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Grayling is the second largest independent communications firm in the world. We specialize in Investor Relations, Corporate Communications, Public Affairs, Event Management and Digital/Media. We have over 900 staff and 70 offices around the world. Christopher Chu, the author of this blog is an... More
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  • Anne McBride Letter to Clients and Friends: How are IR and PR aligned? Have a crisis and find out 0 comments
    Mar 2, 2010 11:30 AM
     
    If you have been on the Planet Earth in the last few weeks, you have been reading about Toyota's crisis with automobile recalls. This particular issue is highlighted by the global nature of the media attention (we've seen stories in The Economist, International Herald Tribune, New York Times, Wall Street Journal, Newsweek, Dow Jones, and many other publications). If the news wasn’t so bad, Toyota’s recent media coverage would be a great hit list for the publications you want to reach.
     
    Here are some thoughts to take away from Toyota's problems and how you can prevent or handle any crisis better, quicker, and more intelligently.
     
    First, let me be clear. All companies have challenges and most companies will encounter a crisis at some point in their history. It's not having a crisis; it's how you address it. Being prepared with a crisis plan that can immediately and effectively be put into play when needed is a necessity for all companies.
     
    Lesson 1. Culture
     
    Culture plays a large role in how managements, who are people after all, adapt to news they would prefer not to communicate. Toyota has at heart been "the pinnacle" of Japanese innovation, manufacturing quality and industrial strength as the world's largest carmaker. The Economist argued in a February 13th article that Toyota’s crisis management problems can be linked to deficiencies in Japanese corporate governance. [Large Japanese companies] “typically have a rigid system of seniority and hierarchy in which people are reluctant to pass bad news up the chain, thus keeping information from those who need to hear it in a misguided effort to protect them from losing face.” The article further contends that “the preference for harmony crowds out alternative viewpoints.”
     
    Toyota has been badly tarnished by an absence of outside perspective. There are no independent directors on the board and all board members are Japanese, men, and insiders. Toyota’s crisis may not have been handled better with a more diverse universe of decision makers. However, I would maintain that all public companies with a worldwide shareholder and revenue base should be more open, diverse and receptive to other viewpoints, especially since critical decisions can make or break a company's reputation. In this example, the market capitalization loss at Toyota was equal to the total market capitalization of Ford. As The Economist noted, this is a good time to reconsider your "internal" workings.
     
    2. Transparency
     
    Toyota has for months now disavowed many of the problems and been slow to respond, if it responded at all. Management has been perceived as indecisive and when Toyota finally did respond, appeared to be spinning the story. "You can't hide, says Bob Grupp, president of the Institute for Public Relations, an industry-funded think tank in a February 11th article in the Los Angeles Times. "These are uncomfortable situations to be in. But in today's 24/7 society, you have to step up and acknowledge your reality very quickly." Toyota has shot itself in the foot, not because the problem was terminal but because the denials and obfuscating have caused those of us who drive Toyota's and the overall general market to be focused on the problem and not the long standing brand credibility. Toyota might remember how the missteps of U.S. car makers have resulted in a lack of faith regarding quality among many American consumers which persists to this day.
     
    Therefore, get the story out, maintain your brand reputation, remain credible, put your top executives in the forefront and remind your audiences of the good news as well as the reality of what the challenges are. Don’t dither!
     
    3. Timing
     
    In life, timing is everything. We live in a global world. Talking to the broadcast media is great but not enough. Remember how our current President built up momentum and strength through his staffs’ twitter and email savvy?  The Internet is an opportunity to join the conversation and engage customers and clients.
     
    Use the digital age to your advantage, don't let it take advantage of you. Companies must learn to use their web pages and blogs more to their requirements than react or ignore the messenger.
     
    4.  Restoring reputation
     
    This isn't the first or even second time we've seen enormous crises within major multinational companies. Bridgestone Tires’ recall, Johnson & Johnson’s Tylenol scare and Audi’s acceleration issues in the 1980s are well known examples.  I was very interested to read that the way J&J went forward was to revert to its long standing credo created in 1943, putting customers first. The Los Angeles Times notes that Toyota has a credo too. It's called "The Toyota Way,” a 14 point management primer that includes putting customers first. Time to revisit your core values and mission statement and shout it loud and far.
     
    My last words on this subject are that I am often asked what investor relations has to do with public relations. I'd say this is a perfect example. Losing billions of dollars of shareholder and management value aligns IR with PR. 1+1=3.
     
    Post Script: The Wall Street Journal reported today that Toyota’s President changed his tack and promised to appear before Congress next week.
     
     
    Best,
     
    Anne McBride
    Chairman
    Grayling Investor Relations
     
    Todd Gerlough
    Director of Research
    Grayling Investor Relations


    Disclosure: No position
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