Companies Assess Katrina Response

By Del Jones, USA TODAY

Corporations have surfaced from the Katrina disaster looking noble in the eyes of the public and with a swagger that says the next time a city is devastated, the private sector will be there to save lives. With 48 hours notice, Team Corporate America will be ready like never before. Trouble is, the next time there might be no notice. The next time a city is wiped out, it could be an 8.5 earthquake in San Francisco or a terrorist nuke in Washington, D.C.

Companies have fine-tuned the 48-hour notice, much as NFL teams are expert in the two-minute drill. When a hurricane is but a distant cotton ball on a satellite image, Cardinal Health and McKesson stockpile drugs and medical supplies at distribution centers near the perimeter. Budweiser switches beer production to canned water. Chevron can evacuate Gulf employees at the rate of 100 per hour. Office Depot employees kick into disaster mode almost robotically, and four days from landfall, someone is booking hotel rooms ahead of the rush.

But the next time, just as companies are lining up for the two-minute drill, they might discover there is no time on the clock. They will have to run the kickoff back for a touchdown. In interviews, executives speak as if their company disaster preparations are approaching perfection. When pressed for flaws, they say they were surprised by the Katrina communications meltdown that caused many to spend days and weeks finding employees, suppliers and customers. They say Katrina demonstrated a costly vulnerability to looters that must be planned for, and reminded them again that they need a second headquarters on the chance the first headquarters is shut down.

Verizon runs disaster war games in an undisclosed underground location. If necessary, Abbott Laboratories can shift decision-making to Germany. It practices all the time, and 20 senior Abbott executives meet four times a year to train and run disaster scenarios.
"Drilling helped us exponentially (to prepare for Katrina)," says Abbott Senior Vice President Joe Nemmers. "We have a very achieving culture. We know how to execute."
But ask how they drill for the terrorist nuke, and declarations become more subdued. Abbott hasn't practiced that one, Nemmers says.

Abbott and many other companies have earned a right to boast. Government efforts in the initial aftermath of Katrina made relief efforts by the private sector look masterful in comparison, and most companies have not been shy about publicizing it. Cracker Barrel, for example, is giving 100,000 meal cards worth $10 to Katrina victims, which it announced last week on the stage of the Grand Ole Opry. Nearly 290 large companies have contributed $250 million in cash and about $500 million in products at fair market value, according to the Association of Corporate Contributions Professionals (ACCP), a trade organization for corporate contributions and community relations executives.
Generous giving — and crowing — has put a shine on the corporate image that has not been seen at least since before Enron's troubles. A survey by Boston communications company Cone found that 62% of 1,044 adults say companies are better able to respond to disasters than government agencies, and 88% said they have a more favorable impression of companies that came to the aid of Katrina victims.

There is a flip side that may come back to haunt the companies. The survey also says the public now expects a generous and efficient corporate cavalry for subsequent disasters, and more people say the private sector should help solve social problems typically left to the government, such as ending poverty and curbing crime.

Toyota Motor Sales USA security manager Joe Baxter says the real lesson of Katrina is not that people should rely on companies instead of the government, but that people must rely on themselves. Toyota Motor Sales USA is in Southern California, where it's a matter of time before a crippling earthquake strikes, and everyone must have three to five days of food, water, medicine and whatever else they need to survive, Baxter says, because there will not be a multitude of helicopters checking on their comfort.

Companies will be making some changes after Katrina that will pay off in an earthquake or other surprise disaster.

• Just about every major company is ordering satellite phones. "Every plant, every single executive wants one," says Patti Reali, a communications research director at technology consultant Gartner. The phones cost more than $1,000 each and air time costs $1 a minute, so companies won't put satellite phones in the hands of all who desire one. But past sales of about 10,000 satellite phones each month by Iridium and Globalstar will jump 30% to 50% for an extended period, Reali says.

• Companies have also learned that a local disaster, if devastating enough, will spread across states as evacuees flee. A USA TODAY analysis of Katrina found 1.3 million people had dispersed to communities in all 50 states. Merck found itself sending $9.4 million in vaccine to nine states, said Brenda Colatrella, director of Merck's office of contributions. Katrina took on the complexion of a Third World disaster, and companies found themselves responding as such. Each disaster is unique, Colatrella said.

• Corporate postmortems will reveal more lessons. DuPont says its look back at Katrina about what went right and what went wrong is already underway before "the memories fade," says Gil Meyer, director of crisis management. Other companies including Chevron, FedEx and Cardinal Health will also have postmortems, but are still too deep in the Katrina/Rita one-two punch. Best Western's annual convention begins Oct. 23 in Phoenix, and disaster preparedness at its 4,100 hotels worldwide will be at the top of the agenda, CEO David Kong says.

• Trade associations are also planning brainstorming sessions. The Partnership for Quality Medical Donations will meet Oct. 25 at Fairleigh Dickinson University in New Jersey. Thirty companies that make up the board of directors of the ACCP will meet next week at DaimlerChrysler in Auburn Hills, Mich. That board meeting will likely result in a major proposal at the association's annual conference March 12-15 in Orlando, says Curt Weeden, president.
The proposal, Weeden hopes, will be the establishment of a command and control center where companies, relief agencies and local, state and federal governments can make a single phone call or send an e-mail to coordinate giving.

"Katrina frustrated many businesses," Weeden said. "Many couldn't get a straight answer on how and where to ship non-cash donations. They were bounced between government agencies and non-profit relief groups that didn't know how to handle out-of-the-ordinary offers."
A command center would let all companies list the products and services they have available so they can be immediately directed to where such products and services are needed. If a local agency contacts the command center asking for, say, rescue boats, the center will know that ExxonMobil has them. DuPont is among companies that prefer a "pull rather than push" system, Meyer says, so that truckloads of blankets aren't heaped on those who need water.
Service companies such as Deloitte are a major untapped resource, Weeden says, because they have specialized brain power that could solve complex problems in an emergency. A command center might help connect such experts to those who need them.

Perhaps the most potent asset companies can lend to a disaster are the employees that have long lived in the city of catastrophe. Procter & Gamble, for example, had 500 at its Folgers coffee plant in New Orleans. There are Abbott employees familiar with every community, because they call on virtually every hospital in the USA.

Local employees have established business and personal relationships and likely have a gut instinct for what is needed and where. They might know of a local church that can respond more quickly than a megarelief agency and steer their companies' cash and products to the right place, Weeden says. Merck employees in Indonesia and Thailand proved invaluable in getting vaccines to those in need after the tsunami hit Dec. 26, Colatrella said.

The next U.S. megadisaster might be much like the tsunami. Without 48 hours notice, companies can't stick a finger into the wind or make decisions based on public perceptions and pressure, said former FBI agent Anna Winningham, now vice president of operations with Risk Control Strategies. Crucial in a surprise disaster is that companies know who's boss, Winningham says. Disaster decision-making is best done by dictators, she said.
Disasters are by their nature overwhelming, and even CEOs with enormous confidence can feel helpless in the midst of one.

"In times of crisis, people crave strong and supportive leadership," says Kong of Best Western. "A key point is, you've got to stick with the plan," says Steve Odland, CEO of Delray Beach, Fla.-based Office Depot, where dealing with hurricanes has become second nature but an instant disaster gives pause. Odland says: "Practice, practice, practice." When companies know the disaster is coming, they must follow the plan "lockstep," and that does not change if the disaster is a surprise. "You just start at T-minus zero," Odland says.