Implosion of a brand: What can we learn from Toyota's crisis mismanagement?by
As Toyota struggles to repair customer trust and its brand reputation in the wake of its vehicle recalls, Neil Davey explores what went wrong - and what we can learn from it.
- In June 2009, Katsuaki Watanabe is replaced as CEO by Akio Toyoda, grandson of the manufacturer’s founder. He is stinging in his criticism of the way the company has been run, saying it had "become too big and distant from its customers". Only weeks later, Toyoda is informed of a fatal accident involving a brand new Lexus – with a stuck accelerator identified as a possible cause. Toyoda offers his condolences.
- In November, Toyota recalls around 4 million vehicles in the US following concerns that the accelerators could get trapped by loose floormats. The following month, the US National Highway Traffic Safety Administration (NHTSA) meets with Toyota executives to seek assurances that prompt action will be taken.
- In January, Toyota informs the NHTSA that the pedal may have a sticking effect, and after pressure from the Administration, the manufacturer announces further recalls and halts the sale of eight models.
- February sees the US Transportation Secretary Ray LaHood concede that although Toyota has started taking responsible action, "it unfortunately took an enormous effort to get to this point." The next day LaHood seems to suggest that Toyota owners should stop driving – though these remarks are retracted and attributed as a misstatement. A new problem also surfaces, as around 500,000 Prius and Lexus hybrid cars are recalled due to concerns over their braking. The company finally begins to publicly address the issues, crafting a letter to customers that runs in major daily newspapers and on its website, followed by a second letter days later, and then a US television commercial. Toyoda also appears at a news conference to apologise for the problems, promising that a taskforce featuring independent sources will review quality.
The slow public response to the problem was a major mistake from the outset. It wasn't until seven months after the fatal crash that Toyota held a news conference about the problem, when their management of the situation should have sprung into action as soon as the accident occurred.
"Toyota broke the cardinal rule in crisis management: assume the worst," says Judith Ingleton-Beer, CEO of IBA International. "Companies often don't realise they have a problem until it hits the media fan – and nowadays, Twitter, bloggers and YouTube beat most lumbering corporations to it. From a disgruntled employee to toxic waste – assume the worst.
"The fact that the media was able to get hold of this and force Toyota into a defensive position suggests that the company did not understand the scale of the problem or the potential size of the risk," adds Haynes.
- Dealing with product recall is an aspect of corporate crisis management which should be a key part of an organisation’s business continuity programme and regularly tested. Too often the focus of such programmes is on traditional risks such as fire or flood but reputational damage can be far more harmful to relationships with customers, consumers and business partners and should be addressed with appropriate vigour and pre-planning.
- Mitigating the impact of a product recall is not just about the response, but arguably more a question of preparation, so companies need to ensure roles, responsibilities, response structures and logistics channels are in place in advance so that management can communicate and take action the instant a product problem arises.
- When an incident occurs, it must be escalated quickly. The company needs to confront the situation immediately, understand the legal position, see things from the customer’s point of view, not just that of their organisation and ensure that all stakeholder concerns are identified and addressed.
- Ensure that the precise technical nature of the problem is understood so that what has occurred and how the recall will be dealt with can be explained clearly. This may involve considerable research and the engagement of third parties, which needs to be factored in to advance preparations.
- There must be communication from the most senior level of the business, and this must be honest, show concern for those affected and express a strong commitment towards solving the problem. The communication should be used to reaffirm the company’s core beliefs and values around quality and customer focus.
Neil Davey is the managing editor of MyCustomer. An experienced business journalist and editor, Neil has worked on a variety of newspapers, magazines and websites over the past 20 years, including Internet Works, CXO magazine and Business Management. He joined MyCustomer in 2007.