Issues and Crisis Management - Natures Selection Foods - Case Study Example

Any organisation that handles food knows that the possibility of contamination provides an ever-present risk that threatens not only the consumer, but also the organisation’s reputation. As a result, most food-handling companies know the importance of having crisis plans in place in order to deal with the threats when they happen. But what exactly does a food crisis involve? Well, According to Pearson and Clair (1998, p. 60), a crisis is a “highly ambiguous situation where causes and effects are unknown.” Usually, crises are highly improbable, but when they do occur, they give the organisation little or no time to respond, and hence are most likely to leave a lasting negative impact on the business. To minimise the effects of crises on businesses, theorists and scholars have developed the crisis management concept. According to Charles and Kim (1988), crisis management is the process responsible for the development and implementation of programs and policies, which aid businesses to avoid and/or cope with the risks posed on people and business by natural and man-made disasters. The case of Nature’s Selection Foods Nature’s Selection Food (hereunder NSF) is an Australian food handling organisation based in New South Wales, which provides “manufacturing and warehousing solutions in the retail food and commercial food service sector” (Doyle & Liporto, 2009, p. 6). NSF is a medium-size organisation employing 100 workers. According to Doyle and Liporto (2009), the organisation has estimated annual revenue of 50 million Australian dollars. According to Delforce, Dickson and Hogan (2005), the food processing industry in Australia is a $65.9 billion industry, with flour and cereals accounting for 6 percent of these revenues. Pointedly, the food industry in the country is rated second to mining in the generation of trade account surplus. Regardless of this, several challenges face the industry players collectively. Competition, inadequate investment in research and development, food quality and safety concerns, changing employment requirements and changing consumer preferences are all some of the identified challenges that food producers, processors (like NSF), and retailers put up with(Delforce et al., 2005). Considering that Australia is a global player, organisations like NSF also have to compete in the global market in addition to competing with other processors who market their products in the domestic market. Of specific importance to the crisis management topic is the challenge posed by “potentially heightened bio-security risks and the integrity of Australia’s pest and disease free status” (Delforce et al., 2005, p. 382). Luckily, individual players do not have the capacity to handle such a challenge alone hence obliging the Australian government to intervene through entities such as Food Standards Australia and Biosecurity Australia among others. NSF is a branch of AAB Holdings Pty Ltd and hence the safety policies set by latter are applicable in all NSF outlets. Among the notable workplace safety precautions established by AAB, is the “nobody gets hurt” policy, which is at the core of the business’s “efficiency, safety and quality” in operations. Although NSF works with retail and industrial customers, some of its products still find a way into the end-consumer market. This is especially the case with items such as fruits, seeds, nuts, legumes and the dry mix products used for baking, cooking, and snacking. Cake mixes manufactured and marketed by the organisation are also popular with end-consumers. To cater for the retail customers, NSF manufactures both branded and unbranded items. In the latter category of items, the retail customers have the freedom to brand the items with using their own logos and brand names. Products in this category include cereals, baking mixes, seeds, nuts, and fruits. NSF disaster preparedness Among the measures that NSF has put in place in order to guard against risks related to food contamination include inspecting items that goes into the organisations’ warehouse in order to ensure they are risk free (Doyle & Liporto, 2009). The organisation also has a Hazard Analysis and Critical Control Point (HACCP). According to Food and Agriculture Organisation (FAO) (1997), the HACCP is a science-based system, which identifies hazards and measures that may be used for the control of such hazards in order to uphold food safety. HACCP system assesses the hazards and establishes control systems needed to prevent risk to the human health. FAO (1997) noted that HACCP makes testing of the finished products less important especially where it has been implemented effectively. For the successful implementation of the system to occur however, FAO (1997) noted that the management and workforce in an organisation need to be fully involved and committed. Depending on the food items handled by an organisation, expertise in areas such as agronomy, microbiology, production, veterinary health, public health, medicine, food technology, chemistry, engineering and environmental health, may be necessary. While food inspection may seem like a straightforward undertaking, it is notable that the organisation has not specified the actual inspection activities that it implements. Since identifying the food inspection practices in the organisation would be an impossible task for this paper considering that its relying on secondary sources only, it chooses to dwell on some of the ‘risk gaps’ created