The Role of Public Relations in Crisis Management for the Oil and Gas Industry - Essay Example

The Role of Public Relations in Crisis Management for the Oil & Gas Industry Hamda Ghanim Al Suwaidi M80002901 Zayed Table of Contents ABSTRACT 3 INTRODUCTION 4 LITERATURE REVIEW 5 RESEARCH METHODOLOGY 12 FINDINGS 13 Collapse of Rig Main Deck With Multiple Fatalities, 15 April 2000 (Company A & B) 13 Vehicle Fire Resulting in Multiple Fatalities, 07 May 2011 (Company C) 14 Oil Spill, 03 June 2012 (Company D) 14 The Interviews 15 DISCUSSION 17 RECOMMENDATIONS 19 1.It is essential to have a spokesperson and that this person assumes a leading strategic as well as public relations role such as dealing with the media (Protecting Critical Infrastructures, 2008, p. 29). This person will garner trust, maintain the consistency of the messages and attend to enquiries in a systematic manner. 20 2.This spokesperson should be able to operate across cultures and ideally in more than one language. He or she should be academically well qualified and of a sober and respectable temperament, as well as able to deal confidently with a variety of people and situations. 20 3.The main focus of the company at this stage needs to be to incorporate a crisis communication department into their system. The Director General will head the department. It will include a Manager of communication, with supporting junior staff. There will be a spokesperson, who will directly report to the Director General but will work in collaboration with Manager of communication. The other directorates will access the communication department through the Manager. 20 Conclusion 20 REFERENCES 22 ABSTRACT Crises are inevitable realities in business organisations for which the organisation management must learn to prepare. This research paper discusses the role of public relations units, with a specific focus on the oil and gas industry which plays a crucial role in the economic development of the United Arab Emirates (UAE). Traditionally, most organisations use public relations at the forefront to control, manage and minimise the damage of crises to their business operations. Previous crises such as the BP Gulf of Mexico Oil Spill in 2010 and the Exxon oil spill of 1989 have demonstrated that Oil and Gas companies are not always transparent and they often experience great communication difficulties when crises occur. This study examines the significance of public relations activities in crisis management in the Oil & Gas industry in general and in the UAE in particular. It reviews four major Oil & Gas operators in the UAE that have faced crises recently. Those companies engage over 3000 employees, excluding contractors, and operate in more than 20 fields across the country. Using structured interviews and data analysis this study research discusses their crisis management philosophy, their systems and procedures, and how these are communicated and makes recommendations for improvements. INTRODUCTION According to the Webster New Collegiate Dictionary, a crisis is defined as ‘an unstable or crucial state or state of affairs whose outcome will make a decisive difference for better or worse’ (Butterick, 2011). Crises take different forms and they may be social, political, economic, legal, cultural, religious, technological etc. Events such as mergers and acquisitions, plant closings, layoffs, firing, business deals, expansions, corporate scandals, employee discrimination, unfair trade, unsustainable business approaches, environmental degradation activities, exploitation of labour, accidents, catastrophes, health and safety hazards etc, are newsworthy. Virtually every business organisation is on the brink of potential fallout and it must do everything that it can in order to protect its interests. The damage that business organizations could sustain due to a disastrous event could take years to recover from, and at worst may be irreversible. Over the years, many organisations have faced crises or have anticipated an oncoming crisis. They have tried to minimise the damage or cope with the situations by deploying effective and efficient public relations activities. In fact, some companies have succeeded in using public relations to help them turn the crisis into a business advantage. However, there are situations where it may be impossible for organisations to minimize the damage or regain their reputation because of a crisis (White & Mazur, 2010). This could be due to the ineffective use of public relations to resolve or handle the crisis in the proper way. Ironically, historical evidence points to more examples of ineffective use of public relations in crisis management than the proper use thereof. This research is concerned with the proper use of public relations in crisis management (Hendrix & Hayes, 2009). The focus of this research is to explore the role of public relations in crisis management with a special focus on Oil & Gas industry in the United Arab Emirates as well as its overall impact and effectiveness. Furthermore, the research will compare and contrast the public relations strategies of UAE Oil & Gas industry with the rest of the world. Based on evidence gleaned from the study, the research will also offer appropriate suggestions to create and manage a communication department for addressing the Public Relations requirements of companies in the oil and gas industry. The following research questions are the starting point for this study: RQ1: What is the role of public relations