Toyota: Leading or Folding under Pressure?
Last week a colleague asked me whether Toyota would become the next Johnson & Johnson in terms of being a pinnacle example of a firm handling a crisis well. At the time, the jury was still out. Toyota did seem to have moved swiftly and decisively in organizing a massive recall of cars across several product lines. And, like J & J, at the time of the initial recall Toyota enjoyed considerable good will, trust, and customer loyalty. On the surface, it seemed as if they could in fact weather the storm as a result of the high reserves of financial capital and consumers’ emotional commitment to the brand.
This week, however, things have completely unraveled for Toyota. Information has leaked to the public about just how long Toyota had known about the faculty acceleration before the company took precautions that would have indicated that customer safety was a priority. In addition, the firm waited too long before putting a face on the problem. It was a week after the recall when the U.S. Toyota president, Jim Lentz, made the news rounds to explain the problem and what Toyota was doing to resolve it. In the absence of their coming forward with information and an apology more quickly, public trust and confidence in the firm has declined precipitously; and worse, an accusation of a cover-up has surfaced. Toyota is now in the unenviable position of trying to get in front of a story that is moving fast. They are clearly playing defense for the reputation.
So what should Toyota have done differently?
- Get the news out fast and first
- Recognize that “acceptable margins of error” to your risk managers is potentially experienced as a fatal accident to your customers
- Communicate genuine regret and sorrow
- Provide clear and specific information on how they were resolving the problem
- Make it easy for customers to have the repair made
- Implement a no-hassle replacement policy for a new accelerator for customers who lack confidence in the proposed repair
- Provide whatever resources are necessary for dealers to get repairs made quickly and correctly
- Maintain communication with the public about the status of the recall and the repairs
- Take stock of this event and develop a plan for avoiding a similar situations in the future
I would answer the question differently today than I would have a couple of weeks ago regarding whether Toyota would become the next Johnson & Johnson in terms of being an exemplar of effective crisis handling. Today the answer is a resounding “no.” In my work on crisis leadership I coach executives on leadership, and in particular on how to lead under pressure and during times of crisis. In my new book, Leading Under Pressure: From surviving to thriving before, during, and after a crisis, I address how to manage crisis situations before they occur—having learned from past crises to prevent future ones. I coach on how to lead during a crisis—being proactive rather than reactive to the situation. And I coach on how to lead after a crisis—taking stock of what the underlying issues were that caused the crisis and building new capabilities into their organizations based on those insights. But effective leadership in times of crisis does not stop there. I also help executives identify ways of using the crisis as a means of promoting a mindset, in themselves and among their employees, that enables the organization to see opportunity to create a better company. The learning part is difficult for the egos of these large corporations, especially those that have been labeled as the “best in quality” such as Toyota.
Unfortunately, Toyota does not seem to be leading through this recall, rather scrambling to react after getting caught on the delay. Being in defensive mode means that Toyota will likely not take this as a learning opportunity to change future processes and regain their spot once again as “best in quality”…but let’s hope for their sake they do.
Tags: crisis leadership
February 6th, 2010 at 10:14 pm
This is a very illuminating assessment of the Toyota crisis. I wonder what Toyota can do now that things continue to unravel for them. First, the accelerator problem, next the Prius brake problems. How can a company stop the seemingly inevitable freefall that comes when one mistake is exposed and intense scrutiny begins to reveal a host of other mistakes?