What are the lessons we have learned from Toyota crisis management regarding recall issues?
Facts: - 9 Million cars had to be recalled in 2 separate recalls because floor mats could jam the gas pedal down - The Toyota brand, once almost synonymous with top quality, has taken a heavy hit. What can we learn? - Maintaining a good corporate reputation in the 21st century is tricky - Aggressive growth can create unmanageable risk (Toyota expanded too much and too fast and so it pushed it to the outer limits of quality control; in 2005 Toyota recalled more cars and trucks than it sold; by 2007, Consumer Reports magazine stopped automatically recommending all Toyota models because of quality declines on three models; ) - Get the facts quickly and manage your risks aggressively (current recall, covering 4.1 million cars, involves potentially sticky gas pedals. Late in 2009, Toyota also recalled 5.4 million cars whose gas pedals could get stuck on floor mats. Plus, Toyota says there are some cars affected by both problems; investigators almost always start with two time-worn questions. What did you know? And when did you know it? Were employees encouraged to flag safety issues to senior management? Were sufficient resources devoted to investigating the problems? When did the board become aware of the situation and what did it do about it? good internal risk assessment programs can help identify those areas of the business where management should be on the alert - Your supply chain is only as strong as your weakest link (auto companies make hardly any of their parts; quality control [means] daily vigilance. You can't coast on your reputation because it can fail very quickly; Smart companies will know their suppliers and their respective strengths and weaknesses) - Accept Responsibility ( - Take the Long View ( - What Can Be Known Will Be Known - Communicate Inside Out - The Message Matters - Don t Stonewall the Media
´ David Cole. In the absence of being told what to say to customers. albeit maybe a year or more too late. Director of the Center for Automotive Research. The three leading factors burnishing corporate reputation these days are "quality products and services. given the hand that it¶s currently playing.especially if you¶re not convinced that her car is safe. Next to Toyota customers whose cars don¶t stop at red lights. not any problem with the product itself. As a fiduciary. for example.´ Accountability matters enormously. and every one of them needs context and talking points.January 31. we feel especially sorry for Toyota dealers and employees. following the deaths of seven people in the Chicago area. a company I can trust and transparency of business practices. few companies have all the facts gathered when a crisis strikes. Disgruntled investors and Wall Street analysts will make the company aware of their feelings. when²the information starts to flow. That¶s unfortunate news for Toyota.Accept Responsibility. But the company doesn¶t have much choice. especially in a crisis. 2010 Two decades ago. Be aware that employees are constantly talking with customers and shareholders. In certain situations. as is the case with Toyota. in the weeks and months ahead. This is one area where Toyota seems to be doing a good job. likely. Toyota spokesman Mike Michels said: ³I don¶t want to get into any kind of a disagreement with CTS. And competitors are already trying to woo customers away and capitalize on Toyota¶s misfortune. if a company makes a major mistake. Johnson & Johnson¶s 1982 recall of its painkiller Tylenol. Ignoring a major mistake and hoping no one will learn about it didn¶t work very well in the µ80s or µ90s. who last week released his corporate ³Trust Barometer´ survey for 2010. Lesson #1: What Can Be Known Will Be Known. We imagine that the only thing harder than addressing angry shareholders and reporters is facing a Toyota-driving soccer mom who wants you to promise that her kids are safe in her car. That doesn¶t include lost revenue to Toyota and its dealers from the production shutdown. has earned it a permanent place in the annals of crisis management. Twitter-driven world. Our position on suppliers has always been that Toyota is responsible for the cars. told Design News. in large measure. customers. however. class action lawsuits are almost a certainty (one lawyer is already searching for Toyota customers as clients). Audi took the position that ³it was the driver¶s fault. In our experience. realize that employees will make up their own script. (2)
. Take the Long View. to the reputation for quality products and corporate responsibility it has developed over the last two decades. that you should advise the organization to issue a press release every time it stumbles. and reporters define the situation and remedy instead. By one estimate. Whether the company has five employees or 50. Reputation can be easily lost ± and Toyota¶s reputation is indeed threatened ± but it¶s highly unlikely the company will collapse completely. and one that Toyota will undoubtedly be citing and calling upon. the best approach is to immediately correct the business problem and have a reactive communications plan in place if²and. it¶s only a matter of time before word will get out. The ³sweep it under the carpet´ approach rarely works. auto industry recalls conservatively cost an average of $100 per car suggesting that Toyota might be on the hook for at least a one billion dollar charge. Coles says that reaction ultimately hurt Audi¶s reputation. The reality is that Toyota is positioned for recovery about as well as it could be ± owing. every one of them is a spokesperson. Since both customers and shareholders are critical to the success of the company. you can help a company succeed in a crisis by counseling them to (1) move quickly to reassure their employees and customers that they will do the right thing for their customers (and hold them accountable for sticking to that promise). when Audi encountered a safety issue similar to Toyota¶s. so is anyone who interacts with customers. Toyota seems to be avoiding the appearance of passing the buck. In today¶s 24/7. That doesn¶t mean. There are risks to a reactive approach. most notably losing control of the story and letting competitors.000. Lesson #2: Communicate Inside Out. That¶s what makes it a crisis: it¶s one part mistake and two parts lack of clarity. That reputation is a valuable asset. When pressed by the New York Times about problems that might have been caused by supplier CTS. That¶s tough«. But that recall stemmed from the deadly act of an outsider (who has never been caught).´ writes public relations executive Richard Edelman. And that may be one of the one of the biggest lessons for other companies as they study how Toyota emerges from this recall crisis. Toyota's National Ad on Recall .
