What Has Business Learned from 9/11?

What, if anything, have businesses learned from 9/11? Unfortunately, not much, even though it is estimated that up to 80% of terrorist acts are committed against businesses, not against governments. And the ways in which businesses responded to 9/11 have a great deal to teach us how Mattel responded—or should have responded—to its recent crises in China.

Prior to 9/11
For over 23 years, my colleagues and I have been analyzing and consulting with regard to major crises of all kinds, from the 1982Tylenol poisonings, which are generally acknowledged to be the beginnings of the modern field of Crisis Management, to Hurricane Katrina, the Virginia Tech shootings, etc.
Just a few months prior to 9/11, we sent out a survey to the Fortune 1000 companies. We gave them a large laundry list of crises to rate, from fires to product defects to terrorism. We asked them how many of each crisis they had experienced, and which ones they were prepared for. Not surprisingly, prior to 9/11, terrorism was the crisis that companies were the least prepared for.

Immediately after 9/11, we sent the same survey out to the same companies. And, we have continued to send the survey out on the anniversary of 9/11 so that we can track what, if anything, has been learned since then. Just after 9/11, preparation for terrorism shot to the top of the list. Just as interesting and important were the reasons. In brief, “It was the right thing to do, irrespective of costs.”

One year after 9/11, however, preparation for terrorism was still high, but the rationale had shifted dramatically. Preparation for terrorism was justified but “if and only if it was cost effective.”

And then, just two years later, the preparation for terrorism had fallen to where it was before 9/11! Now, if 9/11 is not a big enough whack in the head to get companies to pay attention to terrorism, then I truly don’t know what is.

Even more revealing was the finding—a finding that has been borne out by all our previous studies over the years—that there is a huge difference between two very different kinds of companies: proactive and reactive.

Proactive companies prepare for significantly more crises than they have experienced. Reactive companies experience significantly more crises than they have prepared for.

Guess which companies actually experience more crises? Reactive! And, guess which companies are significantly more profitable? Proactive! And yet, guess again which companies care mainly and only about making money? Reactive companies!

The mindset of these two kinds of companies is so drastically different that the proactive companies actually end up making more money than the reactive companies. Why? Because the proactive companies see Crisis Management as something that can uncover potential problems and thus fix them before they happen. Hence, Crisis Management contributes directly to their viability and profitability. In contrast, reactive companies see Crisis Management as a “burdensome cost” that “detracts from the bottom line.”

The China Syndrome: Mattel’s Recent Crises
But, terrorism is one thing. Perhaps it is expecting too much for companies to be prepared for extreme events like terrorism. Sadly, this is not the case.

The announcement by Mattel that it was recalling yet another batch of toys only reinforces all our previous findings.

One, you can’t just react to crises. Once a company is in a reactive mode, it is virtually impossible to get out of it. It is unable to anticipate and handle future crises better. In short, when one is reactive, one is perpetually trying to deal with and recover from the severe stresses and strains of previous crises before one can handle the next ones.

Two, the only permissible stance is to be proactive. It is truly incredible that Mattel appears not to have been prepared for the multiple crises it has experienced. Unlike terrorism, these crises strike at the very core of its businesses.

By any stretch of the imagination, the range of crises that China has experienced—SARS, contaminated pet food, peanut butter, and toothpaste—should have been a clear and unmistakable warning that Chinese factories were not up to world standards of quality control. After all, when one threatens the world’s health, messes with the health and safety of pets and young children, what more of a warning does one need? As any PR professional will tell you, pets and young children are two out of the holy trinity of stakeholders that one never offends, the other being the elderly. Long before this happened, Mattel should have deployed its own quality control inspectors.

Three, you can’t do business in the global economy with a local mindset. If American consumers want cheap goods, then they ought not to be surprised that it comes with greatly increased risks. The plain fact of the matter is that you get the safety that you are willing to pay for. You can’t separate safety from manufacturing, period!

Lastly, Mattel demonstrates that we have more to fear from companies that operate like it does than we do from Al Qaeda! After all, on a daily basis, which one affects our lives more?

This is perhaps the most important lesson of all.

About imitroff

Dr. Ian Mitroff is Professor Emeritus at the Marshall School of Business and the Annenberg School for Communication at the University of Southern California in Los Angeles. He is the president and founder of Mitroff Crisis Management, a private consulting firm based in Oakland, California, that specializes in the treatment of human-caused crises. He is a Senior Investigator with the Center for Catastrophic Risk Management at the University of California, Berkeley.
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