Business people of all kinds are going to study the BP Gulf of Mexico oil spill and its fallout for years to come.

Oil spill shows need for solid crisis management

Larry Waterfield

Here’s an event that has everything: environmental disaster; apparent technical and human breakdowns; lax management; sloppy — and maybe corrupt — government regulation; a major food safety event involving the seafood industry; and a hotel and foodservice meltdown involving thousands of restaurants, hotels and tourist businesses that lost the bulk of their business.

Here was the ultimate in crisis management, in bad public relations. Here was a media feeding frenzy that multiplied the crisis in the mind of the public.

Here was an event that will cost billions of dollars — $20 billion at minimum, and some say the cost could go to $50 billion or more.

In addition, seemingly every politician, government agency and Congressional committee is investigating the event, which undoubtedly has slowed down the recovery. Swarms of lawyers will be kept busy for years with lawsuits and class action settlements.

The public now often assumes the worst about business, particularly Big Business. BP is one of the biggest — fourth largest in the world, with $246 billion in annual sales. Plus, almost no one likes oil companies, even though the entire economy is dependent on them.

Certainly, agriculture is dependent on gasoline, diesel, natural gas, fertilizers and petroleum-based chemicals and packaging.

The media coverage was frantic and unending, especially on cable TV news. Probably the greatest PR damage was from the TV shot, shown constantly, of the oil gushing into the gulf. This was shown even when the spoken words were saying that many coastal areas were free of the oil.

In TV, pictures trump words, so the spilling oil wiped out any good news. This brought angry responses from restaurant and hotel officials along the Gulf.

The head of a major Florida hotel and restaurant group complained that the oil pictures were keeping tourists away from south Florida, even though no oil reached its white powdery beaches.

The food safety concerns were also an economic disaster, affecting a $1 billion industry.

One fish processor pointed out that Gulf seafood was the most tested food product in the world, while seafood imports were only lightly inspected.

“Some of the imported seafood is produced in sewer-polluted waters,” he said.

A smaller company would not survive all this, but BP has deep pockets, including vast pockets of oil and gas reserves, although falling prices made the pockets more shallow before the oil spill.

This reporter did something that almost no other reporter bothered to do. I looked up BP’s Annual Report, which is online.

The 2009 report showed the company was coming down from a high in profits stemming from the record oil prices. Prices were down, profits down, and the company bragged it was cutting billions of dollars in costs to keep profits and dividends up. That cost-cutting might be at the root of the oil spill.

BP was profitable, but not wildly so. After tax profits were around 7%, which is respectable but nothing spectacular. Profits and dividends are now wiped out.

The report showed that the company was as much American as British, with much of its business and employment in the U.S.

Ironically, the company bragged about its “green” image, including investments in solar energy and agriculture-related ethanol production in Brazil. The company was positioning itself as an energy company, and more than an oil company. That effort crashed and burned along with the oil rig.

Every press report and every politician blasted BP. One commentator on CNN called BP officials “thugs.”

No mere PR campaign or crisis management was going to help. BP and its advisors decided the only solution was to launch its own campaign, with $50 million in paid advertising showing that it was an American-centered company with local people who vowed to “clean up the Gulf. We live here.”

That probably helped. Not many companies can afford to do that.

The media and government reactions were universally hostile — with one exception. The Federal incident commander, Admiral Thad Allen of the Coast Guard, praised BP for pulling out all the stops and marshalling vast resources to stop the spill. That modest pat on the back was virtually ignored.

When it’s a no-win situation, you can’t win, so cut your losses. A smaller company would have declared bankruptcy, sold off major assets, pulled out of the U.S. and tried to salvage what it could. BP may be another company too big to fail.

There were discussions between President Obama and British Prime Minister David Cameron about how to save BP.

A smaller company, one caught up in a food safety issue or food recall, or some misuse of a chemical or pesticide, will find it has few friends or allies, and will face a hostile media and public.

If disaster does strike, it’s still best to get all the bad news out fast, and not let it dribble out month after month as BP did.

Talk to the media — it will help some and may soften the coverage. And point out, again and again, that you deplore what has happened, are fixing the problem, and plan to help any victims.

That’s the bottom line survival mode.


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