in the oil and gas industry? RQ2: Do these companies employ PR strategies during a crisis? RQ3: How effective these PR strategies have been during crises situations? RQ4: How can these PR strategies be improved, enhanced, and fine-tuned? LITERATURE REVIEW The importance of public relations in modern companies is well documented. Strategic public relations efforts make the demand curve surge upward, thus leading to higher sales and greater market share. Second, when companies are able to communicate their message through effective and strategic public relations activities, the need for spending great sums of money on other marketing communication tools decreases (Bilbil & Sutcu, 2010). Third, strategic Public Relations efforts raise the bar for the entire industry thus increasing the costs of marketing for the competitors. The first and second aspects combined will lead to greater profitability. Fourth, strategically aimed public relations activities are more likely to decrease the turnover amongst the employees. Besides, the employees are likely to be motivated to be a part of an organisation which cares for the public and establishes relationships with them (Theaker, 2002; Smith, 2004). When employees who join an organisation observe the way the company responds to its stakeholders, and recognise the respect it gains, they will be motivated to remain with the company. Fifth, effective public relations can garner the support from the public that may play an important role in critical situations (Regester & Larkin, 2008). People might support companies in tough times by providing them with feedback, recommendations and word of mouth advertising, and offer them workable ideas. Sixth and the last, effective and strategic public relations can act as a buffer for preventing any fallout in crisis situations. An organisation which has a proactive and efficient public relations system in place, is more likely to cope with a crisis in a better way as compared with one that has no defined public relations activities during the crisis situations (Coombs & Holladay, 2010; Regester & Larkin, 2008). Public Relations activities conducted in crises differ significantly based on the underlying principles which provide the strategy. These principles are: 1. The relationship principle is based on the belief that organisations can avoid crises in the first place by being proactive about maintaining good, healthy and long-term relationships with important stakeholders (Zerfass, Ruler & Sriramesh, 2008; Smith, 2004). 2. The accountability principle dictates that organisations should take responsibility for a crisis if it has been associated with them, even when it is not their fault (Kwanash-Aidoo, 2005; White & Masur, 2010). 3. The disclosure principle argues that during the time of a crisis, the most effective public relations strategy could be to disclose all possible information (Fearn-Banks, 2007; Coombs, 2007) which will allow the public to develop a certain level of sympathy for the organisation (Tench & Yeomans, 2006). 4. The symmetrical communication principle states that the best public relations approach during a crisis situation is to place the interest of the other stakeholders and general public, at least on an equal footing with that of the organisation (Austin & Pinkleton, 2001). When an organisation fails to understand the sufferings of the people and develop sympathy for them, their public relations activities become meaningless (Heath, 2001). Crises often imply that the affected organisation faces certain legal, regulatory, governmental or political pressures and it may also have a negative impact on its reputation and financial aspects (The New York Times, 2010a). The unpreparedness of organisations for crisis management often implies that they get caught off guard when a crisis occurs. This means that the response to and the handling of such a crisis will obviously be in jeopardy (American Petroleum Institute, 2008). The oil and gas sector is not immune to crisis events. In fact oil and gas industry has historically exhibited a number of crises in recent years and these are now briefly outlined. The Union Carbide Chemical Factory Gas Explosion which occurred in December 1984 triggered the release of toxic gas into the air in and around Bhopal, India. The event entailed the death of 3,800 people and a total loss of 4.2 billion US dollars (Bhopal). Union Carbide handled the crisis quickly and efficiently this response is regarded as one of the best examples of crisis management in history to date (Browning, 1993). Ten Union Carbide executives and managers led by the CEO formed the crisis management team. They worked closely for several months to insure proper coordination, efficient operation, and excellent communication in response to this disastrous industrial accident. The public relations methods deployed for managing this crisis included crisis communication, consumer public relations, internal communication, and government relations. According to a report by Browning (1993), the PR team held its first press conference immediately after the explosion occurred, explained what it was doing to address the crisis, and held daily briefings thereafter. The company also offered appropriate briefings to the employees, customers, shareholders, supplies, the US Congress, regulatory authorities and representatives of the government. The application of accountability principle, disclosure principle, and symmetrical communication principle were