The caricature of best business practice, exemplified by private equity firms, large corporations, venture capital operations, and Ivy League graduates, is to be deliberate and slow when making decisions. Entrepreneurs and investment bankers shoot from the hip.
One of the most important case histories for crisis management was the Johnson & Johnson Tylenol recall in 1982.
It is likely that only a few lots were tainted by poison–perhaps only a few bottles. Nevertheless, James Burke, the company’s chairman, pulled every bottle of the painkiller off the shelves – nationwide. Tylenol was one of J&J’s most profitable products. Two decades later, The New York Times wrote “What set apart Johnson & Johnson’s handling of the crisis from others? It placed consumers first by recalling 31 million bottles of Tylenol capsules from store shelves and offering replacement product in the safer tablet form free of charge.”
BP plc (NYSE: BP) could hardly be a larger company with tremendous resources. The United States government could hardly be a larger government. Despite their resources, they both follow the business decision the caricature suggests. They have let the Deepwater Horizon problem fester and have not demonstrated an urgency in getting the problem fixed–even if it could not be fixed.
It was clear, as the rig burned starting April 20, that its pipe was at risk for serious rupture. BP and Transocean could have and should have known that the rig had failed some critical tests. BP management could have been at the site days before they actually arrived.
The press attacked Ken Salazar, the Interior Secretary, and the EPA for failing to take the situation seriously. President Obama attacked BP for the tardiness of its reaction to the leak. Still, with the right advice, Obama might have been in Louisiana days before he arrived.
If there is a lesson in this it is that fortune favors the early and damns the late. A look at international, political, and environmental catastrophes shows that reacting too late is almost always a problem, which means acting early would probably be harmless at worst and might be critical to success.
The government and Exxon Mobil (NYSE: XOM) were slow to react to the Valdez catastrophe. Both parties argued that they were slow because the location of the accident was so remote. However, both the oil company and government had plenty of helicopters and ships. There was no mobilization of the National Guard or other military operations to get to the spill early to slow the effects of it coming ashore. It might not have been successful, but a quick reaction could have helped.
President Obama’s presidency has been harmed by the government’s slow reaction to the Deepwater problem. It is not much different from Hoover’s slow reaction to problems in the U.S. economy or Carter’s dawdling during the Iran hostage crisis. Carter did not go to Iran. Bush did not get to Louisiana after Karina–not until well into the disaster.
Obama got to the Gulf late and has not go often. Being early and out in front of any of these problems might have changed the course of things. And might have lessened the harm that was otherwise caused.
It is a lesson that very few large companies, or politicians, have learned.
Douglas A. McIntyre
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