How To Bounce Back From A PR Disaster

REBECCA ROBERTS, host:

This is TALK OF THE NATION. Im Rebecca Roberts in Washington.

Toyota's problems keep on coming. The Transportation Department announced today it's investigating brake problems in the 2010 Prius. This follows weeks of bad news about problems with floor mats and sticking accelerators, which resulted in a massive recall of various makes and models of Toyota vehicles.

But Toyota's only the latest company to deal with a huge public relations disaster concerning the safety of its products. The Tylenol crisis in the '80s is usually brought up as an example of what a company did right. Firestone's handling of its tire problem 10 years ago, which caused over 30 deaths, is cited as an example of how poor decisions resulted in years of bad publicity. Long after the problem's been fixed, companies still face the challenge of repairing their image.

Later this hour, how Haiti and the Dominican Republic ended up on such different paths, and if you tuned in today to hear discussion on the Don't Ask Don't Tell policy, we've had to reschedule that, but we're hoping to have that conversation next week.

Now - what to do when your company faces a recall crisis. We want to hear from you. Do you pay attention to recalls, whether it's cars of peanut butter? Does it change how you think about the company? Give us a call. Our number here in Washington is 800-989-8255. Our email address is talke@npr.org, and you can join the conversation at our Web site. Go to npr.org, and click on TALK OF THE NATION.

With us here in Studio 3A is Eric Dezenhall, CEO of Dezenhall Resources, a crisis management firm here in Washington. He's the author of "Damage Control: Why Everything You Know About Crisis Management Is Wrong." Welcome to TALK OF THE NATION.

Mr.�ERIC DEZENHALL (Dezenhall Resources): So suppose you had the ear of Toyota's CEO. What would you advise them to do this week?

Mr.�DEZENHALL: Well, I think that there's three things. There's three elements to this. Number one, there's a mechanical element, and number two, there's an operational element, and number three, there's PR.

Mechanical means fix the problem, and the good news for Toyota is they claim that they have a fix, which is extraordinary, if true, and if they have it so quickly because one of the things I think that people don't understand is there's always this sort of what-did-they-know-and-when-did-they-know-it moment, and the assumption is a company under siege secretly has the answer all along, and they're sitting in an underground lair like Dr.�Evil saying, you know what, we could fix this problem but let's not.

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Mr.�DEZENHALL: That's not - you know, that's not what's happening in these situations. So it's good that they supposedly have a fix.

Number two, operational, getting the cars, millions of cars, in the shop to fix them. Can they do it? Can they do it quickly? They seem to be -they seem to have a schedule that allows them to do it. That is also very good and very impressive.

Then you have the PR elements, which inevitably, at first, are bad, especially when you have a company that - when a company is under attack, it's like a person under attack. You're not organized, and everybody loves to think that these companies are very well-organized in these situations.

My experience, spending, you know, a quarter-century on these dream teams is they're not dream teams, they're nightmare teams because nobody knows what they're doing and it's bedlam. And so you saw a Toyota executive coming out wearing a surgical mask on camera last week, apologizing, and it's surreal.

And, you know, the American consumer marketplace, we're very emotional. Japanese and German automakers, they tend to be technologically focused, whereas we want to have our hands held.

So I think that they've had a problem in that area, but they've since recovered. The CEO of Toyota USA has done interviews, has begun explaining the process, and so they're moving in the right direction on that account, but they weren't great out of the gate, but few people are.

ROBERTS: Well, it also seems that when a consumer base needs some compassion and needs some hand-holding, as you say, that conflicts with legal advice to admit no wrong. So how do you tread that line between admitting error but also apologizing to your consumers?

Mr.�DEZENHALL: You're hitting what the great tension is. I mean, whether it's Tiger Woods or anything, you're always hearing these very silly PR people when a crisis hits dive in front of the camera and dish out this ridiculous clich� that if you just fessed up, the problem would go away.

I see absolutely no evidence whatsoever that that's true. Okay, it sounds wonderful in a high school PR class. I don't see evidence that it's true. If all of these people start confessing to things and apologizing to things, you're vulnerable legally. However, if you are cold and aloof, it's a whole other situation.

