Thursday, August 30, 2007

The Worst PR Debacle in History

BoSacks Speaks Out: Here is a real news story that has huge PR lessons embedded in it for us all. Denny Hatch's conclusion takes this world news story and brings relevancy to our everyday business, be you large or small. It seems clear that we will be affected by this story on many levels for years to come. My conclusion so far is that we are better off that China does not have better PR . . . Imagine the consequences if they did.

"Friendship is like expensive china. It can be fixed when it is broken, but the crack will remain."


The Worst PR Debacle in History
What Can Be Learned from China

In 50 years of being a news junkie, I cannot recall a tectonic success-the roaring Chinese economy-being so badly trashed by greed, incompetence and appalling PR.

With a 1.3 billion population, China is governed by an iron-fisted Communist regime. But with millions of individual entrepreneurs "doing their own thing," its laws are unenforceable.

When laws are unenforceable, a society is ungovernable.

The key takeaway point in this story: Whether you are a nation, a corporation, a small business or an individual, do not get into a pissing match with your critics, do not stonewall and do not try to muzzle the media.

This is not good PR.

The June 21 story in this e-zine was titled, "IS IT TIME TO STOP DOING BUSINESS WITH CHINA?

I created a laundry list of unacceptable Chinese behavior: theft of intellectual property, piracy, counterfeiting, exporting poisonous foods for humans and pets, the export of chemical-laden toys and products, plundering the oceans, cruelty to animals and gendercide-the state-approved murder and abandonment of girl babies.

I assumed that the story would gradually fade away, and I could go on to other things. But during the past month, the media have reveled in recalls of more toys, tires, formaldehyde-infested blankets and pajamas as well as a scathing report on working conditions in Chinese toy factories.

The only light at the end of the tunnel for China appears to be the headlamp of an onrushing locomotive.

China's Pollution Crisis

This past Sunday's front-page exposé in The New York Times on pollution in China was huge-four columns with an illustration of a coal mining shantytown above the fold. A good 40% of the front page was devoted to this 4,300-word story. It has worldwide implications and serious troubles for China.

Last Saturday at the Osaka, Japan, track and field championships, one-third of the marathoners were unable to finish because of the polluted air. Juliet Macur reported in Sunday's New York Times that with the 2008 summer Olympics scheduled to be held in Beijing, American marathoner Deena Kastor is considering wearing a surgical mask.

"Chinese cities often seem wrapped in a toxic gray shroud" write Joseph Kahn and Jim Yardley in the Times. "Only 1 percent of the country's 560 million city dwellers breathe air considered safe by the European Union. Beijing is frantically searching for a magic formula, a meteorological deus ex machina, to clear its skies for the 2008 Olympics."

Imagine the embarrassment to China if all 10,500 Olympic athletes-as well as thousands more staff, handlers and fans-are seen wearing surgical masks on worldwide television for the full 10 days of the event!
How China will deal with its pollution crisis remains to be seen. Especially interesting will be its PR offensive as it tries to persuade the world that Beijing is a simply ducky place to have the Olympics, that running the marathon will not be the equivalent of inhaling the smoke from two cartons of cigarettes.

Based on the events of the past month, China has a lot to learn about how PR works.

Bellicose Chinese PR
American PR practitioners in government and the private sector are trained to do their damnedest to smooth things over and get a bad story out of the public eye. The object is to contain it until something more dramatic captures the attention of news editors.

Containment is not in China's lexicon. The Communist government's current modus operandi is aggressive confrontation and intimidation.

"China Steps Up Safety Efforts"

This is the July 6 headline of a story by David Barboza in The New York Times. Barboza described China's clumsy PR effort to deal with defective products created for export. To make the world feel better, China boasted about quickly executing (presumably by pistol shot to the back of the head) a drug official who had taken bribes to overlook shoddy products.

"Uncle Sam, Your Banker Will See You Now . . . In the Hole to China"

On August 8, this headline ran over Paul Craig Roberts' byline in Alexander Cockburn's e-zine, CounterPunch. The less-than-elegant lead paragraph:

Early this morning China let the idiots in Washington, and on Wall Street, know that it has them by the short hairs. Two senior spokesmen for the Chinese government observed that China's considerable holdings of US dollars and Treasury bonds "contributes a great deal to maintaining the position of the dollar as a reserve currency."

For years-using very complex wheeling and dealing-China has maintained an artificial value of its currency against the dollar, putting the United States deeper and deeper in thrall to the Chinese economy. The Bush Administration has threatened sanctions against the Chinese if they continue to manipulate the yuan against the dollar.

Trouble is, China holds more than a trillion dollars in American debt. Roberts' story is about Hi Fan, a researcher with the Institute of World Economics and Politics at the China Academy of Social Sciences, who issued a dire threat to the United States. If the United States starts playing economic hardball, China will start selling dollars on the world markets and literally destroy the U.S. economy.

Welcome to hardball, Beijing style.

Three days later, the Associated Press ran a dispatch by Audra Ang with the following headline: "Product Safety Fear Inflated, China Says." From Ang's story:

BEIJING, Aug. 10-China's Health Ministry accused foreign media Friday of exaggerating problems with the safety of the country's food, and a Chinese tiremaker at the center of a huge U.S. recall accused the company importing the tires of distortions. While China faces "severe challenges" in ensuring food safety, foreign media are playing up the problems and have ulterior motives, Health Ministry spokesman Mao Qunan said at a news conference.

Everybody hates the media. To the Chinese, good PR is shooting the messenger.

