21: A Crisis Case Study: Elizabeth Holmes in a bloody mess

Foreign. This week the character trait a business leader must have to survive a brand or business crisis. I'm going to compare two brands going through a crisis and identify the similarity to both. And why this week? Because last week one executive's reputation is now barely surviving the turbulence while the others a bloody mess. For the Confident Communications Podcast, I am Molly McPherson and this episode is a special headline news edition on the one trait you need to survive a brand crisis. The focus of this week's episode is on reputation management as it relates to business leaders, business owners, entrepreneurs, members of the C suite and I chose this topic for a few reasons. 1. I could not get through the week without seeing any notifications on my phone about the Boeing company. 2. Elizabeth Holmes is way on my radar this week I watched the HBO documentary the Inventor out for Blood in Silicon Valley which aired last week. Watch it please. It is very good, as is the podcast the Dropout. That's a six part podcast produced by ABC News and they also showed the video version on an episode of Nightline. All good television watching. And I also spent the week in San Diego at Social Media Marketing World where I surprisingly did not feel like the oldest person at the San Diego Convention center yet. My email was blowing up with crisis related request. So on the mild side, I was asked to write a blog post about top corporate crises that I followed leading up to a conference that I'm speaking at in May for the International Crisis Management Conference and other requests were from clients, from new clients, potential clients. Also I received a media request from a financial publication out of the uk. It was out of the blue and it was asking me questions about crisis prevention and what's going on in the news nowadays with these brands in crisis. Thought this is a good week to talk about crisis because I think just from seeing the work that I do with my current clients and I told my team this week, you're all now in the crisis management business, I'm noticing that the communication pendulum is swinging back towards crisis prevention. People in business are worried. I can feel it. Everything feels like it's tilting not towards crisis communications but but crisis prevention or preparedness. And most important, why is it happening and why is it only getting worse for companies and organizations? So that's the reason why I wanted to make this special headline news edition for listeners. I'm going to take two examples of brands and crises. You heard Theranos and the Boeing Company and I want to pull out the lessons that I found that we can all learn from from what happened last week and getting to the truth of the matter, but I also want to discuss how the landscape has drastically changed for business leaders. It feels like it's overnight, but it's not. It's slowly been happening. And also, if you're a company that has a crisis media toolkit or for any of the companies that spend thousands of dollars for a crisis management expert to create a toolkit, if you did that before this year, just toss them out because chances are they don't even apply anym saying this as someone who's written plenty of crisis media toolkits. Now, in terms of background, on the one side we have Elizabeth Holmes. She's the Stanford University dropout, turn startup CEO and founder of Theranos, the beleaguered biotech company. They were considered a revolutionary blood testing company that turned out to be not so revolutionary. She founded the company in 2003 and was soon raking in millions, well, a billion dollars in venture capital funding for the development of these single drop blood tests from one prick of the finger. And the company's success was bolstered by a list of influential supporters and members of the board who include former US Secretary of State George Shultz, William Perry was the former U.S. secretary of Defense, former U.S. secretary of State Henry Kissinger, former U.S. senator Sam Nunn, former U.S. senator and heart transplant surgeon Bill Frist, General James Mattis. You get the idea. You can see how Elizabeth and the company shield itself from the effects of any scrutiny just based alone by building that fortress of reputation on her board. But there were plenty of problems inside the building. It has since been reported that Holmes and her president, Ramesh Balwani, who's also known as Sunny, I'm sure you've seen his name in the press who ran the company with Elizabeth in a corporate culture of secrecy and fear. And by the way, Sunny was her boyfriend. But nobody knew that. And if you watch the documentary or listen to the podcast about Holmes and Theranos, you may notice, as I did, that Elizabeth seems like a person who does not seem comfortable in her own skin. At no time, whether she was on camera, unintentionally or intentionally, she never seemed comfortable, like she was always waiting for something to happen. There was one excruciating scene in the documentary where all the employees are gathered in, it looks like their cafeteria. I won't add any spoilers here, but they were there to celebrate a certain finding that had happened. So the music starts playing and in dances Elizabeth who can't dance. But I'm not judging anyone for that. But it's clear as she's trying to dance and put her hands in the air in that kind of woo woo fashion that she's very uncomfortable doing. So it's not that kind of carefree dance. It's a very reserved and measured dance. It's as if someone is trying to project an image of calm and happiness and excitement, when on the inside they're terrified and they're hiding something. It's one part awkward, but it's another part completely inauthentic. And that lack of authenticity has followed Elizabeth everywhere. Another bizarre story about her, and this one's about her voice. Many claim that it's put on. So if you listen to her in most public appearances, she speaks in an unusually deep baritone voice. And it's been said that her natural voice is actually a few octaves higher. I was able to find a clip from the View that has the two voices together. Take a listen.