I think, though, that what Toyota is doing is right. They're apologizing for the difficulty that the consumer marketplace is having. They're not apologizing for being responsible for every injury that's taken place, and that is a fundamental difference, as opposed to some of the silliness that happened around the Martha Stewart scandal, when people were saying she needs to just fess up and apologize.

You can't go on Larry King and say, ladies and gentlemen, let me just take this opportunity to apologize for something I did not do. I didn't do it, but let me apologize for it. It's ridiculous.

If your position in court is you're not guilty, why are you apologizing? But in the case of Toyota, it depends what you're apologizing for, and I think that they've struck that note okay so far.

ROBERTS: Are there specifics to this case, either because the stakes are high because an unsafe automobile is deadly, but also, you know, Toyota, it's not the fanciest car manufacturer, it's not the cheapest car manufacturer. It's old reliable, right? It's supposed to be the trustworthy, popular, you can always count on your Toyota.

So undermining the trust of this brand in particular undermines a whole lot of what they're supposed to stand for.

Mr.�DEZENHALL: That's right, and I think that the good news for Toyota is when you have some degree of trust equity in the bank, you can borrow against it somewhat because most consumers understand that a company in this type of mess isn't doing it on purpose and may be inclined to give them the benefit of the doubt, provided that they fix the mechanical problem and, number two, do so in a fashion that's rapid and makes people feel that they listened.

But you can't push control-alt-delete. It's not like that movie "Men In Black," where they can hold a zapper in front of your eyes.

ROBERTS: The flashy thingy.

Mr.�DEZENHALL: Yeah, and make people forget that they ever saw it. But I do think that they do have some of that moral authority. But look, I mean, 20 years from now, even if they fully recover, and they probably will, this will be something that is on the Internet. You can retrieve it. The original sin lives on in the modern age.

ROBERTS: Let's hear from Michael at Chapel Hill, North Carolina. Michael, welcome to TALK OF THE NATION.

MICHAEL (Caller): Thank you.

ROBERTS: What's your comment there, Michael? You're on the air.

MICHAEL: Yes, I just wanted to say that I think Toyota as a company with, you know, its spotless over the years, I don't think consumers should be that worried, especially with the recent action they have taken, an immediate action, about their products, and I think that once people see that, you know, a solution has been found and immediate action is taken, their opinion of that manufacturer should remain positive.

ROBERTS: And Michael, has Toyota specifically built up historic good will with you? I mean, would it be the same if it were, say, GM?

MICHAEL: I dont think so because I think that Toyota has shown over the years that they have had proven reliability, and with GM, I don't find that so much. When you look at, you know, consumers' ratings, such as Consumer Reports and whatnot, Toyota has shown a steady and consistent reliability rating, and I think this just takes to show that, you know, companies do make mistakes and they do fix them when necessary, and as long as they take the necessary and immediate action to do so, consumers should be faithful to their company.

ROBERTS: Michael, thanks for your call. Well, this goes to your point, Eric Dezenhall, that they have this deposit of good will that they can withdraw from.

Mr.�DEZENHALL: They do, but also it's amazing how quick it could go away in this day and age. I mean, we - that's one of the problems with mass communications now, is you can take somebody down relatively quickly, and I think if you look at the phases that these things go through, they really are always the same.

First, there's a catalyst, something happens. Second, there is a company response of some kind. Third is the hysteria. There's these agendas at work, and you know, crisis management doesn't happen in a vacuum. It's not like if you do the right thing people will then say - why, thank you - for doing the right thing.

You now have investors in this crisis. You have their - Toyota's competitors. You have plaintiffs' lawyers. You have members of Congress. You have legislators. You have consumers. And you know, a few years ago, when there was that Jet Blue cancellation of 1,000 flights, I did this interview on one of the cable business shows, and the guest said to me: Why is Jet Blue in such a mess? And I said: Because you keep inviting guests on asking them why Jet Blue is in such a mess.

So I say that because you now have these other investors in the crisis. Then the next phase becomes the what-did-they-know-and-when-did-they-know-it phase.

I guarantee you, there is a 100 percent chance someone will find an email or a memo that says, I'm a little worried about the engine here, or I'm a little worried about the accelerator. And by the way, you want that. You want there to be this debate, but it has the whiff of malfeasance.

