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.





Why Attacking the Media Doesn’t Work – A Case Study with Etihad and Bloomberg

Unlike for certain politicians, corporates attacks on the media rarely work and often backfire

It’s fair to say the corporate communications world is a fairly quiet place in the Gulf, but every now and then there’s a story that even manages to make me go agog. Last week, whilst sitting in the dentist’s clinic, I picked up a copy of the local publication Arabian Business. The front cover was a story on the Abu Dhabi-headquartered airline Etihad. The airline has had a lot of turbulence of late, with a loss of $4.8 billion over a three-year period as investments were pulled in failing airlines.

With this in mind, I was looking forward to a good read about how Etihad was turning things around, and getting back on track. Instead, it’s fair to say the introduction wasn’t what I was expecting, particularly the quotes from the CEO of the airline (who is presumably media-trained). Have a read below, or see the original piece here.

Attacking the media isn’t a strategy that is often used by corporates, and should be avoided

Any good media person (and, by extension, corporate executive) should know that the media won’t always get a story right. It’s our role to protect and build reputations. For the media, their job is to report the news as they find it. This is especially true of newswires, which both seek out business news that isn’t pushed out by the communications team and seek to verify their news reporting through multiple sources.

Why did Etihad’s CEO attack Bloomberg? I’d argue frustration with the reporting, which I understand. Here’s what he should have done.

  1. Use Positive Language – What surprised me more than anything was the use of the language here, especially given who is being talked about. I have a great deal of time for newswire journalists, as they’re often the best in the industry. Negative language sticks in the reader’s mind, and makes everything else pale in comparison. I’ve forgotten everything else in the piece, which is much more positive, due to the negative language used here.
  2. Focus on your Company’s Own Actions – It’s a simple rule of media work that you focus on what you’re doing and the vision behind it. There’ll always be opinions and views on your organization, both good and bad. Reputations are built on actions, and Etihad has been looking to turn around the business and trim losses. That’s the lead story. Instead, the CEO has gifted the journalist a major headline, and re-focused the issue on the story he didn’t like.
  3. You’re always “On The Record” – Even the first comment, about being guarded, was strange. Every time I’ve given media training, I’ve always emphasized that anything an executive says is on the record, regardless of what is placed in front of them. In an interview, it’s good to build a rapport with the journalist, and put them at ease. A likeable executive is one of the best ways to do this (the best example from the aviation sector is the likes of Richard Branson, who always comes across as an interesting person you’d love to have a conversation with).

Ultimately, the media is one channel that communicators use to get information out to the public and other stakeholders. Nobody is right 100% of the time, including even the best journalists. If they’ve written a piece that’s incorrect, a communicator’s job is to get on the phone with them, point out the mistakes, and get on with telling their firm’s story positively.

Calling out the media publicly, through the CEO and in a derogatory fashion, only sours the relationship with both that outlet/journalist and also with the media in general. It also focuses the media on the negative issue, and ensures that the topic becomes front and center in any future media engagement. Any business which does this never gains any reputational value. It makes for a good read, however. So thank you Etihad from one reader for keeping my mind preoccupied whilst I waited to see my dentist.

Sondos Al-Qattan: Lessons from a social media star and a self-made crisis

Will brands continue to work with Sondos Alqattan after this outburst?

It’s news that has gone global, from CNN and Buzzfeed in the US all the way to Manila. No, it’s not movement on the Middle East peace process, or an update on the fight against extremism. Instead, the headlines are being made by a social media star and her views on a specific nationality. I’ve lost count of the number of articles and videos I’ve seen that have featured Sondos Al-Qattan, a Kuwaiti national and make-up tutorial social media star who has 2.3 million followers on Instagram. Sondos is one of the original social media stars; she’s worked numerous beauty brands, and she’s made significant money doing so.

Given this, you’d think she’d have some savvy when it comes to what she says online. This doesn’t seem to be the case. On the 14th of this month Sondos spoke against the new laws put in place by the Kuwaiti government governing the treatment of Filipino workers in the country. To put it mildly, Sondos wasn’t pleased. A video of her was shared where she criticized the new laws. To paraphrase:

“For people who want to get a Filipino domestic worker, what are these ridiculous work contracts you’ve got to sign? The woman I met with was reading out the rules to me and I was shocked. Put aside that they need to be given a break every five hours, that’s normal. But, how can you have a ‘servant’ in your house who gets to keep their passport with them? Where are we living? If they ran away back to their country, who’ll refund me? Even worse, is that they get a day off every single week! What’s left? Honestly, with this new contract, I just wouldn’t get a Filipino maid. She’d only work six days a week and get four days off a month.”

