For about 24 hours last week, Peyton Manning and Toyota Motor Corporation President Akio Toyoda had a lot in common. Minutes after the conclusion of Super Bowl XLIV, sports pundits, armchair quarterbacks, and fans across the country were pontificating about what Manning should have done differently to win the 2010 Super Bowl Championship, as well as his abrupt exit from the field. Fortunately for Manning, his fans and coaches will forgive his team’s mistakes, and he will take the field again next year with his reputation and his organization’s value intact. Mr. Toyoda isn’t so lucky.
During the last few weeks, every major news outlet has carried in-depth coverage about Toyota and its expanding recall. Many commentators are pointing to the debacle as a textbook case of what NOT to do when faced with a corporate crisis. One thing is for sure, even if Toyota starts managing the recall brilliantly, there has been significant harm done to the firm’s reputation and bottom line.
More than any other recent crisis—even the one named Tiger Woods—the Toyota debacle holds several important lessons for directors. When considering how best to fulfill your fiduciary responsibility AND provide guidance to your company’s executive leadership in a crisis, consider these points:
Lesson #1: What Can Be Known Will Be Known.
The “sweep it under the carpet” approach rarely works. Ignoring a major mistake and hoping no one will learn about it didn’t work very well in the ‘80s or ‘90s. In today’s 24/7, Twitter-driven world, if a company makes a major mistake, it’s only a matter of time before word will get out.
That doesn’t mean, however, that you should advise the organization to issue a press release every time it stumbles. In certain situations, the best approach is to immediately correct the business problem and have a reactive communications plan in place if—and, likely, when—the information starts to flow. There are risks to a reactive approach, most notably losing control of the story and letting competitors, customers, and reporters define the situation and remedy instead.
Lesson #2: Communicate Inside Out.
Next to Toyota customers whose cars don’t stop at red lights, we feel especially sorry for Toyota dealers and employees. 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’s tough….especially if you’re not convinced that her car is safe.
Be aware that employees are constantly talking with customers and shareholders. Since both customers and shareholders are critical to the success of the company, so is anyone who interacts with customers. Whether the company has five employees or 50,000, every one of them is a spokesperson, especially in a crisis, and every one of them needs context and talking points. In the absence of being told what to say to customers, realize that employees will make up their own script.
In our experience, few companies have all the facts gathered when a crisis strikes. That’s what makes it a crisis: it’s one part mistake and two parts lack of clarity. As a fiduciary, 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), (2) communicate what they know for sure, which may be very little, and (3) explain the process they’re undertaking to gather the necessary information. Most importantly, companies must communicate all this information to their employees first, and then to their customers, shareholders and other important constituents. Legal counsel can help guide management in creating communications materials that won’t cause discovery and/or litigation issues down the road.
More than ever before, a successful crisis communications plan includes—and goes beyond—media relations. Customers, shareholders, regulators, employees, franchisees, dealers, intermediaries, industry influencers and vendors are all important constituents who need to be included in the communications process.
Lesson #3: The Message Matters.
In our experience, companies in a crisis are well served by developing three or four key messages that summarize the “who, what, where, when and how” of the situation. Often, much is unknown at the outset, and it’s imperative that legal counsel is included in both the message development and delivery process. If a company in crisis creates the right key messages and delivers them in a timely manner and consistently to all important audiences, it will likely minimize bottom-line and reputational damage.
Lesson #4: Influence the Influencers.
If you doubt that industry experts are important to a business during a crisis, ask Toyota Motor Corporation President Akio Toyoda how U.S. Transportation Secretary Ray LaHood impacted Toyota on the day of his remarks at a House of Representatives hearing, and for many days thereafter. One sentence, in which Secretary LaHood counseled any owner of a recalled Toyota to “stop driving it,” sent Toyota stock into a freefall and Toyota owners into a panicked frenzy.
In every industry, experts are contacted by the government, by the media, and by customers to provide perspective on a crisis or event. In Toyota’s case, it would be nearly impossible to proactively contact every industry expert around the globe; however, there are several important constituents whom Toyota seemed to ignore, Secretary LaHood among them. We have found there are always a few experts who stand out from the crowd and who should be contacted proactively. Better yet, advise your management team to develop and maintain good relationships with industry experts now so that they know your company before a crisis occurs.
Lesson #5: Don’t Stonewall the Media.
We’ve heard executives and directors say, “If we talk with the media about this issue, it will only legitimize their articles and make them longer.” In our experience, that’s rarely true. 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. 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. Some will talk on the record; others won’t. Either way, it doesn’t bode well.
What You Can Do
Even well-managed companies can find themselves in situations that can hurt their reputations and bottom-line results. When that happens, remember these five lessons and ensure that your executive management team manages the situation in a way that will efficiently address the issue, reaches all important constituents, and positions the company for future success.
In the meantime, keep in mind this wise quote from Warren Buffett, “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.”
Jane Ingalls is founder and president of Artemis Communications.