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In the jaws of a crisis.

In the Jaws Of a Crisis

The topic of crisis management could not be any more timely than it is today. In the oil industry we have come to learn that the world is full of surprises and rapid, radical changes. Reflecting upon the last 20 years in the oil business, we have seen:

- Surplus and shortage;

- Price runups and price collapse;

- Fat refining margins and margins that were all too slim;

- Price and allocation controls;

- Oil industry decontrol;

- Rapidly growing demand, an almost-as-rapid decline, and, then, renewed demand growth;

- Refining undercapacity, overcapacity, and, now, tight capacity;

- Rapidly expanding exploration and production budgets, followed by drastic cuts;

- Record-high rig counts and, then, the fewest in recent memory; and

- Various mishaps and other events that affected the public's opinion of us.

This is just the short list. It doesn't even attempt to include the myriad environmental regulations and other laws that have been passed affecting the oil industry. And events such as the recent political change in Eastern Europe and the recent war in the Middle East show how suddenly the whole world can change and how quickly a crisis can occur.

Such events may happen even more rapidly in the future. What's more, America has the added stimulus of a new social agenda and its twin sister, environmental activism. So, change, turmoil, and even crisis are likely to dominate in the years ahead. And if organizations are to survive as we know them, we had better learn to deal effectively with change and crisis, not as a matter of necessity but, rather, as a matter of choice.

Ashland Oil Inc. found out the hard way that a crisis can happen at any time, and that Corporate America had better be prepared to deal with major emergencies because the way we respond to crisis often determines the public's perception of us for years to come. We learned that the reputations that companies spend years to build can be destroyed in an instant unless the proper response is made.

Abraham Lincoln's admonition of more than 100 years ago emphasized the importance of public opinion: "Public sentiment is everything. With [it], nothing can fail, without it, nothing can succeed; consequently, he who moulds [sic] public sentiment goes deeper than he who enacts statutes and decisions. He makes statutes and decisions possible or impossible."

Today, it is clear that crisis management has evolved from a public relations issue to one of professional status. Crisis management has become an organized, systematic method to cope with the unexpected.

There are several well-known examples of good crisis management: Johnson & Johnson's handling of the Tylenol crisis is among the most notable. As a result of these successful examples, there is some commonly understood wisdom about the process. According to Professor Gerald Meyers of Carnegie Mellon University, good crisis managers have four key tools in their crisis management kits. Briefly, they are: * One, the crisis audit. This is purely and simply an inventory of what can go wrong and what resources can be made available to tackle the problem. And remember Murphy's Law: What can go wrong, will go wrong. * Two, the crisis team. Key people who will accept responsibility and make critical decisions should be identified before a crisis even occurs. And an efficient and effective system of notifying them should also be worked out. * Three, practice. Simulate the kinds of situations that the crisis audit has identified, and practice dealing with them. Communicating with the public is crucial in a crisis. The media will want to know everything about the site, the product, the employees, and the company. It is a good idea to have a source book for every facility on file. * Four, the crisis center. This is the command post where the crisis team works. Know in advance where it will be and equip it with the necessary resources. If it is to be on-site, be prepared to start from scratch - to have no power, no telephone, no fax. In other words, have a contingency plan.

No team, no plan

We learned from experience what items the crisis manager needs in his tool kit. When an oil spill in Pittsburgh happened on the holiday weekend of Jan. 2, 1988, we didn't have a team, and we didn't have a plan, but we had been through smaller emergencies and had a basic idea of what to do. What follows are the circumstances we found ourselves in and our response.

At about 5 p.m. on Saturday, Jan. 2, a tank containing nearly four million gallons of diesel fuel collapsed suddenly at Ashland's Floreffe, Pa., terminal near Pittsburgh. The force of the collapse sent diesel fuel surging over the containment dike like a skier off a ski jump. The force of the wave dented another tank 100 feet away and knocked out power and telephone lines. Our manager had to run up the street to find a phone to call headquarters and begin proper notifications.

Unbeknownst to us, the diesel fuel ran across our property and into a storm sewer on adjacent property. From there, it entered the Monongahela River, threatening the water supply of suburban Pittsburgh. The spill eventually flowed into the Ohio, where it affected the water supplies of several communities downstream.

Due to darkness and poor weather conditions, several hours went by after we were alerted before we could confirm that there was oil in the river. Even after it was confirmed, we initially believed any interruption of water supplies could be averted. Pittsburgh's West Penn water station was the first to be affected. It had two intake valves - one three feet and another 16 feet beneath the surface.

