Owning a Crisis

I recently gave a talk to one of our clients in the automotive sector titled ‘Owning A Crisis’. I said at the time that while I’m no psychologist, if an individual has problems that they don’t address, then generally the problem goes unfixed and will likely get worse.

The same goes for companies, and while it is perhaps human nature to wish away a crisis, this is often entirely counter-productive.

To illustrate my argument, I used three case studies: United Airlines passenger removal, the Volkswagen emissions scandal and the BA cyber-attack.

UNITED AIRLINES PASSENGER REMOVAL

You will no doubt recall the incident where the airline oversold a flight but instead, as is common, offering passengers a small sum of money to take the next flight they allowed passengers to board the plane but there were too few seats and too many people. They asked for volunteers to leave the plane, but none came forward, so security was sent on board and a doctor was unceremoniously dragged from the flight. Unsurprisingly, other passengers videoed the event on their phones and with the plane still on the ground and data available, it went viral.

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So, what did the company do? Initially they issued a frankly bizarre apology with the CEO saying: ‘This is an upsetting event to all of us here at United. I apologise for having to re-accommodate these customers.’

To be clear, I’m sure it was also quite upsetting for the doctor who probably didn’t realise he was being re-accommodated rather than being hauled like a sack of spuds off the plane.

Latterly, after an intense backlash and boycott threats, they attempted to fix the problem with the CEO saying: ‘We have committed to our customers and our employees that we are going to fix what’s broken, so this never happens again.’

How hard would it have been to issue that apology directly after the event? It should have been made a soon as the incident came to light.

A prime example of a company and a boss not owning a crisis.

VW EMISSIONS SCANDAL

Don’t underestimate how durable a crisis can be. There used to be a saying that if you become involved in a crisis you just have to wait until the next big news story comes along to knock you out of the headlines. This hasn’t worked for VW.

The story broke way back in 2015 when the company finally admitted to installing defeat devices to cover up emission levels sometimes in excess of 40 times the legal limit.

And how did executives respond? The Boss Martin Winterkorn issued video apology saying, “It’s the mistake of a few people”. A remark that cut little ice. Then saying when he resigned: “I’m not aware of any wrong doing on my part.”

Later on, in the States in a clumsy effort at damage control VW said defeat devices were not illegal in Europe. Not true: German regulators said immediately.

Thereafter VW CEO Mattias Muller said “We didn’t lie” to US regulators…”

The above is a catalogue of senior executives trying to run away from a crisis.

And now in March 2019 VW is being sued in the US by the Securities and Exchange Commission. The SEC claims the firm misled investors by issuing billions of dollars’ worth of bonds and securities, without admitting it had cheated emissions tests. Martin Winterkorn is also being sued.

At the motor show, also this month, the new CEO Herbert Diess said: “We’re not yet through the diesel scandal, it’ll probably still take years… and it’s a burden for us.”

It certainly has been a burden with more than $30bn paid out in the US alone, in fines and other penalties, and to buy back affected vehicles.

In Europe too – VW is still facing a wave of consumer lawsuits over its refusal to pay compensation.

Unfortunately, crises can last longer than anyone would like, particularly when they are not owned by executives.

BA DATA-BREACH

Now let’s look at the flip-side of this coin and see how a company should respond to a crisis.

When British Airways suffered a significant data-breach they owned it, rose to the challenge and gave an object lesson in crisis management.

To remind you of the details: In the fall of last year, the airline admitted that around 380,000 payment cards were compromised over a two-week period.

Names, email addresses and credit card details including card numbers, expiry dates and three-digit CVV codes were stolen by the hackers.

It would appear that hackers had installed malware in the company’s website so that when customers typed in their credit card details, a piece of malicious code allowed the hackers to seize the client data.

When a firm’s reputation is at stake then a crisis will inevitably follow in its wake and to add to BA’s woes this was the first major UK data-breach following the introduction of GDPR.

BA needed to reach all the customers who had had their credit card details stolen and they achieved that within two days.

BA’s boss, Alex Cruz became the face of their fight back. He didn’t duck media interviews or tough interview questions and was visible throughout. He made it quite clear where his priorities lay and that was looking after his customers. He issued an immediate apology and said that no one would be out of pocket.

At the time there was a lot of talk about BA receiving a regulatory fine for as much as £500m. So far that hasn’t happened.

In a crisis firms would do well to take a leaf out of BA’s book, to move quickly, apologise and to take responsibility or in other words: own the crisis.

Jim Preen (Head of Media)

Jim Preen