There was a recent 2020 special on ABC News podcast. It's called the Dropout and it focused on the billionaire fraud charges against former Theranos CEO Elizabeth Holmes. And it showed how she even put on a fake voice when she was doing business.

Watch her voice.

What she could figure out, a surprising baritone, was that it would likely cost her a few thousand dollars to get these tests done.

In this interview with NPR from 2005, we hear a very different sounding.

Elizabeth no, it hasn't. Well, if I use traditional words to describe what we're doing, it's hard.

What do you think? Now me, I believe it. I believe that she's putting on that lower voice. But. But on the other hand, I think how exhausting would it have to be to walk around and change and modulate your voice every single time you spoke? It would be exhausting. But here's another tilt towards her lack of authenticity. She appropriated someone else's brand many times in the ABC produced podcast the Dropout. When I listened, they had mentioned Holmes obsession with the Apple brand and specifically its leader, the late Steve Jobs. Theranos branded everything after Apple, from swiping their employees to swiping their brand aesthetic. Holmes clearly admired Jobs, that she even copied his style deliberately. So you will see a lot of photos with her, a lot of videos with her, and she's wearing one color, the same color that Steve Jobs wore, black. And when you see photos of her on the COVID of Vanity Fair or any other magazine, she's usually dressed in the ubiquitous black turtleneck, just like Steve Jobs. And then of course, there are the lies. Back in episode 16, I produced a episode about lying. It's titled how to Spot a Liar. I included a link in the show notes, and I uncovered the ways that anyone can spot a liar to be a human truth detector. And based on the reaction of that episode, it was one of my most popular. And the reason why, I think it's not just because it was a great episode, but because people want to have this skill. They want to be a human lie detector. The reason, well, keep listening if you run a business or organization, because I'm going to uncover this. Since I recorded that episode, I cannot stop looking for the lies. My poor family, my kids, like I'm accusing them. Like, look me in the eye, tell me the truth. I can spot a liar. But it's the same when I watch television. Specifically when I watched Elizabeth Holmes, I could not stop looking for the lies. Now, she has these huge eyes, these huge blue eyes that they're very, very easy to track. And when you watch her in the documentary, you're going to notice that she never blinks or she rarely blinks until she was asked during an interview to tell a secret. Now, I know that you can't see this visually, but listen, can you tell us a secret?

I don't have many secrets.