well displayed in the PR activities of the company during this crisis. The Exxon Valdez oil spill disaster of 1989, on the other hand, has been branded as a textbook illustration of a key PR disaster and communication failure that cost the organisation more than $3.8 billion in clean up costs, fines and compensations (Pitts, 2009). Since they had no efficient systems prepared to effectively respond to the mishap, their response was considerably delayed. This delay, along with the magnitude of the disaster resulting from the Exxon Valdez tanker running aground off Alaska (dumping 250,000 oil barrels into Prince William Sound) ruined the company’s reputation for years to come. An analysis of the disaster by Professor Ron Smith (2007) indicated that the problem was of international scope and thus attracted close scrutiny. The organisation was a multinational corporation and the largest oil company at that time. The major blow to the public relations occurred due to the improper manner in which CEO Rawl Lawrence reacted to the public. In the midst of intense public attention, the choice to refuse outside help and eschew the disclosure principle was a disaster in itself. In an initial period of inaction, rumours sprang up across the globe (Seymour & Moore, 2000; Smith, 2004). There was no assigned or designated company spokesperson and there was an open refusal to share information (Smith, 2007). The company violated all the cardinal rules relating to crisis management. Efforts to control the spread of the oil spill were extremely slow and only low level managers were sent to Alaska (Holusha, 1989; Klein, 2009). The Texaco Company case relates to a legal issue, which had the potential to taint the image of the company if the public relations were not handled effectively. A disgruntled employee in Texaco tape-recorded the company managers having inflammatory discussions concerning racial discrimination. The employee presented the recording to the attorney of the plaintiff in a lawsuit filed against the organization. This tape was then leaked to The New York Times leading to a major scandal. The company responded decisively and quickly using crisis communication, consumer public relations, and internal communication. The responses involved the CEO acting as the company’s principal spokesman on the subsequent media onslaught. Besides, they initiated action to discipline the involved employees, resolved the lawsuits, and stopped a boycott that had been called by Jesse Jackson. The dispute cost the company $175 million and almost a similar amount in addressing the internal costs. The situation could, however, have been worse for the image of the company and damaging financially if they had not resolved it decisively and quickly. A study by Heradstveit (2011) analyses the recent BP case relating to the oil spill in the Gulf of Mexico. The platform Deepwater Horizon owned by a company called the Transocean Limited was contracted to BP for drilling a well for exploration in the Gulf of Mexico. The explosion, which occurred on this platform on 20 April 2011, claimed the lives of 11 workers and caused a massive oil spill. The oil gushed into the Macondo Gulf for about 86 days before BP managed to cap it (McAllister et al., 2011). The company struggled with the response efforts and communication during the critical early stages after the explosion. Initially, BP committed to clean out the contamination by the oil spill and fix things, but later changed their stance apparently due to the legal advice that they need not take responsibility for the spill. Not only did the company have an environmental crisis at hand, but it also appeared not to have any idea how to handle it- fumbling through the crisis communication. The poor management of the crisis by BP and improper handling of communication led to the crisis lasting for five months and the reputation of the company taking a major hit, eventually affecting their brand (Bilbil & Sutcu, 2010). In contrast to the BP case, the PG &E Company handled their crisis utilising effective public relations methods. On September 9, 2010 the pipeline of the PG &E Company exploded in the San Bruno neighbourhood, a suburb of San Francisco, claiming the lives of 8 people, injuring several more, and destroying numerous homes. The company responded quickly, understanding the magnitude of the crisis. They applied the principle of accountability and used the public relations methods such as crisis communication, internal communication, financial public relations, consumer or lifestyle public relation, and government relations. The company admitted full responsibility of the crisis right from the first day. Within hours of the explosion, PG & E communicated to the public the action they would take, and they held community meetings (Anthonissen, 2008). PG &E worked in close collaboration with voluntary organisations and community officials immediately after the explosion to provide temporary shelters and emergency medical assistance to individuals who lost their residences and also placed in a truck at the shopping area to supply water and food. Thus, they promptly reacted to the needs of the victims and, thereby, ruled out any chances of complaints or future litigations. The above five international cases demonstrate the significance of public relation tools to manage crises and minimize legal, regulatory, governmental, political, reputation and financial consequences to the organizations. While some of the examples