• 3 lessons from Toyota's product recall crisis

    In 2009 Toyota faced what was possibly it's worst reputation crisis. With product recalls amid safety concerns that lasted nearly two years, there were rumours that the world's largest car maker's standing as a safe manufacturer was forever tarnished.

    There is much that corporate affairs professionals can learn from this debacle – especially in terms of what not to do. 

    1. The Board of Directors must exercise diligence 

    Toyota's ambitious growth policy worked to its detriment. 

    Pulitzer prize-winning journalist Paul Ingrassia of the Wall Street Journal explains it best,: Toyota decided to expand too much in a short space of time and this affected not only the company's bottom line but also the quality of their products. 

    This raises a key insight – the board of directors can prevent a reputational crisis from happening in the first place by asking the right questions when presented with an aggressive plan to acquire maximum market share. Could the members have had a more in-depth discussion about vehicle safety when the enterprising growth plans were put in front of them?

    2. Accept responsibility 

    When a crisis happens and it is clear that it could have been avoided by exercising due care by the organisation itself, be quick to accept responsibility.

    Toyota admitted fault, but only a year later. Had this happened earlier it could have helped them salvage what was left of their reputation much quicker.

    However, on a positive note, when the New York Times asked a Toyota spokesperson if it was pedal manufacturer CTS Corporation that should be blamed, the company's representative reiterated that the safety of the cars remains the manufacturer's responsibility.

    2. Appoint specialists who can respond immediately to a crisis

    Senior Fellow at Harvard Law School and Author Ben W. Heineman, Jr. says Toyota's CEO made the right move by appointing a head of safety and rapid response team, however, this is something that should have been done earlier. 

    The expert adds that the team should report potential issues pertaining to corporate responsibility, as well as critical business or legal concerns to the CEO and senior management.  

    This should be followed by creating teams of senior leaders who can address issues relating to several aspects, such as design problems and solutions.

    "The CEO or top business leaders must have prompt, periodic, direct reports until there is a good understanding of the interrelated issues. Then they must make decisions on an appropriate response," adds Mr Heineman.  

    Toyota's reputation did come under threat, however it was unlikely that the car manufacturer would have completely crumbled as a result of the crisis. However, the product recall does highlight the fact that reputation is an asset that requires constant investment.  

      

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