Phone hacking scandal a crisis study
The News of the World phone hacking scandal has dominated the news for the past week or two with thousands of pages of news and commentary filling every newspaper.
To anyone interested in communications the story is well known and won’t be repeated here. Instead it is worth looking at some wider aspects of the crisis.
Recently Burson Marsteller and Penn Schoen Berland published their 2011 Crisis Preparedness Study. You can find the details of that study here.
It makes fascinating reading. There was one slide in the study which demonstrated the depth and the extent of this particular crisis for the media, police and politicians. The slide examines the impact of a crisis on a company after it has experienced a major crisis.
• 32% saw a drop in revenue
• 24% experienced cut-backs and layoffs
• 18% suffered loss of corporate reputation
• 18% experienced a destabilisation of the entire company
• 17% saw a loss of public trust
• 13% were subject to increased regulatory scrutiny
• 13% saw a drop in share prices
• 12% suffered increased scrutiny from new media
• 11% experienced law suits from individuals or groups
• 10% were subject to increased political scrutiny
• 10% paid extensive fines
• 9% led to inconsistent statements being made to the media
• 8% suffered from loss of media trust.
Perhaps with the exception of the last bullet point every other factor in this list has been prevalent in the phone hacking scandal and subsequent crisis.
First the crisis is not limited to one organisation or one individual. It has embroiled the media (and not just News International) and politicians as well as the police.
It has seen a sensational drop in revenue for News International, resulted in the closure of the News of the World and the subsequent lay-offs as well as the resignations of two senior police officers. The destabilisation of News Corp and probably Rupert Murdoch himself (at the hands of the Board) is happening; the Prime Minister may just have got away with it, but the Metropolitan Police have not.
The corporate reputation of News Corp is badly damaged, as is that of the police and arguably the prime minister’s office and there is a clear and quantifiable loss of public trust in all three institutions. Probably all three institutions are likely to be subject to increased regulatory and political scrutiny.
News Corp has seen a meteoric fall in its share price (although there has been some recovery) and is already committed to settling, out of court, potential law suits from those whose phones were hacked. We shall have to see if fines are on the way, but inconsistent statements are still being made which has led to even more investigative journalism digging up new angles on the story almost every day.
This crisis is the closest you will ever get to death by a thousand cuts caused through poor crisis communications planning, poor management, apparent institutional incompetence and, arguably, gross arrogance at senior levels.
Read More