Companies must get the facts straight

The fight intensified after Amazon fired four workers who had publicly criticised safety measures. (Representative image)

By Vidya Hattangadi
Crisis management is the process by which an organisation deals with a disruptive and unexpected event that threatens to harm the organisation or its stakeholders. The study of crisis management originated with large-scale industrial and environmental disasters in the 1980s.

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In September 2015, the US Environmental Protection Agency (EPA) found that in over 590,000 diesel motor vehicles Volkswagen had violated the Clean Air Act as the vehicles were equipped with ‘defeat devices’ in the form of computer software, which was designed to ‘cheat’ on federal emissions tests.

In April 2017, a US federal judge ordered Volkswagen to pay a $2.8 billion criminal fine for “rigging diesel-powered vehicles to cheat on government emissions tests.” As of June 1, 2020, the scandal had cost Volkswagen $33.3 billion in fines, penalties, financial settlements and buyback costs.

In India, the authorities observed that Audi cars’ emissions for nitrogen oxide were 5-8 times the permissible limits, and after the National Green Tribunal imposed a penalty of Rs 500 crore on Volkswagen (parent of Audi), the irked customers realised that they had been duped of their hard earned money. Unfortunately, the way the company handled the scandal made things even worse. As the case progressed, the company’s response was seen as inconsistent and, at times, contradictory to previous statements. Executives claimed they did not know about the cheating.

Meanwhile, the company’s PR and social media teams struggled to keep up. As the company set out to recall millions of vehicles, officials promised to reimburse some, but not all, customers for their troubles.
Had the brand acted maturely, perhaps it would have fared better through this crisis if it had taken a few key steps—been upfront and honest as soon as the story broke; kept its response consistent with an empathetic and apologetic tone; reimbursed all affected customers the same amount; demonstrated a commitment to change in some way by setting new emissions goals or partnering with an environmental organisation to help combat air pollution. It took 4-5 years for Volkswagen to return to normalcy.

A major principle for handling crises is governing communications—to be upfront with customers, to speak the truth, and keeping them informed of the correct and incorrect aspects of the same. The moral and immoral dimensions relevant to communications are very important to handle crises. Any organisation’s crisis response must be designed to move faster than social media, which is not easy. It means having a crisis team that is well-drilled and knows exactly what to do when a threat emerges. It means having technology built into the access and activation of the organisation’s plan. And it means co-opting social media as a tool for communication and not just let it dictate the threat.

India’s food regulator had banned Maggi in 2015 after tests showed that it contained excessive lead and for alleged mislabelling over flavour enhancer MSG. Nestlé has since then removed the claim ‘No added MSG’. Indian food inspectors ordered Nestlé India to recall a batch of Maggi noodles from the north Indian state of Uttar Pradesh, claiming that tests had found Maggi instant noodles ‘unsafe and hazardous’ and accused Nestlé of failing to comply with the food safety law.

The initial response from the global FMCG major was that it rejected the accusation that its noodles were unsafe and said on its website and social media accounts that there had been no order to recall any products. A statement on its website noted “The quality and safety of our products are the top priorities for our company. We have in place strict food safety and quality controls at Maggi factories. We do not add MSG to Maggi Noodles, and glutamate, if present, may come from naturally occurring sources.

We are surprised with the content supposedly found in the sample as we monitor the lead content regularly as a part of the regulatory requirements.” Nestle kept the customers informed about its response to this case, and action taken by the company continuously for four long years. In January 2019, the Supreme Court allowed a test report to be the basis of proceedings in an almost four-year-old class-action lawsuit over MSG, lead content in Maggi.

It’s difficult to handle reputational risk, the way threats emerge and are fanned by the social media is difficult to handle. Yet the principles of the way an organisation takes ownership and gets ahead of the problem largely depends on its culture. Customers don’t appreciate half-hearted apologies to the victims and lies hid behind corporate walls. It doesn’t work.

Amazon has been a winner during the Covid-19 crisis because it made households’ lives easy during the pandemic. Its sales soared when bricks-and-mortar shops and malls shut during the lockdowns. Yet Amazon has been bitterly criticised; the most serious accusations are made against it in the US and France. In France, all Amazon warehouses were temporarily closed after a huge row about worker safety. In the US, Amazon saw a lot of workers quitting over warehouse safety and condition issues. Many of its workers pledged to stay home in protest because Amazon has failed to provide face masks, and refused to pay sick leaves. The fight intensified after Amazon fired four workers who had publicly criticised safety measures. In progressive countries such as the US, the UK and France, customers closely gauge the behaviour of companies.

Every committed buyer of a product/service observes it closely; they observe the organisation’s behaviour towards society as well, and in crises they expect clear, concise, correct, coherent, complete and courteous communication, with concrete actions.

The author is a management thinker and blogger