Huawei, Boeing and McKinsey – When Internal Cultures Cause Reputational Crises

How much are reputational crises related to internal cultures, and an ability (or inability) to take into account a variety of diverse viewpoints?

I’ve watched over the past couple of weeks as the crisis around the Boeing 737 MAX has grown. Before that, it was Huawei and the suspicion in many Western capitals that the Chinese telecommunications firm was in a position to either spy on or act in favor of the Chinese government through sharing data collected through its network equipment. Before that, there was the McKinsey sagas in South Africa and Saudi Arabia respectively.

As a communications professional, it’s been fascinating (and painful) to watch events unfold. But one thought is stuck in my mind – is there a common thread to all of these events? And is that common thread an internal culture which is neither diverse or inclusive enough to understand and tackle issues before they become crises?

Let’s take Huawei, whose story has been covered in depth by a number of exceptional writers and features (check out Arun Sudhaman’s 4,000 word piece on the Holmes Report website). Huawei is a typical Chinese-headquartered multinational, with senior management being predominantly Chinese nationals. This has proved problematic for Huawei’s understanding of markets such as the US.

“There was always a fundamental lack of trust in non-Chinese. You offer guidance, and are regularly second-guessed,” Huawei’s former US public and government relations department, William Plummer, told the Financial Times. Plummer published a book last September in which he explained how senior local staff in foreign markets were regularly excluded from key decisions whilst Chinese executives second-guessed senior management in local markets out of fear of the company’s founder, throwing into turmoil into the company’s handling of PR and lobbying outside of China.

While McKinsey’s management is more diverse in nature, it could be argued that a an over-aggressive culture and a lack of local understanding resulted in the consultancy giant making one of its biggest ever mistakes. To quote from the New York Times:

McKinsey admits errors in judgment while denying any illegality. Two senior partners, the firm says, bear most of the blame for what went wrong. But an investigation by The New York Times, including interviews with 16 current and former partners, found that the roots of the problem go deeper — to a changing corporate culture that opened the way for an aggressive push into more government consulting, as well as new methods of compensation. While the changes helped McKinsey nearly double in size over the last decade, they introduced more reputational risk.


The firm also missed warning signs about the possible involvement of the Guptas, and only belatedly realized the insufficiency of its risk management for state-owned companies. Supervisors who might have vetoed or modified the contract were not South African and lacked the local knowledge to sense trouble ahead. And having poorly vetted its subcontractor, McKinsey was less than forthcoming when asked to explain its role in the emerging scandal.

McKinsey’s former managing partner told the New York Times that the firm had a “bit of a tin ear” when it came to the initial response. David Lewis, executive director of Corruption Watch, a South African advocacy group, told the NYT that: “For the scale of the fee, they were prepared to throw caution to the wind, and maybe because they thought they couldn’t be touched.” For me, there’s the feeling that the internal culture led McKinsey to make the wrong decision and down a path that would become the biggest crisis in the firm’s history.

Finally, there’s Boeing. The airline manufacturer is struggling with a crisis that has grounded worldwide its latest jet, the 737 MAX, after two crashes which share a number of similarities. The first crash happened in Indonesia last October, with the loss of 189 passengers. Following the second crash, this time in Ethiopia in March, Boeing was asked why more wasn’t done to fix the faults found to be responsible for the first crash?

In crisis communications, the most important action is post-crisis, and communicators are told to work with the organization to ensure that lessons are learned, solutions are found, and trust is re-built. This didn’t happen with Boeing – the software fix for the plane’s flight system has yet to be completed, and relatives of those who died in the first accident have questioned Boeing’s response.

Vini Wulandari, sister of one of the ill-fated Lion Air flight’s co-pilots, said that the Ethiopian crash confirmed the suspicions that she and many of the victims’ relatives had about the MAX 8 being a “defective product”.

