Crisis management: Fonterra fronts up to address failings
Thursday, 7 November 2013 00:17
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Fairfax NZ News: Fonterra’s new Communications Chief Kerry Underhill had been in the job nine hours when the international PR veteran got a call to say a lab mouse had died.
Then his world went mad.
Within hours Fonterra announced a potential botulism contamination threat in one of its ingredient products and was overnight catapulted into an international storm.
That was in the first week of August. Three months on with the threat proved by overseas testing to be a false alarm, Blenheim-born Underhill says the crazy work days continue as New Zealand’s biggest company and the world’s leading dairy exporter treads water against an incoming tide of scrutiny over its substandard handling of a global food-safety event.
Incoming tide of scrutiny
It has been subject to reports and probes and criticism and unrelenting questions at home and overseas. Two inquiries down, two to go. Each new flurry of insights into the calamity-that-wasn’t triggers demands for answers from consumers and New Zealand Inc, and chips away at any progress on restoring Fonterra’s damaged reputation. All of it happening on Underhill’s watch.
The farmer-owned co-operative got another public roasting this week with the release of the report of an independent inquiry team commissioned by Fonterra directors. A gritty, penetrating analysis of what went wrong, why, when, where and what should be done so it doesn’t happen again.
A report that essentially said Fonterra failed Crisis Management 101; that urged the Down Under dairy giant to lose the “Fortress Fonterra” attitude; that had a lot to say about inadequate communications planning and skills.
It said Fonterra was “immature” in adopting a sophisticated social media presence, a situation it was addressing.
It noted in a crisis a lack of a social media strategy and capability could be costly for reputation and remedial opportunities.
Where does Underhill fit in?
So where does the newbie Underhill fit into a public-relations structure which for 12 years has been the sole domain of external company Baldwin Boyle Group?
And what is BBG’s status now, given the report concluded Fonterra had a “historic, strong and unusual dependence” on a communications model based on the services of one, external, firm; a model “highly unusual” among large enterprises with complex information needs where communication specialists are more usually employees.
Underhill, whose career pedigree is sprinkled with Managing Director and Senior Vice-President titles with large European companies, including investment banks, was employed by Dutch Chief Executive Theo Spierings early this year.
He recalls he was Senior Vice-President of Group Communications at Dutch international retailer Ahold when out of the blue Spierings, whom he knew from Europe business circles, rang to suggest a coffee meeting. Spierings pitched a job; Underhill resisted.
“I hadn’t lived in New Zealand for 30 years. I had no network. Fonterra used an outsourced [communications] agency; how would that work?”
Spierings told him he’d had Fonterra’s communications structure reviewed shortly after he’d started as Chief Executive two years earlier, and McKinsey & Co had recommended Fonterra needed to build an in-house communications crew.
Eventually Underhill was persuaded to return to New Zealand, and despite the fiery baptism, says he’s pleased to be back.
He joined Fonterra in February as Group Manager, Brand Management and Corporate Marketing, taking over the communications role on August 1 with a mandate to build an in-house specialist team. Within hours he was fronting some of the biggest media scrums in New Zealand corporate history.
Working with BBG
He says he is working with BBG, which has a long history with the company and whose embedded personnel at Fonterra are “solid experts” in the dairy industry. BBG was awarded a new five-year contract early this year.
“We will work with them to make sure what we are doing creates expertise for the company’s internal and external communications,” Underhill says. BBG represented Fonterra legacy company, New Zealand Dairy Group, for many years. Chairman of that Waikato-based company, Henry van der Heyden, went on to become chairman of Fonterra, created in 2001 from a big industry merger. Van der Heyden, since knighted, stepped down as Fonterra Chairman in December. He and BBG principal Brenda Baldwin have a long friendship, and today Sir Henry sometimes works out of BBG’s Auckland office.
Underhill says among his first hires will be digital communications skills.
He says BBG was not contracted, or expected, to provide social media expertise. Nor did Fonterra have a communications representative in Wellington, home of the Beehive. Given Fonterra is born of special legislation and still subject to the Dairy Industry Restructuring Act 2001, the gap would not have served the company well in Government relations during the contamination crisis. Underhill has filled it, appointing former parliamentary press secretary Vanessa Rawson in the capital to work with government officials.
Underhill says the number of BBG staff at Fonterra “ebbs and flows”. Veteran BBG adviser to Fonterra Graeme McMillan and a writer assistant are in the Princes St headquarters “pretty permanently”, Underhill says, and there is a BBG staffer on the media phone and an administration person.
“An open Fonterra”
Underhill says it’s too early to say how many staff he will appoint to the in-house team, but a high priority is to “up our game in social media”.
He says he is committed to providing “an open Fonterra”.
The inquiry’s “Fortress Fonterra” comment was “not a complete surprise although I think it’s unfair”.
“I’m still new so can’t talk historically but I do recognise that a very large company can be seen as faceless. I want to show and prove we are an open company and do all we can do to make sure it [fortress label] isn’t used again.”
Asked for comment on BBG’s future at Fonterra, McMillan said “we look forward to continuing to support Fonterra”.
