An Analysis of Crisis Response and Communication

Written By: Amy Littleton

Three companies are still dealing with the fallout from the biggest crises in 2016: Volkswagen, with software in cars that showed inaccurately low emission levels; Samsung, with its explosive Galaxy Note 7 phones; and Wells Fargo, which opened millions of fake customer accounts. These three companies have seen investor confidence shaken, stock prices plunge and consumers take to social media slamming reputations. This is when crisis response and communication becomes the key to survival.

Here are the top three key learnings from this year’s cases in terms of crisis communications, issues management and reputation:

1. The biggest factor in crisis response is people. Fixing problems within a company is largely a people issue, and, most of the time, heads must roll.  Making changes at the top is not about having a scapegoat, it is about holding people accountable – from top to bottom – for their actions, and making the tough decisions in the best interest of the company and its future. Companies must be seen as having the right people to lead change and fix the problem. Most times, it is impossible to support people who were at the helm during times of unethical action. Making deep leadership changes demonstrates that the company is serious and taking corrective action.

2. There is an insatiable need for speed and accuracy in today’s world, and it is almost impossible to keep up. During a crisis, there are always decisions made that, in retrospect, weren’t the best. And, with the speed of communication today, a corporate response is almost never delivered quickly enough to appease consumers and media. That said, one can judge the impact of crisis response by the long-lasting effects it has – or does not have – on a company’s business growth or stock price. One example of a rough start but a strong finish can be found in Toyota and its response to the sticky accelerator issue. In the early days, management was slow and inaccurate with its response. In the end, however, the company put all of its weight toward recalling vehicles, correcting the problem, offering extended warranties, communicating about its pursuits and reassuring the driving public that it was on top of the situation and that Toyota would always stand for quality and safety. Today, Toyota’s stock price is almost as high as it has ever been ($119/share) – more than twice what it was during the recall.

3. Investors want well-managed companies with stable growth potential. When a company is in crisis, it is important for managers to act quickly and make operational changes in order to help put investor fears at ease and demonstrate stability and progress. With swift and transparent action, they must clearly show investors that they are progressing beyond past issues and toward a positive future.

VW, Samsung and Wells Fargo all have built great brands over many years. Their future, however; will now be defined by how well these three companies manage their respective crises in terms of correcting their problems and communicating effectively to restore customer and investor confidence.

There are thousands of smart and talented people at each of those companies who are no doubt working around the clock to correct their cultures, products and operations. In fact, Volkswagen’s stock is already creeping back. If consumers give these companies a second chance, they will likely see some very positive changes – “if” being the operative word.