- OIL & GAS
As I write these lines, the “Toyota situation” is still unfolding.
First, there was apparently a problem with driver’s side floor mats â€” they could interfere with the function of the accelerator, in a worst-case situation, depressing it. This triggered the recall of many Toyotas.
Next, it became clear that an additional problem with the accelerators, probably an electronic problem, could cause inadvertent maximum acceleration, which cannot be overridden by the brakes. This problem has been implicated in several deaths and appears to involve eight models of Toyota, as well as some Lexus models. Toyota has recalled millions of vehicles (current count as I write, around 8.5 million).
The company shut down production in the facilities that make these models, and shut down sales of the affected models from all dealerships for an unspecified period of time.
And additional problems are trickling in â€” problems with brakes in particular.
Pounded by the pressThe situation is clearly catastrophic. News sources emphasize several key points:
First, the response from Toyota is perceived as slow and disorganized â€” possibly even actively deceptive. Management was, and still is, “behind the story.”
Second, Toyota officials are seen as complacent (as the #1 auto maker in the world). When Toyota’s CEO spoke recently before Congress, he acknowledged his company might have “grown too fast,” with the pursuit of market dominance coming at the cost of quality and safety.
Serious questions are being asked: Will Toyota ever fully recover from this disaster? If so, how many years might it take?
Lessons learned1) Organizations must grasp the notion that the environment of business is increasingly “turbulent.” Success essentially guarantees nothing. Changes in customers’ expectations, competitors’ products and services, federal and state regulation, relationships with suppliers, labor agreements, leadership direction, and so on, can suddenly impact any business. When things change, they change amazingly quickly. Complacency must be challenged and resisted. No company can run on autopilot. That invites extinction.
2) Image and reputation in the marketplace is central to an organization’s success. They must be built and protected at all costs. A company known for its quality, its culture of continuous improvement, and the durability and safety of its products must quickly and decisively act if anything might tarnish that image. A company known for its focus on customers cannot respond to a crisis by closing its doors and becoming internally focused. It cannot afford to be perceived as responding in a slow, piecemeal approach.
3) Effective risk management includes “crisis management” plans. How will management quickly and transparently fix the problem? Second, how will it manage public relations issues generated by the crisis (and public perceptions of the company’s response)? This crisis management process should not be formuladriven and rehearsed as to appear slick or robotic. But at the other extreme, it must not appear chaotic, unorganized, and haphazard.
4) Beware of coming off “tone deaf.” I recently saw two Toyota commercials on TV, acknowledging and reacting to the crisis. One featured soothing background music as an equally soothing voiceover says vague but comforting things about how “we are working to regain your trust.” This reminded me of the classic movie “2001: A Space Odyssey,” and the sequence in the film when the rogue computer, Hal 9000, having done some very bad things, reassures Dave, the one remaining astronaut that Hal hasn’t terminated, that his (Hal’s) recent “problems” were all behind them now.
The second commercial featured a reassuring mechanic, who said he and his family drive Toyotas, and that he is confident that with the actions the company is taking, they are safe. The final screen says “Toyota... moving forward.” Ouch.
It’s instructive, in light of Toyota’s problems, for all of us to recognize the extent to which the external and internal environments of our business are exposed to turbulence. How quickly the game can change. We need active, accurate mechanisms of risk management â€” early-warning systems to identify “off-normal” events and to capture and isolate error that could lead to catastrophic consequences. And we need concrete (yet flexible) plans for crisis management, to include handling the problem (first) and handling the PR surrounding the problem and our handling of it (second). In the tragic Toyota situation there are lessons for us all.