The time to act is always now
On Thursday 19th April 2007 the European Commission released its annual report entitled ‘Keeping European Consumers Safe.” The report detailed some alarming statistics: in the previous year there were over a thousand notifications of unsafe products, more than ever before and a third higher than in 2005. The number of notifications in the UK had doubled from 2005 to 2006, more than the EU average, pointing towards a proportionately bigger problem here than anywhere else in Europe, with a further surge expected in 2007. 2006 saw 92 reported recalls or safety notices from the UK, not including the 78 food related recalls and withdrawals. This more than double the number in 2005, which itself saw an increase of 44 percent compared to 2004. Last year the UK had the fourth highest number of notifications in the EU after Germany, Hungary and Greece. There is clearly a situation growing that could cause alarm among businesses with exposure to product recall risks. But before becoming concerned about figures it’s necessary to understand the reasons behind them and then what, practically, companies can do about them. So why are notifications increasing? Firstly there is product safety legislation which came into force in November 2005, compelling manufacturers to be responsible for informing the authorities and consumers of any potential risk to consumers from their products. Going beyond pure legal obligation there is also a growing desire on the part of organisations to live up to their corporate social responsibility commitments, by being seen to do the right thing. Recalls are also becoming increasingly international in scope, and with 48 per cent of European recalls involving products made in China, UK businesses relying on Chinese manufacturers are particularly vulnerable. This is especially significant given that the Chinese legislation is still not wholly aligned with European and until this happens we could see a continued rise. The oxygen of new media, such as massively interactive websites and 24-hour rolling news, is also fanning the flames of crisis. Wall-to-wall, instant media enables news – particularly bad news – to spread extremely quickly without barriers of time or geography, and patterns can emerge fast. Furthermore, new media commentators, bloggers in particular, could be characterised as untrained in perceiving shades of meaning or separating fact from fiction, and so a vicious circle of rumour can build up from the most innocuous of events. Clearly there is an increasing need to develop robust crisis management strategies. These strategies should begin well before there is a hint of a problem, so that when one emerges it can be handled in a professional manner that can even enhance an organisation’s reputation. This can cut right through to the bottom line: profits can be affected well after the initial event, bringing into sharp relief the importance of brand in relation to a company’s perceived value. First, the example of how not to do it. In January 2006 Cadbury’s had a leak in one of its waste pipes at its factory at Marlbrook, Herefordshire, UK. Later that month it detected salmonella contamination of products. However it failed to act until forced to do so by the Health Protection Agency and Food Safety Agency. One million chocolate bars were recalled at a cost of over £20 million, but it was too late. Figures from polling company YouGov’s Brand Index monitor showed that Cadbury's Brand Index had fallen from 44 to 22, the greatest fall since the index started five years ago. AC Nielson, the market research company, also reported Cadbury’s UK sales dropped by 5 percent in the four weeks to 17 June. This was particularly damaging for a company with a wholesome, family-oriented image to be seen as taking what some might perceive as a cavalier attitude toward consumer wellbeing. By contrast, cut-price fashion retailer TK Maxx handled a recent high-profile crisis well. When it emerged that fraudsters had collected the details of some forty million customer credit cards the company launched an immediate and total communication blitz. This included a section on its website dedicated to the crisis, with Q&As, details of customer hotlines and a letter of regret from the CEO. The result was that TK Maxx controlled the message and the damage was minimised. However looking forward, a sustained commitment to communication will be required to rebuild the long term trust of its customers. These examples illustrate issues that are critical to business health: manage product recalls well and you can protect or even enhance your reputation; manage them badly and they can cause serious damage, directly affecting profits now and in the future. Fortunately there are practical steps organisations can take now to prepare for the future, which scrutinise risks from the inside out and the outside in and create a solid foundation for handling crises effectively. - Understand your obligations. Crises escalate rapidly and time is always in short supply. As a starting point you must be absolutely clear on what you are legally obliged to do in a product recall, whom you need to notify, and your internal escalation process. Make sure you know this before a crisis happens: you don’t want to be downloading and trying to understand documents in the heat of a crisis while the situation careers out of control. - Form a crisis team. This team – typically made up of between six to ten people is responsible for crisis management including product recalls. It should include a crisis coordinator who owns the process, for example making sure people are trained and that manuals and contact numbers are current. Every team member needs a deputy, and in particular you should identify and train at least three potential spokespeople so that you’re confident someone will be around at all times. Judgements will be made based on the performance of your spokesperson in a crisis so it’s essential to have a strong and broad team on standby. - Assess risks now. Good planning begins by identifying as many potential threats to your business as possible, including reputational risks. This makes for targeted and well-informed crisis planning. Use internal brainstorms with key areas of the business represented, so that for example the HR director identifies personnel risks, the IT director looks at infrastructure vulnerabilities and so on. Complement these traditional methods with other techniques to get the ‘outside in’ view and ensure you’re not blind-sided by an unseen risk. Role-play can be extremely effective, in which your people assume the roles of fierce competitors, investigative journalists and embittered ex-employees. You could also bring in third parties such as your PR consultancy and trusted freelance journalists who are trained to think the unthinkable and ask the difficult questions. You’ll be surprised at how this exposes threats that are just not visible from the ‘inside out’. - Develop plans, processes and materials. Develop a clear and simple crisis plan and ensure the crisis team understands it and what they need to do to action it. Make sure all your other employees know what they should do if they become aware of a potential crisis. At its simplest this should be to tell their manager about the problem, who will then escalate up to the crisis team. This awareness of the need to escalate is especially important for people such as the sales team and reception staff who are in the front-line, as they may need to know as much what not to say as what to divulge. In addition to the plan, develop template materials such as media holding statements and positioning papers for likely risks which can be tweaked and issued in the event of a live crisis. Being able to slot figures into these templates and disseminate them quickly can buy valuable time and helps fill the information vacuum. - Hold crisis simulations at least once a year. Make these as close to reality as possible, for example with phones leaping off the hook from ‘irate callers’ and ‘inquisitive journalists’. Organisations doing this for the first time are often surprised at the holes this exposes in their plans, and by how much they learn about teamwork. They typically score around four out of ten when evaluated after the first simulation but with each rehearsal they improve. If no rehearsal ever takes place, these flaws are exposed in real-life situations which can make a bad situation immeasurably worse. - Monitor the landscape. As already highlighted, technologies are enabling crises to spin out of control through incredibly fast, interconnected communication, but they can also help you keep tabs on what people are saying. You can monitor blogs and chatrooms not just to dampen fires but to be aware of issues as soon as they emerge. For example Hasbro noticed a comment on the Amazon website about a child choking on one of its toys, and whereas they were legally secure (the child was too young for the toy), it immediately voluntarily recalled the product. But remember to complement this with good old-fashioned talking. Talk to your employees and stakeholders and make sure you’re aware when issues arise. An open, communicative culture will help to facilitate this. With crisis management, the time to act is always now.UK businesses must not bury their heads in the sand and assume ‘it will never happen to us’. Against a backdrop of increasing risks the message is clear: UK business must act now to get prepared for a recall or risk heavy financial losses and damage to their brands.
•Date: 19th June 2007• Region: UK/World •Type: Article •Topic: Crisis comms |