And then the fifth phase is really the crucible, where this thing gets slugged out in the courts and the press. And what's the answer? I think that Toyota, by doing these recalls and fixing the problem, they're playing the long game, but there is no way to get out of a weather system by pulling a cute PR stunt. That's a myth.

ROBERTS: You mean by having some sort of incentives for buying new cars or...

Mr.�DEZENHALL: Well, that may be some of it, but I think that the cognitive fallacy in the way the consumers and the media cover these scandals is the false belief if you had just done this one thing, this would go away. And it gets back to the greatest myth of all, which is the 1982 Tylenol recall.

I mean, if you saw the movie "The Insider" with Russell Crowe, he says the minute Tylenol had a problem, and he sweeps his hand across the camera, they immediately recalled the product.

That is not true. It took eight days. It didn't happen until CVS and Walgreen's pulled the product from the shelves. The company had made assurances that they felt were honest, that there was no cyanide in any of their plants. That turned out not to be true. If that had happened today, it would have been considered a debacle - not that they didn't do many things right at some point.

ROBERTS: So what's different today?

Mr.�DEZENHALL: What's different today is it takes about three seconds for a scandal to go viral and go completely out of your control, whereas in 1982 you had decision-makers and referees to the crisis. Now anybody can go online and allege anything.

ROBERTS: My guest is Eric Dezenhall. We are talking about product recalls, following Toyota's troubles this week, and we're taking your calls, 800-989-8255. Especially if you've been inside a company that had to make some recall decisions - let us know. You can also send us an email, talk@npr.org. I'm Rebecca Roberts. It's TALK OF THE NATION from NPR News.

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ROBERTS: This is TALK OF THE NATION. I'm Rebecca Roberts in Washington. If you Google Toyota right now, you'll see total recall. Today, the Transportation Department announced it will open a formal investigation of the 2010 Toyota Prius' alleged braking issues, this on the heels of two huge Toyota product recalls involving problematic floor mats and sticky accelerator pedals.

Of course, Toyota's not the only company navigating crisis management in the event of a faulty product, and we're talking about corporate strategy in the face of this kind of disaster and how to save a brand.

Eric Dezenhall is CEO of Dezenhall Resources, a crisis management firm in Washington, D.C., and we want to hear from you. Do you pay attention to recalls? Does it affect how you feel about a brand? And if there are any PR people or CEOs in our audience who have dealt with a recall, give us a call and tell us your story, 800-989-8255. Our email address is talk@npr.org, and you can join the conversation at the Web site. Go to npr.org, and click on TALK OF THE NATION.

Eric Dezenhall, you said, you know, it's guaranteed that eventually, some email will come out that someone was concerned about this a long time ago. What is that conversation on a corporate level? Why would you ever delay a recall? Why would you ever consider not getting the news out there? Why would you go against the sort of conventional wisdom of take care of it, take care of it early and get out ahead of the story?

Mr.�DEZENHALL: If a company - if recalling a product was automatically the right thing to do, all companies would be doing all day long is recalling products. Because if you manufacture millions of products, guess what? There's going to be a problem with some of them.

And so the silly Mother Goose chestnut, that always do a recall, my clients, that's all they would be doing. And what do we do when we find out there's a problem in one particular store? We first try to determine did anybody get hurt? Is this isolated to this one store? The whole idea that you set off this massive apparatus, you would have no economy.

So you have to make a judgment. What are the variables? Is anybody hurt? Does it seem to be widespread? Is the allegation plausible? For example, Pepsi and syringes.

In 1993, there was an allegation that they were turning up in - that syringes were turning up in Pepsi cans. Well, if you've ever seen the manufacturing process of soft drinks, where thousands of cans are whirring through a factory in a second, the idea that a syringe could get in there is ridiculous. And ultimately, that crisis ended when a store camera, by sheer serendipity, picked up a consumer sticking a needle, a syringe, inside a can.

Pepsi wisely released footage showing the manufacturing process, but the problem with evaluating crisis management is everybody believes that there are these hard-and-fast rules of things you always do: always recall, always apologize, always be transparent.

