ON SATURDAY, AUG. 23, THE HEAD-OFFICE lobby of Maple Leaf Foods in midtown Toronto should have been quiet-it was, after all, the middle of a sleepy summer weekend. Instead, the air was electric, the scene tumultuous. Maple Leaf, Canada's largest meat company, was facing the most serious crisis of its 100-year-plus history. It had been confirmed: Packaged meat from its Toronto plant was killing people.
It was the nightmare scenario for any consumer-products company. Maple Leaf's crisis plan was duly put into play. A camera crew was dispatched to the office lobby, where president and CEO Michael McCain, tall, lean and attired in an open-neck blue shirt with a white undershirt, taped a televised statement.
After announcing that he had closed down the plant and ordered a recall of its products, a grim-looking McCain apologized and expressed his sympathy for the victims of the nationwide listeriosis outbreak. He followed up with a press conference the next day. "Going through the crisis, there are two advisers I've paid no attention to," he told reporters. "The first are the lawyers, and the second are the accountants. It's not about money or legal liability-this is about our being accountable for providing consumers with safe food."
McCain's appearances and statements seemed perfectly natural to the public. To crisis management experts, they appeared to be expertly crafted. The contrite message resonated so strongly in public opinion that even as the number of deaths caused by listeriosis mounted and the entire Canadian food safety system came under attack, McCain seemed insulated by his statement that "the buck stops here." His sad, sober visage became standard fare on the evening news, on YouTube and in newspaper photos. He emerged as the human face of a company that cared about its customers.
Yet, when I met McCain in the fall, he made it clear he did not want to talk about himself, only about "the team." He refused to even call what he had done "crisis management." It was simply doing what was right; and doing what was right came directly from the company's ingrained values. "This is not about some contrived strategy," McCain said. "It's just about a tragic situation and an organization's desire to make it right." He insisted he could not even remember who had written the compelling words in the public statements-although Maple Leaf insiders say that the CEO's hand was in every deed and every word. "The core principle here was to first do what's in the interest of public health, and second to be open and transparent in taking accountability," McCain told me. "For the team, this was almost not a decision-it was obvious. It's just what we are."
Whether he was aware of it or not, McCain was illustrating the paradox of leadership in the modern corporation. More than most CEOs, he had fostered teamwork and collaboration, particularly during the long and painful process of creating a new corporate strategy for Maple Leaf in the face of a high dollar and rising farm commodity costs. Tapping the intelligence of his people was not just good PR-he had actually lived it.
But now, the stakes were about more than strategy. This was a crisis of public confidence, and McCain could no longer use the team approach, no matter how collaborative his decision-making had been. When a company's very existence is on the line, the CEO has to step up as the face of the organization. "That's the CEO's role in something of this nature," he conceded. "I take personal accountability but, in doing so, I can easily represent the interests of 23,000 people, and that is what I have tried to do."
Still, the 50-year-old McCain was dismissive of the idea that he had done something heroic by confronting the TV cameras with such openness and empathy on that August day: "We won't allow ourselves the luxury of any heroes or medals in the middle of a tragedy. We just don't feel it is appropriate. There is no room for patting ourselves on the back, for handling a real tragic situation well."
Hero or team player, McCain could hardly ignore that he had, in the space of a few weeks, become the most closely watched executive in Canada. Yet there is a thin line between heroism and hubris-and this reluctant hero could yet become the scapegoat if the company loses its battle with a barrage of horrors.
THE TESTING OF MICHAEL MCCAIN has its roots in the mid-1990s, when, along with his father, Wallace McCain, and older brother Scott, he was exiled from the family company, french-fry giant McCain Foods, following a nasty succession dispute. Stripped of their roles at New Brunswick-based McCain Foods, Wallace and his sons took over Maple Leaf, a company that had sprung from Canada's oldest meat packing company, Canada Packers. Maple Leaf had added other operations, such as bakeries and flour mills, to create a food conglomerate.