“The [Ethiopian] crash shows that 737 MAX 8 is a manufacturing fail from the beginning,” Vini Wulandari, sister of one of the ill-fated Indonesian airline Lion Air flight’s co-pilots, told the South China Morning Post. “When I first heard about [the Ethiopian crash] I was sad because I am familiar with the sadness that the victims’ families must feel and I was also sad because the 737 MAX 8 should have been grounded after the Lion Air crash. Maybe because it was only one accident, so a lot of people thought there was no need for immediate [action].”

Was Boeing’s internal culture to blame, in particular Boeing’s urgent desire to come up with a new airplane that would compete head on with rival Airbus’ new models? It’s hard not to be convinced that Boeing rushed the 737 MAX’s design after reading a bombshell report in the New York Times.

It’s hard not to be swayed by the argument that uncompromising internal cultures are to blame for poor decision-making; too many similar voices, too few diverse views and an inability to listen have been a cause in each of these crises. That’s why proper inclusion matters, at all levels, as well as an ability to seek out differing viewpoints, especially from outside the organization. As communicators, we have to play a role in promoting both in our workplaces.

I’d love to hear your views on these crises. What’s your view? Message me, or leave a comment.


Sondos AlQattan and how brands need to learn lessons from this self-made influencer crisis (part 2)

Sadly, the controversy around the Kuwaiti social media influencer Sondos AlQattan continues. As with her initial post, which she recorded two weeks back, her additional comments over the past week initially defending her views on Kuwait’s new laws protecting domestic workers from the Philippines have not helped in calming the situation. In her latest video, recorded and shared yesterday, she accuses Western media of anti-Muslim and anti-Arab/Gulf bias, adding that she’ll lead boycotts of brands she has worked with who have terminated their relationship over this incident.

I’ve been asked a number of times for my views on what is happening. I talked with the good people from the Gulf News business desk this week on the issue of when influencers go rogue (go on, have a listen). I’m including here a summary below, as well as additional inputs from what has happened this week.

  1. Influencers will cause more crises – Consumer brands are working with an increasing number of influencers. These people aren’t celebrities, who are often media-trained. All of us have the ability to go online in a matter of seconds. Add that to a significant following and brand endorsements, and you can except more situations will happen which will burn brands.
  2. Brands need to act quickly – The lack of response from some of the brands who have a relationship with Sondos AlQattan was striking. Despite both social media mentions and media inquiries, some brands just didn’t respond. I’d understand if the delay were a day or two, as this is the Middle East and regional offices often feel the need to go back to corporate HQ for advice and guidance. However, two weeks is inexcusable. It harms the brand, and in the eyes of consumers it makes companies look negligent at best, complicit at worst. There’s two words all communicators need to know – brand safety.
  3. Consumers want brand clarity – Some of the initial brand responses were wishy-washy. To quote one brand, a spokesperson said, “[the brand] does not support or align with the recent statements made by Sondos AlQattan.” What does this even mean? Will you stop working with the person, or not? That’s the question. I’ll repeat a simple mantra here – communications is 90% what you do, and 10% what you say. This was a fail, and it was reflected in the headline above. Is that really how the brand’s communications team wanted their stance to be perceived? I’m assuming not.
  4. Consumers care about brands working with Sondos AlQattan today – I was also asked about a brand that I work with, which had once worked with Sondos AlQattan. I can’t think of a beauty brand which hasn’t worked with her, given her 2.3 million followers and her focus on makeup. However, consumers online only care about those brands who are associated with Sondos AlQattan today.
  5. Brands can come out of this positively – I initially felt for those brands who were associated with Sondos AlQattan at this time. Even though I’ve talked about background checks, there was no way that any of them could have foreseen this crisis. However, what is memorable is that the brands who came out first with a clear position have been viewed positively by those who have been angered by the statements made by Sondos AlQattan. Consumers have felt as if these brands have listened to their concerns and acted upon them.
  6. Always remember your employees – One aspect of this which has been rarely mentioned is the internal communications aspect. May companies operating in the Gulf are diverse in their employee hiring, and I doubt any of the brands who are working with her don’t have Filipino nationals on their books. How do these employees feel about the stance their companies are taking? There’ll be a good deal of both anger and sadness among the employees of brands and distributors who are caught up in this sorry situation. I only hope that the internal communications is clearer than the external piece (the narrative should be the same here in any case, given that many employees will be following this story externally).

