Three Examples of Successfully Managing A Business Through a Crisis

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By nature, most people avoid planning for crisis situations. After all, there is so much to do in the here and now without trying to second guess the future. Business leaders are no exception when it comes to the often thankless task of crisis planning. Unfortunately, disaster can strike any company, at any time. Even more difficult than actually planning for such an occurrence is the task of determining what possibilities to plan for.

Lately, the list seems endless, from natural disasters like earthquakes or floods, to man-made disasters like terrorist attacks or oil spills. Within the walls of a business, the crisis could be anything from a breakdown in leadership to intentional sabotage. And, while some crisis situations happen in an instant, others evolve over time. It’s always important to remember that no matter what type of crisis you may face, the technology is in place to make the news public within minutes. Is your company prepared?

While crisis situations may present themselves in a variety of ways, each one has the ability to cause serious financial damage and, perhaps more importantly, damage to your company’s brand. In 2010, the Japanese automaker, Toyota, faced a crisis of epic proportions. Other notables such as Johnson & Johnson, Exxon, and Pepsi also faced unexpected disasters. Valuable lessons can be learned from their examples — lessons that can be applied to your business. Let’s take a closer look.

Toyota

For decades, Toyota won customers and market share from American car manufacturers. After all, the Toyota brand was synonymous with quality. At least that was the perception until it became necessary to issue recalls for millions of vehicles with sticky accelerators – sticky accelerators that took innocent lives. Internal issues, including a lack of focus on the company’s customer-centric core values, contributed to the decline. In fact, the focus at the top shifted from making a high quality product at an affordable price to becoming the world’s largest automaker. In actuality, this shift may date back to the late 1990’s when Toyota’s shares were listed on the New York Stock Exchange, elevating the need to increase short-term profitability. Regardless of what initiated the change, rapid growth strained engineering resources and taxed the company’s revered and widely emulated corporate infrastructure and discipline.

From the simple act of owning up to the problem and expressing concern for lives lost, to identifying the cause and implementing a solution, Toyota was anything but efficient or effective. The company was slow to take responsibility and issue the recalls, unable to quickly identify the exact cause of the acceleration issue, and initially offered a solution that was not, by their own admission, fixing the problem. If quality was their cornerstone, it didn’t make sense that they were unable to quickly identify the cause. Had quality, their biggest strength, now become their biggest weakness? No matter what the answers are to these questions, the company not only suffered from exorbitant financial damage, but the Toyota brand was severely tarnished.

Johnson & Johnson

In the early 1980s, Johnson & Johnson

experienced a major crisis when numerous bottles of Tylenol capsules were laced with cyanide – a deadly poison that resulted in the loss of lives. Led by their high-profile CEO, Johnson & Johnson took quick action. With a seeming disregard for financial considerations, the company held true to its customer-first philosophy by showing its commitment to safety and the quality of the Tylenol product.

Embracing the media exposure, Johnson & Johnson immediately began alerting people about the potential dangers. It also dispatched scientists to determine the source of the tampering, embarked on a massive recall and ceased production temporarily while tamper-resistant packaging was developed. Preceded by an aggressive campaign to rebuild its brand, the company placed its “triple tamper resistant” product back on the shelves within a few months, along with a number of incentives.

Johnson & Johnson set a new precedent for crisis management with their swift actions. It was the CEO’s willingness to be open with the public, investigate the matter, and offer a solution that helped the company maintain public confidence throughout the incident. Certainly there were financial losses. But the integrity of the leadership, combined with smart incentives that were offered as part of the re-launch of the product turned the crisis around. Johnson & Johnson not only held some of its original market share, but within a few months of the incident, exceeded that level.

Exxon Valdez

A few years after the Tylenol incident, Exxon Corporation caused one of the worst environmental disasters in history when the Exxon Valdez oil tanker ran aground, spilling hundreds of thousands of barrels of oil onto the coastline of Alaska’s Prince William Sound, a remote habitat for fish and fowl.

Following the spill, Exxon failed at the task of taking responsibility. It took the company a number of hours to even begin containing the spill. And, when these efforts fell short, the company tried placing blame elsewhere. In addition, it took several days for the CEO to make a statement to the media and subsequent communications from company executives were inconsistent. The unwillingness to accept blame, combined with a slow response and highly ineffective communications, severely tarnished the Exxon brand — a brand which, as a result, was equated with environmental disaster for a number of years into the future.

Pepsi Corporation

In the early nineties, the Pepsi Corporation faced a crisis which began with claims of syringes being found in cans of Diet Pepsi. Following an immediate and intense investigation, an arrest was made just eight days later.

Pepsi was open with the public and its employees throughout the crisis. Following the investigation, the company embarked on a public relations campaign beginning with a series of video news releases. One detailed the actual Pepsi production process – a process that clearly demonstrated that tampering of this nature was impossible within their facilities. Another detailed the arrest of the perpetrator. In addition, an FDA official publicly declared Diet Pepsi safe to drink. Finally, Pepsi ran a series of ad campaigns to thank the public for standing by the company and offered coupons for their products. In the end, there was little, if any, lingering effect on Pepsi Corporation.

Next Week: Part Two-How to Manage a Crisis When Your Business is Under Fire