by the HACCP system. According to FAO (1997), HACCP has proven over the years that food-processing plants can rely on it to enhance food safety. However, as Linton and Almonza (1996) note, “HACCP is not a stand-alone system!” If an organisation wants to minimise all wipe away all food-related risks, it must learn to clean and sanitise its facilities, as well as ensuring that all people handling food in the organisation are healthy and clean at all times. Crisis Inventory By reviewing the industry, which NSF operates, this paper identified seven key areas, which present the organisation with the greatest risk. They include Sabotage in food processing activities by employees Corporate malfeasance Product tampering Massive loss of property through fire Contamination by food-borne pathogens Contamination by food allergens Industrial accidents Crises Families Reviewing the identified areas against Mitroff’s (2005) crisis families reveals that they span the economic, human resources, reputational, and national disasters as shown in the table below Crisis Families Crisis Economic Sabotage in food processing activities by employees Human resources Corporate malfeasance Psychopathic acts Product tampering Natural disasters Massive loss of property through fire Physical Contamination by food-borne pathogens Contamination by food allergens Industrial accidents Sorting the identified crises according to clusters as classified by Coombs (2004) produced the following results: Clusters Types of Crises Victim According to Coombs (2004), crises are in the victim cluster if they are caused by product tampering, workplace violence, rumors, or a natural disaster. In NSF context, such include: Employees sabotage of food processing activities Corporate Malfeasance Product tampering Accidental Coombs (2004) classifies accidental-cluster crises as those occurring from challenges, accidents or recalls associated with technical errors. In NSF, such would be: Massive loss of property through fire Intentional According to Coombs (2004), intentional-cluster crises occur from accidents or recalls that happen due to human error or organisational misdeed. They can be prevented by taking the necessary precautionary measures. In the NSF context, such include: Industrial accidents Contamination by food-borne pathogens Contamination by food allergens Risk Register Risk Consequence Likelihood Controls Risk priority Sabotage in food processing activities by employees 10 This would put to a stop the entire production process thus affecting the ability of NSF to supply its products to the consumer market 1 employees seem to be satisfied since they are well compensated 3 By considering the welfare of its staff members well, NSF is able to control the probability of sabotage among its employers happening 600 (Moderate risk Severity) Contamination by food allergens 10 The consequence would be dreadful since contaminated products would mean that NSF is not careful enough in the production process. This may affect sales negatively 5 The processing of nuts by NSF increase the likelihood of cross-contamination with other products 4 Allergen contamination can occur through machines, people. Separating the processing plants is only moderate effective. 725 (High Risk Severity) Contamination by food-borne pathogens 10 The negative publicity created by this would have the potential to reduce profitability as people may avoid buying NSF products altogether. 5 HACCP is not a sufficient-enough program to ensure that contamination does not occur 6 The HACCP program, without sanitation and cleaning programs ,and committed employees can only be moderately effective in curbing food contamination 775 (High Risk Severity) Massive loss of property through fire 10 This would have significance effect of the company’s profitability, and capacity to conduct business in future. 3 The use of electric machinery makes fire a probability in the company. Besides, NSF is not clear about the anti-fire equipment or processes it has undertaken 4 Regardless of the fire-safety measures that NSF has put in place, it is highly unlikely that they would be totally effective in preventing massive loss of property 675 (Moderate risk Severity) Industrial accidents 5 The consequence of such accidents would be major since it would reflect on the quality of training that the company gives its employees. Also it would reflect on the precautionary measures implemented by NSF 5 This is a present threat where people use machines in work. IN NSF, people use machine in almost every operation including off-loading raw materials, sorting, processing and packaging. 6 There is always a possibility that such accidents will happen regardless of how well employees are trained or the precautionary measure in place 525 (Moderate risk Severity) Product tampering 5 This would have a major effect in the company since some consumers may interpret it to mean that NSF is not careful enough with products meant for the consumer market 3 Product tampering can occur at different stages in the supply chain. The unbranded products released by NSF for the retailers is especially at a increased risk of tampering 6 Product tampering is beyond NSF’s jurisdiction and hence other parties may still tamper with the product regardless of the anti-tampering measures in place 475 (Low risk Severity) Corporate malfeasance 10 This would be catastrophic because the company would lack leadership 2 Although it is not entirely unlikely, there is no evidence that NSF managers have engaged in malfeasance in the past, or the probability of them doing so in future 3 As part of the decision-making circle, managers are likely to voice their preferences clearly, and the NSF ownership is highly likely to negotiate with them in order to avoid a crisis in the company. 