The McCains have often said they brought modern management ideas, advanced computer technology and talent development to a company that seemed to be stuck in an earlier era. Michael, always tagged by his family as leadership material, became the major architect of this modernization after he was promoted to CEO in 1998. Bright and ambitious, he took over a company with a split personality: one side low-margin commodity, the other value-added product. A price-taker in its pork business, Maple Leaf had more leverage as a branded meat supplier under a range of well-known labels such as Maple Leaf, Bittner's and, after a 2003 takeover, the venerable Schneiders. This array of brands made Maple Leaf the biggest supplier of fresh and processed meat to Canadian supermarkets.
The two sides of Maple Leaf co-existed fairly peacefully until the middle of this decade, when the rising Canadian dollar eroded the company's competitive position in world markets. It forced a long-overdue assessment of the split-business model. After five months of study that involved all ranks of the company, Maple Leaf decided to concentrate on value-added products and back away from being a primary pork processor. Pork-cutting facilities would close and be sold, and what fresh pork the company did need to produce would be concentrated in its modern megaplant in Brandon, Manitoba. Jeffrey Gandz, a Maple Leaf director and a professor at the Richard Ivey School of Business at the University of Western Ontario, explains the move this way: "If you are a pure commodity player in a small market like Canada, you have 'V' for victim stamped on your forehead."
Maple Leaf should probably have moved earlier on its restructuring, but this foot-dragging was typical of many Canadian manufacturers that clung to low-margin businesses until the dollar's climb wiped out their competitiveness. When the currency's explosive rise forced Maple Leaf to change direction, it moved dramatically. The plan was for a three-year reorganization. McCain won praise internally and externally for his ability to engage the entire company in the process, but also for acting decisively as the CEO when the time was right.
Part of that switch to value-added products meant an increased focus on the product category known as deli meats or luncheon meats. The exalted future of the company would, ironically, become the source of its life-threatening crisis.
In refocusing Maple Leaf, McCain relied heavily on a team of old confidants. On the executive side, they included his brother, Scott, a production specialist whose people skills complement Michael's often brash self-confidence. Another key player was chief operating officer Richard Lan, whom Michael had known since his McCain Foods days-Lan had overseen the juice division out of Chicago when McCain was running the New Brunswick giant's U.S. operations.
The boards of directors of Maple Leaf and its bakery subsidiary, Canada Bread, are also liberally sprinkled with old allies, such as Purdy Crawford, the corporate lawyer who is McCain's most influential mentor (other than his father); Claude Lamoureux, former head of the Ontario Teachers' Pension Plan Board (which has invested in Maple Leaf); and turnaround manager Bill Aziz, a chum from McCain's undergraduate days at the Ivey School of Business. Gandz, the Ivey professor, has known McCain for 31 years, since he taught him.
But the company of friends was little solace for what was to come. As Maple Leaf proceeded through its ambitious restructuring, it was hit in early 2008 by another shock: the rapid increase in the price of farm commodities. Maple Leaf's bread business, so dependent on grains, was deeply affected. Again, as he's done throughout the trials of restructuring, McCain guided his company through the crisis, calmly waiting for opportunities to pass along cost increases to consumers.
THEN MAPLE LEAF EXPERIENCED ONE of those improbable, seemingly random events that start out on the edges of consciousness and suddenly threaten the existence of an organization. On Aug. 7, 2008, one of its distributors told Maple Leaf that a public health inquiry into some Maple Leaf brand meat products was in the works. Five days later, the Canadian Food Inspection Agency informed Maple Leaf that it had launched a formal investigation into three products from its Toronto meat plant. As the CFIA investigation got under way, Maple Leaf told its distributors to segregate the affected food. This was standard practice, and the news did not travel to the chief executive suite.
But McCain became entirely involved at about 10:30 on the evening of Saturday, Aug. 16, when he received a call at his cottage north of Toronto: The CFIA had confirmed the presence of listeria monocytogenes in two of its sliced meat products. Immediately, the identified product lines were recalled, and a press release to that effect was issued.
The following Tuesday, McCain was informed that the investigation had found more positive tests. Thus, the recall was widened. At that point, McCain says, "we didn't know what the nature of that investigation was, other than a) there was illness involved; b) there was possible death involved, a loss of life; and c) there was a possibility of a linkage to one of these items we had recalled."
Then came that fateful day of Aug. 23, when the possibility turned into reality. DNA linkage was established between some of the affected individuals and the two products. Maple Leaf launched a recall of 191 products, closed down the Toronto plant, unleashed its mass communication campaign and made its CEO accessible to the media.
