Doing the Right Thing

Imagine if Yoshi Inaba, Toyota's North American Chairman and CEO, had said the following when he first learned of the throttle problem with Toyota vehicles:

"It has come to our attention that there is a problem with the accelerator pedals on some of our vehicles, and as a result, we have launched a comprehensive investigation to determine the exact cause. Once the cause has been determined, we will take all necessary steps to correct the problem -- in every affected vehicle -- as quickly as possible. At Toyota, the safety of our customers, and the driving public, are, and will remain, our top priorities."

And what if the folks at Toyota had followed up their initial statement with regular updates on their investigation, public safety advisories, and prompt recall notices to their customers? I'm guessing that we'd all think more highly of the Toyota brand then we do today.

Here's another hypothetical. Suppose the International Luge Federation, the Vancouver Organizing Committee and the International Olympic Committee had put out a joint statement on Saturday morning that read as follows:

"All of us who are involved with the Olympic games mourn the death of Nodar Kumaritashvilli, who was killed yesterday in a practice run on the luge track. We extend our sincerest condolences to his family and to his Georgian teammates. The organizers of these games have spent years preparing these facilities, and safety has always been our top priority. But yesterday's accident demonstrates that there were structural problems with the luge track that were not anticipated by its designers, and which must be addressed urgently. No athlete should be forced to risk his life for an Olympic medal. We are therefore suspending the luge competition pending a complete review of the course and we will not resume competition until structural repairs have been made to the track to assure its safety. We apologize to the athletes from around the world who have spent years training for this event. And we join with the entire Olympic community in mourning Nodar Kumaritashvilli's tragic death."

Instead of the above, the International Luge Federation and the Vancouver Organizing Committee put out a statement that blamed the victim for his own death. "There was no indication that the accident was caused by deficiencies in the track," they said, even as hundreds of millions of television viewers around the world were watching repeated video clips of Kumaritashvilli flying off the luge track and slamming head first into a steel beam.

How could Toyota and the Olympic organizers have bungled their crisis communications so badly? How could they have failed to anticipate the potential damage to their reputations by failing to do what they surely knew was the right thing?

Based on my experience as a counselor to a wide variety of companies and institutions in trouble, I think there are several things that frequently get in the way of "doing the right thing" in a crisis.

The first thing is money. Pushing the OFF button on a car assembly line or issuing a massive product recall -- to use the Toyota example -- can cost millions of dollars, and all of it comes straight from the bottom line. So a CEO looking to put customers first and profits second will almost always get an argument from his Chief Financial Officer. And that argument will usually be accompanied by a spreadsheet detailing exactly how much the corporate mea culpa will cost.

The second naysayer in the boardroom will probably be the General Counsel. He or she will point out that any statement that contains an apology or an acknowledgement of responsibility will open the company or institution to lawsuits by victims, who will use the company's own statements as evidence of culpability. And again, these lawsuits will be costly.

But at that point, the Senior Vice President for Communications will likely weigh in with a counter-argument. He or she will point out that the damage to the company's or institution's reputation could be even more costly, and more difficult to recover from, than all of the above. And in the end, he or she will argue, the money saved on product recalls and lawsuits won't matter much if customers turn against the company and refuse to buy its products. (Or, in the case of the Vancouver Olympics, if viewers decide to tune out the Winter Games in disgust and watch old movies and sitcoms instead).

You would think that the reputation argument would be compelling, but in my experience, the Chairman or the CEO doesn't always take the PR person's advice. Why? I think the main reason is that the costs associated with things like recalls and lawsuits are more readily quantifiable than the cost of a lost reputation. Recall figures can be printed on a spreadsheet. Reputation costs are more hypothetical.

Writer James Surowiecki noted in a New Yorker piece on crisis communications in 2005 that "Many companies have basic assumptions about public relations that can hurt them during a crisis. They tend, as people do, to stonewall and deny." After all, the boss might argue, maybe the worst won't happen? Maybe we can sweep this problem under the carpet, or fix it before anyone notices? Or, who knows, maybe the Tiger Woods scandal will push the story to the back pages?

In circumstances like these I've often made the case to people in leadership positions that the crisis at hand actually presents them with a unique opportunity -- maybe a once in a lifetime opportunity -- to demonstrate both their personal character and their company's values. Handled well, I suggest, a crisis can provide a Churchillian moment -- a "finest hour" -- for individuals who grasp the opportunity to lead. (It can also, of course, help save the company).

And how does a smart leader handle a crisis well? My advice is simple. Play it by the book. Acknowledge the problem, apologize for your mistakes, and take responsibility for making things right. In other words, politely thank your CFO and your General Counsel for their advice... and then do the right thing.