The condemnation was swift, both in the media and on social platforms despite the original clip being deleted. The video below is just one example of many of how she’s been criticized.

What’s telling about the case isn’t just how to get yourself in trouble online. The Sondos incident is a wealth of lessons, for both communicators and social media influencers.

  1. There is no Local – Sondos may have thought that she was addressing a local, Kuwaiti audience (she was speaking in Arabic on a local Instagram account). However, there is no local online. Her comments were widely shared, and translated. Once they were translated, her views went global.
  2. Audience is Authority – If this was a Gulf national with a couple of hundred followers, it’d have been dismissed. With a following of over two million, this would have never been the case with Sondos. Social media influencers (and brands) must understand that people are hanging on your every word, both good and bad.
  3. Brands will make a Choice – With her words, Sondos offended a whole nationality, a population of over 100 million who spent over 1.28 billion dollars on imported makeup in 2015. Brands who work with Sondos, the likes of Phyto, Max Factor and others) will quickly decide if they want to put their sales in danger (they should have already put out statements by now, especially given the number of calls for boycotts on her YouTube pages). Brands who are looking to work with social media influencers are increasingly understanding the need to do safety checks; if an influencer has said something negative, brands will simply not work with them.
  4. Stop Digging – Sondos has done pretty much everything she can to nullify criticism. She’s turned off comments on her Instagram page, her Twitter account is private, and she’s not responded to any media queries. A new video has been posted tonight by Kuwaiti newspaper Al-Qabas in Arabic, where she basically repeats her initial messages and adds that she sees the media coverage as a good thing as it’ll make the Kuwaiti government take action on behalf of those who hire Filipino maids. Some people just don’t learn.

This issue may go away in a couple of days – people have short attention spans. But in a world where there’s no concept of local, Sondos would have been best advised to listen to the criticism and apologize in English for her views. As it is, I don’t see how she can continue to work with global brands when she herself has become a toxic brand.

Lessons we can learn from Marriott’s Anti-Islam Tweet and Nike’s Iran Boycott Crises

It’s rare for brands to deal with a reputational crisis so openly in the Middle East. Last week, we had two issues happening at once. First up was Dubai’s JW Marriott Hotel, which took the decision to part ways with celebrity chef Atul Kochhar after he wrote a tweet that offended many Muslims (the offending tweet is below, and you can read the back story here at the Khaleej Times). The hotel terminated Kocchar’s deal with its well regarded Rang Mahal restaurant.

“Following the recent comments made by Chef Atul Kochhar, we have taken the decision to end our agreement with him for Rang Mahal. With the termination of our agreement, Chef Atul will no longer be associated with the restaurant,” Bill Keffer, general manager of the hotel, told Gulf News.

Atul tweet

Atul’s tweet was highly criticized, both by individuals as well as the Marriott itself.

The second reputational issue was faced by Nike. Days before the beginning of the World Cup, Nike announced that it would not be providing equipment (think boots) to the Iranian football team.

“U.S. sanctions mean that, as a U.S. company, Nike cannot supply shoes to players in the Iranian national team at this time,” a company statement said.  “Sanctions applicable to Nike have been in place for many years and are enforceable by law.”

Unsurprisingly, the decision hasn’t gone down well with fans of the Iranian football team, as well as the team’s coach, Carlos Queiroz, who criticized the timing of the announcement.

There are two basic lessons that we can take from the situations Nike and Marriott found themselves in.

1. Do/Continue your Due Diligence – While the Marriott moved quickly to tackle the crisis, the question must be asked of the due diligence undertaken on Atul Kochhar’s views. Every time an agreement is undertaken, the in-house team/agency must check the influencer’s/celebrity’s background, including their social media. And they must ensure that they’re on top of anything which may be perceived as being controversial. Many have pointed to Atul Kochhar’s social media posts prior to last week’s outburst, posts which could be seen as being Islamophobic (the below is just one example of this). While hindsight is a wonderful thing, the Marriott team could have developed an insight into Atul Kochhar’s views through monitoring his social media posts before he wrote something that would have caused the brand reputational damage. This month’s crisis may have been averted.

2. Foresee issues and tackle them proactively – Our role as communicators is to understand what is happening in the outside world, and bring those insights to senior management. We have to be social and political analysts, and we have to be able to monitor issues and foresee the outcomes that will impact our organizations, and work proactively to ensure that an issue doesn’t become a crisis. How Nike’s communications team didn’t foresee what could have happened re Iran and US sanctions is beyond me, as is the possibility for Nike to apply for a permission to be able to supply the team with equipment (boots). It was a major miss, and handed rival Adidas an open goal.

Do you have any additional insights from these two issues? What are your thoughts? As always, I’m happy to hear them. Till then, take care!

