Every organization at some point faces with a crisis situation; a crisis is any situation that challenges the reputation of an organization, its clients, donors, or individuals associated with it. Whether it is directly or indirectly, an organization’s reaction and response to the crisis situation directly impact its brand image.
The Volkswagen emissions scandal
In September 2015, the Environmental Protection Agency accused Volkswagen of manipulating its engine controls to be able to pass laboratory emissions tests. Not only was the company violating the Clean Air Act by selling vehicles that did not meet environmental requirements, but it was also violating its customers’ trust by making its cars seem more environments friendly.
Unfortunately, the way the company handled the scandal made things even worse. As the story evolved, the company’s response was seen inconsistent and contradictory. Executives claimed they did not know about the cheating. Meanwhile, the company’s PR and social media team struggled to keep up. In the meantime, the company got ready to recall millions of vehicles, its officials promised to reimburse some customers, but not all. All the while, consumers reported that the company seemed to be handling the crisis in a deceitful manner by not fully “owning” its role in the scandal.
The brand would have fared well through this crisis if it had been up front and honest as soon as the crisis broke; kept its response consistent, with an empathetic and apologetic tone; reimbursed all affected customers the same amount without discrimination; demonstrated its commitment to change by setting new emissions goals or partnering with an environmental organization to help combat air pollution.
Johnson & Johnson Tylenol case
In 1982 seven people in Chicago died after consuming Tylenol capsules (used for treating fever and mild pain) poisoned with cyanide. The tampering was believed to have occurred when someone injected the chemical into capsules and returned them to store shelves. The deaths remain unsolved, but the way Johnson & Johnson handled the episode has become a renowned case study for effective crisis management and business ethics at Harvard Business School and elsewhere. In 2003, Fortune magazine named James Burke, the company’s CEO at the time, as one of history’s greatest CEOs for the way he handled the scare.
Highlights of Johnson & Johnson’s handling of the crisis: According to a book on the case by Harvard Professor Richard Tedlow, on the afternoon of the first two deaths, the company halted all product advertising, sent 450,000 messages to hospitals, doctors’ offices, and other stakeholders, and established toll-free hotlines for consumers. At a cost of more than $100 million, the company recalled the entire Tylenol from store shelves which was one of the fastest nationwide recalls; even though government officials felt that doing so was excessive. Additionally, Johnson & Johnson issued warnings to consumers not to take its pain reliever.
Honesty and Integrity always pays
Despite evidence that the poison was introduced via store shelves, Johnson & Johnson did not try to dodge its responsibility. As a result, Burke was praised for his honesty. The company became a pioneer in developing tamper-proof packaging, and eventually moved away from capsules to a more tamper-resistant caplet. Burke was candid in expressing regret that the company had not done so before the crisis. In less than a year, Tylenol regained its market share and sales leadership, and according to a BrandSpark (boutique research and consultancy agency) study, it continues to rank highly for consumer trust.
Maggi Noodle Ban in India
Maggi is famously known as 2 minute noodle; cooked in 2 minutes as a perfect quick-snack between meals and very easy to make so much so, that kids prepare it alone. At the end of May 2015, India’s Food safety administration (FDA) ordered Nestle India to recall its popular Maggi noodles after few customers complained that the product contained high levels of lead and MSG. The 2-minutes ready Maggi Noodles was banned in India.
Initially, the company Nestle rejected the accusation that the noodles were unsafe and said on their website and social media accounts that there had been no order to recall any products. A statement on their website said “The quality and safety of our products are the top priorities for our Company. We have in place strict food safety and quality controls at our Maggi factories. We do not add MSG to Maggi Noodles, and glutamate, if present, they may come from naturally occurring sources. We are surprised with the content supposedly found in the sample as we monitor the lead content regularly as a part of the regulatory requirements.” This statement was made to retract the ban.
Nestle continued to keep its customers up to date on the investigation into the safety of Maggi noodles in India in the courts. Nestle stated on the official Maggi Noodles Facebook page, Twitter and website, that extensive testing revealed no excess lead in Maggi Noodles. It used its Twitter and Facebook accounts to answer customers questions about the levels of MSG and lead found in their noodles. The company continued to re-assure customers that the noodles are safe and that they are a transparent company working closely with authorities in India to resolve the issue. Nestle launched a FAQ page on the official website.
From a high point of a 78 per cent market share in the Rs 38 billion branded noodles market, the Maggi crisis left the market open to competitors like ITC’s Yippee and Nissin’s Top Ramen and allowed aggressive players like Patanjali to enter the space with cheaper products in late 2015.
When the ban was lifted from entire India in 2019, Nestle restarted from scratch. Since then it has launched over a dozen products under the brand that have helped it regain much lost ground. In 2017 itself Nestle contributed over Rs 26 billion to its top line with over 60 per cent value share of the instant noodles market. Value added products in the instant noodles and pasta market have aided growth.
Lessons learnt from above cases
Ownership
Organizations need to take ownership of the problem. In the case of Volkswagen the executives started playing blame game and appeared inconsistent in their approach. Whereas in Johnson & Johnson case the CEO apologised to the customers at large and though it was not a problem created by J&J, James Burke, the company’s CEO at that time called off the entire stock of Tylenol from the US market. He is praised as one of the greatest CEOs in world for handling the crisis bravely. It also is very important for the leaders of the organization to be present in the crisis.
Effective communication most important
Organizations must rinse and repeat its communication with all stake holders; with their employees, customers, suppliers, government, NGOs with all the communication must be kept on. People have very less retention capacity of information. People often misunderstand the communication as to what has been said. Only ⅓ of people are actually listening and grasping what is being said.
The major principles governing communications, the correct and incorrect aspects of the same, the moral and immoral dimensions relevant to the communication are called ethics of communication. In other words, communication ethics is the notion that human beings are governed by morals which essentially affects communication. Any kind of moral present in communication of any form is generally termed as communication ethics. It is important that whatever an organization communicates should be guided by certain ethical principles. In the above given case studies only J&J and Nestle kept their communication with stake holders continuous and with clarity.
Resolve problem as early as possible
In crisisall team members become fearful; rumours destroy confidence of everybody, a research has proved that during crisis 86% of organizational gossip only hinders and creates obstacles. It is therefore critical to have a crisis solution team in place which gathers information that allows the leadership team to take the next step in resolving the issue. The crisis solution team must be alert and agile.
Leadership
Leadership is pivotal in handling crisis. It requires many competencies such as timely decision making, motivating individual members in the team by helping them in crisis, and the most important – ability to lead by example. A team that’s being led by a weak leader will experience disagreements, politics, and spitefulness and will never reach goals of the team. When teams are led by good leaders, they maintain team spirit because the leader participates in the team work and leads by setting example. Situational leadership model is a popular model of leadership which is designed by Paul Hersey and Ken Blanchard. This leadership model is based on the idea that effective direction depends on leader’s ability to be firm and decisive as per the condition of a situation in the organization. In the cases explained in beginning J&J CEO James Burke will be always remembered in history of leadership for being honest and for taking firm decision for calling off Tylenol from the entire US market. He proved with is action that Honesty and integrity have no substitute.
