Case study on GSK

CASE STUDY
Presentation Outline:
Background
Case Summary
What is ‘crisis management’?
Strategic Phase
Reactive Phase
Image Restoration
Lessons Learnt

Background:
GlaxoSmithKline (GSK) is a British multinational pharmaceutical and consumer healthcare company that operates in over 100 countries.

They have an extensive portfolio of products for major disease areas including asthma, cancer, infection, diabetes and digestive conditions

Some products they produce that you might be familiar with:
Nicorette
Ribena
Panadiene/Panadol/Children’s Panadol – which will be the focus of today’s discussion.

Case summary:
In June 2000, GlaxoSmithKline found itself the victim of an extortionist. The extortionist claimed intentional contamination of its Panadol product. This resulted in all Panadol products to be recalled from stores across Australia. GSK had to account for 7 million products of Panadol. Once the company was regaining stability from the crisis they were again subject to another extortion attempt. On the advice of authorities GSK moved its products to pharmacies only and behind the counter. This entire ordeal damaged brand name, corporate image and integrity of the product range offered by GSK

Discussion point
This article is an interview of GSK Consumer Healthcare Managing Director Alan Schaefer in which he discusses the demand placed on him through the extortion crisis as well as the importance of having a crisis management plan.

Crisis management
The process by which an organisation deals with a major event that threatens to harm the organisation, its stakeholders and/or the general public (Wilcox, 2012)

There are 7 steps involved in crisis and risk management
1. Monitoring – which is all about environmental scanning while simultaneously considering the impact the issue has on the company.
2. Identification – what kind of issue is it? And what cycle of the crisis lifecycle is it at?
3. Prioritization – what is the probability of this particular issue occurring and how immediate is it?
4. Analyse – this step involves determining the most important details and determines the impact the situation will have on the organisation.
5. Strategy decisions – is creating a strategic response and define the content of the message. In this step, organisations will allocate resources they believe they will need to handle the crisis and develop the communication plan.
6. Implementation is the implementing of programs that have been approved by relevant management bodies.
7. Evaluation requires assessing the results post crisis and capturing lessons learned and failures that could have potentially been avoided.

Crisis management context

There are the four stages of a crisis:
Proactive
Strategic
Reactive
Recovery

The crisis management plan aims to prepare organizations and its members with effective strategies and guidelines on how to approach specific tasks or crisis. In doing this, organizations will generally scout the environment for potential threats; this is the proactive stage of the lifecycle.

Contained within the crisis management plan is the crisis management cure. This essentially is the reactive stage of the lifecycle in that you must now address the media with key messages and tactics employed to help the organisation maintain its brand and corporate image.

It also plans out how organizations can recover from the crisis, what relevant steps can be taken to overcome the crisis aftermath, image restoration.

PROACTIVE PHASE - the role of crisis management plan
1. To establish necessary company wide guidelines on approaching a crisis
2. To ensure business objectives are in alignment
3. Create a consistent approach throughout crisis
4. To provide reassurance and keep key stakeholders informed.
5. To coordinate vital resources both internally and externally

Benefits of planning? (class question)
Reduce stress
Consistent flow of information
Involves identifying and managing stakeholders
Business continuity
Can class issue into a lifecycle stage
Enables businesses to actively monitor, identify and strategic prioritize which risks may be form current crises.
STRATEGIC PHASE – who is part of the crisis team?
Schaefer stated in the article that it was important to keep the crisis team to only extremely relevant parties. When the crisis initially came about only 2 members were involved in the initial reaction. Once the crisis required the organisation to take formal action, Schaefer grouped 6 people to be part of their Core Crisis Team in which they would begin to address company objectives and how to approach the issue.

He discusses the notion that the tighter those defining objectives are, the greater clarity there is. Therefore, it is important to only utilize vital employees as too avoid too many opinions which distract from resolving the issue as quickly as possible.

GSK decided they has two main objectives:
1. Consumer safety is priority
2. Maintain the company and brands reputation

REACTIVE PHASE
This is when the crisis reaches a critical level of impact and the organisation must deal with it.
It involves the implementation of the prepared crisis plan, following guidelines and issuing statements that are congruent with overall company visions.
Due to the issue being at a full-blown crisis level, the organisation is under pressure to respond quickly and accurately to the media.
With GSK, they took on the ingratiation and corrective action approach. They did this by recalling all of their Panadol products of the shelf, not only did this appease the public by confirming that GSK was looking out for their safety but this also denoted they were going to disregard costs and focus on fixing the extortion problem before continuing their business.
Another strategy employed was continual informational updates by the CEO, spokesperson. This denoted a transparent and honest two way communication plan between the organisation and the public

Party of one?
GSK considered both situational demands and organizational resources when initially regarding the crisis in their management plan
Organization resources – do you have the knowledge and management commitment to tackle the threat?
Situational demands – the danger to the organization? Long term duration? What effort is required?
Schaefer discusses that it is rare an organization has the necessary capabilities built in to the organization in crisis management, you need outside expertise.
GSK employed Burson-Marsteller who are the center of the crisis in terms of communication, he maintained that their input was critical in helping GSK get through the crisis.

