with a near disaster at the Union
    Carbide Institute's West Virginia plant in August 1985, focused
    **public attention** on the dangers of hazardous chemical
    manufacturing, use, and storage.

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a.  In October, 1986, President Reagan signed into law the Emergency
    Planning and Community Right-To-Know Act, otherwise known as Title
    III of the Superfund Amendments and Reauthorization Act **(SARA
    Title III).**

b.  This **act directs states, communities, and industry to work
    together** to plan for chemical accidents, develop inventories of
    hazardous substances, track toxic chemical releases, and provide
    public access to information on hazardous substances.

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C.  **Chernobyl,** April 1986 (Barton pages 159 and 160 and Lerbinger
    pages 286--289). An explosion in the Chernobyl, Ukraine, nuclear
    power plant resulted in 31 immediate casualties and the release of
    over 50 tons of radioactive materials to the environment. Some ten
    years after the explosion, the Ukranian government estimated that
    7,000--8,000 clean-up workers died as a result of exposure and that
    the extent of civilian casualties might never be known. (Barton page
    159 reports a source claiming 300,000 casualties). After a 40-hour
    delay in publicly acknowledging the explosion, some 135,000 people
    were evacuated from the immediate area. The environmental impacts of
    Chernobyl, on the immediate area, Europe, and even the entire world,
    will last well into the 21^st^ century.[^5]

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1.  Contributing to the **basic and immediate causes** of the disaster
    and failure to notify the public immediately were several
    factors:[^6]

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a.  The Soviet government and nuclear industry **culture** stated the
    position that the nuclear industry was "accident free."

b.  Accident **preparation** was minimal. Plant workers lacked
    protective clothing, Geiger counters, and a code of conduct to
    follow in the event of a serious accident.

c.  Plans only covered **minor incidents** such as isolated fires and
    minor injuries to personnel.

d.  In 1986, the **Soviet government** was in a state of turmoil with a
    relatively new leader. Chernobyl was an unwanted embarrassment.

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2.  Contributing to the above problems was the Soviet insistence on
    **centralized control,** organizationally from distant Moscow, and
    technically with construction of a single turbine hall which did not
    allow isolation of the multiple reactors.

3.  In the immediate aftermath of the explosion, **confusion** was the
    most notable feature of the response.

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a.  Personnel did not comprehend the **magnitude** of the problem and
    the station director did not realize that the explosion had taken
    place in the reactor.

b.  **No public warnings** were issued for 40 hours, and the official
    announcement to the world waited for another several hours.

c.  A decision was made to **evacuate** a 30-kilometer circle around the
    plant, a purely arbitrary decision based, not on scientific
    examination, but on the availability of temporary housing outside
    the 30-kilometer zone. Some 45,000 people were relocated to an area
    that was highly contaminated.

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4.  The **official Soviet response,** continuing into 1987, was the
    claim that the situation was not dangerous and was basically "under
    control," coupled with a criticism of the Western media's
    "sensationalizing" the event and of purported flaws in the western
    nuclear power industry.

5.  The Chernobyl disaster provides an example of **failed crisis
    management,** from risk assessment and planning through response and
    recovery. Any plans in effect were totally inadequate and the
    consequences and impacts of the disaster reflect that.

6.  Chernobyl had, and continues to have, a significant **impact** on
    the nuclear industry throughout Europe and the then Soviet Union.
    Several plants have been closed and planned construction has been
    cancelled.

7.  In the **United States,** the impact on public opinion by Chernobyl
    was less pronounced. Lerbinger reports that there is "evidence that
    the accident ironically might have increased acceptance of nuclear
    power" (p. 286).

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a.  The widespread media coverage has **raised public awareness** of
    nuclear technology.

b.  The nuclear industry has **focused risk communication** efforts on
    winning public acceptance, rather than approval, of the nuclear
    industry and has experienced some success.

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8.  However, the combined effects of the Chernobyl and Three Mile Island
    crises have had a significant **impact** on the nuclear industry in
    the United States.

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D.  ***Exxon Valdez,*** March 1989 (Lerbinger pages 190--192). The
    tanker *Exxon Valdez* ran aground on Bligh Reef, Prince William
    Sound, Alaska, releasing approximately 11 million gallons of its 50
    million gallon cargo of crude oil into the environmentally fragile
    area. In the first few days following the grounding, the
    organizations charged with responding (the State of Alaska, the
    Coast Guard, Alyeska (pipeline company) and Exxon) implemented their
    own contingency plans, which had not been adequately coordinated
    before the fact. The resulting confusion and conflict contributed to
    the inaction during the crucial first 72 hours which contributed to
    the magnitude and impact of the spill.