625 (Moderate risk Severity) Consequence 2 = Minor 3 = Moderate 5 = Major 10 = Catastrophic Likelihood 1 = Rare 2 = Unlikely 3 = Possible 5 = Likely 10 = Almost Certain Controls 1 = Totally Effective 2 - 3 = Highly effective 4- 5- 6 = Moderate effectiveness 7- 8 - 9 = Marginal effectiveness 10 = Totally Ineffective Risk Priority No (Consequence X 50) + (Likelihood X 25) + (Control X 25) 0 - 499 = Low Risk Severity 500 - 699 = Moderate Risk Severity 700 - 874 = High Risk Severity 875 - 1000 = Extreme Risk Severity Seeing that contamination by food allergens and contamination by food-borne pathogens scored the highest risk priority point in the risk register, they are therefore the subject of this essay’s scenario 1 and 2. Scenario 1: The Risk of Allergens According to Mallett (2010), effective control of allergens requires the food processing company to address several areas in the food handling process. First, the organisation needs to review the ingredient specifications issued by the suppliers in order to identify all allergens contained in the supplies. Second, the processing organisation needs to put up on-site controls in the food storage area to ensure that products that contain allergen are separated from non-allergenic foods. Notably, products like nuts may need the processing company to set up storage areas that are entirely separate from other foodstuffs. Third, the food processing company may need to segregate the food handling and/or processing processes into entirely separate processing areas. Where the company does not have sufficient space, Mallett (2010) observes that a “deep allergen clean down” can be conducted before and after processing allergen-containing foods. Before processing other foods in the same facility, Mallett suggests that tests should be conducted in order to detect any remaining allergen traces. Food processing companies handling allergenic foodstuffs should also consider creating staff awareness, and controlling staff movement in the factories. As Mallett (2010) notes, high-risk allergenic products such as nuts not only need to be processed in separate areas, but also by “separate, visibly identifiable staff, wearing specific, often coloured protective clothing” (p. 11). Additionally, the organisation must train its staff members to recognise allergenic foodstuffs, potential allergen sources, and ways to avoid allergen contamination. Food processing companies must also issue allergen warnings on all product labels and packages. Any change in the allergen status must also be reflected on the label. Moreover, Mallett (2010) notes that an organisation must carry out an internal allergen audit on all their products in order to validate the allergen content against the warning provided on the label or product package. The allergen audit also helps the organisation detect allergen contamination products, which should otherwise be non-allergenic. The final area that for the food processing companies that handle allergenic foodstuffs should consider improving is the proper selection and use of equipment. According to Mallett (2010), an organisation that handles allergenic foodstuffs should only purchase equipment whose surfaces can be cleaned with ease. Hard-to-clean equipment can be a source of contamination and should therefore be avoided at all costs. Considering the above pointers, there is no doubt that NSF stands the risk of allergen contamination, especially considering that it handles nuts, which cause allergic reactions in some consumers. Evaluating the possible risks based on Coomb’s (2002) threat grid, the allergen contamination allergen would probably pose a higher threat to the company’s reputation, than it would on the company’s operations capacity. As such, this report, places the threat levels at Quadrant 3 of the threat Grid (see figure 1). Allergen contamination of other food items handled by the company can occur during storage, or during the processing phase either through contaminated equipment or through staff members. Suppose the contaminated items are not discovered during allergen audit phase, and they are placed in the consumer market without proper allergen warnings on the labels or packages, then this would create a crisis for the company. Scenario 2: The risk of food-borne pathogens According to the information provided by NSF, the organisation has always upheld a “nobody gets hurt” policy as its main strategy in reducing risks that may affect its employees and the company’s bottom line. Among the measures that the company has taken in order to ensure it remains in business, is the HACCP system, which has been put in place in order to enhance food safety. Notably, Linton and Almonza (1996) argue that HACCP is often taken for a farm-to-table food safety net. As a result, prerequisite programs such as sanitation and cleaning practices by staff members are not given much emphasis. To make matters worse, managers in some companies where HACCP is used lack the awareness or commitment needed to pursue sanitation and cleaning practices in the organisations they lead. In such companies, food-borne outbreaks are likely to happen. Since NSF has not mentioned that it runs sanitation and cleaning programs, or training for its staff members, this paper is assuming