have demonstrated the effective application of PR principles, others illustrate the ignorance of management to these covenants and its negative consequences on the organisations involved (Degenais & Raboy, 1992). Turning now to the Gulf region, there are also some case studies which provide statutory lessons on the appropriate use of public relations. One of these firms, which shall be nameless within this discussion for the purpose of anonymity, was involved in the Kuwait Petroleum crisis; caused by the deliberate burning and destruction of the Kuwaiti oil fields by the Iraqi army. Kuwait Petroleum made a decision to open valves in their tankers and cause a deliberate oil spill in response to a directive from the Iraq military (Barkham, 2010; Yetiv, 1997). Enormous quantities of oil flowed into the Gulf causing devastation to the wildlife and affecting the Northern Coast of Saudi Arabia particularly badly (Barkham, 2010). The Americans responded to this situation by bombing the oil fields; which only partially stopped the spill (Hall & Peel, 2013). The Kuwaitis lacked adequate knowledge of crisis communication and so they did not take effective control of the public relations situation (Wilcox & Ault, 2001; Sadiq & McCain, 1993). The company approached this crisis by beginning with a focus on identification of the target audience who were in these markets, in order to facilitate effective application of public relations as a component of OSRT operations (Thinking Foresight, 2012). This crisis required designing a simulation that entailed numerous factors that were used for effective preparation. Apparently, during the preparation stage, the company had to review previous drill information and expectations for unavoidable surprises and doubts (Regester & Larkin, 2002). The firm executed a well-planned campaign to deal with the Kuwaiti Oil spill. They acquired a capacity to establish comprehensive media databases and information archives (Reid, 2000) and in the process they also established a team with relevant skills to help prepare for this form of crisis in the future. RESEARCH METHODOLOGY The interpretive paradigm is adopted for this research (Eriksson & Kovalainen, 2008). This study aims also to be critical, and most critical researches are qualitative in nature and believe in socially constructed knowledge (Goddard & Melville, 2004; Merriam, 2009). Empirical evidence was gathered in face-to-face semi-structured interviews and content analysis of the incident reports. During the interview, a voice recording was used along with notes. Interviews took place at the offices of the respondents concerned. From each of the four organisations, a minimum of 5 of the executive management team, i.e. VP, SVP and CEO, were selected to participate in the research. Moreover, from Company A and B five respondents were selected to participate and from Company C & D seven were selected. Judgement sampling was considering the requirements and the limitations of the researcher. Simple random sampling, convenience sampling and snowball sampling would not make sense because in different organisations, different people are going to be crucial respondents due to their involvement and leadership at the time of crisis (Eriksson & Kovalainen, 2008; Cohen, 2007). FINDINGS The following case summaries and information have been drawn partially from incident reports, but the more intricate details including the findings were culled from internal reports of the companies by investigating committees tasked to analyse the specific incident. Collapse of Rig Main Deck With Multiple Fatalities, 15 April 2000 (Company A & B) The report indicates that an incident took place at the offshore rig in April 2000 involving fatalities of four people following the collapse of the drilling rig from its working position. The emergency response was competent because it successfully evacuated the rig in 20 minutes and the personnel who fell into the sea. The collapse of the rig into the sea resulted in temporary loss of communication; however, communication was re-established by the backup system during the rescue operation. In this occasion, communication was re-established quickly when a crewmember used a personal mobile telephone without escalating the emergency because of the use of uncertified electrical equipment. Vehicle Fire Resulting in Multiple Fatalities, 07 May 2011 (Company C) At about 5:40 p.m. on 6 May 2011, a Central Degassing Station (CDS) of the company went into an Emergency Shutdown (ESD). A fire occurred at one of the flow lines roughly 200 meters away from the wellhead, at which point the well is isolated. A second leak was not identified and a vehicle crossed the oil pool and caught fire resulting in the casualties of the 4 passengers within the vehicle because of burn injuries. In this event, the fire fighting vehicles were unable to conquer the off-road conditions of the desert, which means there is need for contingency planning. Oil Spill, 03 June 2012 (Company D) The crisis incident took place on March 6, 2012 at about 11:15 a.m., when an oil slick was observed at the central production complex of the wellhead platform. The information about the oil slick was immediately communicated to the Control Room. The Team diverted the flow of water produced from the Wellhead Platform to another Wellhead Platform. Because of bad weather oil-spill-response-centre equipment could not be mobilized to the field. During the emergency, communication lines and awareness