Business Book Summaries

Toyota’s recent recall trouble highlights the need for companies to respond appropriately to crisis. Toyota President Akio Toyoda’s initial response to the recall of certain Toyota models for uncontrolled acceleration was seen by many as inadequate. In this case his apology was viewed as insincere and disproportionate to the size of the issue. In addition, the company initially tried to downplay the severity of the problem while casting blame on third-party manufacturers. In essence, Toyota’s response left much to be desired, but how can companies learn from Toyota’s mistakes?

In the case of crisis response there are several key factors to keep in mind:

1. Communication. Toyota did not adequately communicate the acceleration issue to its customers. As a result, many were confused over the cause of the acceleration issue and which car models were affected. At  the same time, the company made conclusions as to the cause of the problem before all information was available. While crisis and emergencies are inherently chaotic, companies must keep their customers and employees informed to the best of the ability throughout the ordeal. If a company does not have adequate information to make a conclusion, it should communicate this fact to its internal and external stakeholders and let them know that they will be informed when the information becomes available.

2. Partner Relationships. Before the acceleration issue was fully understood, Toyota blamed some of its third-party manufacturers for the problem. While this move was meant to reassure customers as to the safety and quality of the Toyota brand, the company may have hurt its relationship with some of its partners. While this may not have such a dramatic impact in the automotive market (part suppliers are heavily dependent on automotive contracts for the majority of their income), other businesses may not be able to afford weakening partner relationships by playing the blame game. For this reason, companies should think twice before making any accusatory statements towards business partners or suppliers.

3. Leadership. When the accelerator issue first came up, Toyota leadership was reluctant to take action and make the necessary moves to reassure its stakeholders and solve the problem. Company leaders must be able to quickly assess and tackle the problem before it gets out of hand. This means keeping employees informed of the situation and reassuring customers and external stakeholders. If leaders wait too long before taking decisive action, a problem can quickly escalate into a full-blown crisis.

Related book summaries in the BBS library: Corporate Conversations, Beyond Good Company, Just Good Business