They'll also gain some wisdom on how to learn about. and (3) explain the process they¶re undertaking to gather the necessary information. Lesson #3: The Message Matters. Most importantly. Better yet. If a company in crisis creates the right key messages and delivers them in a timely manner and consistently to all important audiences. when and how´ of the situation. worse. And it becomes an even greater problem if Congress takes notice and requests (or. dealers. that¶s rarely true. ³If we talk with the media about this issue. In every industry. Lesson #4: Influence the Influencers. companies in a crisis are well served by developing three or four key messages that summarize the ³who. remember these five lessons and ensure that your executive management team manages the situation in a way that will efficiently address the issue. and positions the company for future success. If you doubt that industry experts are important to a business during a crisis. Some will talk on the record. it doesn¶t bode well. advise your management team to develop and maintain good relationships with industry experts now so that they know your company before a crisis occurs. which may be very little. Either way. If you think about that. employees.´ In our experience. others won¶t. Lesson #5: Don¶t Stonewall the Media. companies must communicate all this information to their employees first. What You Can Do Even well-managed companies can find themselves in situations that can hurt their reputations and bottomline results. More than ever before. In the meantime. intermediaries. reaches all important constituents. you¶ll do things differently. experts are contacted by the government. shareholders and other important constituents. where. Who is better positioned to deliver your company¶s perspective: the company or its competitors? There are plenty of competitors who will talk about why your company made a mistake and the impact that mistake will have on its business. and for many days thereafter. Often. it will only legitimize their articles and make them longer.S. and then to their customers. In Toyota¶s case. demands) your presence. Legal counsel can help guide management in creating communications materials that won¶t cause discovery and/or litigation issues down the road. franchisees. Toyoda. it would be nearly impossible to proactively contact every industry expert around the globe. Managers everywhere will learn some lessons on how to handle tough questions. and it¶s imperative that legal counsel is included in both the message development and delivery process. When that happens. and announce bad news quickly and effectively²a skill that would have helped limit the scope of Toyota¶s quality problem and soften its consequences. much is unknown at the outset.communicate what they know for sure. One sentence. Answering Questions
. Customers. In our experience. however. ³It takes 20 years to build a reputation and five minutes to ruin it. Transportation Secretary Ray LaHood impacted Toyota on the day of his remarks at a House of Representatives hearing. admit to. a successful crisis communications plan includes²and goes beyond²media relations. who has already apologized for how his company dealt with safety problems that led to a massive recall of its vehicles. If an issue is important enough (and/or it¶s a slow news day) articles will be written ± and segments will air ± regardless of a company¶s willingness to respond.´
It¶s never easy to find your company on the front page or leading the nightly news for all the wrong reasons. We¶ve heard executives and directors say. industry influencers and vendors are all important constituents who need to be included in the communications process. by the media. offers a crash course in crisis PR. it will likely minimize bottom-line and reputational damage. shareholders. what. Secretary LaHood among them. there are several important constituents whom Toyota seemed to ignore. and by customers to provide perspective on a crisis or event. in which Secretary LaHood counseled any owner of a recalled Toyota to ³stop driving it. We have found there are always a few experts who stand out from the crowd and who should be contacted proactively. regulators. But this is just where Toyota Motors president Akio Toyoda finds himself. ask Toyota Motor Corporation President Akio Toyoda how U.´ sent Toyota stock into a freefall and Toyota owners into a panicked frenzy. keep in mind this wise quote from Warren Buffett.
