Monday, July 13, 2009

Bad Drywall, Bad PR -- Making the Best Out of a Smelly Mess.


** My favorite business writer for the Wall Street Journal, James Hagerty, has written a short update about the bad drywall from China that was used by some builders in the United States.

** The upshot is Miami-based Lennar Homes -- the largest major builder to publicly come clean about the drywall -- has set aside tens of millions of dollars to get it replaced in hundreds of homes in Florida.

** Unless you've been in a cave -- most of us who remain interested in the travails of the home building industry already know that the Chinese drywall has been implicated in hundreds of reports in more than 20 states (mostly in the Southeast) -- from homeowners complaining about bad smells, irritated throats and eyes and visible evidence of metal corrosion.

** In my view, too many builders fearful of present and future liability/litigation have been hidebound about this issue -- or at the very least, have been too careful when called upon to respond publicly to questions about bad drywall.

** So while I think it's laudable that Lennar has decided to tackle the issue head-on, the cynic in me is bummed that the WSJ had to find out about Lennar's actions in a mandatory filing with the SEC on July 10, a Friday before the weekend.

** PR pros already know that "end of week" filings always looks suspicious to news editors accustomed to companies trying to bury a controversial issue. But companies keep doing it, even though their timing is almost universally viewed as damage control, e.g., an effort to minimize public and investor relations exposure a company might otherwise receive -- from a similar "splash" appearing on a routine business day. If Lennar was truly interested in improving public and customer relations -- it could've issued a press release about it -- even if it meant using the same legally-vetted language in its securities filing. (A check of Lennar's investor relations website indicates the company did not issue a press release about this.)

** Having once worked for more than a decade inside the walls of a publicly traded Fortune 500 company, there's little doubt to me -- that a discussion took place about the ramifications of any announcement related to the bad drywall -- between Lennar's finance and legal departments -- with or without input from its marketing and public relations teams.

** I strongly believe the level of candor imbedded in a company's corporate culture -- is the pivot point, the deciding factor if you will -- that determines whether damaging information reported in a securities filing -- will be concurrently reported in a news release -- that goes independently to customers via the media.

** I'm curious about what other marketing and PR experts think about the balancing act required in cases like this -- whereby a company attempts to minimize exposure to liability -- while still appearing sensitive and forthcoming to customers. Most of us still hold Johnson & Johnson's proactive handling of Tylenol in 1982 (tampered bottles discovered laced with cyanide) -- and in 2009 (FDA committee recommends banning Percocet and Vicodin and stronger warnings about acetaminophen causing liver damage in high doses) -- as the gold standard of public relations/marketing/crisis communications.

** You can read the WSJ story in its entirety by clicking here or on the image above.

(Original material © 2009 by David Kusumoto.)

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