Do you think it is vital to nominate a spokesperson? Why? (Class Question)
Clear individual for the media to identify
Honest and authentic – reliablity of organisation
High level personnel from management indicates the company is taking issue seriously
Spokesperson is responsive and active
Through the application of the case we can see that this is indeed true.

CEO
During the crisis, CEO, Alan Schaefer found the media exposure to be ‘something different’. The intensity and the longevity of the crisis in the media was something he was not prepared for.
The stakeholders had a strong expectation for the CEO to ‘come out, stand tall and try to tell the story’.
By having a singular spokesperson, it gave clarity of ideas and key messages as only one individual was addressing the situation directly with the media.
By nominating Schaefer as spokesperson he was able to manage the story to a conclusion and help restore brand image.
Delegating the task to a public well known figure provided integrity to comments issued

Disclosure
Schaefer notes in the interview that
“..if you do the right thing by your consumers, your key stakeholders, you will be rewarded…..consumers will remember, however, that you put their interests in front of your own.”
The price tag was at 100 million dollars during the extortion crisis. Although the price tag for transparency during the crisis was extremely high the company felt and understood being forthcoming with information would retain a level of reputability and integrity from perceptions of the public
By being transparent and consistently informing publics GSK believed the rewards of their long term survival over rid the short-term thinking on costs.
Schaefer contends that you must “give them that story, otherwise they may disengage and move to competitive products.”
GSK took it upon themselves to show behind the scenes advertising, showing manufacturing to packing and selling – how they planned on getting the product back to the market place.
Consumer validated that the heritage of trust and safety that Panadol was built on.

Managing the organisation
Schaefer notes that ‘every crisis has its productivity curve’
When a crisis hits:
The organisation rallies
Productivity goes up
Everyone is doing more than their normal workload
The long-lived crisis:
The productivity begins to fall
You don’t come back to the same level; fall behind on what you were doing before.
Schaefer describes the emotional and physical exhaustion that takes place, employees are working up to 50% more hours a week than normal.

Communication protocols
As a global organisation, all action required approval by overseas head offices
This had the potential to diminish quick response times as clearing information took time.
GSK flew in a few people from the UK and US to assist with manufacturing issues
Combatted the main issue of extortion by allowing plenty of leeway to handle it locally
They ensured that input in key decisions were made with people from overseas by having them on 24 hour availability

The company still runs smoothly
Every crisis is unique, although they may share certain elements each crisis has different elements within it. To determine solutions you must be adaptable and flexible.
Prior to the crisis, proactive and strategic stages will already have established way to deal with crises in general.
You need to have pre agreed, clearly defined responsibilities and delegations.
You don’t want to be working this out in the heat of the crisis – by then, its too late.

Who minds the farm?
As CEO, you are required to manage the business as a whole, but during the crisis your attention and as spokesperson for the media you are understandably distracted.
Just because you face a crisis that doesn't’t mean daily operations cease.
In the crisis management plan, it is established who will lead in the event of a crisis.
In the case of GSK, Schaefer left his Director of Finances and Director of Marketing in charge.

IMAGE RESTORATION – how to rebuild?
GSK didn't’t have any product in the market place for 3 months.
The marketing department had to re-launch the brands.
On all three affected brands (Panadol, Panadeine and Children’s Panadol) during the 1st extortion.
During the second, they didn’t go public with the extortion attempt, no product recall
They had to move behind the counter on advice from authorities. Caused problems with planned re-launch

Adopting a different message
Organizations must be open to change
When a crisis is over, companies can rarely go back to doing the same thing they did previously.
GSK re-developed their marketing message to stress the competitive advantage. Pre crisis they rarely named competitors and focused solely on the results of the product.
GSK also had to differ their marketing message from pre crisis marketing due to companies like Herron, waging a marketing war on ‘Australian-ness’.

Schaefer’s advice
Pace yourself – he says that a crisis is not a sprint but a marathon, it takes time to recover and go through the course of bad press before there is a light at the end of the tunnel.
‘Out of the box’ thinker – a crisis demands that you do things that under normal circumstances you wouldn’t ever consider. It is important to be open and diverse in your thinking to handle crises.
Get the help – plenty of expertise can be brought in for a crisis. you are not expected to have all the expertise yourself, avoid the ‘not invented here’ syndrome. Lessons learned
Implement thorough planning
Ensure all statements are consistent and follow organisational objectives
PR practitioners need to manage the crisis effectively to shorten the lifecycle of the crisis
If the crisis poses a long term threat, organisations must take steps to ensure employees are still productive and not questioning their job security
Remember to be transparent versus a smoke screen, the long-term goals out way the short term relief.
GSK worked with external PR groups for the duration of the crisis, it is important to be aware of organisational resources to handle the issue appropriately