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1.  The spill and largely **bungled response and poor crisis
    communications** contributed to a major crisis for Exxon.

2.  The **triggering event** is attributed to the irresponsible actions
    of an intoxicated vessel master who improperly left the ship's
    control area, but the basic and immediate causes run much deeper.
    Cost-cutting measures that decreased personnel and their redundancy
    on the Exxon fleet, cutbacks in Vessel Traffic Safety (VTS) system
    controls, inadequate training, and the uncoordinated response
    increased the likelihood of such an event and the subsequent impact
    of the event.

3.  Exxon immediately activated and dispatched a **crisis management
    team** to the scene, headed by the president of shipping. Upon their
    arrival Exxon assumed responsibility for salvage and oil spill
    response, a role that had not been anticipated by the other
    participants.[^7]

4.  Despite this quick reaction, the efforts of Exxon to avert a major
    environmental disaster and accompanying organizational crisis were
    doomed to failure because Exxon was operating under a host of false,
    if not faulty, beliefs. The *Exxon Valdez* crisis revealed that the
    following **assumptions were all invalid** for several reasons
    (Mitroff and Pauchant pp. 103 and 104):

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a.  That Exxon and the state of Alaska were **prepared** for a crisis of
    the magnitude that occurred.

b.  That the proper cleanup **equipment was actually there** and in good
    operating order.

c.  That crews had been **well trained and well practiced** in what to
    do in the event of such a spill.

d.  That the **proper procedures** for a spill of the magnitude
    encountered would be followed, notwithstanding their viability.

e.  That the **weather** would be benign.

f.  That everyone truly knew **her/his role** and what to do.

g.  That the **information and communication lines** of the company were
    open so that different divisions could get the proper trained
    personnel to the spot and help in the cleanup.

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5.  Not until three weeks after the grounding did Exxon's **CEO,**
    Lawrence Rawls, visit the scene of the disaster. He was being
    criticized by the press for Exxon's decisions, which were perceived
    as generally uncaring with regard to the damage to the environment
    and the impact on the population. His late appearance on the scene
    did little to deflect the criticism.

6.  Like Union Carbide in the aftermath of Bhopal, when it tried to
    **shift blame** to a saboteur, Exxon tried to place the blame
    primarily on the shoulders of the ship's captain. Although the
    captain's actions clearly were a triggering event, the blame could
    not be deflected from the basic and immediate causes attributable to
    Exxon as an organization.

7.  Some two years after the grounding, it was still apparent that Exxon
    had **not learned its lesson** when CEO Rawls, following the
    announcement of \$1 billion in settlements against Exxon, stated, "
    The settlement will have no noticeable effect on our financial
    results" (Barton p. 162) -- so much for showing concern for the
    public and the environment that still suffer the effects of the oil
    spill over 10 years later.

8.  The *Exxon Valdez* disaster and the inept handling of the crisis by
    Exxon contributed to the passage of the **Oil Pollution Act of 1990
    and the Oil Spill Liability Trust Fund legislation,** which
    establishes planning and response responsibilities, procedures, and
    organizations for incidents involving the discharge of hazardous
    substances into the environment.

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III. Discussion of **assigned reading** from Barton and Lerbinger.

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A.  **Barton** provides additional examples (Love Canal, asbestos) of
    the impact and results of corporate environmental abuse, with the
    **overriding message** that private sector leaders are "increasingly
    expected to adhere to socially accepted norms that meet the needs of
    society while continuing corporate activities" (p. 151).

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1.  The **lesson from the above case studies and Barton's discussion**
    is clear: If you harm the environment you will pay both financially
    and in damage to your public image. Regulations and laws affecting
    entire industries will probably follow if the significance of the
    event is great.

2.  The interview with **Zygmunt J.B. Platter** (pages 165--166)
    provides an excellent outline for further discussions on the
    environment and the law.

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B.  **Lerbinger,** like Barton, provides examples of technological
    crises and discussions of their impact. The **overriding message**
    is also similar to Lerbinger's: Individual businesses and industries
    as a body must pay attention to the overall crisis management
    process to prevent the occurrence of and mitigate the impact of
    hazardous events.

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1.  The three-phase **"Hazard Management Model"** (pages 94--108) is
    very similar to the causal chain model used in this course, as it
    addresses interventions (controls) to prevent occurrence (basic and
    immediate causes), forestalls initiating events, and mitigates
    consequences and impact should an event occur.

