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Crisis leadership: A lesson from Toyota

When there is a crisis within an organisation everyone looks to the leader to well, lead us all out of the wilderness of misfortune. It is times such as these that the mettle of 'he-who-takes-home-whole-heapa dollars' a.k.a. the CEO and the man-in-charge, is tested. This is when he truly earns his keep. If he does not 'handle his business' the fall-out can be great. Huge chunks of market share can be lost and we can all watch helplessly as share prices tumble and fall as mercilessly as TV's biggest lb-loser during the rope-climbing exercise.

How do you know if your management is leading from in front and communicating effectively to staunch the flow of red ink? We can take a lesson from the recent experiences of Toyota. Earlier this month a San Diego man claimed that his 2008 Toyota Prius surged out of control for several minutes while police dispatched a patrol car to guide him to a stop. This safety crisis dealt a considerable blow to Toyota which reportedly recalled more than eight million of its vehicles globally and kept its US dealers from selling some models in inventory until fixes could be made.

The news flash to this is that on Monday March 14 Toyota cast doubt on the man's claim, saying "the report is inconsistent with the findings of the company's preliminary investigation." Said Toyota in a statement reported by Associated Press, "the accelerator pedal was tested and found to be working normally and a backup safety system worked properly. The automaker said the front brakes showed severe wear and damage from overheating, but the rear brakes and parking brake were in good condition."

But before we look at the most recent occurrence let's look at how badly Toyota's leadership initially handled the incident. I agree that the first misstep the CEO made was to hide from his public, the people who has kept his palate in touch with the taste of caviar. Writing in an article in the Harvard Business School's 'Working Knowledge' (February 22, 2010) Bill George, Professor of Management Practice, Henry B. Arthur Fellow of Ethics, at Harvard Business School, points out that "under the media spotlight, Toyota CEO Akio Toyoda, grandson of the founder, went into hiding and sent American CEO Jim Lentz to make apologies". This leader Prof. George said let, "serious product quality issues spiral out of control by understating safety risks and product problems. This left the media, politicians, and consumers to dictate the conversation, while Toyota fumbled the responses."

I stand corrected but when last I checked I did not see 'hiding' as one of the 'must-have' qualities of a CEO. I could be wrong, but I always thought a CEO should be decisive, strategic and bold but proficiency in hiding was not high on the list of character requirements. But I am open to rebuttals. One of the first rules any effective communicator knows is that in a crisis you must own and make sure that your side of the story is told. Don't leave it up to interpretation nor should you leave a vacuum large enough to be filled with lies and half-truths.

So, definitely hiding is not a part of your game plan. In hiding from his publics Toyoda placed his company squarely in the 'Hall of Shame'. In this regards, Professor George advises: "In a crisis, people insist on hearing from the leader. Akio Toyoda can't send out public relations specialists or his American executives to explain what happened. Having lost sight of his company's True North-its values and principles-Toyoda must come out of hiding, take personal responsibility, and subject himself to intense questioning by regulators and the media. Then he should make a personal commitment to every Toyota customer to repair the damage, including buying back defective cars."

The most alarming part of the Toyota saga is that the business seems to have pooh-hoo-ed early questions about the acceleration problem. "Toyota either ignored or minimized reports of sudden acceleration," Representative Edolphus Towns, a Democrat from New York, told Toyoda, during a congressional hearing last month. So far, five deaths have been linked to the accelerator problem, and 29 more fatalities are under investigation. Toyota faces a criminal inquiry as well as untold civil penalties and lasting damage to its reputation and to its business.

Meanwhile, competitors Ford and General Motors have seized the opportunity to take advantage of Toyota's gaffes, offering highly attractive financing and trade-in terms to Toyota drivers. If you were a competitor, wouldn't you? And of course, who but the Americans loves the inside of the court-house, especially when big business is involved? So ambulance chasers are lining up, knee-deep, to file lawsuits against Toyota.

The history books are still being written about this crisis, but the leadership is not going to come out of this looking as if they handled it in the best way possible. The lesson learnt is the importance of responsible leadership taking charge in a crisis and leading from the front of the battle-lines.



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