For every example of a company that did the right thing, I can give you examples of a company that did the wrong thing and did fine. I mean, Apple computer violates every single rule of crisis management, and it comes out on top, basically because they're Apple, that's why.

ROBERTS: Well, you mentioned, you know, how credible are the allegations, how many people were hurt, you know, all the different considerations. One thing I didn't hear you mention is how much money will a recall lose us, and how does that compare to what we lose by litigation or bad press?

Mr.�DEZENHALL: It's a very important point and definitely an oversight in my little list, because there is a cost-benefit decision being made, and there is a cost benefit that, you know, do we spend billions of dollars, or do we try to fix these things at a local level, where the concerns might be, or do we pay off litigants?

And I think what's so extraordinary about the Toyota recall is they knowingly and willfully made a decision to spend billions of dollars to fix this, and this is one of the biggest crisis-management stories of our time. And I think it remains to be seen whether it will be effective, but in terms of investing back in their brand and being ethical, that kind of recall is a huge undertaking that many people could argue was not in their self-interest. I would argue that it is in their long-term self-interest, but not in their short-term self-interest.

ROBERTS: And by long-term, you mean five years, 10 years?

Mr.�DEZENHALL: You know, even sooner. You know, the fact is in the middle of these things - I mean, judging a crisis is sort of like judging a patient in the middle of heart surgery. They're pale. They're bloody. It looks like it's been botched. But it takes a while.

But no, I think it's entirely possible, five years from now, there's a full bounce-back, depending upon how it goes.

ROBERTS: And does some of that depend on how well Toyota's competitors take advantage of this moment of weakness?

Mr.�DEZENHALL: Totally. It depends on whether or not the fix really is a fix. It depends on whether or not they can get the vehicles in to fix it. It depends on how, if Toyota owners are really committed. It depends if competitors are able to convince people, come in and buy our car. A lot of variables.

ROBERTS: Let's take a call from Mary(ph) in Cincinnati. Mary, welcome to TALK OF THE NATION.

MARY (Caller): Hi, thank you.

ROBERTS: Sure.

MARY: So, my comment is more generally related to, you know, when a recall hits the media. Of course the first thing that I do is go to the cupboard and, like, check my serial numbers, but you know, as the mother of two small kids, I, you know, went online to the CPSC or, you know, whatever link was provided to get more information on what I was looking for, and I was overwhelmed.

I was actually just blown away by the hundreds and hundreds of other products that have been recalled or are on a current or past recall list on - that, you know, had never made the media.

And of course, something had to have happened. Either someone was hurt, or there was a concern, and it was - it seemed nearly impossible for me to go through the list and go through every item or every serial number in my home and make sure, you know, that it was safe, and I didn't know how to categorize or even process all of this information by these either mandatory or voluntary recalls from all of these products. And I just wondered, you know, what you might have to say about the ones that make the media versus the ones that are, you know, that are out, that are listed, that, you know, never do. And, you know - how do we know what's important all the way down the scale without having to actually read each individual recall?

ROBERTS: Yeah, Mary, thanks for your call. So it's not only the thousands that don't make the news but then presumably thousands of products that aren't even recalled in the first place.

Mr.�DEZENHALL: That's right. And the caller makes a very important point in that what are the best-managed crises? They're the ones you never hear about because they went away, and when somebody calls me, as they do on these situations, a media, they say: What is the best crisis you've ever managed? The answer is: I'm not going to tell you because it went away, and my client doesn't want me to be on NPR saying I worked with Rebecca Industries, and they had this problem, and look how I saved them. All of a sudden, you're looking at all of your Rebecca products and going, oh my God, is there danger here?

Every day in the Washington Post, there is a section that says recalls, and every day, products are recalled; every day, they're fixed; and every day, nobody cares. And so to make the judgment that the answer is always a massive, sweeping recall assumes you hear about all this stuff, and the best ones are done quietly.

There's a second point the caller makes that's very important, which is: Is there an easy consumer action? Okay, if I said to you, Rebecca, that - let's say we had a repeat of the 1982 Tylenol, and you were afraid of getting sick or dying, and you had Tylenol in your medicine cabinet. How would you prevent yourself from getting injured?

