Gerard Seijts is an Associate Professor at the Richard Ivey School of Business, The University of Western Ontario, and is the Executive Director, Ian O. Ihnatowycz Institute for Leadership
BP CEO Tony Hayward has always had a way with words. In May 2009, less than a year before the BP-fuelled crisis in the Gulf of Mexico, Hayward addressed Stanford University's Graduate School of Business. He reflected on the troubled company he had inherited as CEO. In comments which have gained new popularity on the web in recent months, Hayward explained one of his company's major shortfalls: "We had too many people that were working to save the world."
Flash-forward 14 months. Hayward has become the face of the Deepwater Horizon disaster. His often bungled words fed pundits and late night comedians. He indulged in self-pity. His estimates regarding the amount of oil gushing from the oil well were off base. And his non-answers during his testimony before a House panel infuriated members of the U.S. House of Representatives Committee on Energy and Commerce. After three months of uncontrolled oil flowing into the Gulf, paralleled by three months of seemingly uncontrolled public relations disasters, BP faces an uncertain future. The cap over the oil well has stopped crude from spilling into the Gulf, but if BP hopes to recover, salvaging not just its share price, but the very soul of the company, it must rethink everything.
And it's not too late. Think about Toyota, currently rebounding from its own crisis.
Government officials and customers around the world were deeply concerned about Toyota's slow and inadequate response to its accelerator problem. Like BP, a public relations firestorm emerged. Despite a recent rebound in sales, the company's reputation for reliability has taken a significant hit.
Observers have accused Toyota's executives taking too long to figure out the problem and taking too long to speak candidly about it. In Canada, members of the House of Commons Transport Committee focused their questions on the three-month delay between the time Toyota learned about the accelerator problems and when it notified safety officials and customers.
Because of the botched response, the Toyota brand has suffered, at least in the short-term.
How a company handles a crisis sets it up for the subsequent recovery. Brands generally recover more quickly if people feel confident that a company has been sincere and trustworthy in dealing with its problems. Toyota and BP did not do themselves a favour in this regard.
A good model is Maple Leaf Foods' quick and open response to the 2008 listeria outbreak in Canada, in which more than 20 people died and hundreds fell ill. (Maple Leaf Foods is a consumer packaged food company with operations across Canada, the U.S., the U.K., Asia and Mexico.) Maple Leaf Foods launched an immediate recall of the suspected contaminated products to mitigate the risk to the consumers and closed the plant.
The company showed decisive action. Senior executives were highly visible - on national news and on YouTube - and accessible. The CEO gave press conferences as soon as word of the outbreak reached him, and publicly apologized to all Canadians, expressing his sympathy for the victims. The CEO took personal accountability for the problems and showed compassion. As the crisis unfolded, TV spots and advertisements gave updates on what the company was learning through its investigation. It provided specific plans to correct the problem. The approach was decisive and transparent. A class action settlement was reached in 2008; and families and individuals who suffered received compensation in 2009. CEO Michael McCain later said: "Going through the crisis, there are two advisers I've paid no attention to ... the first are the lawyers, and the second are the accountants. It's not about money or legal liability - this is about our being accountable for providing consumers with safe food."
Can BP or Toyota make similar claims?
Initially Toyota seemed committed to the traditional way of handling a crisis: admit nothing; obscure and conceal rather than clarify and reveal. Toyota's top executive in North America initially refused to appear before the Commons Transport Committee? Such actions fuel public distrust and weaken brands.
But Toyota learned from the ordeal and has turned around its approach. Toyota's president Akio Toyoda recently told reporters "For the past year I was leading the company in apology." And Toyota has implemented several concrete initiatives to address the concerns of customers and the public, including opening additional regional offices in North America to more quickly respond to and investigate customer complaints.
BP responded in similar fashion - dismissive, defensive and self-serving. The company is not blessed with the quality track record of Toyota. BP had accidents leading up to the Deepwater Horizon debacle. It had yet to recover its reputation after a 2005 explosion at a Texas City, Texas refinery killed 15 and injured more than 170 others. The U.S. Occupational Safety and Health Administration had fined BP in the past for safety violations as well as issuing a record-breaking fine. The U.S. Chemical Safety Board has expressed concerns about the safety culture at BP. If you accept minor accidents, a major one isn't far behind.
Now BP has to look forward; here are three priorities that will help address the concerns of their customers.
First, the concerns need to be addressed in a clear and unambiguous fashion. Communicate. Communicate. Communicate. Articulate the specific steps that have been taken to address the problem. Provide the facts. Be frank and forthright about how the company is holding executives accountable for their commitments and performance. Leadership needs to show integrity and consistency between the espoused values and action. For example, BP has made promises on compensation - and needs to be seen to be paying the legitimate claims resulting from the oil spill. People want to see that promises are kept. Studies show that one of the best approaches to handling a crisis is to take time for a dialogue, make a decision and then announce the decision and deliver on it, fast. This approach is superior to the approach we often see when companies make a decision, announce that decision and then continue to defend that decision.
Second, BP needs to uncover what caused previous accidents and the Deepwater Horizon disaster. It should examine the accident from multiple angles (financial; safety; control and oversight; and operational and technological) and at multiple levels (individual; group; organization; and context). Disasters of this magnitude often have many contributing factors. To understand and prevent similar accidents, BP should leave no stone unturned. It needs to encourage joint fact-finding and cooperate with credible third-parties. It needs to be open to discordant information. Admit the mistakes that were made. Were potential threats downplayed? This crisis should be a wake up call and an impetus for radical change to change the culture of the organization. If not, it can't move to a culture of learning and improvement.
Third, focus on re-building long-term relationships. How can BP regain its status as a leading company? Maple Leaf Foods announced a program of continuous improvement in food safety. The company created a new position - Chief Food Safety Officer - to commit to being a world leader in food safety and quality assurance. In addition, Maple Leaf Foods was determined to work with government agencies to enhance food safety across the entire industry. What innovative operational and technical processes can BP bring to the market?
None of these prescriptions are easy or fast. Nobody is asking BP to save the world; but only refrain from destroying it. Leaders from all organizations should reflect on the words of David Grier, an executive at the Royal Bank of Canada: "A business has a conditional license to operate. Insofar as it meets the expectations of society it will be free to operate. When it fails to do so, that freedom will be curtailed."