After 168 years of publication, the British newspaper "News of the World" published its final edition on 10th July 2011. At the time, the newspaper was profitable. News Group Newspapers Ltd., the unit within News International responsible for the News of the World and The Sun, reported an operating profit of £18.2 million in the year ended June 27, 2010.
So what led to the demise of this historic newspaper?
As readers would know from the current press stories, the closure was not about profits or profitability (although advertisers were reported as departing rapidly). The closure was about reputation - in particular, the reputation of one of the world's richest men, Rupert Murdoch, CEO of News Corp.
It's been said that leaders emerge in tough times. "Tough times" can describe natural disasters such as flood, fire or earthquakes. These can also be manmade such as war, riots, environmental or economic disasters. And of course companies can experience disasters due to mistakes, malpractice or just plain poor decision making.
In such times, we've seen leaders such as Churchill, Ghandi, Mandela, Rudy Giuliani and Jack Welch handle crises in a way that has set them apart as people who were seen as credible and trusted in very trying circumstances.
What is it about these leaders that gives people confidence that despite the pain and hurt it may be causing, the crisis is being well managed? What do these leaders do that others do not?
As Jane Jordan-Meier, author of a new book The Four Stages of Highly Effective Crisis Management, says: "Nowhere is an organization more vulnerable than when a crisis strikes. Crises are defining moments for organizations and their leaders. They are 'make it or break it moments'."
Where's the leadership at News Corp in the current phone hacking scandal unfolding in the UK?
Rupert Murdoch had his "make it or break it moment" when he appeared before the UK Parliament Committee hearing this week.
As Bloomberg's reported, "Rupert Murdoch's refusal to take responsibility for the hacking scandal that has slashed $5.89 billion from the market value of News Corp. (NWSA) may undermine his credibility as chief executive officer. Governance experts who heard Murdoch's performance before the U.K. Parliament yesterday said that by blaming underlings and saying he wasn't responsible he didn't do enough as CEO to acknowledge his accountability."
Despite describing this as "the most humble day of my life" Murdoch insisted that wrongdoing at the newspaper and efforts to clear it up were far below his level. Is this the behaviour we expect of a leader during a crisis?
What should a leader do during a crisis?
When interviewed for this article, Jane Jordan-Meier said: "Put simply, the readers and the storytellers themselves, perhaps unknowingly, expect to hear, see and read about stories of courage, death defying events, people surviving against odds, and that someone, somewhere can be held accountable for their losses. There has to be an explanation for why the government took so long to respond, or why there was in-fighting, or why it was yet another tale of bad boys behaving badly.
"We want to know that someone cares and has the determination, conviction and compassion to do something to make sure that the "worst" can never happen again. We are hearing very little if anything of this in the current phone hacking scandal."
Jordan-Meier's research shows that crises go through four distinct stages:
STAGE ONE: the spotlight is beaming squarely on the incident. This is the "breaking news" stage. "What happened?" is the key question. And the news travels very fast in Stage One to Stage Two – it doesn't take long for the story to jump the "fire line."
STAGE TWO: is characterized by the focus on the "victims" and the response. The light moves quickly from the incident itself (although new facts will continue to emerge) to the "drama". How could this have happened? How many people are hurt, missing and/or dead? How is the organization responding? How quickly did the responders get to the scene? The light will shine brightly on the perpetrator – or who we think the perpetrator might be.
This stage is key. This is the make it or break it stage, the reputation forming stage, the stage where the rallying on social media sites, both negative and positive, becomes a focal point.
STAGE THREE: Stage Three is the one best avoided, although inevitably we all want to go there – yes, the blame, finger pointing stage. Think back to the devastating oil spill in the Gulf of Mexico when the executives of the three companies at the heart of the massive oil spill were severely chastised over attempts to shift the blame to each other.
In this finger pointing stage – everyone has an opinion about you, your product, your organization, your industry, even your country (ask Iran) – lots of "woulda, coulda, shoulda."
Stage Three is all about blame with the key question focused on "Why?" The spotlight is more like a floodlight. The crisis is beamed everywhere.
STAGE FOUR: The light begins to dim in Stage Four which is the fallout/resolution stage. The spotlight now dims, but can easily be turned to full glare again if there is a slip up, or something similar happens in the industry. The crisis is perpetually in print, on Google, in Wikipedia – searchable and discoverable. Your "sin" will be for everyone to see forever – you can't take it back.