Oil from shore to shore

But it wasn't to be. Although it was not immediately apparent, the oil and water had begun to emulsify almost immediately because a power company discharge pipe adjacent to the storm sewer and a navigation dam a few hundred yards downstream were churning the waters. Before we knew it, we had oil from shore to shore and practically from top to bottom. When West Penn Water Co. couldn't use the lower intake valve, we knew we were in big trouble.

In retrospect, we were really very lucky because the city of Pittsburgh draws most of its water from the Allegheny River. But it was bad enough having service interrupted to 25,000 people in the suburbs.

We immediately had an enormous public relations problem on our hands. Television and radio stations in Pittsburgh immediately began special coverage of the situation. One of the lessons we learned from this experience is that in a crisis of this nature, our media relations people - who were being swamped with calls - may have as good, if not better, information about the seriousness of the situation than do the operations people on the site. In fact, it is more often the public - and not the engineers - who decide how big the problem really is.

On Sunday, after we learned that West Penn Water Co. would have to shut down both intake valves and begin rationing supplies, I immediately contacted Gov. Casey of Pennsylvania to review the situation with him. I found that he was already well aware of it, and he was pleased to learn that Ashland would make every effort to correct the problem as soon as possible.

We quickly realized that within a few hours - or a day or two at the most - the contaminated river water would flow past Ohio and West Virginia. So, I also called the governors of Ohio and West Virginia to express our concern and reassure them that we were doing everything we could to rectify the situation.

The crisis affected us on other fronts as well. Our stock price took a substantial hit in the week following the spill. In the weeks immediately preceding the spill, our stock was trading in the high '50s and the volume was well below 100,000 shares a day. But in the first two trading days after the spill, volumes began to rise and the price began to drop.

Reassuring investors

So, in addition to our operating and public relations problems, we were faced with reassuring the investment community that we were dealing with the situation in a responsible manner and that we had appropriate insurance coverage.

To make matters worse, the harsh glare of the media spotlight was on us in full force. We had more media time than our advertising department could ever afford to buy and instant nationwide name recognition, but it certainly wasn't the message we would have chosen. At the same time, the investigative reporters were asking questions, and, unfortunately, our internal investigation had determined that there were many facts about the construction of the tank that we wish had been different. We decided it was time to take the heat. We set up a news conference for Tuesday, Jan. 5, in Pittsburgh. We planned to have it early that day, but rescheduled it for the afternoon so as not to conflict with a press conference by Gov. Casey.

At our press conference, we announced that we would take responsibility for the cleanup and we acknowledged the facts as we knew them about the tank's construction, its permitting and testing procedures. After making our prepared statement, we decided to stay and answer questions until the press was tired of asking them. That took two hours. When a couple of news agencies showed up late, we willingly stayed another half-hour to give them the statement and take their questions.

Participation of outside expert

At the news conference, we pledged to bring in an outside expert - Batelle Memorial Institute - to determine the cause of the tank failure and we promised to make public their findings. Because of environmental concerns, we later decided to fund an environmental impact study by the University of Pittsburgh's Center for Hazardous Materials Research.

We're frequently asked what lessons Ashland has learned from this experience. The biggest lesson was in the experience itself; as a result of it, we've developed what one might call a crisis management "recipe" (see box on page 19).

If the public perceives that you are truly sorry and that you genuinely want to do the right thing, they will usually forgive you rather quickly. But top management must do the job. The greatest sin in crisis management is to trivialize or understate the problem. The public hates to have its concerns taken lightly. Only senior management can add the necessary weight to the message that the situation is under control and that the problem is being fixed.

In the jaws of a crisis, time is short, information is scarce, the stakes are high, your options are limited, and it is easy to lose control of the situation. You have to drop everything else and run to the crisis. You must deal with the public's concerns. In other words, you must take over the crisis, before it overtakes you.

We live in a world filled with crisis. If your company hasn't experienced one lately - worry, your time almost inevitably will come. Advance planning, practice, honesty, openness, and personal commitment are the keys to effective crisis management.
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Copyright 1991 Gale, Cengage Learning. All rights reserved.

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Title Annotation:Chairman's Agenda: Managing Environmental Responsibility; crisis management of the Ashland Oil Inc.
Author:Hall, John R.
Publication:Directors & Boards
Date:Jun 22, 1991
Words:1866
Previous Article:Remolding the environmental function.
Next Article:The environmental audit.
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