Crisis expert advises focus on values to build trust
Decision-making processes based on company values are the best approach to managing a crisis, says Alan Hilburg, president and chief executive of HilburgMalan.
Mr Hilburg has been operating in the crisis management industry for over 35 years. In his time, he designed “trust building strategies” for companies like JPMorgan Chase, Four Seasons, and Gillette. His GE, Wendy’s and AT&T trust campaigns have been ranked in the top 10 of the century list.
The author of two New York Times bestsellers on leadership, Mr Hilburg is credited with advising Johnson & Johnson during the Tylenol crisis, a now classic Harvard Business School case.
“The manager called me late at night to tell me that a series of people in the Chicago area had died after ingesting Tylenol pills that had been tampered with. After talking with the chief executive at midnight, not a good career move by the way, we decided to take of all Tylenol from the shelves.”
Johnson & Johnson’s 31 million bottles recall came at a cost of US$100 million and was a serious hit for the company’s reputation, and bottom line.
The recall reduced Tylenol’s market share from 30% to zero. However, once the product was relaunched with safety measures like protective plastic around the cap, which prevented people from tampering with the medicine, its market share climbed north of 40%.
This decision, like many in Mr Hilburg’s career, was driven by the belief that trust, not balance sheets, is the most important measure of a company’s success.
Along with Harvard University and the University of California, Mr Hilburg developed the platform to measure trust, which is used in HilburgMalan’s consulting work. Mr Hilburg said the instrument can measure trust within any two individuals, “between you and your brother for example”, and pinpoint the aspects of trust and what the underlying factors for that mistrust are.
Through this platform, the firm can measure mistrust between and within different levels of an organisation, as well as between customers, stakeholders and media, and suggest steps to follow to improve trust.
This number does not necessarily correlate with valuations or price equity rations, which are rationally driven. “The analyst community evaluates companies in terms of numbers, but we evaluate them on the basis of people.”
Even if this trust measure is not immediately reflected in valuations, “trust consulting” is still highly sought after by private equity firms. “In the space of mergers and acquisitions we have done about 150 transactions, including with a highly-regarded Wall Street private equity firm.”
“For example, a company was acquiring a manufacturing firm in Poland, which looked great in terms of numbers. The people tell a different story however. The trust between the 14 leaders was very low, and workers trusted their boss but not middle management. We also found that 16% of the company’s customers did not trust the brand.”
While an 84% “trust rate” sounds good from a managerial perspective, Mr Hilburg said, the 16% that don’t trust the company represent a chance to study the areas where the company is falling short.
A people-centric approach helps private equity firms give a longer term view of the company than numbers can. If the company’s relationships are not built on trust, its largest clients, and hence its values, may evaporate in a few years.
“The only thing that is on the line during a crisis is trust, and how you respond to a crisis rather than the crisis itself has the greatest impact on trust,” he added.
He believes that how a company responds to a crisis is a reflection of its character and ethics in the eyes of consumers and stockholders.
Mr Hilburg said the best, perhaps only, way to make decisions in times of crisis is to follow the organisation’s values. These values, which could include timeliness or respect, have to be refined and ingrained in every level of the organisation.