Typically, this stage marks the end of the crisis; there is some resolution. There might be a funeral, a government inquiry, or a Senate hearing. Your product goes back on the shelf, workers go back to the plant, victims return to their homes.
As Jordan-Meier points out, these stages are very clear "The evidence is plain for all to see. Just watch the media coverage, follow the tweets, notice the Facebook posts and you will soon see the narratives played out in very predictable patterns, with very predictable questions. That's the good news. And the bad? Well, it happens at lightning speed, so be prepared to make a statement within an hour of something happening".
Jordan-Meier also points out there is a need for a recognised and credible spokesperson to handle each stage.
"Communicating in a crisis is not for the faint-hearted or the un-trained. In a crisis, you need speed, decisiveness, authority and often significant courage.
"Jack Welch says that even those who are 'extraordinarily gifted' try to make the problem 'disappear' by giving it to someone else to solve. Indeed, not the best strategy. The choice of spokesperson is a critical component for effective crisis management. Crises have the potential to destroy entire industries, bring down governments, and adversely affect large regions of the globe."
So how did Murdoch handle these stages?
When the story started to break in early July, News Corp. hired two public relations advisers to assist the company during its phone hacking scandal.
"Sard Verbinnen & Co. in New York and Glover Park Group in Washington will work with the company's communications, investor relations and government teams", Julie Henderson, a News Corp. spokeswoman, told Bloomberg in an interview.
This is the "breaking news", the "what happened?" stage. Julie Henderson is Senior Vice President, Communications and Corporate Strategy, and despite the impressive title, sits below the senior management team level.
Was this an appropriate response to Stage One – the "breaking news" stage? Was Julie Henderson the appropriate spokesperson? And what of the delegation to PR firms?
Then the phone hacking story quickly moved to Stage Two. As Jordan-Meier points out, "Stage Two is where the focus shifts to the victims and the response from the government or organisation". In this case, the incident that really triggered the huge public outcry in the UK was the phone hacking of murdered school girl Milly Dowler.
The News Corp response? The first was to close the newspaper, News of the World. Would this make the crisis go away?
Then, in short succession there were resignations from key News Corp executives. Notable amongst these was Rebekah Brooks, CEO of News International, the company responsible for the UK operations. The scandal has now also caused the resignation of two of the UK's top police officers.
Where was the key crisis management spokesperson in Stage Two?
Finally, Murdoch appears and provides a personal apology to the family of Milly Dowler.
Remember, Stage Two is key. This is the make it or break it stage, the reputation forming stage, the stage where the rallying on social media sites, both negative and positive, becomes a focal point - How did Murdoch score?
We've now moved very clearly into Stage Three – the "blame", "finger pointing" stage. Rupert Murdoch and his son James, CEO of BSkyB, the UK television arm of News International, appeared before a UK parliament investigating committee. Whilst it appears that James' reputation may have been enhanced, Rupert fared less well.
"The News of the World is less than one per cent of our company," Murdoch told Parliament's Culture, Media and Sport Committee. He said he may have "lost sight" of the paper because it was "so small in the general frame of the company." Is this an appropriate response to capably manage Stage Three?
As we go to press, this story is still unfolding. It would seem that there is more to come. However, Stage Four may have already started with the punch thrown by Rupert's wife Wendi in the parliamentary enquiry (Stage Four includes "fallout").
Readers can make up their own minds as to how the crisis is unfolding and being managed.
However, as Jane Jordan-Meier suggests "So while we have not yet had closure we have some elements of Stage Four, but this crisis is far from over. Will it go away when Rupert steps down? Or when James is "sacrificed"? Stage Four is also all about fallout – and we may yet see more of that in the USA if the FBI uncovers any wrongdoing."
From a leadership perspective, the important thing for all of us to consider is "Could this happen to me?" We may think we are immune to crises, yet who can predict the future? Remember, crises can occur for any number of reasons – some of which are outside our control.
The one thing we can do however is be prepared. Does your organisation have a crisis management plan in place? Are there designated spokespeople to handle each of the stages? Has everyone been trained? Are you ready to handle your crisis?
