~5-6 min read~
We've had the chance recently to take a look at how some very large, multi-national organizations deal with significant crisis. Being located in Chattanooga, the home of the Volkswagen North America plant, it was a blow when it was revealed that their company had intentionally violated emissions standards. Also, over the past month, we've been seeing Samsung deal with the fallout of their Note 7, which had significant problems with the battery and kept spontaneously combusting until it was ultimately recalled.
These are huge companies with massive reach, and companies of this size have understood the important, make-or-break nature of communicating accurately, empathetically, and quickly with their customers for decades. They still make mistakes for various reasons, as we will see shortly. Here's the catch: communicating effectively in a crisis is becoming more and more important for small business as the internet gives more and more reach to individual people. Even the best companies will have issues with some customers, and sometimes products will be a miss. You used to have to be very, very big to crack the news, but now your mistake can be amplified through Facebook, Yelp, Twitter, and any number of ever-growing platforms.
So, it is beneficial to learn a few lessons from Samsung and Volkswagen's ongoing issues.
Intent Matters
Clearly, one of the biggest differences between VW and Samsung is the actual issue at hand: VW intentionally and unethically suppressed information, stretched the truth, and did various other dubious actions in the first place, while Samsung seemed to just be having issues with a new project. Obviously, there is much more good will and grace given to the company who just messed up trying to do something new than to the company who intentionally cheated their customers and cost them money.
If you find yourself dealing with a crisis, this is a key first priority: determine whether the issue was intentionally caused or simply a mistake. It WILL COME OUT. If it was caused by you, start thinking immediately about stepping out. Given the severity of the fallout, it might be the difference in the survival of your company. If it was unintentional and just a mistake, be upfront but cautious. The first scenario is outright survival mode, but the second is very recoverable: your customers will generally understand and allow you some time to fix the problem.
(FYI - organizational ethics are a function of your leadership and your culture. So if it's happening somewhere, it is most likely systemic.)
Speed Matters
The key factor in handling a crisis is speed. You need to figure out what happened fast and communicate it quickly. You need to have steps in place to rectify the issue quickly. For Samsung, within a month they issued at least two recalls (a partial and a total Note 7 recall), which is very fast. It took Volkswagen a very long time to set up a recall process - part of that is attributable to the difference in product type, but part of it was just an issue with VW stalling and hedging.
So if a problem or crisis issue impacts your business, make sure to act fast. Some of these processes might be beyond the capacity of your business to do - if so, hire someone short term to help you mitigate the cost. A few thousand dollars to weather a storm is way cheaper than systemic failure and hemorrhaging customers.
Trust Matters
Samsung has adjusted their quarterly projections down 33% as of this morning. I'm not sure exactly how much that is, but I can guarantee they are going to lose a boatload of money. But because they are responding quickly and, in the public's perception, fairly, they are not going to lose customers. The distinction is very important. Samsung will, in the short term, lose money - just like any company who has tried a new product that hasn't worked and they've lost some money on it. But they won't lose customers in the long-term, because they haven't tarnished their brand.
Volkswagen, because of the nature of their crisis and response to it, has lost a tremendous amount of goodwill and has most certainly tarnished their brand. So not only do they take the short term cost, they will also suffer long term.
Ironically, it was Samsung's issue that posed the biggest threat (phones catching on fire) to the consumer. The nature of the problem - ethical vs. mistake - dictated the level of trust that people would grant each company.
You need your customers to trust that you are going to be square with them. When the issue is that you lied to them, that's a tough hole to dig out of.
Value Your Customers
I think that sometimes we over-think this topic. There are always strategic decisions, the need use discretion with information, and to balance multiple stakeholders - those tough calls remain during crises. But this is a clear cut 'Golden Rule' scenario. If you found out that your phone was exploding, how would you want the company to act? How about if they were unethical? You'd probably want them to be straight with you, apologetic, open, and helpful. That's what your customers want, too.