ROBERTS: I would throw my Tylenol away.

Mr.�DEZENHALL: Bingo. Now, if you had a $40,000 SUV you were afraid of rolling over, Rebecca, just get rid of it. Just pull in the - okay, so there's an easy action, and there's a very - that's why something like the breast implant crisis is hard to solve, but something like an easy consumer product is easy.

You can't go to millions of women and say, oh, you don't - you're concerned about your breast implants? Just pull over and take them out.

ROBERTS: Well, is there - to Mary's point about what makes the news, is it - are there industries, or are there risks that tend to get more attention than others?

Mr.�DEZENHALL: Children, anything with children. And...

ROBERTS: The collapsing strollers stories.

Mr.�DEZENHALL: Absolutely, and I've worked on a lot of those cases because nobody - I mean, first of all, to be Machiavellian about it, the plaintiffs' lawyers love kid-related injuries because they know they can get anything they want. Companies who make kids' products, they're held to a different standard and understandably so.

You know, but then there are other things that - you know, people don't worry about as much, but anything with children is guaranteed to dominate "Good Morning America," et cetera.

ROBERTS: Let's take a call from Bill(ph) in Kansas City, Missouri. Bill, welcome to TALK OF THE NATION.

BILL (Caller): Hi.

ROBERTS: Hi, Bill.

BILL: Hi. I actually worked at the St.�Louis assembly plant when the Explorer was recalled because of the Firestone tire fiasco.

ROBERTS: Oh, yeah, that seemed like it took a while to figure out what was going on and who was at fault.

BILL: Oh, it did, but we were getting daily reports from our people at the plant, and they were telling them that - pointing fingers at the Firestone tires and although every day in the news media, it kept coming up as being a Ford problem. There was a major recall, as you remember, and I actually went from overtime to virtually minimum and even layoff weeks while they got this all straightened out. And they redesigned the Explorer, and I actually had to transfer to the Kansas City plant, where I test drive Escapes now.

ROBERTS: And what was your overall impression, Bill, of how Ford handled that? Do you think that they could have done better?

BILL: Well, Ford - I think Ford did pretty well in their end. They were trying to make the point that it was a Firestone tire problem and not the vehicle problem. But Ford stepped up. They had many law suits. They made many million of dollars of payouts. And I think they upheld their end just fine.

ROBERTS: Bill, thanks for you call. You know, Toyota didnt make these accelerators that stick either, but they're responsible for them.

Mr. DEZENHALL: Well, right, and that's one of the dangerous things is when people start making legalistic arguments to consumers. Well, technically, we didnt make that - nobody wants to hear that. I think that in terms of handicapping the Ford/Firestone situation, Ford did several things. Number one, as the caller said, they blamed the tires, which might not have been the most moral thing in the world to do, but it worked. Second, there was a big management shakeup - the CEO lost a job. Third, and very importantly, the vehicle was recalled, redesigned, there were lots of payouts.

As for Firestone, they are - they were predicted - it was predicted that it was the end of them, but they largely changed the name of their major brand, they switched it to Bridgestone and they came back. And so, it wasnt the end of the world.

ROBERTS: We have an email from David(ph) in Healdsburg, California, who says, I ran a large telecom manufacture. The main problem is that you don't always know when there is a systemic problem versus a problem isolated to a particularly - particular manufacturing run or even customer use. It's almost impossible to know exactly when to pull the panic lever and do a total recall. Pulling the panic lever at the wrong time could cause more harm than then problem that causes such action. Not pulling the lever could be equally disastrous. Bottom line, the public has to understand that any process can result in problems and look at the long-term performance of the manufacturer.

Mr. DEZENHALL: It's a really good point. And I think that the number one, as I said at the beginning, you know, having spent almost three decades in these war rooms, we often do not know what the problem is, if it's a pharmaceutical or what. I mean - and because a lot of these allegations are plausible. It's very plausible that a perfectly ethically pharmaceutical company, that a certain percentage of people who will take a product will have a problem with it.