Ken Wong, a marketing professor at Queen's University's school of business, admired McCain's public-service ad because it had the look of amateurishness. "The text was dull and dry," Wong wrote in a commentary. "McCain was clearly reading off a teleprompter, and his unpolished appearance gave every indication of being tired and weary. I don't know if it was intended, but the ultimate message was, 'We're concerned and this is not about advertising.' Interestingly, a non-ad was exactly what was needed to be the best ad."
The TV spot felt artless and genuine, right from the declaration of culpability to the un-slick presence of Michael McCain in his open-collar shirt. Yet Maple Leaf officials insist there was no premeditated attempt to make it look "real." "We never had the time to overthink anything," says Linda Smith, a communications consultant who has worked with the company for a dozen years. "We weren't that smart, believe me."
All of which is applauded by Christine Pearson, a crisis management specialist at Thunderbird School of Global Management in Phoenix. She says Maple Leaf's apology and accountability were up to the standards of the best reputation management she has ever seen, including Johnson & Johnson's response to the Tylenol tampering that killed seven people in the Chicago area in 1982. In Maple Leaf's case, "the communications piece seemed to me to be high-end boilerplate. He was doing all the right things-it was really good," says Pearson, who has taught at the Ivey School.
If Pearson has one nagging concern, it is whether the company moved fast enough in alerting consumers of the crisis. "Compared with companies I had worked with in the United States, too much time passed before they acted, and I think that still plays out as a problem for the company that is going to plague them for some time." Indeed, with public inquiries expected and class-action suits in the works, Maple Leaf will continue to face the questions: How soon did you know there was a listeria problem, and how quickly did you act? "We need more concrete information on the timelines," says Bob Kingston, who represents food inspectors for the Public Service Alliance of Canada. Kingston has been a constant critic of what he characterizes as a lightened regulatory hand by government in the food safety process. However well Maple Leaf may have handled the public relations challenge, he says, the company has to shoulder some responsibility in lobbying for a system of increased self-regulation that reduced the numbers of CFIA inspectors in the field.
On the charge of being late in responding, McCain says it is simply unfounded: "When you look back through the timeline and how the normal process works, that is not a reasonable conclusion." He insists that CFIA product reviews are routine and constant. The agency only requires a recall when there is a positive test result; it wouldn't have made sense to warn the public at the first notice of an inquiry. Maple Leaf, he says, actually goes beyond standard practice by informing distributors of an investigation, and asking them to isolate affected products. And Maple Leaf, along with its retail partners, acted "with lightning speed," he says, at the moment it found there was a positive test on Aug. 16.
McCain adds that brands and companies hit by product safety crises can come back stronger than ever before (Tylenol is a case in point). But it will not be easy, he admits. "It's like a golf game where you have one shot down the fairway and it's got to be right in the middle." Yet there is little comfort in the Tylenol example, because the manufacturer Johnson & Johnson was able to portray itself as having been as much the victim of the tampering as were the consumers. Johnson & Johnson could claim the deaths were not its fault-they were the product of sabotage. With Maple Leaf, the problem lay in its internal processes-in bacteria trapped in slicing machines-not an outside agent. It could not cloak itself as a victim.
McCain believes his broader challenge is to educate the public on listeria, which, he points out, "is ubiquitous in our environment. All Canadians are exposed to it on a fairly routine basis, and it's benign to the masses. Unfortunately, it is very dangerous to a few." (Those few are the immune-compromised, the elderly, pregnant women and newborns.) For McCain, the issue is more about risk management than the potential for totally eradicating listeria. "It is still our challenge to reduce that risk, but this is one of the oldest living bacteria in mankind, and because of that, it's impossible to eradicate it."
That is a very hard argument to sell to a public shaken by a toll of known deaths that stands at 20 as of early November, alongside a larger number of illnesses. The friends, rel-atives and neighbours of the victims will be unimpressed to hear that listeria is a fact of life in the food system. The 89-year-old mother of one of my boyhood friends died, her family alleges, from listeriosis caused by a Maple Leaf product. When I told McCain about this, he expressed his sadness. Indeed, his eyes often welled up with emotion as he discussed the personal tragedies from the outbreak. But he maintained that Maple Leaf's responsibility is limited to managing the listeria risk within the parameters set out by government. "It's like the airline industry," he says. "You could decide tomorrow you are going to take the wings off every plane and disassemble it before every flight to reduce the risk, but there is a consequence to that."