If you were to watch that documentary, the first glimpse we see of Elizabeth is her sitting there looking right into the camera as she's being asked that question of, can you tell us a secret? And then you would notice that she looks down and. And repeatedly blinks her eyes before saying, I don't have many secrets. It's in the blinks. If you listen to my how to Spot a Liar episode, that you know someone, maybe or likely is not telling the truth. Now, we all know the ending. What happened to Theranos? It was a bust. Elizabeth was a bust. She was a fraud who was brought down in part by a whistleblower, Tyler Schultz, who happened to be the grandson of George Schultz. And one of the reasons why he had so much trouble trying to tell people this information about the company and why he thought it was fraudulent is because his grandfather George, didn't believe him. And he wanted to push him away and push the truth away, which happens a lot in this kind of day and age of corporate culture mistrust. First, Tyler attempted to bring the concerns about the company's activities to management. And that failed. And when that failed, he. He went to the Wall Street Journal. They were doing a story, a blockbuster story about Theranos that was the start of its downfall. And he also spoke with the New York State Department of Health. Now Holmes is facing 20 years in prison for wire fraud, scheming to defraud investors and doctors and patients with her false claims about the blood test onto the next brand crisis. On the other side we have Dennis Muhlenberg. Now he's the President, Chairman and CEO of the BoE and this right now, this week is a business case study in how not to handle a crisis. I cannot go a day without the word Boeing popping up on my phone. I read about an article almost every single day. Now, a brief recap. If you're not familiar with what happened, you have two airline tragedies. There was an October crash of Ethiopian Airlines Flight 407 and Lion Air Flight 610 that happened two weeks ago, resulting in the loss of nearly 350 lives in less than five months. And in both crash, it was reported that the pilots were wrestling with controls before they crashed. That's pretty scary. And most of the pilots we've, we've been told or what's been reported were not trained on how that system work that Boeing created. And many did not even know that it existed. And tragically, I just read this in the New York Times that the Lion Air pilots were so confused by what was happening in the cockpit, they were unaware that they could disable the system. And they spent their last moments praying while they were reviewing the instruction manual. I mean, can you imagine? Pilots in the US had complained at least five times in recent months about problems controlling their the Boeing 737 Max 8 jets during other critical times in their flights. I mean, who knows who were, you know, the people that were on these flights. The pilot groups were complaining that Boeing did little to ensure the plot. The pilots of the airline or anyone else was aware that of this anti stall feature that they had put in this plane so the pilots were not told how to turn it off. And if they were dealing with something that was malfunctioning or if there was faulty data. Now pay attention here because this is the crux of the problem for Boeing and for many companies and organizations that are facing a crisis. The next thing that Boeing did after these crashes happened is they repeatedly insisted in their press releases and in an email to employees that the planes were perfectly safe. But the problem was nobody believed them. Why? Because people died. Now keep paying attention. Before long there were demands that These planes, the 737 Max, should all be grounded. So now the narrative is shifting from questions about the plane's safety to questions about why Boeing and the faa, the Federal Aviation administration were refusing to act quickly or even act at all. And to add to this messy mix, the FAA has delegated some of its responsibilities to the companies that it regulates, including Boeing. And in fact, I read in the New York Times that Boeing employees were partially responsible for certifying these planes as airworthy. Oh, my goodness. There was a quote that I read that said Boeing and the FAA have had an almost symbiotic relationship. The relationship, cozy. And that was from an aviation safety expert. Okay, so this is not good for, for a brand or for a company, especially when safety is at risk. So where are we now? Last week, many countries, including the U.S. banned the plane from their airspace. The Justice Department, the dot, the Department of Transportation, other agencies are now opening inquiries into the crashes and Boeing's relationship with the faa. And Republican Senator Ted Cruz has planned a hearing week on airline safety. And he said, it's not going to be the last. And there is your corporate crisis. Now, where did it all go wrong? Well, plenty of places. Starting first, when people were killed in plane crashes. But where did it go wrong from a corporate crisis management point of view? Well, here are some of our tells. One, Boeing forgot its mission. The mission of Boeing is connect, protect, explore and inspire the world through aerospace innovation. Boeing was not connecting with its stakeholders, the pilots, congressional leaders, the air travel public, the press. They were not protecting their primary stakeholder, the passengers. And one could argue that no one was inspired by their use of innovation when it was