Theranos debacle shows perils facing comms teams

Published on Wednesday, March 2nd, 2022 by julian

Lighthouse Communications > News + Views > Theranos debacle shows perils facing comms teams

What do you say when you don’t have a leg to stand on?

At some point in the lives of most communications professionals, especially if they operate in issues management, there will come a time when the organisation they work for has messed up big time, and there is simply no easy defence to be mounted.

While often amusing to look at as an outside observer, especially when those on high pedestals like politicians are forced to squirm, when you’re in the firing line it’s no fun at all.

A recent high profile story provides a good example. The communications team at medical fraud company Theranos doubtless had a horrendous time as a newspaper investigation and sustained, probing media attention uncovered significant illegal activity.

The trouble began when an employee seemingly tipped off a Wall St Journal reporter about problems with the company’s much-vaunted blood testing. A damaging, high-profile article appeared as a result. The comms team would not have liked it, but they would have been reassured by CEO Elizabeth Holmes and others internally that the story was baseless.

And herein lies the problem. The challenge for a comms team in these situations is that, especially when it comes to technical, scientific or highly complex financial matters, you don’t have the expertise to make an informed judgement on whether the accusations are true or not. And this would, of course, be the leading factor in determining how you responded to them.

Instead, you are mostly forced to rely on your colleagues for guidance, leading to several problems.

The first is that those in charge, especially in fraudulent activity, may be complicit in those activities themselves – as was the case with Theranos. If the charismatic CEO who has built the company from the ground up tells you the story is inaccurate, what are you supposed to think?

In fact, the presence of a visionary, powerful CEO can make things worse because they are strong believers in their own dream, and less likely to be open to constructive criticism or rational scepticism.

Beyond PR, this problem also affects internal communications strategies, especially with dissent in the ranks. As PR Daily put it: “As Holmes and her publicists were busy landing cover stories in Forbes, Fortune and Inc., Theranos’ corporate communications team was either unaware or unconcerned about internal restlessness. Just as Holmes was courting investors and hyping her product in the national media, employees were voicing concerns to their managers and even Holmes herself.”

There was obviously no clear internal communications strategy to address the mounting concerns, and employees saw stories in the media before any internal guidance. This in turn exacerbated the PR crisis as more employees became disenchanted and started leaking about the blood testing woes to journalists, putting the company further on the back foot.

Once the internal team lost cohesion and there was a lack of guidance from the top, it was almost inevitable the situation would deteriorate even further.

For the comms team in this situation, some technical, independent and expert guidance on whether the accusations were true would have been very valuable, but it seems they were in no position to get it, given the secrecy at the top.

In those situations, especially when it is so serious, comms teams need to be very careful about what they say publicly. You do not want to be deliberately misleading when there is so much doubt in the air, and hard though it is, some hedging of bets or wiggle room is probably one of very few options left in that scenario. These team members, if they are both selfish and wise, also have to start thinking about their future career prospect. While defending an unpopular position is ok, knowingly supporting a fraudulent enterprise is definitely not.

However, as PR Daily continues, the comms spiralled out of control because of the CEO’s approach: “Rather than refuting these reports with data-driven answers, Holmes circled the wagons. The moment she came to view press coverage as a liability – rather than a launchpad – she began rejecting interview requests and challenging the media’s legitimacy.”

A culture of denial took hold, and even after strongly hitting back against the Wall St Journal, Theranos’ top PR person departed – a sure sign of more bad days ahead. As everyone now knows, the story ended with the collapse of the business and criminal prosecutions.

Perhaps in this situation there was little that any comms team could have done if the whole business was a house of cards, but there was no doubt that poor media and internal communications strategies exacerbated the problems.

And now the effects will be felt for years, especially in the life sciences arena where greater scrutiny of start-ups is now the order of the day.

As online tech media outlet Protocol put it: “Gone are the audacious timelines of solving cancer tomorrow or getting self-driving cars by Christmas. In the years since the Theranos scandal broke, start-up communications professionals say they field more questions on transparency and data, particularly those working in life sciences.”

In defending complex accusations, the utilisation of sound science, independence expertise and robust data are more necessary than ever, but it should never be forgotten that even while battling the media, your own employees are a vital stakeholder group who can themselves do enormous damage if you put them offside.


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