That’s it from me for now. I hope I’ll be able to resume blogging on another subject during the weekend. For now, good night!

 

VMA Insights: CEOs and what they’re looking for in today’s chief communications officer

VMA picture

I’ve been doing some late night reading of a rather interesting piece of research. Commissioned by the recruitment firm, the VMA Group, the study reached out to business leaders across Europe to ask a simple question: What do CEOs expect of today’s chief communications officer?

The research looked at a number of key areas, and I’ll outline the key findings below.

  • The Value of Communications
  1. Although the value of communications as a central business operation is implicitly accepted by CEOs, many communications directors still need to make a more convincing ROI case for the impact of their own work.
  2. CEOs are still uncertain that the company’s social media activity is driven by either a strategic purpose or a clear sense of the desired returns.
  3. Reputations are more fragile than ever. CEOs frequently see this as the key value point provided by the communications director.

“We see a corporate communications director as the builder of the brand value proposition, the custodian of the corporate reputation – not in a reactive way but proactively. In order to sell our products and services, increasingly we first have to sell the company. Whether it’s government giving you incentives, or it is customers buying because they trust you. Unless you’ve got a meaningful brand proposition you can’t get off first base.

A strategic communications director understands that and understands that’s their role, and it really ought to have as much value on the balance sheet as other assets of the business because any strategic move will create stress points in the brand proposition that need to be managed.” David Lockwood, CEO, Laird PLC

  • Strategy: Is Communications Trusted
  1. Communications directors are frequently involved in strategy creation; almost always at least with some input.
  2. The Majority of CEOs actively involve the communications director when there is a demonstrably ‘communications-centric’ issue.
  3. Three core strategic viewpoints that communications directors bring to the discussion: how to translate the strategy into content and channels; and the reputational rewards and risks of strategic decisions.
  4. CEOs from multinationals see communications’ input more broadly and progressively – as a vital strategic voice in all business decisions, especially from the perspective of reputation and brand.

“I think it’s obvious that a communications professional needs to be closely linked to the strategy because what they work on – formulating the communications and regulatory environment – is of strategic importance. So communications and public affairs needs not just to be ‘part’ of the company strategy but actually linked to the strategy – wired into the board and well resourced. If it’s an afterthought you might as well save yourself the money and not do it.” Wim Mijs, CEO, European Banking Federation

  • All Change – The New Communications Culture
  1. The digital revolution has brought arguably even more significant changes to the approach and culture of communications than to the core skills of the job.
  2. The ‘message control’ model is over. Key challenge: communications professionals must somehow now find a new way to create alignment among audiences without ever dictating to them.
  3. Authenticity and transparency are the essential tonal cues today – otherwise your communications will be dismissed out of hand.
  4. Audiences expect evidence of a new type of business model – socially responsible, publicly responsive, democratically inclusive.

“We’ve noticed a big and increasing demand for transparency. Our consumers and stakeholders at Arla want to know where their food is coming from. They want transparency in the supply chain. And I would say that the balance between a ‘communications’ approach to stakeholder engagement and a ‘marketing’ approach is shifting in favor of communications. In my business, that’s manifested by an increasing preference for having very honest, authentic, transparent conversations, and moving away from grand claims, mass advertising and so on.” Tomas Pietrangeli, MD, Arla Foods

  • The Challenge of Filtering in an Age of Noise
  1. Discernment and filtering have become core skills – the ability to select from a vast and noisy information flow what is of actual value to the business.
  2. Communications professionals need to rise above the manias and mass panics the online world can create, providing a cool head in a crisis.
  3. A key, proactive part of filtering is to anticipate major disruptive events coming down the pipeline and to have a plan of action for how to deal with them.