remained unclear or misunderstood by all emergency response teams. During the emergency, the oil field initially did not contact the radio room directly as per the requirements in the procedures; moreover, because there were no updates on emergency duty schedule, the site manager ended up calling the wrong emergency duty manager. The Interviews The questions for the interviews were structured. However, they were open-ended and thereby allowed the interviewees to explain their answers qualitatively. While these answers have allowed the researcher to gain deeper insights into the nature of crisis response in the Oil & Gas industry and the role played by public relations in crisis management. However, they do not permit an easy assessment because of the diversity of the answers, requiring a content analysis rather than a statistical summation. There were 24 respondents in these interviews. The most salient points of their responses are summarised below: Of the 24 respondents, the majority had at least 20 years’ service to company. Seven had more than 30 years and one had less than ten years. All were senior managers. All but 2 respondents agreed that their company had a clearly defined and well-understood corporate strategy for dealing with crisis but follow up comments revealed that this was defined differently, including external stakeholders in some cases and not in others, for example. Most of the respondents stated that they had only been marginally involved in the particular crisis under discussion in their organisation and some conceded that they should have been more involved. Some claimed only to have been informed of the event some considerable time after it was resolved. This points to a failure of the system, which should have come to the attention of the top management for taking charge of the situation. One PR manager was instructed not to talk to the media and dealings with the press were generally inadequate. All of the respondents mentioned negative effects such as damage to the image of the organisation, and a few mentioned either financial or operational effects. The majority of the respondents were emphatic that the crisis management method applied to the event had been effective, and at times even ‘very effective’. Only one respondent definitively declared, ‘It was not effective’ (Crisis Management, 2009). In most cases the company policies on crisis management were followed quite closely. All but one responded reported that post-crisis event assessment does exist in the company, with the lessons learned identified, analysed, and converted into a positive course of action. There was a mixed response to the question ‘How important was your organisation public relation team in dealing with the crisis?’ Only three were unequivocally positive responses. Two other respondents indicated that PR was important but only within the organisation, implying that externally it did not play an important role. Two respondents believed that the company did not have the right people to properly handle the PR during crises situations. Three respondents have indicated that some other unit of the corporation, such as the central administration, was in charge of external communication and the PR department was not given the authority to handle the public relations function. Four respondents said they did not know. Finally, several respondents categorically stated that PR was not effective. All but one of the respondents agreed that the CEO should be directly involved with crisis management. Only four respondents agreed that there had been improvements to the role of public relations in the organisation following the experience of recent crisis. Question 11: Was the role of public relation revised after the crisis to improve their contribution? DISCUSSION The interviews clearly indicate that the executives are aware of the significance of public relations in the oil and gas industry in general, and crisis management/communication in particular. The executives (in general) believed that the company’s crisis management, as well as its crisis response system is effective. They are convinced however of the inadequacy of the public relations element with regard to the organization’s crisis communication component (Wilcox & Adult, 2001). Being conscious of the need for public relations but not having it, the executives are generally indifferent because they perceive that the company’s centralized crisis communication system should remain in charge of framing and communicating the news of the crisis event to the public. The typical bureaucratic response that public communication is best handled by the policy makers than as a part of the mechanism of the company appears to influence the attitudes of most of the executives interviewed. Even the PR and crisis executives, who should be fully involved in crisis communication, presently do not do so. Only a few of the respondents recognise the impropriety in separating public relations from crisis communications. Similarly, they also understand that addressing crisis communication as a controlled message to the public by top management, with the intention to avoid litigation and other liabilities if the company gets blamed for the crisis and its effect on the community and environment. It has been established that the company does not employ any specific or articulated crisis communications policy or strategy (‘No clear guideline’, one of the Respondent to Question 3, ‘Yes, but we don’t have written