Mayberry 2005: Question 6 Natural Distasters

Student: My name is Connie. I have an undergraduate degree in international finance economics from Union University and now I am here in my first semester as an MBA student. My question is how do natural and other disasters affect your business? What type of business continuity/contingency planning do you have in your business to cope with these disasters in your organization as well as outsource/offshore operations?

Jean Kinney: We've sure had a lot of experience with this one recently with all the hurricanes and tornadoes and whatever. We take this kind of continuity planning and contingency planning extremely seriously. And for any businesses of significant size at P&G, we planned for these years and years in advance. And in some cases we even do drills to get prepared for them. We've gone through a couple of these, very recently New Orleans with Katrina. We have the largest coffee plant in the world which is located in New Orleans . Of course we know what happened to New Orleans . But we had a wonderful business continuity plan. And we are the first business in New Orleans that was back up and running. So it works. It involves everything from simple things like making sure you have phone numbers, cell phone numbers for all of your employees. Making sure your employees are safe. How the heck am I going to get electricity to the plant that's located in New Orleans while there are no infrastructure? So having helicopters ready to fly generators in. How am I going to get water into this city when there is no water? How am I going to get a truck trucked into the city? Where are our employees going to live? So getting the housing for employees so that I can run the plant. We go through this extensively at very detailed levels, and if it's a large business, we even do drills to make sure it's going to work. The other place I would comment on is how it affects suppliers. You know, what happens when you need to get some critical ingredient in your suppliers' plant is impacted? So we also do a lot of work with suppliers to make sure they have business contingency plans or in some cases we'll have things like alternative formulas. So if I can't get this material from this supplier, I know I can shift to a different material from a different supplier or to a different supplier altogether. So, it's very important and something we take very seriously and it works well.

Joe Dehler: What I would add is in our businesses, we are in hotels, restaurants, and cruise lines, we've been very impacted by the natural disasters. And so what we've discovered is the work that we have done with our employees around vision and values has been as important as the detailed contingency planning. I'll give you an example of that. Our Friday's restaurants that were impacted in the gulf area. What our employees naturally did based on our vision is to be the most respected privately held company on the earth, they went into action immediately and actually changed the menu so they can make the most of all the food available in the restaurant and provided $5 meals to all local community workers. And believe or not, I don't know how they did this, but converted one of the men's restrooms into a shower. We realize from that, and that was driven by our vision and our values, not necessarily by any detailed plan, they just understood that it was, you know, we expected them to represent us well in the community because we have this vision to be the most respected privately owned company in the world. And that's a big goal.

Speaker: There were some Radissons affected, too, weren't there?

Joe Dehler: Actually we had just opened a brand new Country Inns and Suites in New Orleans that was heavily impacted, but our Radisson property that was on the grounds of the airport stayed open throughout the whole storm period, and we were able to house a lot of people. And so as much as we can plan, we have to do the detailed planning to be prepared for how we deal with each situation. What we've also found is that it's as important that every employee understands our vision and our values so they can represent us well in the circumstances, and we were very proud of how they handled the situation.

Speaker: Any other comments? David?

David Jones: We were impacted on the customer side. In contract manufacturing, we only have about two dozen customers out of our factory that we deal with. And so the number is small, but the relationship is large, the multimillion dollar accounts. We had two accounts, for us fortunately, they were start up, they were still small, and we were still growing them. One right on the gulf coast of Mississippi and the other, Pevey if you know Pevey Amplifiers, we build some products for them. They were in Meridian , Mississippi , farther inland. Both of those customers were completely shut down. We had no way of getting a hold of them. There was no power. There was no cell phone coverage. Nothing. So we learned a lesson in contingency planning on the customer side. And it has impacted our sales because they're not producing like they were. We'll eventually catch up, but for the time being there is an impact.

Joe Dehler: Just a piece of kind of trivia. When I was most worried about being fairly new in the business was cruise ships. This cruise ships are two and three hundred million dollars. What I discovered, you know, what they are doing in the storm with the cruise ships, when the storms come, how do they deal with and avoid the disaster, they drive away from the storm.

Jack Swaim: One other discussion is been about what the company prepare contingent plan like HP does, similar to that. In addition to that, we realized that, it seems like crazy if we didn't realize it more effectively earlier. But after 911 disaster, so many customers came to us and said we lost this, we lost that. We realized that there is a great market opportunities and help customer to prepare for the disaster or prepare the losses. So we actually developed a significant line of business then help customer have more effective strategy for backing up their data and that kind of thing. And we developed products and services that we sell and make money for our shareholders and provide jobs for our employees, and the customers are quite happy to pay the money because they figure it is a good value received. It's a win-win. And it is big mark up opportunities for us that we didn't think about it so seriously until 911. So that is another aspect of about disaster and how we do it.