The High Co$t of “UN” (Just ask Toyota)

“The quick and the dead,” a phrase that pops up frequently in American culture, provides the title for a number of novels and at least four Hollywood epics. Especially in the context of Western-movie gunfights, “quick” versus “dead” points out being fast is generally a prerequisite for staying alive.

Old sayings invariably contain a good measure of truth, and this one provides excellent guidance for 21st-Century business leaders.

So far in 2010, Toyota’s travails dominated the news. Each management misstep led to a series of screw-ups being reported and Toyota can’t seem to make its current crisis go away.

We know the longer crises linger, the worse the cumulative damage and the bigger the recovery price tag. In Toyota’s case, current estimates already top $3 Billion. And experienced marketers can estimate how much will come off Toyota’s future bottom lines, thanks to its diminished pricing power (margins) compounded by the increased marketing and incentive costs that will be needed to win back lost market share.

Everybody claims to know this, yet companies and organizations of all sizes still refuse to take simple, fundamental and surprisingly low-cost steps—cheap insurance—to give themselves the capability to respond quickly. The fundamental principle: How an organization responds during the first hours of a crisis is the single greatest determinant to the outcome.

Toyota’s behavior demonstrates a dynamic we observe time and time again in our crisis management work: a deeply ingrained unwillingness to engage in preparedness.

Part of Toyota’s situation illustrates fundamental human behavior.

Nobody likes bad news. Most human beings recoil at it. They don’t like to hear it, be confronted by it or be forced to respond to it. But most of all, people hate to deliver it.

Some go to remarkable lengths to avoid becoming the delivery vehicle for bad news. The larger the organization or the higher you climb up the executive ladder, the more you’ll find this to be true.

When institutional or individual embarrassment, hubris or ego gets in the way of the honest delivery of bad news, the same dangerous behaviors are inevitably repeated. First comes denial. (“Problem? What problem?”) Then delay. (“If we wait long enough, this will just go away.”) Sometimes, the reluctant messenger goes beyond making excuses or blaming somebody else, and intentionally crosses the moral line into deceit. In other words, they flat-out lie about the situation. (“We did nothing wrong” or “Our accelerators did not fail” or “There are no recalls needed.”)

In crisis management, we call this progression of Deny—Delay—Deceive, the “Death Strategy.” Employ the Death Strategy, and you’ll kill your company’s or organization’s reputation by destroying the public’s trust in it. Next year at this time, we predict the Toyota brand will be a B-school case study of what a damaged brand looks like.

There’s a second reason why companies and organizations make themselves unable to respond quickly: their internal culture.

Writing in the February 5, 2010 Wall Street Journal, Jeff Kingston pointed out that Toyota’s botched response to its escalating problems has deep roots in Japan’s legal system and corporate tradition—citing the Japanese proverb, “If it stinks, put a lid on it,” as what seems to be Toyota’s approach to its burgeoning safety crisis.

Ask yourself: Is my organization unwilling or unable to respond within one hour to bad news or a potential organizational crisis? Be honest, now.

If your answer is yes, perhaps it’s time to ask EMA’s Reputation Management group to recommend simple steps on how your company can be more prepared to manage a crisis.