It's hard to explain why a firm would choose negative publicity over good--but Allstate did exactly that!

You're in good hands--unless you're a charity.  

The story almost defies belief--because the outcome was foreordained to be a great win-win story for the mega insurance giant, Allstate.  But in the end, Allstate decided to snatch shame from certain glory that will make you almost wonder if the story could actually be true.  Here's what happened:

On February 15 between periods of a U.S. Hockey League's Indiana Ice game, a fan agreed to participate in a contest to win money for charity called The Allstate Good Hands Shootout.  Richard Marsh, a hocky amateur, agreed to participate and initially had the option to either keep or donate the money if he could "shoot" the puck 200 feet--the full length of the hockey rink through a small opening in a barrier at the other end of the rink that was, for the most part, blocking the net of the opposite end goal.  Mr. Marsh agreed in advance to donate the prize if he were to win the challenge.  

Watch the video and see for yourself...

And shoot the puck he did, all that distance down the ice, through the little hole--and into the goal! For the most part, it appeared that Mr. Marsh had--indeed, against very formidable odds--done what the challenge called for. Here, see for yourself what happened--how he did...

If you followed the video closely, you might guess how this situation takes a turn for the less than ideal:  The insurance company balked which had underwritten the policy to pay $50,000 on behalf of Allstate Insurance [i.e., so that the firm could benefit from the goodwill that comes from being the sponsor of the "Allstate Good Hands Shootout"].  Yes, the underwriter of the contest--which Allstate had contracted with--declined to pay the money because the fan--who was playing as a good sport to give the money to the St. Vincent Heart Center of Indiana--was inadvertently a few feet over the line when he made the lucky, long-odds shot. 

Does three feet a $50K difference make?

So instead of being 200 feet away, Mr. Marsh had the very small advantage of being a mere 197 feet away instead!  Thus, the contracting insurer for Allstate refused to pay; in turn, Allstate as well declined to make good, leaving the event a public disappointment for fans, viewers, and St. Vincent's alike--and inviting public scorn in the process.  

The story concludes, with neither of the two insurance companies being stand-up players.  Instead, the owners of the Indiana Ice, Paul and Cindy Skjodt decided to do the right thing--whereby they agreed to make an undisclosed contribution instead.

$50,000 represents a rounding error.

What seems amazing to me is how short-sighted and tone-deaf Allstate Insurance execs were--to choose negative over favorable publicity by deciding not to make-good on the spirit of the event.  To put this in a little perspective:  In 2008 the firm spent $625M in advertising alone to convince consumers that they [i.e., consumers] would be in "good hands" if they did business with Allstate.  In addition, the firm likely has a total marketing budget of twice that amount.

Put in perspective, a $50,000 contribution to the St. Vincent's Heart Center of Indiana by Allstate on behalf of Mr. Marsh's lucky accomplishment represents nothing more than a rounding error in Allstate's promotional budget.  [I don't really know, but I'd bet that $50,000 represents an infinitesimally small proportion of Allstate's charitable contribution budget as well!]

As it is, the firm has invited publicity that will cost it far more than $50,000 to repair.  In truth it would be easier for me to perfectly shoot a hockey puck a full 200 feet into the goal through a little opening than to rationally, logically explain why some firms can't make what seems like a very easy--even self-serving--decision like the one called for here on the part of Allstate.  

Managing profitably but ineptly.

I am compelled more often than I like to remind my MBAs that many enterprises are managed ineptly--albeit profitably.  [My students, of course, are heartened by the prospect of having the chance to do better than the likes of the managers who in this instance at Allstate somehow justified this dopey decision, that their firm would be better off with adverse publicity than not.]  Clearly, this is a sad but great case in point.  
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