5 ways to handle a company crisis

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You’ve seen it thousands of times: a company faces an emergency and has to act decisively, lest they face turmoil from the inside out. From a paucity of impeccable safety standards to a corporate tax evasion, companies oftentimes have to manage crisis control in a way that ensures the brand and staff is kept intact.

There have been numerous instances of brands that have incited the ire of the general public (ahem, Home Depot and its security breaches), and perhaps even the ferocious hand of government regulators. It’s one thing for the fiery emergencies to rampage through the workplace; and it’s another when the crisis hits the consumer in the gut.

Between 2009 and 2010, Toyota announced the largest recall of vehicles in the U.S. This recall generated headlines all over the world because the company had to recall nearly four million vehicles due to floor mats trapped the accelerator pedals. Several weeks after the recall, there was a second recall, but this time it was 400,000 cars. Customers felt betrayed.

How badly did this affect the Toyota brand? Prior to the crisis, 83 percent of U.S. consumers had a positive opinion of the brand, but soon after the incident, the brand’s disposition declined by five to 10 percent.

Ostensibly, Toyota didn’t learn its lesson because later the auto manufacturer had to recall other models due to defective front propeller shafts, corrosion of spare tire carriers and brake dereliction.

Toyota unleashed a marketing campaign that meant to revamp its image and regain consumer trust – in 2010 it had a 59 percent approval rating. As part of its ad initiative, it launched the new motto “Moving Forward!” and informed its customers it wanted to begin anew and look toward a better future. Apparently, this worked as its brand attained higher ratings of approval from consumers.

But realize this kind of strategy doesn’t work for every brand. You have to tailor your recovery campaign to fit your market and client base.

When seven people died after taking extra-strength Tylenol capsules that had been laced with potassium cyanide, Johnson & Johnson was faced with a crisis it was totally unprepared to handle. The company was not to be blamed. Tylenol was just the weapon that was used by a murderer. Nevertheless, the media was continually reporting about Tylenol and Johnson & Johnson’s name faced a tarnishing difficult to reverse. Many people began to have doubts about the brand, the product itself and the packaging.

Industry professionals averred that Johnson & Johnson purported superb leadership when handling the crisis. For instance, the private firm decided to put customer safety first and pulled 31 million bottles of Tylenol from the market, which was worth $100 million of merchandise. The company also stopped all production and advertising of the product and became actively involved with the Chicago Police, the FBI and the FDA to search for the killer.

Unfortunately, the culprit was never found but after the crisis, Johnson & Johnson reintroduced Tylenol with a new tamper-resistant packaging and $2.50 off coupons for customers.

Apple faced a labor challenge when the Fair Labor Association released a report documenting at least 50 issues related to the company’s code of conduct and Chinese labor law. The issue was specifically with Foxconn, Apple’s major supplier, and the report highlighted the number of hours worked per week by Foxconn workers. Apple and Foxconn both agreed with the findings and Tim Cook committed to bring about a change. Cook faced the wrath of the shareholders but promised to scrutinize the issue and implement policy changes to reach a solution.

Indeed, corporate America maintains an image problem. As the consumer base metastasizes into a cantankerous and suspecting public about corporate brands, the private sector must engage with its customers and dispel false notions, particularly when it comes to scandals – think about McDonald’s recent wave of videos rejecting the rumors that its meat isn’t real meat.

Whether you work for multi-billion-dollar firm or an SMB, here are five ways to handle a corporate crisis:

Reassure Staff

When a media report is released or CEO’s behavior comes to light, it’s imperative that the brand reassures its customers, employees and partners about its extensive ethical standards and business practices that have been the backbone of the company since its inception. Also, the corporation must move forward with a fair and extensive investigation of the matter.

“A code of conduct is in place to ensure all employees are aware of the high expectations of the organization, and penalties will result from deviation from the code of conduct,” said Laurie Paleczny, president of the Dash Digital Group, in an interview with B2BNN [Ed. note: Dash is a partner with B2BNN]. “At the same time, it is important for a company to provide support to any employee accused of wrongdoing until guilt is proven, and respect the confidentiality required of any legal investigation while it goes through its proper course.”

Investigate the Issue

When a scathing news story is plastered on the front-page of a newspaper or leads a news broadcast, a company faces many options. Primarily, the most important measure a brand can take is to investigate the topic and discover if there is any truth to the claims. Once the company determines if the story is true or false then it can weigh its options. Often, hiring an external investigator for an internal matter can be helpful and offer much-needed transparency.

Reaction vs. inaction

According to Paleczny, a company’s reaction to a crisis depends on the situation and the accuracy of the media reports. As noted, an investigation is the common-sense next step, but moving forward there are a number of different routes a firm can take.

One approach is to keep silent and not comment publicly in order to refrain from giving any credence to the issue. Another option is to offer the facts of the case and then move on with the status quo, much like how talk show host David Letterman did following his run-in with a blackmailer. The other way would be to directly seek a retraction and ask for an apology.

“This is really situational, and if handled truthfully, openly and respectfully can create a positive spin for the company,” noted Paleczny.

“A good example of a response that I have seen on the internet is the Fed Ex package ( a computer monitor) that got thrown over the fence.  Fed Ex did a great job of responding to the situation from what I have read.”

Update regularly like Windows

If a certain issue is being tackled by management then it’s imperative that the public is informed and updated on a regular basis. A great example of this is when it comes to social media outlets, which always offer up-to-the-minute updates on how the situation is being handled, what is being done and when everything is expected to return to normal.

By giving the general public insight into how your brand is resolving the issue, it shows that your business is being transparent, owning the problem and taking control of the situation.

Marketing 101

If the scandal has gotten completely out of hand then it’s important for the corporation to regain the trust, confidence and business of its clientele. Some might want to revamp and rebrand its company akin to what Toyota did following its automobile recalls. This could consist of a shift of the executive team and perhaps board of directors, adjusting brand image (names, colors and slogans of products or services) and ensuring customers that it’s moving forward and enhancing its operations.

All sorts of businesses – from multi-national corporations to small-time SMBs – are victims of internal scandals. What’s really important is that they address what is being accused and then these brands mustn’t remain insouciant but rather proactive to ensure the damage is minimal.

 Photo via Flickr Creative Commons

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B2BNN Newsdesk

B2BNN Newsdesk

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