Coherent Actions that Would Have Taken to Avoid Legal and Reputation Situation - GSK - Case Study Example

Risk Management Name Class Unit Introduction The Ribena case posed both legal and reputational crisis to the GlaxoSmithKline (GSK). Despite this, the organisation response made it worse. The organisation compounded the crisis by trying to use image maintenance and image repair. The organisation used dissociative defences among other strategies which were all unsuccessful in restoring the image (Jaques, 2008). This report will analyse coherent actions that would have taken to avoid legal and reputation situation that resulted from the crisis. The paper will also discuss the potential problems that may arise from implementing the suggestion. Lastly, the paper will look at implications of these suggestions for organisational and management practice based on risk management perspective. Coherent actions that the organisation may have taken to possibly avoid the legal and reputational situation that resulted from their actions. After receiving the warning signal, GSK would have used good public relations (PR). The management of communication between organisation and public was poor. The company had poor crisis management strategy in place which made them more venerable. When an organisation faces a crisis, effective crisis management plays a major role in helping it (Seymour & Moore, 2000). The use of PR effectively would have contained the damage. The organisation would have owned up the damage before the issue escalated through the use of PR. In this case, the organisation would have used PR to issue a recall of the affected product. GSK had a chance to outsource PR and a legal team before the disaster was made public in the TV (Jaques, 2008). A lawyer with relevant industry experience was also required. This is due to fact that the crisis involved violation of trade law as well as consumer laws. According to Watson (2007), crisis management involves a timeline approach that could have saved the organisation. The leadership should have approached the matter in a way that the impact would not have led to a crisis (Liu, Austin & Jin, 2011). The initial stage would have been acting on early warning signals (Wang, 2008). This is the most important stage that could have saved GSK from legal and reputation issues (Jaques, 2008). In this stage, the organisation would have acted on the impending crisis and turn it into an opportunity. This would have involved preventive planning, teamwork and creativity (Gates & Hexter, 2005). The company had faced an earlier criticism in the UK on Ribena Toothkind. This would have acted as a warning. The company should have responded to the girls’ written approach. The exposure on the national television should have been taken as an indication of the seriousness of the issue (Jaques, 2008). All this could have been avoided by acknowledging the girls complain and handling it in a good way. GSK failed to acknowledge the seriousness of the crisis. When an organisation tries to cover up a serious event, it rarely pays (Pollard & Hotho, 2006). The first step that Ribena would have taken is acknowledging the seriousness of the situation (Blythe, 2004). The company would have listened to the girls complain and communicate the actions they were taking on the issue. The first priority for GSK would have been acting to protect the stakeholders’ interests. The organisation should have acted to protect the stakeholders from any harm instead of reputation. This is through well structured communication that would acknowledge the crisis and give information on what the organisation was doing (Gates & Hexter, 2005). In this case, the organisation downplayed the crisis. The organisation would have acknowledged to have received complains and explain the action being taken. This would have prevented the crisis from escalating to high levels. There would have been involvement of top leadership. Lucero, Tan & Pang (2009) asserts that human resource management has a role in handling crisis. In this case, Ribena should have involved HR department in handling the issue. HR ensures that the organisation is able to reduce the side effects of the crisis to stakeholders. In this case, the HR department at GSK should have acted as the change agents. In a crisis, leadership helps to maintain organisation credibility and trust. The handling of Ribena case failed to use leadership to maintain trust and credibility. Leadership plays a major role in communication during crisis. In Ribena case, there was poor communication (Jaques, 2008). The organisation leadership would have realised that during the crisis, there is a high expectation from the population. The company would have kept constant and open communication (Kapucu, 2006). Adoption of defensive communication approach made the situation worse. With new media, information spreads fast. The leadership should have used media to give dedicated communication to stakeholders (Paraskevas, 2006). Information helps a lot to enable stakeholders cope with the psychological threat associated with it. The company would have then removed the misleading advertisement. This would have been followed by a briefing to the consumers based on what had happened. The organisation would have admitted the existence of the issue and announced the corrective actions being taken. Crisis communication should not begin with a focus on organisation reputation. This is unethical as well as an act of irresponsibility (Wang, 2008). The organisation would have started crisis communication with main focus on the victims’ psychological concerns (Coombs, 2007). In this case, the victims felt cheated by an organisation they trusted. The leadership would have accessed the reputational threat after communicating with the stakeholders. When