Issues Management

Topic Four

Issues and Issues Management

 

Aims

To examine how issues arise in different settings and how managements can manage these issues.

Learning Outcomes

At the end of the topic you should be able to:

Identify how issues arise.

Map a framework that can model how issues arise and develop.

Develop an understanding as to how management’s can manage an issue.
 
 

Preparation

The formal study requirements for this topic are:

Pre-sessional preparation using Internet sources.

Reading and digesting the key material on ethics.

Preparing the case study – General Motors and the Media

Reflecting on practice in managing crises and issues.

Reading

Set Text

Chapter 2: A Stakeholder Approach, Issues, Management Frameworks and Business Ethics. Section 2.7.

Chapter 5: The Corporation and External Stakeholders: Managing Moral responsibility in the Marketplace.

Case 5 – General Motors and the Media. Case study and questions.

Internet Sources

http://www.shell.com

http://www.pirc.co.uk

http://www.peta.com

http://www.meatstinks.com
 
 

Overview

Managing the environment and moral responsibility in the market place for corporations’ means managing strategic issues and crises related to advertising, product safety, social responsibility as well as environmental problems. Crises and issues management should be part of the strategic management process.

What do we mean by an issue? An Issue is an item or subject ofimmediate public or political concern that can have a direct or indirect impact on the firm. It may have arisen due to public opinion or concern, or it may or may not have arisen as a result of an action by the firm. Issues affect corporations in a variety of ways. From a managerial viewpoint, an issue is:

A developing trend in a firm’s environment which has the potential within a foreseeable time period to impact on a substantial or significant part of the organization and affect the ability of the firm to attain its long term objectives.

The words foreseeable, substantial, and significant are key to this debate. The firm should be able to foresee a crisis developing by constantly monitoring the environment. Shell, for example were seriously taken aback by not being able foresee the impending crisis it was to become the Brent Spar case. The other words of importance are substantial and significant. Managements are often reluctant to take issues seriously if the likely impact on the firm is small. However, small issues can grow into larger and more important ones if action is not taken early. Again, in the Shell case, a petrol station boycott of Shell in Germany was one outcome of the Brent Spar case that had a substantial and significant effect on Shell’s profits. Shell was reportedly ‘emotionally hurt’ when people turned around to Shell and told Shell that ‘they were lacking in principles that they held dearly’. Shell had to respond. Companies with principles and values are going to be concerned when those values are challenged and found wanting. Reputations, lost of image and loss of revenues have to be protected. It is interesting to note that in the Shell case these issues were resolved very swiftly, but in the case of the Nestlé, the issue of infant formula milk still rumbles on after 25 years. Nestlé has never attempted to debate this issue and to involve a wider group of stakeholders in discussion.

See Topic Three - Direct Action

The following are a few high profile examples of issues that can affect firms.

· The Environment

· Corporate Governance

· CEO and Top People’s Pay

· Sleaze in Public Life

· Events of a Geo-political nature

· Policies of the Firm in Foreign Markets

· Relationships with political sensitive governments

· Human Rights and Trade

· Fair Wages and Labour Practices

How do issues arise? Some scholars argue that we can see issues in life cycle terms. (See Weiss, pp. 54-55). Figure 1, below shows this diagrammatically.

Figure 1: The Issues Life Cycle

The model is explained in the table below.

Phase

Description

1. Pre-Problem

In this phase the problem is known about but recognition is restricted to a small and specialist community. Little or no wide public interest.

2. Alarmed Discovery

This stage is triggered off by an event - a disaster or a manufactured event like a PR campaign. The issue rapidly captures the public interest and generates both an awareness of the issue and calls for action to remedy the situation.

3. Realizing the Cost of Progress

As the issue has been over-simplified for public consumption, a gradual realization of the complexity of the problem follows and with it a modification of the emotions provoked in phase 2 – alarmed discovery. 

4. Gradual Decline in Interest

A gradual decline in public interest ensues as the market for news and other issues struggle for attention, and newer more pressing problems are highlighted. 

5. Post Problem

The issue has either been resolved completely or else it has become marginalized by other issues. It is no longer a matter of immediate importance. There is however, a collective memory of its existence, which could be activated by a recurrence of an event with similar characteristics.