"China Cracks Down on New Media as Party Congress Nears," was the August 16 headline of Keith Bradsher's story in The New York Times. Bradsher reported that the Chinese government threw a reporter in jail for a year and fined him $130 after his conviction for fabricating a report that dumpling makers in Beijing were using cardboard as filler.

In point of fact, I watched a television news story-I think on ABC-which showed cardboard being cut up and used in dumplings by a street vendor; the story was emphatically not fabricated. The government warned that "those who intentionally fabricated news and caused public anxiety and tarnished the nation's image would be harshly dealt with or even prosecuted if they broke the law. Their news organizations would also be penalized."

In other words, if Chinese authorities do not like your reporting, you do jail time. This was what happened to Shi Tao, sentenced to 10 years in prison for releasing Chinese propaganda instructions to western Web sites.

On August 21, the Associated Press reported an attempt by the Chinese government to restore trust in its products and export practices with the headline, "China launches PR campaign in tainted-goods controversy." The Chinese government also launched a TV series extolling its strict safety standards and excoriated the world press for "demonizing China's products." The week-long series was available only in China.

The following day, August 22, the Associated Press ran a truly bizarre headline, "Chinese Exec: Mattel At Fault For Recall. Blame Cannot Be 'Pushed Aside' For Lead-Tainted Toys, Chinese Toy Manufacturer Says."

This charge was in response to the much-publicized recall of 1 million toys in early August because of lead paint danger-which can kill children-and the recall of 19 million toys two weeks later because they were made with tiny magnets, which children can swallow or choke to death on. Li Zhuoming, executive vice chairman of the Guangdong Provincial Toy Industry Association, put the blame on Mattel for failing to do proper testing.

In that same AP report were two additional charges that the U.S. was at fault for China's problems:

* China's ambassador to the United States defended the quality of Chinese products and blamed the press for "churning up agitating stories."

* China's General Administration of Quality Supervision, Inspection and Quarantine accused the United States of sending a shipment of soybeans that contained pesticides that had a "great potential hazard to the food safety of Chinese consumers."

Another PR technique China is using is to blame American importers for its woes-specifically Wal-Mart, Target, Gap and Eddie Bauer. In an August 22 story in The New York Times, Jane Spencer wrote:

The textile industry is one of China's dirtiest. In addition to heavy metals and various carcinogens, fabric dyes may contain high levels of organic materials, and thread is often dipped in starch before it is woven into fabric. The breakdown of large amounts of organic compounds such as starch can suck all the oxygen out of a river, killing fish, and turning the water into a stagnant sludge.

Prices on fabric and clothing imported to the U.S. have fallen 25% since 1995, partly due to the downward pricing pressure brought by discount retail chains. One way China's factories have historically kept costs down is by dumping waste water directly into rivers. Treating contaminated water costs upwards of about 13 cents a metric ton, so large factories can save hundreds of thousands of dollars a year by sending waste water directly to rivers in violation of China's water-pollution laws.

"Prices in the U.S. are artificially low," says Andy Xie, former chief economist for Morgan Stanley Asia, who now works independently. "You're not paying the costs of pollution, and that is why China is an environmental catastrophe."

"You have to realize," said Professor Wenran Jiang at the University of Alberta, "China is going through a radical transformation and it's hard to manage. The state just doesn't have the expertise to keep up with these things."

Takeaway Points to Consider:

* China is a textbook case of how not handle a PR crisis.

* In the PR world, what China is trying to deal with is known as "reputation management." Its aggressive, uncoordinated lashing out and placing the blame on its customers and the media are doing more harm than good.

* American PR professionals are trained to do their damnedest to smooth things over and get a bad story out of the public eye. The object is to contain it until something more dramatic captures the attention of news editors.

* Crisis management is not taught in MBA courses at business schools. In 2005, Orbitz president Michael Sands told The Wall Street Journal's Ronald Alsop that "crisis communication is critical for business students as is understanding how corporate communications gets integrated into the marketing plan." A graduate of Northwestern's Kellogg School of Management, Sands said that he learned corporate communications skills on the job, "sort of like an apprenticeship."

* You never know when a PR crisis might strike. Who can forget that day when a Wendy's customer found a human finger in her bowl of chili?

* It is imperative for every business to have in place a plan for PR crisis management-a team ready to assemble on a moment's notice, lines of predetermined responsibilities with one person in charge and one calming, reasoned voice that speaks for the company.

* If a crisis hits with no plan in place, the situation will be exacerbated and everybody concerned will look like chumps.

* When a crisis hits, immediately inform your employees and keep them in the loop. If your associates learn about the problem from an outside source and the company is silent, morale will tank.

* No employee should be allowed to speak to the media or answer questions from anybody. All inquiries must be directed to the department handling the crisis. Otherwise, if employees are accessible, the media will gleefully exploit inconsistencies and make mincemeat of your efforts.

* Whether you are a nation, a corporation, a small business or an individual, do not get into a pissing match with your critics, do not stonewall and do not try to muzzle the media.

* "PR is the business of letting people in on what you are doing."

-Evelyn Lawson, my first mentor and publicity director at the Ivoryton, Conn. Playhouse, 1951

Web Sites Related to Today's Edition:

"China's Deadly Pollution," The New York Times, August 26, 2007

"Beijing Air Imperils Olympics," The New York Times, August 26, 2007

Investigations on Toy Suppliers in China, China Labor Watch

Wendy's Finger in the Chili: A Case History

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