News Corp: Beware the knee-jerk crisis responseJuly 12, 2011: 11:25 AM ET
Rupert Murdoch's News Corp. has responded to the scandal at News of the World by jettisoning the publication. That crisis judgement call, among others, could come to haunt the company.
By Shelley DuBois, writer-reporter
FORTUNE -- When it comes to crises, most of us are hard-wired to either fight or flee. This is useful during, say, hand-to-hand combat, but it often spells trouble during a corporate crisis.
Make no mistake about it, Rupert Murdoch's News Corps. (NWSA) is in crisis. And the phone-hacking scandal surrounding the recently-shuttered News of the World grows more complicated by the minute. Some of the decisions Rupert Murdoch has made in the melee look like knee-jerk reactions, says Steven Fink, president and CEO of crisis management firm Lexicon Communications Corp.
Murdoch closed the British tabloid, which printed its final issue on July 10, and is now in the UK trying to salvage a delayed deal to take over the remainder of British broadcasting company BSkyB, which is facing new scrutiny in light of the scandal.
Murdoch and his son James have prioritized protecting Rebekah Brooks, editor of News of the World at the time of the hacks and currently the chief executive of News International, News Corp.'s UK arm.
It's a strange move, Fink says: "It just doesn't smell right. You don't rush out to defend somebody like that who is so close to the fire."
The quick decision to close the 168-year-old tabloid was another curious move. News of the World was doing well. It had a weekly circulation of about 2.6 million and it was profitable. Instead of shedding it, Fink says, "They should have purged the miscreants from the News of the World and brought in a credible and respectable team of journalists to right the ship."
Shuttering the paper abruptly might not rid the company of the problems it's trying to solve. "They're trying to bury the body along with the smoking gun, and you just don't do that if you're managing a crisis properly," Fink says.
Executives often respond to crises with quick action, says Harlan Loeb, a director at public relations firm Edelman. Powerful employees often get to where they are largely because of their ability to make solid decisions while under the gun during day-to-day business. But crises require a different skill set. In extreme circumstances, he says, following your gut can actually lead you down the wrong path.
Not that dropping News of the World is necessarily the wrong move, Loeb says, but dramatic actions stir up questions such as, "What did that decision solve? And how is the company better because of it?" If there are good answers, the decision will ultimately be justified.
On the other hand, dramatic action can be emotionally satisfying, especially in a time of crisis. "I will tell you this," Loeb says, "if you rely on emotion and instinct in the face of crisis, you will almost always get it wrong."
This happens often, says Fink. In 1984, then-CEO of Union Carbide Warren Anderson immediately hopped on a plane to India after a poison gas leak at one of the company's plants in Bhopal. He was arrested upon landing, and rendered far less capable of managing the company's crisis.
Former U.S. congressman Anthony Weiner's recent scandal is another example of the same pitfall. Weiner's decision to cover up his inappropriate tweeting habit ultimately buried him, much more than any crotch-shot ever could.
The best response a person or a company in crisis can take is to quickly pinpoint the problem and then control the conversation about it. Take the recent issue with some of Boeing's (BA) 737 jets, flown by Southwest (LUV), that suffered tears. Boeing traced the issue to a specific manufacturing incident, and "two days later, no one was talking about it," Loeb says.
Companies that can't locate the problem maintain tension and mystery in the story, which keeps it alive in the media.
A bad decision made early in a time of crisis lives on, says Fink, because a leader is often put in the unenviable position of defending it. "The decision to shutter News of the World was designed to say, 'We've solved to the problem, let's move on.' But the question is: have they solved the problem?"