“I don’t think anyone’s figured out quite how corporate communications works in a world where social media is on the scene before you are. Trying to control the message is really tough in that environment, of course. But it’s the speed with which other people out there react – with real-time messaging before you’ve even had a chance to get your messages out and establish the facts.” Mark Tanzer, CEO, ABTA

  • The Need for True Leadership
  1. Core technical skills are still important; they must now be supplemented by more core business skills.
  2. CEOs want more than support, counsel or executive ‘translation’ services. Businesses now need true leadership from communications directors.
  3. Proactive endeavour is the critical element – delivering new business growth, rooting out commercial opportunities, driving change internally.

“I find that communications people should be closer to the business. They should be able to understand the company figures properly – to understand the business, but also where it’s heading and what issues it’s going to face. In general, if communications people have sufficient insights in the business, I truly believe they are able to generate more value.” Paul de Krom, CEO, TNO

  • The Future: A Profession in Revolutionary Change

There’s no key findings here (I’ve highlighted the capabilities required by CEOs today in the image at the beginning of the article). However, I do want to pull up one last quote, as it’s particularly apt to the Middle East, where we have an issue with speaking truth to power and instead focusing on political maneuvering inside the organization.

Before that, I’d like to say thank you to the VMA Group for this thought-provoking report, especially the International Association of Business Communicators EMENA board member Willem de Ruijter, for handing the report out to IABC EMENA and pushing this onto the agenda.

“The communications director works in the same room in the building as the secretary of the board – in fact we are all now on one floor, we do not have separate rooms anymore. S/he has full access to everything, no restrictions. S/he is actively involved and is asked to stimulate and to give feedback. Her/his message should be frank when required… and provocative too. S/he needs to be able to tell a senior leader who has worked at KPMG for 25 years that he or she does not possess the correct KPMG vision. That takes a certain character.” Albert Röell, CEO, KPMG NL

For your own copy of the report please reach out to the VMA Group via this link.

 

 

Disrupting the Function of IC – Global best practices for today’s internal communications from @IC_Kollectif

Disrupting the function of IC

This ebook will help communicators understand the how, what and why of internal communications and what it means for their own work.

For far too long, we communicators haven’t done enough to communicate what we do and why we do it. We haven’t put the day job to use when talking about our own value.

With the help of groups such as IC Kollectif, this is changing. The IC Kollectif’s founder Lise Michaud launched an initiative to bring together communications from across the globe, to talk about different aspects of internal communications to help others understand what we do, how we do it, and why.

The result of Lise’s efforts in persuading thirty communicators is an ebook. Named Disrupting the function of IC – A Global Perspective, the ebook is free and covers a wide range of topics, including Changes and Challenges in Internal Communication, the Skills and Knowledge of Internal Communication Professionals, the Impact of Technology on The Profession, the Leadership Role of IC Professionals, Employee Advocacy, the Convergence and Integration of Communication Disciplines, Collaboration Between Internal Communication and Other Disciplines  and the Future of the Profession.

I want to draw on the inspirational foreword to the book. Written by Anne Gregory, who has devoted her professional life to promoting the communications profession, the foreword sums up why internal communications matters, now more than ever.

Not only is [organizational life] getting less predictable and the issues that have to be grappled with more slippery, but organisational form is changing too. Companies like Uber and AirBnB are totally different from traditional companies and their disruptive influence means that more traditional, established companies are having to respond in radical ways. Governments, too have to re-engineer the way they are interacting with citizens and this requires huge internal change programmes in the public sector. People want a level of constancy when all around is changing. This is driving a huge focus on organisations reexamining their purpose and values in ways that provide meaning for people who are not only coping with huge organisational change, but who are experiencing all the lack of certainty and turbulence that is present in the world. Organisations are a point of stability for many and at the heart of this is IC. For all these reasons internal communications has come of age, and not before time.

That this volume is available free is testament to the commitment of these authors of IC Kollectif to share their work and thinking widely for the benefit of the global internal communication community. For this, our professional community is deeply grateful.

I’d like to reiterate Anne’s thanks for the work which has gone into this seminal piece of literature. If you’d like to know more about IC Kollectif and download the book, please visit the website (you can click here), sign up and get reading.