that it does not. Should this be true, the food items processed by the company run the risk of harbouring pathogens that can cause disease outbreaks in the consumer market? Since food safety is a highly sensitive and emotional issue, it is natural for such an occurrence to generate high publicity, which would in turn affect both the organisation’s reputation and operations. Gauging the effect of such a risk on Coomb’s (2002) threat grid, this report would place the threat at quadrant 4 (see Figure 1). Potential impact of scenarios 1 and 2 on NSF Naturally, should both the risk of allergens, and the risk of food-borne pathogens become a reality in foods processed by NSF, short-term and long-term damages would occur to the company. Among the immediate consequences that the organisation would experience include loss of business and revenue. In the long-term however, the company could suffer from a damaged reputation, low trust and confidence levels in the consumer market, and in some cases, the people affected by the compromised products may file lawsuits against the company. As Lok and Poweel (2000) observe, a crisis of such proportions would also attract coverage from the media, in and out of the country. Ultimately, the media coverage would affect the beliefs and attitudes formed by the public regarding the crisis and the organisation. The crisis would affect the internal and external stakeholders differently. According to Lok and Powell (2000), the impact on internal stakeholders could lead to loss of revenues, profits and jobs. In some cases, the crisis could force the company out of business altogether (Penrose, 2000). The external stakeholders (especially those who had consumed the affected products) on the other hard would be concerned about their safety, or the possibility of compensation. Government would impose stricter food safety requirements in all food handling companies, something that would affect all players in the industry. A preliminary crisis communication plan for Scenario 2 Should food-borne pathogens be detected in (some of) the food items processed by NSF, it is expected that the crisis would unfold rapidly thus giving the organisation little or no time to respond. As Lok and Powell (2000) observe, such situations usually attract intense scrutiny from the media and the public thus requiring prompt communication from the company. Such is especially important because and Lok and Powell (2000) observe, “The media and the public stigmatizes the hazards” often casting the hazard as serious and harmful (p. 3). Considering the effect that food-borne pathogens may have on the consumers, stakeholders that NSF would need to address in the crisis communication (in order of importance) would include customers, investors, employees, media, distributors, legislators, regulators, government agencies, activist publics, intra and inter-industry players, and the community at large. Considering that the risk of pathogens in processed consumer items would pose both reputational and operational risks to NSF, it would be advisable for the organisation to develop both internal and external communications. As suggested by Thiessen and Ingenhoff (2009), internal communication should be designed to stem rumours circulating among employees, investors and the management. External communication on the other hand should be designed to shape public perceptions (Penrose, 2000). The objectives of the crisis communication plan suggested below are drawn from Coombs et al. (2010), and seek to: Reduce negative emotions that different stakeholders may experience because of the crisis Reduce the threat levels faced by NSF Reduce the likelihood of negative consumer perceptions Reduce the impact that the crisis may have on future consumer’ purchase intentions These objectives are further supported by the vision of the communication strategy, which is: to listen and respond to issues and concerns communicated to the organisation by the consumers, employees, shareholders and media. Section 2: Crisis Management Strategy Among the three crisis management strategies suggested by Coombs (i.e. deny, diminish, or deal), NSF would be better off using the latter. Dealing with the crisis will give the organisation a better chance to admit it responsibility, but assuring the affected publics that the crisis was unpremeditated. By opting to deal with the consequences, NSF will also stand a better chance of communicating honestly to the affected publics, hence enhancing the chance of gaining confidence in the consumer market once again. By choosing to deal with the situation, NSF will need to prioritise consumer safety before anything else. As such, the organisation will need to alert consumers of the harmful product and warn them against using the same. The organisation will also need to issue aprompt product recall in order to stop further distribution of the same in the market. Only after accomplishing the two identified tasks will the organisation engage in damage control measures, which includereputation management. The right person to communicate with the public at the height of the crisis would be the highest-ranking manager or chief executive officer in NSF. This would serve to reinforce the notion that the organisation is deeply concerned about the effect of the crisis that it is sparing no effort towards remedying the situation. In most cases (and due to their lack of public relation skills), the key communicator (CEO or Senior Manager) would need to seek guidance on how best to communicate