The mother of all crises…
04 February 2010
What do you get when you combine Three Mile Island, Exxon Valdez, Tylenol, Peanut Corporation of America and just about any other high-profile crisis? Answer: Toyota.
We can officially declare the Toyota Recall to be the crisis of this young decade (until another one comes along… and it will.)
This is the perfect storm… One of the world’s leading carmakers, its reputation built around safety and quality; a media community desperate to demonstrate it is still relevant; regulators falling over each other to show the world they are the stewards of public safety; a global company struggling to keep up with the pressures of a global marketplace and the lightning speed at which information now moves; a public that has absolutely no faith in any institution (particularly car companies and politicians), whose nerves are raw and which is now empowered by social media.
I’ve done a number of media interviews over the past week. Most every reporter asks me the same questions.
1. How is Toyota doing?
2. Can Toyota recover?
3. What comes next?
In response to #1, I say it is too soon to tell. It’s easy to judge companies on the tactics they employ — apologies, letters, websites, etc. But at its core this is a BUSINESS problem first, and a REPUTATION problem second. A smart and prompt fix to the business problem is far more effective than compelling communications. There are plenty of metrics that can be tracked to determine how the company is faring — sales, resales, customer satisfaction data, earnings, etc. (But right now it doesn’t appear that Toyota has a smart and prompt fix, nor compelling communications.)
To Q2 my answer is “sure,” but there will be a new normal. Bridgestone/Firestone recovered, but the crisis will never be forgotten (not in this Google world). Exxon recovered, but its name will forever be linked with Valdez. Tiger Woods will recover, but he will never be viewed in the same light again.
To Q3, I tell reporters that this crisis is running a very predictable trajectory. One that is similar to most other corporate or product crises. And because it is on a familiar path, one can predict with relative certainty what will come next:
The announcement of the recall is initially met by straightforward media coverage in the first 12-24 hours, but all hell breaks loose after that: personal stories of drivers who had problems… lots of internet chatter… reporters doing the “how are they managing the crisis?” analysis… politicians jumping on the bandwagon… people start asking, “what did they know, and when did they know it?”… Trial lawyers chumming for clients to file class actions… copycat events (problems with other models, or with competitors’ models)… the company announces the financial impact of the event… hearings… Ultimately the media and public lose interest as fatigue sets in or they move on to another crisis.
But an examination of corporate crises over the past decade will bear out this pattern.
SO WHAT ARE THE LESSONS FOR REPUTATION MANAGERS WHEN FACING SUCH A CRISIS?
1. Try to regain control of the agenda as quickly as possible. Easier said than done, to be sure, but so long as others are driving the conversation (pardon the pun), companies will be in a reactive mode.
2. Understand the speed at which information now moves, and adjust to it. The time allowed to make decisions is now measured in minutes, not hours or days.
3. Anticipate the trajectory of the situation, and plan for it.
4. Connect with your audience emotionally. Fear and anxiety are far more powerful than reason. You won’t get very far in connecting with people rationally until you can address peoples’ emotions.
AND WHILE I’M ON THE SUBJECT…
I was reading an article in the Wall Street Journal yesterday on a very different topic – the decision by the medical journal, LANCET, to retract a study it had published in 1998 suggesting a link between vaccines and autism.
That single study prompted a heated, emotional and long-running debate among parents and physicians over whether such a link existed, whether children are facing a greater risk by not getting vaccines, and so forth.
What does this have to do with gas pedals?
A physician, Dr. Paul Offit of Children’s Hospital of Philadelphia, was quoted in the WSJ article:
“It’s very easy to scare people; it’s very hard to unscare them.”
That single statement best captures the conundrum facing companies – whether they are car manufacturers, pharmaceuticals, food processors, airlines or any other consumer-facing company. Once the notion of fear is introduced to consumers, it is damn-near impossible to erase it, even if the notion is ultimately discredited. This is something that media, politicians (Ray LaHood??) and consumer groups should keep in mind as they consider weighing in on such an issue.
Am I suggesting that the Toyota recall issue is overblown? No. But I have seem very little data presented to show the number of accidents caused by the faulty accelerator pedals as a percentage of the total number of cars on the road. Such data is far more important than anecdotal personal stories that have not been verified, and which indeed may be promoted by a trial lawyer with a vested interest in a cash settlement.
The Toyota recall is big for several reasons:
1. Scale. Not only is Toyota among the largest car companies in the world, but also so many models are affected.
2. It seems to be blossoming… Now separate and unrelated problems are becoming apparent with other models.
3. The irony of a company that built its reputation on safety and quality, finding itself having to apologize for lapses in safety and quality.
Enough for now. Stay tuned. This crisis has not yet reached its apogee.