Now, Maple Leaf must move beyond communication tactics to a crisis-management strategy that sets people's minds at ease about eating its products. It started by announcing a program of continuous improvement in food safety. This includes establishing a food safety advisory council, made up of experts from around the world, and the creation of a new executive position, chief food safety officer (Randy Huffman, president of the American Meat Institute, was named to the position in November). And the company vows to work with government and other companies to enhance food safety across the entire industry.
As CFIA inspectors pored over every detail of operations, and as Maple Leaf cleaned and sanitized every corner, McCain was determined that when the Toronto plant opened again, it would be the closest thing to a paragon of food safety. But that would only go so far in rehabilitating the battered Maple Leaf brand. The long-term financial hit can't be calculated, but it is far in excess of the $30-million projected cost of the product recall. In other tainted food outbreaks, the problem often lies with a commodity, such as lettuce or tomatoes, but in the case of Maple Leaf, "it is a brand we are all familiar with," says Kevin Grier, senior market analyst with the George Morris Centre, an agribusiness think tank in Guelph, Ontario. "Since the McCains took over Maple Leaf Foods, they've worked very hard at establishing that brand."
What's more, Grier says, the taint persists because of constant physical reminders. "I found it extraordinary to go into delicatessens and grocery stores to see handwritten and/or computer-generated signs that say, 'We don't carry Maple Leaf and we've never carried it.'" The sheer magnitude of sickness and death will be hard to forget. "Companies do go out of business on these kinds of things," Grier says.
One of Maple Leaf's advantages is that it owns an array of brands. No one will likely quit buying Dempster's bread because its sister brand, Maple Leaf, is in trouble. But in the category of luncheon meats, the Maple Leaf association has become a liability. McCain could drop the Maple Leaf name entirely and concentrate on advancing other brands such as Schneiders. But an informed public would catch on. In any case, the entire deli meat segment is under scrutiny now, and any recovery of confidence has to be industry-wide.
Mauro Mila, who manages the meat side for the Bruno's chain of food stores in Toronto, says sales plunged for all processed meat, including Maple Leaf's Bittner's brand, which his stores carry. But there is continuing demand for sliced sandwich meats, and, to fill the void, Bruno's increased the output of meat cooked and cut on its own premises. But he expects the Maple Leaf brand to come back eventually, because it is such an old, trusted name.
McCain says the first step in brand rehabilitation was the company's response in the first few hours of Aug. 23 after it learned its meat was causing sickness. Maple Leaf immediately accepted accountability, apologized for the outcome, was transparent with its findings and was clear on an action plan. "What we believe is that all of those things bought us the right to be heard in the future. They didn't guarantee us anything beyond that."
In a way, McCain is underlining his own dilemma. When he launched the product recall on Aug. 23, and put the full blame on himself, he was doing what was right for consumers, but also what was right for the brand. Whether it was the result of carefully organized strategy or just good instincts, it was textbook reputation management. Bob Kingston, the union leader, sees nothing heroic in Maple Leaf's performance-if McCain had not ordered a voluntary recall, he would have faced a mandatory recall by the food agency, Kingston points out. In that case, McCain could not have taken the high road and portrayed himself as a good corporate citizen. In Kingston's eyes, what was done was motivated by necessity, not altruism.
So McCain can't really win. The crisis management experts describe his action as "a textbook case" and "boiler-plate crisis management." It is faint praise, for it sounds like he is following a proven formula instead of acting from the heart. Yet surely he cannot be faulted for doing what was right to protect his company. In effect, the Maple Leaf case confirms what corporate reputation consultants say: Doing good is good business. Taking responsibility for a corporate failure is particularly laudable in an age when corporate executives shun accountability. You have only to look at the financial system, which was brought to its knees by executives driven by greed and heedless of the need to manage their organizations' risk. While McCain said his primary duty is to protect consumers, in truth, a CEO also has to consider the interests of employees and shareholders. He has certainly fought for the 300 jobs at his Toronto plant. As for the stock, it was battered down below $8 in late October, from $11 in early August, but it would have taken a bigger hit-particularly in the market meltdown-if he had not been so effective a communicator.