killing people in plane crashes. That mission statement is now null and void. Next, the company, through its CEO Muhlenberg, repeatedly insisted in their messaging, the press releases, their statements that its planes were safe. And the problem, again, no one believed them. So also, Muhlenberg personally lobbied President Trump about the plane safety. That, of course, broke in the press, and that was made worse by the fact that the company did donate to President Trump's inauguration. So that heightened any of that, heightened the unflatter scrutiny even further. And when the company's stock tanked, that's likely when the board of directors likely said to Muhlenberg, stop stalling and do something. Okay. Now, did you spot the character trait in both examples? Or rather the flaw secrecy deception that led to mistrust by everyone? The crisis management playbook used by both Holmes and Muhlenberg was to stall and deceive, stall and deceive. There was a day when corporations could hide the facts or shade the truth, employ shrewd messaging. But those days are over. Now, many of you listening are likely not the world's Youngest billionaire or former billionaire, or the head of a multinational business with over $100 billion in revenue. Well, who's to say that you're not? Maybe you are, but anyone can learn from these two examples. We can take the big paychecks and the big transactions and distill them down for learning if you're a business owner, a CEO of a small to mid sized company, a small business owner, an entrepreneur, or someone working in the C suite space. So no matter where you work or what you are responsible for, if your customer doesn't trust you, you cannot successfully run a business in the 21st century. Stop. You can't. There are a number of thought leaders out there who call this a truth crisis. Go ahead and Google it. A lot of people have called it that, this truth crisis. But I disagree. It's not a truth crisis. I call it a crisis of mistrust. We are all firmly settled now in this culture known as the call out culture or the outrage culture. And what this means is that the public does not tolerate dishonesty or shady dealings at all. It doesn't mean that they don't happen. Clearly they do. Businesses run into trouble all the time. But as soon as the public feels something is off or suspicious or I call it, and my kids call it sus, the brand and its leaders will be called out. And the risk of being exposed has increased with the onset of technology, digital and, yep, you guessed it, social media. The ability for people to find information nowadays at their fingertips and for the ability for any movement or a group of people to crowdsource online, for intel, for more people, for funds, anything that can build or propel a movement. As business people, how do we make the ethical decisions in both our traditional and social media messaging and as it relates to our direct dealings with the public. So here is the takeaway lesson for anyone who is listening who wants to learn how to run a business or an organization in this time of mistrust. Now I think the people most at risk, the business people at risk, are the people who clearly are dishonest or dishonest in running a business. If you run a shady biz, expect to be found out. But a question comes up. If you run a business, how public do you need to be when it comes to your business dealings or your policies? How much do you have to let the public in? This question comes up a lot. In the work that I do in my trainings or in my one to one dealings with my clients, the feeling is they want to be open, they want to do work with their customer, and they're not really covering anything. However, they don't understand why they need to share this information just because someone's asking for it. Why do I have to give that to them? And what I tell them is not to focus on how to become more transparent, like what you need to do to give them information, like the specifics of it. But the mindset of transparency change from a business that keeps information close to the vest, because you have every right to, to letting your customers know that you're an open book. But within reason, of course, there are legal financial reasons for not releasing certain information, but you get the idea. I see it over and over again. Business owners, CEOs, members of the C suite who dismiss the power of the people. They reject the power of the Internet and they deny the power of social media. They think if they don't share information to someone who wants it, it's going to end right there. But it doesn't end right there. The public is quickly losing trust in the companies and the brands that do not let their customers into their business or into the mind of its leaders. And when you lose the public's trust or faith or confidence, whatever you call it, it is nearly impossible to gain it without inflicting some form of damage. Now, how do I know when someone or company is at risk? Well, first, I start to hear a lot of these statements and generalizations. The press is out to get us. All the news is fake news. Millennials, those are people that are on their phone all day. They're narcissists. They only think of themselves. They have no loyalty to anyone or any company. If you're shocked by that, don't be. Honestly, I hear that all the time. And this is what I tell them. The press is not out to get you. They're out to get a story. And where do reporters find a lot of their stories on social media? And what demographic spends a lot of time finding information and