THE SANDUSKY AFFAIR: HOW PENN STATE TURNED A CRISIS INTO A DISASTER

By Charles Snow  

On November 5, 2011, Penn State University was rocked by the news that Jerry Sandusky, a former assistant on the staff of legendary football coach Joe Paterno, was being charged with 48 counts of child sexual abuse. Two days later, Penn State’s Athletic Director, Tim Curley, and Vice President of Business Operations, Gary Schultz, were charged with various crimes related to the Sandusky case. Almost a year after those charges were leveled, Penn State’s President, Graham Spanier, was indicted on various charges involving the Sandusky case (additional charges were filed against Curley and Schultz at the same time). Sandusky was convicted on 45 of the 48 charges against him and is now serving a long prison term. The three Penn State officials are still awaiting trial.

As a management professor at Penn State, I watched closely as Penn State’s top leaders – the Board of Trustees and President Rodney Erickson – struggled to respond to this crisis and, in their words, to get the university “moving forward.” Sadly, their handling of the Sandusky affair has been abysmal, and it has cost the university dearly. The Penn State case presents a perfect example of how an organization’s top executives can turn a crisis into a disaster. It has now been more than two and half years since the Sandusky indictment was handed down, and the benefit of hindsight allows us to clearly see how poor the decision-making has been (although the mistakes made by Penn State’s leaders were obvious at the time).

There is an academic and business literature on crisis management, much of it dating back to 1982 when Johnson & Johnson faced a major crisis after an unknown person poisoned several bottles of Tylenol in a Chicago drugstore causing seven deaths. Penn State’s leaders seem to be unaware of the processes and procedures recommended in the crisis management literature. In my view, here’s what they did wrong.

· Lack of preparation. The overall purpose of crisis management is to get control of a situation before the media begins to promulgate its version of events, including rumors and stories, interpretations, conspiracies, and so on. In general, an organization in crisis is advised to (a) acknowledge the severity of the problem, (b) announce its plans for investigating the situation, (c) state the actions that it is going to take right away, and (d) promise to keep everyone aware of plans and developments as they occur. Most large organizations today have a crisis response team, often including external crisis management specialists, that swings into action when a crisis erupts. The goal is to create an accurate “narrative” about the situation led by the organization rather than the media.

What about Penn State and the Sandusky crisis? To get its response off to a poor start – and remember, Sandusky’s alleged crimes were shocking and horrific – Penn State’s Board of Trustees could not even determine who its spokesperson should be. For some reason, the Chairman of the Board didn’t take on the spokesperson role. That fell to a business CEO, presumably because he had faced the cameras and the press in the past. President Spanier, before he himself was indicted, chimed in that Curley and Schultz were men of honesty and integrity, and he was fully supportive of them. It was some time before the university started to express sympathy for the victims in its press releases. Nor was there any indication that the university had contingency plans and procedures in place for handling a crisis. Subsequently, the university went through three or four public relations firms trying to get a fix on how to “move forward.” But by then, the media was in control of the narrative and Penn State was on the defensive. Certainly, no one would expect Penn State to have a specific plan for handling criminal charges against one of its high-profile former employees, but the university had no generic crisis management plans whatsoever.

· Rush to judgment. When an employee of an organization is suspected of wrongdoing or charged with a crime, usually he or she is suspended. The logic behind a suspension is that the employee should not perform duties on behalf of the organization until an investigation of the situation has been conducted. When Curley was indicted, he was immediately placed on (paid) leave. Schultz, who had been called out of retirement to temporarily perform his previous job when his successor took a position at another school, simply went back into retirement. Both actions are consistent with standard management practice. The media firestorm that followed was unprecedented in Penn State and Happy Valley history. The national media had a news story every day and night, and reporters were everywhere in State College. Pressure on the university built rapidly, and the atmosphere was at a fever pitch.

The Board of Trustees was not ready for pressure and scrutiny of this sort. Two days after suspending Curley and accepting Schultz’s second retirement, the Board fired Paterno and Spanier. Although the Board apparently had a reason for firing President Spanier, it was never publicly disclosed. (He remains a tenured faculty member at the university.) Paterno was fired for his “moral failure” to do more when, in 2001, he was given information about Sandusky showering with a young boy in the football building. No investigation of Spanier and Paterno was conducted, and both were fired – instead of suspended – in a hastily called Board of Trustees meeting held at night in a nearby hotel. To add insult to injury, a messenger was sent to Paterno’s home with a letter containing a phone number for him to call. When Paterno called the number, he was told that he was no longer the football coach effective immediately.

Why Paterno and Spanier were fired in this manner remains a mystery to this day. To be denied due process, as was afforded Curley and Schultz, is not only bad management, it is unethical and perhaps illegal. The university now faces lawsuits because of its actions, and the Board of Trustees’ rush to judgment can only be explained by caving in to media pressure.