the crisis is serious, the consumer is highly involved (Mitroff, 2005). In this case, the seriousness of allegations demanded the full involvement of the consumers. This is due to fact that consumers were to act on the negative organisation image. With the exposure, consumers may boycott the products. A major step in addressing the reputational threat is determining the responsibility in the crisis. After perception of responsibility in the crisis, the organisation would have gained insight of the damage. Being responsible involves accountability (Clark & Harman, 2004). The organisation should not have quarantined the brand. This was made worse by their press statement. The company main interest was based on protecting the brand. To deal with the issue, it involved admitting the mistake committed and working to restore the damage. Schoenberg (2005) asserts that a proactive organisation is capable of admitting their mistakes and assuming responsibility. Potential problems that may arise in implementing the suggestions on organisational perspective Implementing the above suggestions has their shortcoming based on organisational perspective. Despite this, the benefits outweigh the problems. Admitting wrong doing is bound to affect the organisation reputation which was their main competitive advantage. By owning up that their advertising was misleading, the organisation would have faced criticism (Clark & Harman, 2004). Negative media is a major challenge that this strategy will face. Negative media coverage has high potential of ruining the organisation reputation. Mitroff (2005), states that an organisation has to defend its reputation well after owning up to the wrongdoing. An organisation image takes time to build and once lost, it becomes hard to regain it. During a crisis, credibility is the most important asset (Comfort, 2005). Investors’ decisions are based on the organisation reputation. Investors want management whom they can trust. This is why giving credible information during crisis is vital to retain the investors and attract more. To defend the organisation reputation which is at stake, the organisation will have to utilise public relations. The first step to defend reputation is through selecting the right spokesperson (Watson, 2007). The person selected is supposed to be well trained in the media so that they can answer difficult questions posed by the media. The company is supposed to have factual material that defines them (Simola, 2005). The company should then invite media and give a regular press briefing. This enables media they to know more about their company. According to Clark & Harman (2004), when the media understand the company, it becomes easy to have an accurate coverage. This will eliminate chances of negative media that can ruin the organisation image. An organisation such as GSK takes years to build a reputation but can be destroyed with a single incidence as seen in the case. Admitting the wrongdoing is a costly action. The organisation would have been forced to withdraw the advertising and make a public apology. Consumers’ feels cheated as in this case which may lead to product boycott (Sayegh, Anthony & Perrewe, 2004). There are also costs in implementing PR and legal teams. The company had been giving misleading advertisement about the content of vitamin C in their products. The moment GSK admits that Ribena does not have the claimed nutritional information gives high chances of public outcry. Admitting the wrong doing will also be an embarrassment to GSK based on great reputation. This situation will be controlled by releasing the news at a go. Once the news is released once, the impact will be lower than trying to contain the news (Comfort, 2005). Also, it is vital to be true in making the comments. When the organisation perceives that there is likelihood of negative media, they have to access the impact it will have. The organisation must analyse its internal capability to handle the financial loses it will incur. The moment the organisation admits to have been in the wrong, it’s bound to incur losses from decline in sales (James & Wooten, 2010). The organisation is also supposed to look at the capability of its public relations management team (O’Rourke, 2004). This is the group that will have a task to explain to stakeholders about the crisis and any development. If the company spots weakness of their PR, using external PR will be the best idea (Wooten & James, 2008). Using respected third party actors can help in restoring credibility. There is a need to access how the organisation management are prepared for the crisis. This is through assessing their crisis handling skills (James & Wooten, 2010). Lack of crisis management may escalate the crisis further. The worst time that one can learn to manage crisis is when it’s happening (Wooten & James, 2008). The analysis of management crisis handling capability will help a lot in coming up with effective decisions. This process will be used to determine the leaders who will handle the crisis. It also helps in taking responsibility of the crisis (Sayegh, Anthony & Perrewe, 2004). The organisation have to access how admitting to wrongdoing will have an impact on their customers and other stakeholders. This assessment gives the organisation the capability to come up with effective strategy to handle aftermath (O’Rourke, 2004). This external assessment can be carried out through third group. The organisation can also use data from previous incidences that had happened in the firm. It’s evident that by admitting, consumers will feel wronged by the company. The assessment should come up with ways in which the affected stakeholders can be handled effectively to minimise the impact (Comfort et al., 2001). GSK required both internal and external changes to respond