consider social media to be their primary source of information? Go ahead, fill in the blank. You see, one feeds the other, and then you add into the mix a segment of people or customers who have formed this culture of not tolerating deceptive behavior. And that group happens to be savvy on social media. And what do they do? They start sharing the news stories, they start creating documentaries, they start producing podcasts, they start building websites, they start to build a movement. And it's not just the millennials, though. The millennials are very, very good at it. It's the Gen XERS it's the baby boomers. And now coming up, Generation Z, it's these digital naturals, these people who are comfortable and using digital technology to call out a business, a brand or a person that they feel is not honest or not being truthful or trustworthy. Our culture thrives on content. And yes, the bloodier it is, the better. And if it bleeds, it leads. It's if someone's impaired, it gets shared. That last part I added, I do get it. The news has its role in adding to this culture, definitely. But the businesses that fight it, the CEOs, the business leaders who fight it, and they try and stay closed off because they think it's their right to keep this information to themselves. Those are the businesses who are ripe for a corporate crisis or business crisis that could lead to a brand crisis. And this isn't just at the corporate level. This could be a small brick and mortar level at, you know, on Main street usa. Okay, back to our examples here. We had two business leaders who represent two damaged brands. But where is the lesson that we can uncover? Well, you can identify the crisis through line that binds them together. We talked about it, secrecy, deceit, mistrust. But now we're going to show where they separate. And this separation is where I think businesses and brands and business leaders can survive a crisis. This is point when the Boeing company separates from Theranos. Here are three tactics to gain your customers trust in the digital age and how Boeing is currently using them to help survive their crisis. Now the first one's an easy one to guess, but in my experience with clients, a not so easy one to execute. And that is truth and transparency. Now the Boeing company, albeit they were a little late to the truth party, but they eventually started to let the public in. Likely the time they hired crisis management firm to come in and they started to tell the truth. They started to acknowledge the problem. They started to acknowledge their role in the problem and admit that there was a problem. They started getting comfortable with the mindset of letting the customer, their stakeholders in. Elizabeth Holmes, by the way, is still in denial today about her role in the downfall of Theranos. The Boeing Company on the other hand, they doubled down on disseminating their messaging. Remember in this age of this call out culture, the public has no tolerance, zip, zero tolerance for shading the truth or flat out lies. People do not want to do business with an organization they do not trust. It's as simple as that. And they can't trust you if they don't know you. And I work with so many people who struggle with this concept. And here's the reason why, as I mentioned earlier, they don't feel as if they need to tell it. And I don't want to label a certain segment, but I will. It's usually the late Gen Xers, baby boomers and above. And to give them a break, the reason why is because that's how business was always done. We always operated in this way. We had corporate communications or we had communicators that would send out a press release, and if we had to do an interview, we would do it before a deadline, before a story. But digital media and social media has changed everything. Information is now on demand. People want information right when they ask for it. So the shift has happened, but the people who have not gone along with this shift are the ones that wind up in trouble. And so often it's not that a company or a person running a company or the board of directors, it's that they're lying or they're covering up for something bad. It's just they, again, they feel like that they're not required to share that information. That's a mindset that isn't working in this digital age. I use this example a lot, too. If people can go to their phones and order a coconut to show up at their doorstep within 24 hours, those same people expect to find information online about a company they do business with. People's brains are now wired to expect to get information when they want it. So why not give it to them? You don't have to give everything away, but the more you let them in, the better. And when a company or person is withholding it, they become suspicious. And your critics, they become suspicious as well. And the activists that have been working, trying to expose you, well, you've given them exactly what you're looking for. And that is a target on your back. Activists love to target organizations who like to hide things. In my business, I'm working with three different groups of clients right now that are working with three national activist groups. So I have a little insight into how this works. And the biggest disconnect and the one that I'm trying to explain is that these activists, they are fueled by two things. One, technology. They love to use social media, they love to use video. They love to use their website to disseminate information because it's so easy to share. But what they're also fueled by is not