· Ignore your fiduciary responsibilities. The Board of Directors of a public company has the fiduciary responsibility of protecting the interests of the company’s owners, specifically its shareholders. The owners of a state university such as Penn State are the citizens and taxpayers of that state. Penn State’s Board of Trustees, therefore, has the responsibility of making sure that taxpayers’ interests are being properly served in the operation of the university. Practically speaking, and applying the concept of stakeholder management, the Board of Trustees should also be protecting the interests of key stakeholders of the university such as employees, students, alumni, and relevant institutions and partners of the university.

Penn State has a 32-member Board of Trustees that is a mix of individuals from various sectors. Some members are appointed while alumni members are elected. Historically, the Board has never faced a truly difficult situation, and the culture of the Board is to bask in the glow of the Penn State tradition without getting deeply engaged in oversight duties. Before reforms in recent months, there were no term limits for appointed Board members, and some appointed and elected members have served for twenty years or more. A handful of long-time Board members, called the Old Buffaloes, have used their positions on the Board to benefit financially and otherwise.

That Penn State’s Board of Trustees is so dysfunctional was unknown to most people for decades. Only when the Sandusky crisis hit did it become apparent that these people, many of whom are quite successful in their professional lives, did not know what to do. The Board mishandled the crisis, and it lacked the leadership to accomplish its stated goal of moving the university forward. For example, less than two weeks after the Board fired Spanier and Paterno, it hired former FBI Director Louis Freeh to investigate the abuse allegations and to make recommendations for improving the management of the university. Even here the university stumbled its way into a deeper mess.

Hiring Freeh’s security firm to conduct an independent investigation is equivalent to a company retaining a consulting firm to do a study and make recommendations. Freeh’s firm had no subpoena power, and although it interviewed more than 400 people in an ambitious effort to determine what happened, it did not interview key players in the case such as Tim Curley, Gary Schultz, and Graham Spanier, all of whom were awaiting trial, and Joe Paterno, who had died. Moreover, the Board did nothing when Freeh himself chose to play a starring role in the case by announcing his findings in a news conference before the Board had even seen his report. According to Steven Fink, a crisis management expert, “The generally accepted method for this procedure would have called for Freeh to conduct an independent investigation and then submit to the board, or a special sub-committee of the board, a draft of his report before it was finalized and released to the public. This would have given the board a chance to review the draft findings and ask questions for clarification, so as to avoid being blindsided. It would also have given the board a chance to flag or correct any perceived inaccuracies in the report. This is a common courtesy. None of this was done, which was a huge flaw in the board’s competence level to not insist on it.” Lastly, within hours after Freeh’s news conference, Penn State issued a statement saying that the Board of Trustees accepted Freeh’s report unconditionally, including all the allegations it contained and the 100+ recommendations it proposed. One has to wonder whose interests are being protected by the Board of Trustees when it accepts such a report without even reading it.

· Summon the courage to fight for values and principles. When President Spanier was fired, the Board of Trustees appointed Executive Vice President and Provost Rodney Erickson as interim president of the university. A week later, the Board removed the interim label and made Erickson the President of Penn State. This was a logical managerial appointment, as any qualified outsider would not consider taking the university presidency during such a period of turmoil, and Erickson was a long-time faculty member and administrator who was well respected within the university. Erickson quickly began doing the sorts of things one would expect at this point such as issuing a statement of his goals for the future, conducting town-hall meetings with alumni and the general public around the state of Pennsylvania, and so on. But the next big development in the Sandusky affair revealed that Erickson was not ready to make strategic decisions in a pressurized environment or to play hardball when it is required.

That development involved the National Collegiate Athletic Association (NCAA). Having already acknowledged Penn State’s institutional failure by accepting the Freeh report, Erickson compounded the university’s problems by signing a consent decree that resulted in the NCAA issuing the harshest sanctions it has ever given to a university, including a $60 million fine, loss of athletic scholarships, loss of revenue from future bowl games, vacating 111 wins from Joe Paterno’s record, and more. Erickson, even though he promised increased transparency in his administration, did not explain why he signed the consent decree. Many observers have wondered why Penn State did not stand up to the NCAA. After all, that organization exists to deal with problems in intercollegiate athletics not criminal matters. Penn State has never been investigated by the NCAA for any violation of sports rules. Indeed, Penn State is usually cited as a model of how collegiate athletic programs should be run.

From a managerial perspective, I believe Erickson’s decision to sign the consent decree was wrong, and it had a devastating effect on the university. The decision was wrong because the NCAA had no jurisdiction over Sandusky’s criminal behavior, and it did not cite any rules violations as the basis for its sanctions. I believe Erickson did not have the courage to stand up to the NCAA, demanding that it demonstrate its relevance to the Sandusky case. His irresponsible behavior wasted university resources, now and in the future. Perhaps the most egregious result of his decision, however, is that the Penn State culture has come under attack. The university is now viewed as being dominated by a “jock culture” which is far from the truth. Thus, the restoration of Penn State’s reputation will fall to Erickson’s successor, new President Eric Barron, who hopefully will exercise the principled leadership the university needs.