FOR MCCAIN, 2008 IS THE ANNUS HORRIBILIS, a year when everything conspired against him. "It is certainly going to go down in my history book as one of the most difficult years ever," he says, "largely as a result of what I would call the compounding of obstacles."
But he will be judged as much by what happens over the next few years as by the crisis of the past few months. Apart from class-action lawsuits, the tainted-meat crisis will spark investigations and calls for tighter regulation. (The CFIA proposed new testing standards in early November.) And the restructuring still faces challenges. It will be hard, at times, for McCain to manage his image-and his composure.
That was evident in early October when he strode again to the microphone in the improvised media room (the employee lunch room) at Maple Leaf Foods. But on this day, the tone was different, as McCain showed flashes of anger and frustration. New traces of listeria had been found in test samples in the Toronto plant, as it geared up production in anticipation of being cleared, soon, to ship products again. As media reports indicated that Maple Leaf still couldn't get it right, the tests seemed a serious setback to the recovery plan.
Yet it wasn't the positive listeria results that frustrated McCain, as much as the media's interpretation of those results-five positive outcomes from about 5,000 product samples and 840 environmental tests over the previous weeks. His message was that the incidence of contamination was well within accepted standards for food plants. The deaths had been tragic but a separate issue-the result of bacteria in slicing machines. The latest samples showed detection programs were working, he insisted. It was back to McCain's constant message: Listeria is everywhere-even, he pointed out, in your own kitchen.
McCain was taking the offensive, arguing that anyone who expressed shock at a single positive test "is at best misguided and at worst fear-mongering." He accused critics of undermining Canada's food safety system and lambasted unnamed journalists for sensationalistic reporting. There was "zero risk" to the public, he insisted, because the offending plant's deli meat products were not being shipped to consumers.
This press conference showed the other side of Michael McCain-not the grieving CEO whom Canadians had come to know, but a more combative leader. The Maple Leaf crisis had entered a new phase, with the CEO under intense pressure to restore the reputation of his brand. Up to this point, McCain had been rallying support by taking responsibility and showing empathy. Now there was the sense of a man fighting for his business life-and for his company and the credibility of the food safety system.
Can the company survive? "Of course, absolutely," McCain insists. "Yes, this is a tragic situation, but we are a very strong organization," he maintains, ticking off the list of virtues-"great diversity in products, amazing people who are deeply committed, a portfolio of fantastic brands. We have a strong balance sheet, a great relationship with all of our stakeholders, a well-articulated future that is bright and everyone believes in." Yes, 2008 was a year of cascading challenges, and Maple Leaf had emerged bloodied but not defeated. "Challenges of this nature just make you stronger, not weaker," he says.
But after the October press conference, crisis management expert Christine Pearson was not so sure he was on the right track. It is risky to go on the offensive and attack the media. After all, Maple Leaf, in the minds of consumers, is "still the villain, not the victim. I don't know that he needs to continue hat-in-hand apologizing, but this to me is an odd turn." She wonders if McCain was not listening to his advisers-and, indeed, the new aggressive tone appears to have been McCain's idea.
By late October, Maple Leaf was beginning to ship meat again from its Toronto plant, but the direct costs of pulling 668,000 kilograms of meat off the market had contributed to a loss of $12.9 million in the third quarter-its fourth straight quarterly loss. Even in the bad news, McCain could see a silver lining: Sales of packaged meat, after plunging during the height of the crisis, were recovering. He told analysts that full sales recovery could come within a year.
What's more, the global financial crisis was, oddly, helping, by reducing the cost of commodities, knocking down the Canadian dollar and, for a moment, pushing the company's problems off the front page. But whether or not McCain likes it, he has forever inserted himself into the public consciousness as the image of Maple Leaf. So far he has won the right to be heard, but the final verdict on his leadership will come over the next two to three years. It will be based on whether he can restore the Maple Leaf brand-and whether that brand will be part of a company that has assured its chances of long-term survival.Report Typo/Error
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