effectively to the crisis. This involved change in areas such as interpersonal communication, information dissemination and decision making (Brockner & James, 2008). This would lead to changes in the way the organisation is represented in the crisis. Wooten & James (2008) claims that leadership should be able to ensure that there is authority and responsibility. It will become easier to disseminate information and solve the crisis. Having well coordinated changes in the organisation ensures that the response time is minimised (Brancato, 2005). The suggested response will require a change in management perspective, internal business processes and attitudes. Implications of your suggestions for organisational and management practice based on risk management perspective. Risk management involves identifying, assessing and prioritising the risks. It involves using resources to minimise, monitor and take control of the impacts brought about by a crisis (Robinson, 2005). In this case, GSK involvement of the management in crisis management is very critical for the success of the process. The strategies proposed require the top leadership in the organisation to be committed in managing the risk. When a crisis happens in an organisation, most people perceive it as a managerial failure and may increase unwanted attention (Brancato, 2005). The way GSK responded in Ribena issue showed a narrow focused and disjoint management activities. This made it hard to achieve a timely and effective response. With the management that was in place during the crisis, it can be hard to admit their wrong doing. The risk exposure is high and its management poor if the leadership cannot handle it appropriately (Augustine, 2000). Management practices in place to determine success or failure of the adopted crisis management strategies (Blythe, 2002). The alignment between corporate strategy, strategic planning and crisis management will be vital for the strategies proposed to succeed (Robert & Lajtha, 2002). The resources of risk management are supposed to be integrated with other business processes (Mitroff, 2004). Omitting the misalignment of risk management strategies in an organisation is a major problem. Risk management starts from top leadership. The organisation reputation is at stake here. The practices and strategies that are adopted by the management determine the success in saving organisation image (Comfort, 2007). If the management utilises public relation effectively in crisis management, there are high chances of success (Crandall, Parnell & Spillan, 2010). This can be explained by the Tylenol case study. PR is a management function and ensures that there is a good relationship between the public and organisation. When there was a crisis in Johnson and Johnson in 1982, effective use of PR by the management saved the company reputation (Benoit & Lindsey, 1987). If GSK can adopt a well formulated PR team, they will succeed in maintaining credibility among the public. This is one of the most vital management practices in times of crisis (Jaques, 2010). Having the wrong PR as seen in the way GSK handled the crisis will be the major drawback in managing reputation. Crisis communication planning in place will play a major role for effective crisis management based on proposed strategies (Smith, 2009). The time of response and underestimating the issue are the main challenges to effective and fast communication. The organisation may respond too slow leading to panic and making the public questionable. If the management is well prepared in communication, it becomes easier to disseminate handle the crisis with openness (Coombs, 2007). The level of crisis communication in place will play a major part in strategies proposed to GSK. This will shape the reputation of the company. In case the organization owns up late, the reputation will be damaged (Robinson, 2005). If GSK utilises effective and fast response, they will be able to maintain the image. Effective management is required to effectively manage the risk (Crandall, Parnell & Spillan, 2010). Lack of appropriate risk management programmes as seen the case of GSK is a major drawback in handling crisis. This can lead to the crisis becoming blown out of proportion. Effective crisis management involves commitment. The management should be well informed in fraud awareness. Effective risk management is based on risk assessment (Wang, 2008). Organisation is supposed to have the capability to systematically analyse the risk. In this case, GSK should have been capable of looking at the risk and determining its impact on the organisation. Referring to the case of Tylenol, the management practices saved the organisation. Quick response and accepting wrongdoing by the management helped to save the organisation image (Benoit & Lindsey, 1987). Management practices play a key role in ensuring that organisation reputation is restored while at the same time, taking care of stakeholders (James, Wooten & Dushek, 2011). Management failure in handling crisis presents a major challenge for the organisation as well as stakeholders (Comfort, 2007). This is the main reason why effective crisis handling is required. Conclusion GSK response to crisis was poor, which lead to legal issues and damaged reputation. The organisation had already seen the early warning which would have made them react in a better way. Based on the case, the paper suggests that GSK would have acted on the first warning and ensured that they are ready to respond to the crisis. There was a need for a consistent and effective communication strategy based on competent PR. The report also suggests that the organisation would have owned up to the allegations and given a full apology to all stakeholders. These strategies would have saved the company from legal and reputational