The life cycle model above is quite similar to the diagrams in figures 2.12 and 2.13 in the Weiss text. Firms need to manage issues as they happen and evolve in order to protect the long-term interest of the firm. When issues arise we see three key characteristics that can cause conflict between the firm and interested parties, particularly those who are calling the firm to justify their position, namely:

· Conflicts of Interest

· Disputes of fact

· Clashes of Values

Often, the company comes into dispute with specific pressure groups and have to respond their publicity. Pressure groups work on the ‘oxygen of publicity’. They thrive on topicality, visibility, credibility and direct action. Pressure groups, along with other ad-hoc groups, form a new kind of moral watchdog, keeping an ever-alert eye on the practices of the world’s biggest companies. And how such companies react to this consumer pressure is vital to their success.

In the Brent Spar case we saw the interests of the protesters clash with that of the company. Each party to the case had a different viewpoint. Shell’s interests were the economic and legal case. It argued that the case for deep sea dumping was the correct one. Greenpeace begged to differ. It argued for break-up and dismantling, as Shell was responsible for the structure. A media blitz was organised by both camps arguing their case. The government backed Shell, as they had given Shell permission for the deep-sea solution. Disputes of fact arose as to the levels of toxic waste in the deep tanks on Brent Spar. On this issue, the company was correct in its assessment, and the protesters’ wrong. This issue of fact was to cause the campaign a significant loss of face in the whole dispute. The clash of values was obvious - the economic case vs. the ecological and moral case. Eventually, the Brent Spar case was to escalate into Shell’s markets in Germany and the Netherlands with consumer led boycott of their petrol stations. The company finally gave in to the demands of Greenpeace and the platform was towed into a Norwegian fiord to await alternative use or systematic dismantling. While Shell was fighting on the Brent Spar front, its activities in the Nigerian Oilfields were under scrutiny. The execution, by the Nigerian authorities of a well-known writer and dissident in Onogiland, Nigeria was a cause celebre. (See the Shell site http://www.shell.com and the PIRC site, http://www.pirc.co.uk  for material on the Shell Nigeria case. Also check the Human Rights Watch site at http://www.hrw.org where you may also find useful material.)

How does a firm respond when it finds itself in a crisis situation and the issues that have arisen either from the action of the firm or from collateral sources? It has five basic options to follow:

· Ignore

· Fight Back

· Accommodate

· Comply

· Exit

The firm’s corporate lawyers will often advise the firm to say nothing and admit nothing. However, the advice given to the chief executive of large firms, by Regester Larkin, a crisis management firm, would be to ‘get out there and communicate very quickly the firm’s core principles. Companies should acknowledge public concern, explain what has happened, follow-on with an announcement as what action the firm proposes to do, and if possible, state the actions that will be taken to prevent such a situation from happening again.'

Weiss, on pages 57 and 58 describe this process very eloquently. On page 60, Weiss quotes the work of Matthews et al (1987) on managing a crisis.

· Face the problem – tell the truth

· Avoid the ‘no comment’ as this implies guilt

· Recognise the age of instant news. There is no such thing as a secret or a private crisis

· Stage ‘war games’ to plan for crisis management

· Re-assert core values to help defuse a crisis

· Use the firm’s closeness with customers and end users for early feedback

· Understand the crisis by involving key stakeholders.

There is a key maxim to remember - "News is something you don’t want to see published, everything else is advertising".

Tasks

· Go to the Shell site and collect the relevant documents on the Brent Spar case and assess how Shell responded.

· Attempt to model the case using the life cycle model. When you have done so  click here to go the Brent Spar presentation that chronicles the issues and shows how the Issues Model can be applied.

· If your firm has had a crisis or a serious issue to deal with, how did it carry it out? Assess the actions of your firm in the context of the material in this chapter.

· Assess the role of non-governmental organisations or NGOs in corporate accountability.

Activity
· Read case 5 in Weiss – General Motors and the Media and prepare the questions at the end of the case.

· A class discussion on the many issues that arise from the case and other cases will be held.
 
 

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