Product recalls are the Dante’s Inferno of crisis management. Ostensibly about the process of identifying and fixing a problem, they have become the hellholes of America’s political and legal systems. What awaits the unfortunate manufacturer facing a full-blown national recall is not an exercise in remediation, but months (or longer) in the dunking pool of public disgrace followed by the transfer of huge sums of money to plaintiffs’ lawyers.
“Here’s how it works: Congress calls for the scalps; the Department of Justice goes after the scalps; and then it’s left to the trial lawyers to see if any of them can stand to go on.” ― Stanley Brand, The Brand Law Group, as quoted in “Legal Times,” Oct. 13, 2008
This is not a veiled apology for Toyota. Nor, is it a blind defense of those companies that have made shoddy products, failed to fix them, and lied about it along the way. They deserve their comeuppance. Rather, it is a rejection of the widely held view peddled by the “I worked on Tylenol” (and who didn’t?) PR pundits that only “mismanaged recalls” end up in trouble. In fact, it is easier to argue that rarely does a major recall not go badly.
First, let’s acknowledge that large manufacturing companies are designed chiefly to make things and sell them. That is what they know. There is no chief recall officer. Reputations, careers, bonuses, loyalties, and internal processes are all directed toward making and selling more stuff. So, not only is there no political upside to championing a response, if senior engineer Ted invented the gizmo that is reportedly rupturing into flames, Ted is going to be pretty energized in its defense. Moreover, I guarantee that within every major company in the world there is at least one memo, email or whistleblower-in-the-making raising doubts about the safety of whatever the company makes or does. As consumers, we want people within these companies raising questions. But when they end up on the front-page of The New York Times, often taken completely out of context…well, you get the picture.
So, what goes on inside a company wrestling with a major recall? Initially, there is great debate—call it “Casual Confusion”—over whether there is a problem and what’s behind it. This is followed by “The Little Fix,” more often referred to as a “containment strategy.” Here, everyone agrees not to “overreact.” Phase three is “Okay, Now We’re Really Serious,” which involves hiring scores of consultants and a frenzied effort to do “whatever it takes.” But it’s too late, and soon the company is in the grips of “Liability Lockdown,” meaning every action is dictated by the need to reduce legal and regulatory risks.
Of course, outside the company, everyone is aghast over the bumbling incompetence and cold indifference of its underwhelming response. The iconic Watergate narrative of “What did you know, and when did you know it?” inevitably drives the press to conclude the manufacturer knew about the problem, ignored it, and then engaged in a massive cover-up—until a whistleblower forced it to do the right thing.
So, what’s the secret to avoiding the death spiral of a botched product recall? Is it more planning? Early warning systems to better detect problems? A rededication to quality, safety and putting the consumer first? Sure, these things can help. But the first step is recognizing what’s realistically achievable is: to make a bad situation less bad—to make it go away somewhat faster, somewhat better, while enabling the company to get back sooner to the business of what it does. The second key is being blessed with a CEO and senior leadership team that embraces the rigors of taking charge of a risky situation and has the courage to expend the time, money and political capital to force necessary change. And you won’t find that in any crisis plan.
John Weber is the president of Dezenhall Resources Ltd.