14. Managing Outside Pressure

     In Lesson 13, we covered supply chain management, and you saw how one bad link in the chain can harm a company’s reputation. Reputation management, though, involves more than things that can go wrong in your supply chain. It also involves decisions you should make in managing your business’s reputation.

     You’ve probably heard the old saying, “The road to hell is paved with good intentions.” By the same token, just thinking of yourself as a good person doesn’t mean that you can’t get a bad reputation.

Case Study #1: Royal Dutch Shell

     Some years ago, the oil company Royal Dutch Shell had to dismantle an aging oil platform in the North Sea. After years of study, they concluded that the most reasonable way to dispose of it was to blow it up and sink it. Their scientists told them that the ruins of the platform would become a habitat for fish and other sea life.

     Some oil would leak into the sea, but it would be far less than the sea naturally experiences without human causes. Besides, the oil would soon biodegrade.

 

     Then, in the dead of night, a radical environmentalist group called Greenpeace seized control of the oil platform. This captured the world’s attention.

     Greenpeace argued that, if this platform were sunk, other aging platforms would also be sunk. This, they said, would create a pollution hazard. Royal Dutch Shell further harmed their own reputation by using water cannons to try to dislodge Greenpeace activists from the platform.

     Amid public disapproval, Royal Dutch Shell’s profits fell. In the end, they agreed to dismantle the oil platform and recycle it on land.

Case Study #2: Star-Kist

     Star-Kist is the world’s top processor of canned tuna.

     Tuna fishermen use nets to catch them, but they sometimes accidentally catch dolphins. Since dolphins are mammals and not fish, they can drown if they become entangled in nets.

     At the time, dolphins were regarded as plentiful all over the world. On the other hand, tuna populations—especially blue fin tuna—have been depleting since 1886, and several species of tuna are approaching the risk of becoming endangered species.  

     Scientifically, there’s every reason to be concerned about tuna populations but no reason to be concerned about dolphin populations. At least that’s what Star-Kist’s scientific advisers told them.

    During the mid-1980’s, a popular television program premiered: Flipper. The “star” of the show was a lovable dolphin named Flipper, who was also very smart and often saved people’s lives.

     Viewers of the TV series Flipper could be excused for wondering why anyone needed life guards or a Coast Guard when they had Flipper to solve all their seagoing problems for them.

     Overnight, the public began to see Star-Kist as low-life scum who were murdering Flipper’s friends. Star-Kist sales dropped faster than a brick. Never mind that Star-Kist’s competitors were doing the same thing. Activists targeted Star-Kist, and Star-Kist suffered.

     Star-Kist began using “dolphin-free” nets and noted this fact in their advertisements.  As a result, they eventually regained their market share.

Case Study #3: Nike

     Nike, with its image-driven marketing campaign, was enjoying double-digit increases in sales figures each year from the beginning of the 1980’s until near the end of the 1990’s. In just one year—1996—Nike’s sales figures jumped by a whopping 36% over the previous year. The figures for 1997 were even more impressive: 42%. Nike was on a roll, and it appeared that nothing could stop it.

     All during the 1990’s labor rights groups tried to publicize the labor abuses of Nike’s source plants in Asia, particularly Indonesia. Nike CEO Phil Knight dismissed these concerns, saying that he “didn’t have to know” about labor conditions in his source plants. If anyone had a problem with the way Nike’s source plants treated their workers, they could take it up with the source plants—not with Nike. “We don’t make shoes,” Knight flatly stated.

     Then the Nike labor scandal hit the mainstream. For more than a week, the popular comic strip Doonesbury emphasized issues of safety, health, child labor, and physical abuse at Nike source plants in Vietnam. Tonight Show comedian Jay Leno panned Nike on his television program.

     Hollywood muckraker Michael Moore made a movie in which he interviewed Nike CEO Phil Knight. On camera, Knight said that he wasn’t bothered by the thought of 14 year-old Nike laborers, because, in Southeast Asia, that was the legal age for dropping out of school and going to work in a factory.

     Nike’s sales figures still climbed but at a much lower rate: 14%, as opposed to 42% the year before. Nike had to reorganize just to make a profit. The following year, Nike posted its first loss in two decades.

   
      Since 1999, Nike has worked with chosen activist groups to improve its image. Nike source plants are no longer accused of child labor, physical abuse, labor contract violations, or violations of safety and health.

     Nike does, however, remain on watchdog watch lists for alleged union-busting tactics. For example, in Latin America, a source plant was allowed to unionize. After it was unionized, Nike then cited quality control problems at the plant as a reason for ending his contract with the plant. Public pressure forced Nike to back down and rehire the workers.

     As dismal as Nike’s labor record is, labor activist groups generally consider Nike “one of the better performers” on labor rights.

     In the decade since the labor abuse scandals of the late 1990’s, Nike has never regained its market share.

Royal Dutch Shell, Star-Kist, Nike:

What did these three scandals have in common?

1. All of these companies were obeying the law as the laws existed at the time.

2. Standard business practices of the time were still in a state of flux, and it was not yet firmly established that what the companies were doing was wrong. (About the same time, Adidas and Levi Strauss took quicker and more responsible approaches than Nike and their sales didn’t suffer, except as a direct result of the Asian Currency Crisis of 1997-98.)

3. All three companies were able to offer compelling reasons for their actions.

4. All of these companies failed to consider the emotional side of the issues. Seeing only facts and statistics, they were blindsided by public outrage.

What can your company do to manage outside pressure?

     Most protests will never harm your company’s reputation or sales. Still, it is important to be able to recognize which issues should be taken seriously.

Ask yourself a few questions about the issue:

1. Does the issue have the power to raise emotions?

2. Is the issue media friendly (current, visually striking, easy to understand)?

3. Can your opponents make a reasonable-sounding case for their views (even if you disagree with their views)?

4. How far has the issue progressed? (By the time the issue has hit the comic strips, talk shows, and evening news, you may have waited too long to act.)

5. How difficult is it to find a solution? The easier it is to find a solution, the more important compromise becomes.

6. How much potential does this issue have to harm my company’s reputation or sales?

7. How “isolated” is my company? That is, is there any reason to believe that other companies may help in my defense—or will they find that it makes better business sense to leave my company to its opponents?

8. Can anyone make a connection between this issue and some other highly emotional issue? For example, the Royal Dutch Shell protests went beyond North Sea oil platforms; people associated it with the general principle that the earth’s environment should be protected.

Now it’s your turn!

     Get together with your team and decide what kind of CSR issues can be used against your business or its marketing strategy.

     Remember that CSR issues don’t have to be of world-class importance. For example, what if your company sponsored a Little League Baseball team? That sounds like good PR and good CSR, but what can go wrong? For one, Little League Baseball teams are for boys. Opponents could ask, “Why are you discriminating against girls?” This could cause you to lose half of your customers—the female half.

     On your final exam, include a discussion of CSR issues and outside pressure that your business may face and how you would manage it.