If there¶s no new news to announce. If you don't yet know the full extent of the impending change. but look elsewhere before you finish so you don't get a negative followup question. The question might be being asked out of great concern. The person who asked the question might accept a perfunctory response² but will feel resentful. also rehearse the Q&A. Tell the employees about how hard it was to make the decision without apologizing for it. Here are some special tips for answering questions during the Q&A part of a presentation: If the question was negative. Prepare persuasive. when you rehearse the presentation. match the conviction of your words with appropriate movement and vocal changes. Maybe the question is intended to rattle you. These can be make-or-break questions that must be handled well. maintain your equanimity and handle it with respect because you may have misunderstood the employee's intention. and from customers concerned about product quality. Break the news early in the day.
. Announcing Bad News Let¶s say you're announcing something your employees don't want to hear²a staff cutback. and ask for their support. say so. equally important. As you lay out the facts. possibly fear. though. especially when you expected to be confronted. Sound bites are memorable²but they can also appear glib. look at the questioner as you begin answering. Do it personally. you have to show that you yourself believe. This gives the employees time to digest it and ask questions. Call the reporter back right away or the story will be published without your rebuttal to the charges. and supportable answers to these questions. employees also will worry about taking on the responsibilities of those who were laid off. If layoffs are part of a multipronged organizational improvement effort." You must show you recognize the questioner's feelings and are concerned about them. making an error here can compound the problem. keep showing your humanity.Every manager gets faced with challenging questions²from a boss who wonders about a project that has yet to meet goals. It¶s best to make the announcement quickly so you head off rumors that might grossly misrepresent the change. Be certain about your facts because they¶ll be scrutinized. Check legal counsel about what can or can't be said. from staff members who heard rumors of a cut in benefits. Rehearse your announcement so well that you won't need written comments. Speak from the heart. But don¶t talk at length about how bad you feel because you'll seem less concerned about those affected. Tell the employees everything that can be told. Frame your responses so they answer the question and tie back to one of the points you're making. Anticipate the questions you're likely to be asked. To be believed. If your problem arises to a Toyota-like level. As you answer the question. Be ready to tell everyone what their role will be and assure them that they'll have a voice in future planning. Apart from concerns about their job security. It's important to understand that a tough question often has an emotional component. Finally. describe it. You can't do that effectively if you read from a script. Assure the employees that the future is bright because management has a strategy for overcoming hard times. It's all right if you set the groundwork before you address the question²but make it clear from the beginning that you'll give the answer. Your answer must appeal to the heart as well as the head. Promise to keep everyone informed. They might be intended to make you to contradict something you said or did earlier. concise. It isn't true that "the facts speak for themselves. say so. otherwise employees will feel they're being blamed for the company's bad times and only they are being penalized. rephrase it without changing its meaning. Be careful not to resort to clichés and circumlocutions. Be optimistic²but don't infer that there won't be future layoffs. Never announce bad news by email. but be sure you really answered the question before you tie back. Many questions are predictable during tough economic times like these. consider getting public relations crisis consulting. use supporting evidence that the other person accepts and. Don't sabotage a good answer by adding an unsupportable statement like "Employees are our most valuable asset" because the followup question might be "Then why are you putting people out of work?" Beware of hypothetical questions. understands. And never count on the power of your position to provide a satisfactory answer. for example. As you answer questions. And here¶s some advice on how to handle questions from the press about your layoffs or any other problem: Appoint someone who will be in charge of answering questions from the media.
If you participated in decisions that led to the problem.Begin the presentation by describing why change was needed²but do it quickly. Answering tough questions and delivering bad news constitute two of the biggest challenges managers face. Too much background up front can make you sound evasive or insecure about how to present the news.portfolio. Read more: http://www. admit it. By handling these challenges well.com/resources/2010/02/24/management-lessons-from-toyotas-recallcrisis/#ixzz11QxvCcor
. you'll demonstrate to senior management how well you can lead in tough times.