If there was ever any question…
09 February 2010
… About how profound a crisis Toyota is facing, that question was answered Saturday morning. My three sons were sitting at the kitchen table eating breakfast. CNN was on the in the background, and evidently there was a report on the Toyota recall. Suddenly my 8-year-old announces, “Toyota is the worst car.“
Of course it isn’t, but if we have reached the point where the Toyota recall has gotten the attention of elementary school children, then that is a fairly good indicator of how deep this is now embedded in the American psyche.
As I speak to more reporters, it’s time for me to update the Q&As from my prior posting:
1. Has Toyota’s apology been effective?
First of all, beauty is in the eye of the beholder. So that is a question best posed to Toyota’s customers and shareholders. But generally speaking, apologies have limited value. The published apology or expression of regret is now part of the mandatory playbook for companies in crisis. Companies are expected to do it (and criticized if they don’t), but they don’t win many points for it. The apology is to the corporate world what the admission of a drinking problem is to the alcoholic. It’s necessary, but alone doesn’t mean much. What is far more important is the performance and behavior going forward.
2. Why has this become such a big story?
There are several reasons for this. First, the sheer size of the recall. Second, the unusual step that Toyota made in suspending product sales. That’s not something one typically sees in a recall. Third, that Toyota didn’t yet have a fix in place at the time in announced the recall. And, perhaps most important — Toyota’s own reputation for quality and safety was its own undoing. Were this to have occurred to another car company not known for quality and safety, the reaction may not have been as severe. The lesson for companies here is that they must work to maintain a balance between the reputation they aspire to and the products and services they sell.
3. Has the fact that this is a Japanese company affected how the crisis has evolved?
It is certainly a question worth exploring. Jeff Kingston, director of Asian Studies at Temple University Japan, put it this way in an op-ed in last Saturday’s Wall Street Journal (“A Crisis Made in Japan,” Feb. 6):
“It is not surprising that Toyota’s response has been dilatory and inept, because crisis management in Japan is grossly undeveloped. Over the past two decades, I cannot think of one instance where a Japanese company has done a good job managing a crisis. The pattern is all too familiar, typically involving slow initial response, minimizing the problem, foot dragging on the product recall, poor communication with the public about the problem and too little compassion and concern for consumers adversely affected by the product. Whether it’s exploding televisions, fire-prone appliances, tainted milk or false labeling, in case after case companies have shortchanged their customers by shirking responsibility until the accumulated evidence forces belated disclosure and recognition of culpability…
“Japanese firms often seek to cover up or fudge the facts and the people communicating with the media and public often do not have the information they need to do their job. The absence of a structure to quickly get accurate information to top management hampers an accurate and adequate response. That leaves management unprepared to deal with media questioning and conveys an image of stonewalling and indifference.
“There is a cultural element to this penchant for mismanaging crisis. The shame and embarrassment of owning up to product defects in a nation obsessed with craftsmanship and quality raises the bar on disclosure and assuming responsibility. And a high-status company like Toyota has much to lose since its corporate face is at stake. The shame of producing defective cars is supposed to be other firms’ problems, not Toyota’s, and the ongoing PR disaster reveals just how unprepared the company is for crisis management and how embarrassed it is. In addition, employees’ identities are closely tied to their company’s image, and loyalty to the firm overrides concerns about consumers.
“There is also a culture of deference inside corporations that makes it hard for those lower in the hierarchy to question their superiors or inform them about problems. The focus on consensus and group is an asset in building teamwork, but also can make it hard to challenge what has been decided or designed. Such cultural inclinations are not unknown elsewhere around the world, but they are exceptionally powerful within Japanese corporate culture and constitute significant impediments to averting and responding to a crisis.”
Companies — whether Japanese or not — ought to do some soul-searching to determine whether their culture, their management style, their policies and systems will enable them to effectively manage a global crisis in today’s environment.
4. What can we expect next?
Crises such as this follow a very predictable trajectory, as I pointed out in my prior posting. The Toyota recall is no different. However, as a media event I think we will soon reach a saturation point and media will move on to other issues, either because of fatigue (the media are notorious for their A-D-D), or because a new story emerges. But the fact that the story disappears from the front pages should not be seen as an indication the crisis is over. It just means it is time to turn the lemons into lemonade.