CRISE MANAGEMENT – ARTICLE A

Maclaren is a small private company with a big public problem, one that it has not handled
well.
On Monday, Maclaren announced that it was issuing repair kits for up to 1m pushchairs it
had sold in the US over the past decade after 12 cases in which children’s fingertips were
chopped off in the pushchairs’ hinges. By that afternoon, its website had frozen and its
phone lines were overwhelmed by parents. Meanwhile, the British company founded in
1965 by Owen Finlay Maclaren, the inventor of the “umbrella-fold” buggy, told non-
Americans they would be treated differently.
Instead of a formal product recall, it was simply issuing warnings to owners not to let
children stick their fingers in the folding mechanism as they opened the pushchairs. Repair
kits to cover the hinges would not be automatically dispatched to every Maclaren owner, as
in the US.
Outrage ensued, with messages on Twitter such as “OH MY GOD. Amputations from a
stroller?!” By the time Farzad Rastegar, chief executive of Maclaren in the US and the
brand’s controlling shareholder, had lunch with me in New York on Tuesday, he sounded
shaken.
“Did I expect this kind of coverage? No I did not,” he said. It was hard to grasp why. The
words “child” and “amputation” in a media release from the US safety regulator would
surely terrify anyone.
After talking to him, I concluded that Maclaren does not have a bad story to tell – its safety
standards are higher than cheaper rivals. But it has done a poor job of telling it.
Therein lie lessons for companies that face similar crises, of which there are a lot. Nokia
has announced a recall of 14m phone batteries, while Toyota is still coping with a recall of
3.8m cars with floor mats that can make the vehicles accelerate uncontrollably and crash.
Lesson one: be ready. “Like the Scouts, you must be prepared and Maclaren was not,”
says Craig Smith, professor of ethics at Instead, the European business school. Maclaren
had plenty of warning – the 15 incidents of fingertip laceration or amputation in the US
occurred over 10 years, but it became concerned when there were eight cases in the past
two years. It has been working since the summer on how to remedy the problem. But when
the announcement of the recall (confusingly, “recalls” in the US need not involve products
actually being taken back) leaked early, Maclaren was left floundering. Not only did its
technology fail, but it was several hours before Bahman Kia, its US chairman, offered to
give media interviews. Reaction to such events tends to move swiftly, especially in the age
of the internet. By Tuesday, Maclaren had vans driving around New York handing hinge
covers to people with strollers and was urging European executives to talk to the media but
it was already playing catch-up.
Lesson two: empathise. Maclaren is the latest of many companies to fall into the trap of
being inwardly focused and failing to realise how customers will react. Finger injuries
account for 3 per cent of the total to children from using pushchairs and such serious cases
are very rare. But statistics do not reassure consumers when something so horrifying is
involved. “Companies tend to approach recalls with an engineering mindset but that is not
how most consumers respond. They do not have a good appreciation of risk,” says Prof
Smith. Maclaren knew it had an extremely low accident rate (“zero” according to Mr
Rastegar) when children are seated in fully-opened pushchairs, and its folding frames and
hinges are stronger than many competitors. The consumer heard “amputation” and that
was enough. This problem of inward focus was exacerbated by the fact that Maclaren is a
private company, or set of companies, controlled by Mr Rastegar’s family and is
uncomfortable about public scrutiny. It has had a similar shock to other private equity
companies that acquire consumer brands.
Lesson three: be polite. The injuries were caused by carers letting children grasp the
hinges as they opened pushchairs. Mr Rastegar insists that he is not blaming his
customers but at times it sounded a bit like that. “If you operate the product properly, your
child is not at risk,” he assured me. On paper, he is correct but any parent knows how
difficult it is to corral a small child while opening a pushchair, often in a hurry and feeling
hassled. Maclaren needed to be better prepared with a simple, inoffensive way of pointing
out what parents needed to do.
Lesson four: don’t discriminate. Maclaren’s biggest mistake was to appear to be treating
American children’s fingertips as more precious than those of children in the UK and other
countries (ironically, since it advertises its English origins).
Safety regulators in most countries were content with Maclaren issuing a short-term
warning and working on a safer design for the hinges in the long term but the US
Consumer Product Safety Commission insisted on a temporary fix. It should have been
obvious then that the kits had to be offered globally, and not just in one country. Mr
Rastegar explained at length why he did not think so – including the fact that Americans
more often get children to walk next to pushchairs – but I was not convinced.
Now Maclaren is backtracking under pressure from consumers and retailers and saying
that anyone can have the hinge cover if they ask for it. The company might have avoided a
lot of potential damage to its brand and its reputation by employing its common sense more
quickly.

CRISE MANAGEMENT – ARTICLE B

Crises are an inevitable part of management and the larger the business grows the bigger
the crises seem to become. However robust a business seems, it is still fallible - as has
been shown by the recent histories of Arthur Andersen and Marconi.
An understanding of risk is essential in crisis management. Sophisticated modelling
techniques and expert consultants can help managers appreciate risks better, especially
those stemming from global issues such as terrorism and climate change. Closer to home,
risks such as changing customer preferences or takeover threats may be best analyzed
within the company itself. The constant monitoring of what is going on in the larger world is
an essential activity. Once a range of possible future crises has been established,
contingency plans can be put in place.
However, not every crisis can be foreseen. The chances of an airliner crashing, for
example, are extremely small, but every airline must still live with the possibility. When an
Air France Concorde crashed on take-off from Paris - the first accident involving a
Concorde - Air France was prepared to deal with the issue. Managers moved quickly to
withdraw Concorde from, service, announce an investigation into the accident and reassure
the travelling public that it was still safe to fly Air France. The following day the airline s
share price did decline, but not by much and not for very long.
Intel, the world’s leading maker of semiconductors, suffered a huge and unforeseen crisis
when It emerged that a small proportion of its Pentium microprocessors were faulty.
Quickly assessing the options, the company took the brave step of recalling and replacing
the entire production run of the series. The move cost more than $lbn (Ј550m) and
probably saved the company. Intel showed that it was committed to its product, whatever
the short-term cost, and customers responded positively
Looking back on the incident, Andy Grove. Intel’s chairman and then chief executive,
compared managing in a severe crisis to an illness. Strong, healthy companies will survive,
although at a cost to themselves. Weak companies will be carried off by the disease and
will die. In Mr Grove’s view, the key to successful crisis management is preparedness.
Forward thinking and planning are essential; understanding the nature of the crisis that
might occur can help managers be better prepared, as the Air France example shows.
Yet even while managers are planning how to deal with seismic events such as terrorist
attacks or natural disasters, they may be missing more subtle threats such as the
development of new technologies that could undermine their business. Good crisis
management requires the ability to react to events swiftly and positively, whether or not
they have been foreseen.