Crisis management is the process by which an organization deals with a disruptive and unexpected event that threatens to harm the organization or its stakeholders. The study of crisis management originated with large-scale industrial and environmental disasters in the 1980s
In September 2015, the US Environmental Protection Agency (EPA) found that in over 590,000 diesel motor vehicles Volkswagen had violated the Clean Air Act as the vehicles were equipped with “defeat devices” in the form of computer software, which was designed to cheat on federal emissions tests.
In April 2017, a US federal judge ordered Volkswagen to pay a $2.8 billion criminal fine for “rigging diesel-powered vehicles to cheat on government emissions tests”. As of 1 June 2020, the scandal had cost Volkswagen $33.3 billion in fines, penalties, financial settlements and buyback costs.
In India the authorities observed that Audi cars’ emissions for nitrogen oxide were 5-8 times the permissible limits and after the National Green Tribunal imposed a penalty of Rs 500 crore on VW, the irked customers realised that they had been duped of their hard earned money. Unfortunately, the way the company handled the scandal made things even worse. As the case progressed, the company’s response was seen inconsistent and, at times, contradictory to previous statements. Executives claimed they did not know about the cheating. Meanwhile, the company’s PR and social media team struggled to keep up. As the company set out to recall millions of vehicles, officials promised to reimburse some, but not all, customers for their troubles.
Had the brand acted maturely may be it would have fared better through this crisis if it had taken a few key steps: been up front and honest as soon as the story broke; kept its response consistent with an empathetic and apologetic tone; reimbursed all affected customers the same amount; demonstrated a commitment to change in some way by setting new emissions goals or partnering with an environmental organization to help combat air pollution. It took 4-5 years for the VW to return to normalcy.
The major principle to handle crisis is governing communications. To be upfront with customers, to talk the truth and keeping them informed of the correct and incorrect aspects of the same. The moral and immoral dimensions relevant to the communication are very important to handle crisis. The organization’s crisis response must be designed to move faster than social media which is not easy. It means having a crisis team that is well drilled and knows exactly what to do when a threat emerges. It means having technology built into the access and activation of organization’s plan. And it means co-opting social media as a tool for communication and not just let it dictate the threat.
India’s food regulator had banned Maggi in 2015 after tests showed it contained excessive lead and for alleged mislabelling over flavour enhancer MSG. Nestlé has since then removed the claim “No added MSG.” Indian food inspectors order Nestlé India to recall a batch of Maggi Noodles from the northern Indian state of Uttar Pradesh claiming that tests had found Maggi instant noodles “unsafe and hazardous” and accused Nestlé of failing to comply with food safety law.
The initial response from the global FMCG Company 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 that “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 out Maggi factories. We do not add MSG to Maggi Noodles, and glutamate, if present, 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.” Nestle kept the customers informed about its response to the serious case, and action taken by the company continuously for four long years. In January 2019, the Supreme Court of India allowed a test report to be the basis of proceedings in a almost four year-old class-action lawsuit over MSG, lead content in Maggi.
It’s difficult to handle reputational risk, the way threats emerge and are fanned by social media is difficult to handle. Yet the principles of the way an organization takes ownership and gets ahead of the problem largely depends on its culture. Customers don’t appreciate half-hearted apologies to the victims and lies hid behind corporate walls. It doesn’t work.
Amazon has been a crowned winner during the Covid crisis because it made corers of household’s life easy during pandemic. Its sales have soared due to the shutting of bricks-and-mortar shops and malls. Yet, Amazon has been bitterly criticized; the most serious accusations are made against it in the US and France. In France all Amazon warehouses were temporarily closed after a huge row about worker safety. In the US Amazon experienced lot of workers quitting over warehouse safety and conditions. Many of its workers pledged to stay home in protest because Amazon has failed to provide face masks, and has refused to pay sick leave. The fight intensified after Amazon fired four workers who had publicly criticized safety measures. In progressive countries such as US, UK and France customers gauge the behaviour of companies.
Every committed buyer of a product/service observes it closely, they observe the organization’s behaviour towards society and in crisis they expect clear, concise, correct, coherent, complete and courteous communication with concrete actions.