from the PR practitioners in the firm. The key communication channels that NSF would need to utilise include internal memos/ emails or physical meetings for communication intended for the employees, traditional media channels such as radio and television broadcasts, newspapers, magazines, and up-to-date information posted on the organisation’s website for the technologically savvy audience. Crisis Communication Plan i. Communication of the organisation’s standpoint: Having chosen dealing with the situation as the preferable crisis management strategy, NSF should present the true and accurate facts about the situation in the soonest time possible. According to Lock and Powell (2000), most media reports about a crisis are based on speculation, rumours and half-truths. As such, the earlier an organisation states the facts to the affected publics (i.e. customers, investors, employees, media, distributors, legislators, regulators, government agencies, activist publics, intra and inter-industry players, and the community at large), the better for it. NSF would need to embrace factual communication at this stage, since such would enable it institute damage-control measures. Specifically, NSF will need to take control of how the media perceives and reports about the situation. The organisation would first need to indicate its unequivocal responsibility for the crisis, and offer an unconditional apology to the affected stakeholders. According to Matheson (2008, cited by Howell and Miller, 2010), an organisation that accepts its responsibility and apologises to the consumers is perceived as transparent and responsible for its actions. According to Lok and Powell (2000), an organisation that asserts its control through communication, stands a better chance of using the media to communicate messages that reflect the true situation. Through emphasizing NSF’s true position to the affected publics though effective communication, the organisation will stand a lower risk falling victim to unverified media reports. In the communication, NSF would need to identify the actual problem in its products and state the corrective measures that it has taken. Additionally, all communication from NSF must be perceived as honest and open. Further, the communication must show the public that the organisation is concerned and proactive in handling the crisis. ii. Taking immediate action: Words and actions go hand in hand during a crisis. As such, NSF should communicate through actions too. Specifically, the organisation should take actions that minimise further risk to consumers. As Sturges (1994, cited by Coombs et al., 2010) argues in ‘Situational Crisis Communication Theory’, efforts to manage an organisation’s reputation should only happen after public safety issues have been adequately addressed. In NSF’s case, alerting consumers of the harmful product should be the first priority in the crisis communication. Only after addressing public safety should NSF focus its communication to reputation management (Coombs et al., 2010). Lok and Powell (2000) further suggest that any actions taken by the company should be communicated to the public in order to portray the organisation as the protagonist in-charge of the situation. Additionally, NSF should be seen as the most active player in solving the problem. iii. Listening and responding: Since communication is two sided, NSF will listen and understand the concerns, issues are perceptions communicated by the consumers, employees, shareholders and the media. As Lagadec (1993, p. 14, cited by Howell & Miller, 2010) stated, communication “does not simply mean being able to send messages; it also means being able to receive them”. Based on this, the organisation will then design communication strategies that address stakeholders’ concerns in a simple but compelling manner. NSF will also take notice of any misinformation and dismiss the same through communicating facts to its audience. The organisation must also communicate its strategy to prevent future crises from occurring and affecting the consumers. Conclusion As Seymour and Moore (2000) suggest, crisis communication should be a reflection of the organisation’s sense of care, commitment, consistency, coherence and clarity. Specifically, care should be taken to uphold public safety, shape public perceptions, and empathise with the cause of the people affected by the crisis. Commitment on the other hand, should be reflected in the organisation’s conduct (Seymour & Moore, 2000). In NSF’s case for example, the company should be perceived as an entity that is willing to do right regardless of the cost it may have to suffer. Specifically, the organisation must communicate its willingness to remedy the situation in the shortest time possible, and take measures to avoid a recurrence of the same in future. The organisation must give consistent, coherent, and clear messages to the stakeholders in order to avoid confusion. References Charles, M. T., & Kim, J. C. K. (1988). Crisis Management: A Case Book. C.C. Thomas: Springfield. Coombs, W. T. (2002). Deep and surface threats: conceptual and practical implications for “crisis” vs. “problem.” Public Relations Review, 28, 339-345. Coombs, W.T., Frandsen, F., Holladay, S.J. &Johansen, W. (2010). Why a concern for apologia and crisis communication? Corporate Communications: An International Journal, 15(4), 337-349. Delforce, R., Dickson, A., & Hogan, J. (2005). Australia’s food industry- recent changes and challenges. 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