getting the information. They don't care about the information. Because of the Internet, most anyone can find information. You Just sit down and start typing away and eventually you can find it. I've mentioned this on the podcast before. It's not the information that they're after. They just want you to go on record saying that they can't have it. Or they want you to go on record saying that the policy that you currently have for your business is the right policy, simply because this is how we've always done it. They love that activists, love people that operate in the past, that live in the past. These brands and organizations, business owners associations, whatever you are, whoever you are, those are the people who are at risk and are in target range now. 2. Always. Whether you are weathering a crisis or it's day to day with your business, show empathy in all of your messaging. Now, I learned this past week when I was at Social Media Marketing World that the number one tactic for building engagement leading into 2019 into 2020 is video. And this is also called trust. It's like visual trust. Video on Instagram, Instagram stories, Facebook live, Facebook watch parties, video on your website. If someone can see you, it will increase the chance that they will trust you. And this is what Boeing did in their messaging. They posted a video to its website of the CEO Dennis Muilenburg. But first, I'm going to let you listen to it. And listen to that first line. Lives depend on the work we do at Boeing. Did you hear that? Lives depend on the work we do at Boeing. Now that should have been their mission statement. Make all your messaging simple, easy to follow. Make the message understandable. Put your business owners, your CEOs, your employees out in front for everyone to see. When there isn't a crisis. Talk about your mission statement when there is a crisis. In the case of what Boeing did, they said that their priority now was life. Lives depend on the work that we do at Boeing. And the third one is share it for all to see. Unveiling the truth in as many places as you can is going to help restore your trust. The message was simple, it was easy to understand. But more importantly, it was easy to share. It wasn't too wordy or complicated because if it was, the social audience would completely tune it out. Now, Boeing first, they made the video and press statement shareable, both of them. If you go to their website, they have an easy share button there because they want to encourage people to share it on social media. And by people, I mean the stakeholders like the press. And that line, lives depend on the work we do at Boeing, it had only 41 characters, which allows plenty of room to share it on social media, specifically Twitter, where a lot of reporters and lawmakers live, because that falls well below the 280 characters needed on Twitter. So they can share the line, that statement and then a reporter or another stakeholder can add their opinion to the mix. And then they backed it up with good old fashioned newspaper ads. Which is the first place where I saw the Boeing statement, it was in a full page ad in the Wall Street Journal. It's like on page three, prime real estate. So they used a traditional communication channel to tell all their stakeholders, we want you to see everything. No matter where you consume news, you need to read or hear this message. Now to recap, how can you keep your customers trusting you when your business hits some turbulence? The methodology is simple. One, tell the truth. Use a transparency mindset. The customers expect to know how you run your business and the more you tell them in the good times, it will build up the goodwill that you will need in the more turbulent times. 2. Engage with your customers. Introduce them to your leaders, your employees. Use simple, easy to follow messaging that lets the customer in and show empathy at all times, in good times and in bad, and understand what is happening. Let your customer know that you know what's going on and tell them that if there is a problem, you're going to do something about it. And three, share all your messaging across all your platforms for everyone to see. Use all the social media at your disposal, but don't abandon the traditional. Use mailers, use letters, use newspaper ads, use radio ads. No matter what it is, it's telling your customer that we want you to trust us because we're going to tell you the information where you live. The jury is still out on the Boeing company and how they handle this crisis, but the methodology that they're using that I just explained to you I think is going to go a long way in helping them regain the trust of all of their stakeholders. Well, that's all for today's special edition of the Confident Communications podcast. If you want more information on how you can become more comfortable as a modern day communicator, you can download my special guide, the top five rookie mistakes seasoned business leaders make as they make their way into online media. It's available on my homepage of the website@mollymcpherson.com or you can text the word rookie r o o k I e to 345345. That's typing the word rookie in text 345345 and you will receive a link to click and then download for more communication tips, you can subscribe to the podcast on Apple, itunes, Stitcher or wherever you listen to your podcast. Remember, I want to help you become a modern age communicator in your industry and help you build a crisis proof reputation for you and your business. Thanks for listening. Bye for now. Sa.