2.  Lerbinger also emphasizes the importance of **communication** to
    build and sustain public trust in science and technology.

Supplemental Considerations:

The students should discuss the overriding messages of Barton and
Lerbinger and the implications for business crisis management and
organizational continuity. An article (Harrald, Cohn, and Wallace), book
(Mitchell), congressional report (Three Mile Island) and a web site
(CRS) are cited in the lesson plan. It is not necessary to read this
material in preparing for this session. There are, however, numerous Web
sites and readily available articles and books covering the Three Mile
Island, Bhopal, Chernobyl, and *Exxon Valdez* crises, and the instructor
may consider reviewing a sample for this session.

The material presented in this session, as supplemented by the assigned
reading in Barton and Lerbinger, provides a foundation for completing
the case study, "LNG Release and Explosion," which ties crisis
communication together with the entire crisis management process in the
context of a major technological crisis.

**Objective 22.3 Apply the material covered in the sessions on crisis
communication along with the entire crisis management and organizational
continuity model to the case study "LNG Release and Explosion."**

**Requirements:**

Obtain and reproduce a map of the Port Richmond, Staten Island, New
York, (South of Bayonne, New Jersey, and about one mile east of the
Bayonne Bridge) and the immediate area as part of the case study.

Distribute the case study and provide the students with sufficient time
to read the material and ask questions.

Direct each student to prepare a written response to the set of
questions (two pages) and the postcrisis audit (two pages). They will
turn in their responses at the beginning of the next session and
participate in a class discussion of the responses and additional
questions posed by the instructor.

Complete the modified experiential learning cycle for this objective
following the class discussion in the next session.

Remarks:

I.  Distribute the case study and provide the students time to read the
    material and ask questions. (It will be necessary to briefly cover
    the postcrisis audit questions).

II. **Postcrisis Audit** (see Mitroff, Pearson, and Harrington pp.
    68--71).

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A.  A postcrisis audit provides a means of **identifying and documenting
    lessons learned** from a particular crisis for incorporation into
    daily operations and overall crisis management.

B.  Important **areas** in a postcrisis audit include:

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1.  **What happened?** Determine the basic facts (disputed and
    undisputed).

2.  **What caused** the accident?

3.  **Which factors** (internal and external to the organization) led to
    the occurrence?

4.  Did the **structure, culture, technology, or people** in the
    organization contribute to the crisis potential?

5.  Did the **business environment** or pressure from external
    stakeholders create or exacerbate the organization's vulnerability
    to this type of crisis?

6.  In the response to the crisis, what was **done well?**

7.  What was **done poorly?**

8.  Does the organization continue to be **vulnerable** to this type of
    crisis?

9.  Could a crisis of this type **lead to other crises?** What are they?

10. What steps must the organization take to **reduce its risk** from
    future crises, both this type and others?

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C.  Input to the audit should include the **perspectives** from the
    multiple internal and external stakeholders.

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III. The students will **turn in their written assignments** at the
     start of the next session and participate in a class discussion of
     their responses and other questions posed by the instructor. They
     should prepare a copy of their written work to refer to in the
     class discussion.

Supplemental Considerations:

None.

[^1]: Katz, David M. 1997. "Strong Recovery Urged in Food Cases."
    *National Underwriter.* Vol. 101, No. 47. Start page 29. Electronic
    version 3 pages.

[^2]: *Report on the President's Commission on the Accident at Three
    Mile Island.* 1979. Washington, DC: Government Printing Office.

[^3]: Congressional Research Service. December 1996. Issue Brief 88090:
    Nuclear Energy policy \[on-line\].Washington, DC: Federation of
    American Scientists. \[Cited April 22, 1999.\] Available at
    [http://www.fas.org/spp/starwars/crs/88-090.htm](http://www.fas.org/spp/starwars/crs/88-090.htm(Dec).

[^4]: Mitchell, James K. 1996. *The Long Road to Recovery: Community
    Responses to Industrial Disaster.* New York. United Nations
    University Press. Pages 122 and 132.

[^5]: Mitchell pp. 183--187.

[^6]: Mitchell. pp. 188--190.

[^7]: Harrald, J.R., Cohn, R., and Wallace, W. 1992. "We Were Always
    Reorganizing...: Some Crisis Management Implications of the Exxon
    Valdez Oil Spill." *Industrial Crisis Quarterly.* Vol. 6, No. 3.
    Page 200.