issues. Implementing these suggestions would still lead to reputation issues and negative media but at a lower scale than the response used. The company will also have to incur costs due to reduced sales, legal and PR costs. There is need to access GSK leadership readiness for crisis as well as the impact admitting wrong doing will have on stakeholders. Implementing these suggestions will lead to change in GSK management perspective, internal business processes and attitudes. Effective risk management is required to monitor access and control impacts of crisis. This is required at GSK as it can benefit the organisation in timely identification, response and solving the crisis. Effective crisis management helps a lot in maintaining organisation reputation after the crisis. References Augustine, N. R 2000, Managing the crisis you tried to prevent. In Harvard Business Review on crisis management, 1-32.Boston, ma: Harvard Business School Press. Benoit, W. L., & Lindsey, J. J 1987, “Argument strategies: Antidote to Tylenol's poisoned image,” Journal of the American Forensic Association, Vol.23, no.3, p.136-46. Blythe, B. T. 2004, “The human side of crisis management,” Occupational Hazards, Vol.66, no.7, p. 37-39. Blythe, B. T. 2002, “Everyday crisis management,” Journal of Petroleum Technology, Vol.54, no.8, p.32-34. Brancato, C. K. 2005, Enterprise risk management systems. New York: The Conference Board. Brockner, J. & James, E. H. 2008, “Toward an understanding of when executives see crisis as opportunity,” The Journal of Applied Behavioral Science, Vol.44, no.1, p. 94-115. Clark, J., & Harman, M. 2004, “On crisis management and rehearsing a plan,” Risk Management, Vol.51, no.5, p.40-44. Comfort, L. K. 2007, “Crisis management in hindsight: Cognition, communication, coordination, and control,” Public Administration Review, Vol.67, no.1, p.189-197. Comfort, L. K. 2005, “Risk, security, and disaster management,” Annu. Rev. Polit. Sci., Vol.8, no.2, p.335-356. Comfort, L. K., Sungu, Y., Johnson, D., & Dunn, M. 2001, “Complex systems in crisis: Anticipation and resilience in dynamic environments,” Journal of contingencies and crisis management, Vol.9, no.3, p.144-158. Coombs, W. T. 2007, Ongoing Crisis Communication: Planning, Managing, and Responding, Sage Publications Inc., Thousand Oaks, CA. Crandall W. R., Parnell, J. A. & Spillan J. E. 2010, Crisis Management: Leading in the New Strategy Landscape, Sage Publications Inc., Thousand Oaks. Gates, S., & Hexter, E. S. 2005, From risk management to risk strategy, Conference Board. Jaques, T. 2010, “Reshaping crisis management: The challenge for organizational design,” Organization Development Journal, Vol.28, no.1, p.9. Jaques, T. 2008, “When an icon stumbles: the Ribena issue mismanaged,” Corporate Communications: An International Journal, Vol.13, no.4, p.394-406. James, E. H., & Wooten, L. P. 2010, Leading under pressure: From surviving to thriving before, during, and after a crisis. Routledge. James, E. H., Wooten, L. P., & Dushek, K. 2011, “Crisis management: Informing a new leadership research agenda,” The Academy of Management Annals, Vol.5, no.1, p.455- 493. Kapucu, N. 2006, “Interagency communication networks during emergencies boundary spanners in multiagency coordination,” The American Review of Public Administration, Vol.36, no.2, p.207-225. Liu, B. F., Austin, L., & Jin, Y. 2011, “How publics respond to crisis communication strategies: The interplay of information form and source,” Public Relations Review, Vol.37, no.4, p. 345-353. Lucero, M., Tan T. K. A., & Pang, A. 2009, “Crisis leadership: when should the CEO step up?” Corporate Communications: An International Journal, Vol.14, no.3, p.234-248. Mitroff, I. 2005, Why some companies emerge stronger and better from a crisis: 7 lessons for surviving disaster. New York: American Management Association. Mitroff, I. 2004, Crisis Leadership: Planning for the Unthinkable, John Wiley & Sons. O’Rourke, M. 2004, “Protecting your reputation,” Risk Management, Vol.51, no.1, p.14-18. Paraskevas, A. 2006, “Crisis management or crisis response system? A complexity science approach to organizational crises,” Management Decision, Vol.44, no.7, p.892-907. Pollard, D., & Hotho, S. 2006, “Crises, scenarios and the strategic management process,” Management Decision, Vol.44, no.6, p.721-736. Robert, B., & Lajtha, C. 2002, “A new approach to crisis management,” Journal of contingencies and crisis management, Vol.10, no.4, p.181-191. Robinson, C. 2005, “Preparing for the unexpected: Teamwork for troubled times,” The Journal for Quality and Participation, Vol.28, no.1, p.26-30. Sayegh, L., Anthony, W. P., & Perrewe, P. L. 2004, “Managerial decision-making under crisis: The role of emotion in an intuitive decision process,” Human Resource Management Review, Vol.14, no.2, p. 179-199. Schoenberg, A. 2005, “Do crisis plans matter? A new perspective on leading during a crisis”, Public Relations Quarterly, Vol. 50, no. 1, p.2-7. Seymour, M. & Moore, S. 2000, Effective Crisis Management: Worldwide Principles and Practice, Cassell, London. Simola, S. K. 2005, “Organizational crisis management: Overview and opportunities,” Consulting Psychology Journal: Practice and Research, Vol.57, no.3, p. 180. Smith, R. D. 2009, Strategic Planning for Public Relations, Routlege, New York. Wang, J. 2008, “Developing organizational learning capacity in crisis management,” Advances in developing human resources, Vol.10, no.3, p.425-445. Watson, T. 2007, “Reputation and ethical behaviour in a crisis: predicting survival”, Journal of Communication Management, Vol.11, No.4, pp.371-384. Wooten, L. P., & James, E. H. 2008, “Linking crisis management and leadership competencies: The role of human resource development,” Advances in Developing Human Resources, Vol.10, no.3, p.352-379. Read More