The lessons Australia’s CEOs are failing to learn

In her memoir, Karen Hughes, a former US presidential advisor, tells the story of being on a beach holiday when she saw a small plane dragging an advertising banner across the sky. It said, “Come back Jill, I am miserable without you. Love, Jack.” She thought: Bad message Jack - too much about you, not enough about her.

Companies, their chief executives and boards, often act like Jack amid corporate crises. It’s all about them, and not enough about the customer, which in Hughes’ example, is Jill.

One of the worst examples of this was in 2010 when BP’s chief executive Tony Hayward was managing the Deepwater Horizon explosion and oil spill in the Gulf of Mexico. It was the largest marine oil spill in history, which left 11 workers dead and 17 injured.

In the midst of the crisis, the very highly paid Hayward complained: “I want my life back.”

In Australia, corporate scandals are becoming a regular feature of the landscape. This past year there have been crises at Qantas, PwC Australia and Optus. Unfortunately, rather than moving quickly to own the problem and allay the concerns of all stakeholders, the initial reaction in those instances was to protect the company, which can end up doing greater damage.

Earlier this month, Optus suffered an outage of its network, which left more than 10 million customers, including some banks, government agencies and small businesses, without internet, telephone, triple zero, and e-payment services for at least 12 hours.

Optus’ management took too long to communicate with all stakeholders that it had a problem, and its transparency and accountability for the outage has been widely criticised as poor.

Optus boss Kelly Bayer Rosmarin resigned after the network outage, which was the second crisis the company suffered in 13 months – it was the subject of a cyberattack last year.Credit: Alex Ellinghausen

It surprised everyone, including top corporate troubleshooters, who thought Optus would have learnt from the crisis it went through last year, when it suffered a cyberattack that exposed the personal details of its customers.

Optus’ relationship with the federal government was on already shaky ground after its abysmal handling of last year’s cyberattack. Knowing this, Optus management still failed to alert the federal Communications Minister Michelle Rowland immediately of the network outage.

“Didn’t they learn from the previous saga that the first thing they had to do was cover off the government?” says one of Australia’s top corporate communication advisors, who would only speak anonymously given their work requires discretion. “Even if Optus didn’t know what was going on, you tell the government you’ve got a problem and open the lines of communication.”

There are simple rules to follow in responding to a crisis say a number of the country’s top corporate troubleshooters, who all declined to speak publicly. That is, when there is a crisis: own the problem, apologise, do your penance. But above all, move fast and communicate, communicate, communicate with all stakeholders, whether its customers, shareholders or the government.

The argument for speed is that stakeholders will be more forgiving if you are quick to acknowledge there is a problem, show that you understand the distress it’s caused, apologise, and keep explaining in regular updates what you are doing to fix it. Another reason for speed is that social media has dramatically shifted the balance of power from companies to their critics.

Regular communication with all stakeholders in a crisis will help reduce a public backlash. The best example of this was during the pandemic, when the state premiers held daily briefings at a scheduled time. It set expectations and gave everyone reassurance that they would be kept informed.

Good companies have a war room ready to go when a crisis hits. However, what often prevents companies acting quickly are internal decision makers such as lawyers or financial officers who worry an admission of guilt will lead to lawsuits or hit the bottom line. It’s when a chief executive has to overrule those internally, knowing it’s more important to allay the concerns of all stakeholders with a view on what is the end game in the crisis. If not, the cost and public relations fallout can be higher.

Even when a CEO communicates effectively, the crisis may be so bad, that the only circuit-breaker is for the boss to resign. This was what happened at Optus, Qantas and PwC Australia this year.

Alan Joyce retired early after a series of customer service failings and allegations the national carrier sold thousands of tickets on ghost flights. Credit: Dion Georgopoulos

But even then, changing the CEO is not always a fix, if the company hasn’t addressed the underlying problem, which may be cultural.

Consider Qantas, and the fight and hubris that came from the national carrier’s board and management when it was seemingly deaf to its customer service failings. This included not refunding more than half a billion in cancelled flight credits owed to customers for two years. Only after it was revealed that the airline was being sued for allegedly selling thousands of tickets to customers on ghost flights, did the company’s tone begin to change, with the early exit of its chief executive Alan Joyce.

But even now, after Joyce has gone, replaced by Vanessa Hudson, Qantas is making arguments in court that would not pass the pub test with customers. As it fights allegations that it sold tickets on ghost flights, Qantas lawyers have argued it was “selling a bundle or rights” that “expressly excluded any guarantee of flight times”.

Is Qantas acting differently? Has it learned from the mistakes in how it treated customers?

Another leading corporate communication advisor says most companies brands are stronger than the individual who leads them, and will survive a crisis. The caveat to that is ensuring the company’s board picks the right replacement, who truly demonstrates that things will be different from now on.

What remains surprising is how often companies and chief executives fail to learn lessons from past crises, and there are many in corporate Australia from the Royal Commission into the financial services sector, to sexual harassment and fraud scandals at AMP and National Australia Bank, to name a few.

Perhaps it’s arrogance, ego and the delusion by boards and management that a crisis will never happen on their watch.

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