document’, Question 7 Respondent). If one should be chosen, it should incorporate the elements of each of the principles earlier mentioned, depending on the type of crisis event. However, the strategy should lean more towards the symmetrical communication principle, which aligns the interests of stakeholders with those of the company. A policy of full disclosure in all instances is not favoured because wrong messaging may be unfairly exploited to the company’s detriment by its rivals, while overreliance on the accountability principle may work against the company’s advantage because of its emphasis on liability and the conflicting desire of the organisation to avoid any liability at all. Good faith is always important, no matter which strategy the organisation chooses. The respondents have confirmed that crisis events have had the most detrimental effects on the organisation’s image, which far exceeds the financial costs and operational repercussions. Company image is the most immediate and direct concern of public relations and, therefore, the PR Department of the oil and gas companies should be closely involved in the overall crisis management and response policies, rather than being side-lined, as indicated by the answers of the respondents. Segregating the role of PR for the regular business and PR for crisis management is not only hypocritical. It undermines the credibility of the organisation, which puts on a different public face when things go well, and another when crises take place. Ultimately, the effectiveness of PR strategies during a crisis will depend upon the degree to which stakeholders, particularly the community, are able to repose their trust and confidence in the corporation. Therefore, the organisation must strive to make their presence felt within the community even during peace times in its best interests and not merely focus on the profits they make. The interviews and case studies have brought to light the difficulty of setting up an effective PR strategy for crisis communication. The causes of crises in these operations are highly technical and difficult for the laymen in the community to understand. This is what increases the importance of the PR effort to be devoted for creating awareness in the public and PR strategies must establish a long-term relationship with the public, which will work as the basis for establishing trust and confidence. This, in turn, will nurture the credibility of the organization in the minds of the public. A dedicated PR department that undertakes regular public relations functions should also be integrated with the crisis communication effort, for several reasons (Coombs, 2006). Firstly, they already have close personal contacts with members of the stakeholder groups particularly the community, and secondly, they could integrate the normal PR efforts with the crisis communication function, thereby smoothing out the messaging system and maintaining consistency throughout different contexts. Finally, a PR department that formulates the crisis communication tactics will be more effective even during the periods of relatively routine activity, because crisis preparedness should also be part of regular liaison of the organisation’s PR with the public. RECOMMENDATIONS The key recommendations arising out of this study are as follows: 1. It is essential to have a spokesperson and that this person assumes a leading strategic as well as public relations role such as dealing with the media (Protecting Critical Infrastructures, 2008, p. 29). This person will garner trust, maintain the consistency of the messages and attend to enquiries in a systematic manner. 2. This spokesperson should be able to operate across cultures and ideally in more than one language. He or she should be academically well qualified and of a sober and respectable temperament, as well as able to deal confidently with a variety of people and situations. 3. The main focus of the company at this stage needs to be to incorporate a crisis communication department into their system. The Director General will head the department. It will include a Manager of communication, with supporting junior staff. There will be a spokesperson, who will directly report to the Director General but will work in collaboration with Manager of communication. The other directorates will access the communication department through the Manager. Conclusion The research has set out to explore and analyse the impact of public relations activities in crisis management especially in the context of oil and gas companies in the UAE. The findings of the study show that while the overall crisis management of the oil and gas organisations in the Emirates is highly organised and effective, the public relations aspect of crisis communications before, during and after the crisis event is mostly found to be inadequate. Internal communications were described as well organised and effectively employed, but the external or public communication during crises are reported to be ambiguous, centrally controlled and at times relegated to merely allaying the fears of the stakeholders only when the crisis incident is already taking place, not prior to or after. Too many of the top executives of the company are unaware and ill informed of the company’s messaging to the public, and the lack of coordination and cooperation from the executives greatly diminishes the credibility and effectiveness of the PR efforts. 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