So I think that this desire to run out and - this whole myth that you have to immediately do stuff - look at the anthrax scare of 2001 where the D.C. postal service came out and made assurances that the problem had been taken care off. The next day, two people died of anthrax poisoning. Am I going to tell my client to get in front of the camera and swagger with certainty that he knows the answer to what's causing things when we really don't? And sometimes, just like in wartime intelligence, it turns out to be wrong.

The Audi case - everybody, the media, the government and consumers were convinced the car was just running away and it turned out - after the Audi was decimated in the U.S. market place for nearly two decades -everyone was wrong. The woman who start - who ignited the whole problem ended up under oath apologizing because her foot had been on the accelerator.

ROBERTS: Well, we actually have an email from Joe(ph) in Framingham, Massachusetts about that. And he says, they, then - the Audi, he's talking about - turned the company around by giving incredible customer service and expanded warranties. Do you think this will happen with Toyota? I'm willing to bet in a few years from now this will be a distant memory.

Mr. DEZENHALL: I think he's - that's the way - if I were to put money on the table today, that's the way I would bet. But also remember, even though Audi was vindicated, they were vindicated after they were destroyed. What good is that? So it will take time, and crisis management is really a marathon, not a sprint.

ROBERTS: Youre listening to TALK OF THE NATION from NPR News.

Let's take a call from Alanca(ph) in San Antonio, Texas. Welcome to TALK OF THE NATION.

ALANCA (Caller): Thank you. I work for a rental car...

ROBERTS: Uh-huh.

ALANCA: ...agency and we've had to ground many cars. And if you do that times as many rental cars are in the nation - and people don't seem to care. I mean, I have people coming in still requesting Toyotas.

ROBERTS: So you've taken your Toyotas off the lot?

ALANCA: Well, we started by taking the Toyotas off the lot, the ones that were on the list. And then, we started by going through them to see which ones have the pedals made here or pedals made there. But we still have people requesting them. I mean, they come up to the counter and nobody seems to, you know, be affected by it.

ROBERTS: And when they request it, why is it - why is that? What do they want in a Toyota?

ALANCA: Well, they just like the reliability of it and the gas mileage is a big one, you know, the comfort, I guess. But, you know, we still have people requesting the Toyotas.

ROBERTS: All right. Thank you so much for your call, Alanca. Yeah, it's - I mean, there's - then the consumer reaction is a whole separate chapter of this that, of course, the corporation can't control on to a huge degree - how much people actually pay attention to the recall, whether they're willing to give the company the benefit of the doubt?

Mr. DEZENHALL: Well, right, and I think that so much of this - so much of crisis management comes down to answering two questions: Am I going to be okay, and what are you doing about it? Okay? And I think that, certainly, if you drive one of these products, you are going to want to get it fixed. But I also think that one of the perverse benefits of the media Internet age is every single day you are assaulted with things that are going to kill you. And at some point, you have to calculate what are the chances of this happening to me. And the reason why I would be optimistic for Toyota - and for the record I am not working for them and I have no financial incentive to say this - is generally speaking, very good companies want to remain very good companies and are going to do what it takes to do the right thing, but it will not happen immediately.

ROBERTS: We have an email from John(ph) who says, we used to be adults in this country. Why must we expect perfection from any product or company? Every car has mechanical weaknesses of some kind. All cars are a lot safer now than in the past, and we lived with them then.

Mr. DEZENHALL: Well, and that - one of - that is the reason why plaintiff's lawyers have become billionaires, because what they exploit and what the television magazine shows exploit is that there are these cinematic cabals of evil corporate wrongdoers, knowingly and willfully injuring people, and the fact that one person is injured is statistically unacceptable to a culture where we believe there should be zero risk. And if there is someone got hurt - if someone does get hurt, there are no acts of God. It's because a bad person made it happen.

ROBERTS: Eric Dezenhall, CEO of the crisis management firm Dezenhall Resources, is the author of "Damage Control: Why Everything You Know About Crisis Management is Wrong." He was here with us in studio 3A. Thank you so much.

Mr. DEZENHALL: Thank you.

ROBERTS: Coming up, Jared Diamond will join us for a look at the two sides of the island of Hispaniola, Haiti and the Dominican Republic.

I'm Rebecca Roberts. It's TALK OF THE NATION from NPR News.

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