Lessons from McKinsey on the importance of being seen to be ethical

GuptaMckinsey

McKinsey’s reputation has been heavily impacted by its work in South Africa. Could the same happen in Saudi? (image credit: Ingram Pinn)

McKinsey is a household name, at least in Saudi and South Africa. And not for the right reasons either.

The firm, which consults for governments and businesses the world over, hasn’t had a good time of it lately in these two markets. In South Africa, McKinsey has been embroiled in the Gupta family scandals through its work with the state energy firm Eskom and Trillian, a local company linked to the Gupta family.

In Saudi, McKinsey has been working with the government for years. The company hasn’t always been popular, and has often been blamed by the Saudi public for the austerity measures the Kingdom has enacted. Recent events have shone even more light on McKinsey. An article in the Wall Street Journal looked at the consultancy’s habit of hiring from the elites. To quote:

“The consulting company has employed, among others, at least two children of the man who serves as the Saudi energy minister and head of the state oil company, a son of the finance minister and a son of the CEO of government-controlled Saudi Arabian Mining Co.”

The Wall Street Journal piece describes in detail McKinsey’s company’s hiring practices in the Kingdom, and also notes that there is no allegation of wrongdoing by the firm.

The issue that McKinsey faces isn’t dissimilar to tens of thousands of other firms. It’s the choice between reputation and profit. However, few other firms are as prominent as the consultancy, partly owing to its clients (primarily government in emerging markets) and the quality of McKinsey’s people. To quote the response to the Wall Street Journal article, a McKinsey spokesperson explained that:

“McKinsey is a meritocracy. We hire exceptional people and are confident in the robust policies and practices that underpin our recruiting and development both globally and locally.”

How many exceptional people would it take to understand that working with the Gupta family in South Africa wouldn’t be good for business. Five minutes of due diligence would have thrown up the links between Eskom, Trillian and the Gupta family.

Last year I wrote about Caroline Sapriel’s masterclass on crisis communications. There’s one chart I want to re-share, which should be a guide for all of us.

cm-ladder-copy

CS&A’s crisis management culture ladder maps out where organizations are in terms of their ability to manage and learn from a crisis. At the bottom are organizations who essentially don’t care as long as they’re not caught; at the top are organizations who thrive on and grow with every crisis they encounter. Where are you at?

The question that I have for McKinsey (and every other business leader) is what price would you put on reputation? Even if the firm did work in a legally appropriate fashion, which McKinsey has claimed it did in South Africa, the spirit and the letter of the law are two different things. This question could also be asked of KPMG and SAP, who have also found themselves in the thick of it in South Africa.

If you’re unsure as to where you are on the culture ladder, here’s a stress test you can use to understand how your firm fares. Can your executives answer the following questions relating to any business engagement?

  1. Have they done a due diligence test, including listening to the communications team on possible reputational risks and stakeholder reactions?
  2. Are the executives able to clearly explain their actions? Is their reasoning believable and authentic?
  3. When viewed from the outside, would an action seem to be ethically dubious at best, or illegal at worst?
  4. What are you doing in general when it comes to corporate social responsibility? How do you engage others in conversation?
Writing in the Financial Times in September of this year, John Gapper shared his thoughts on McKinsey’s activities in South Africa:
The firm has a brisk defence to accusations from South African politicians and Corruption Watch that it facilitated state capture by helping Trillian to gain money from Eskom. It says that its own inquiry into its behaviour has not uncovered wrongdoing, nor anything that would require it to report itself to the US authorities under anti-corruption laws. This seems to be setting the reputational bar rather low.
Being willing to charge an entrenched institution in a fractured country so much money looks awfully like rent seeking, especially when payments of up to $700m were to be split with what it should have known was a dubious consulting partner. McKinsey is full of superior intellects but sometimes you only need to open your eyes. None of this occurred in a vacuum.
The group Business Unity South Africa this month bemoaned the “scourge of corruption that is stifling the country” and called for an end to a “culture of immunity”. Each time that a consultant or accountant fails to take a decisive stand, the scourge worsens. KPMG has recognised it but McKinsey is still learning. It could start by confessing that it was wrong and promising not to repeat its failure.
The firm still maintains that it behaved correctly and is walking the tightrope of self-justification. I am intrigued to see how long it will take to fall off.
I wonder if the same will be said of McKinsey’s activities in Saudi Arabia. What price is McKinsey willing to put on its reputation? You tell me.

The 3 issues today’s crisis comms professional needs to tackle

prepared

Make sure that you’re prepared for these three big issues which are shifting the crisis comms goalposts (image source: http://www.bairdscmc.com)

It doesn’t take a genius to tell you that the world is changing, and with it the way that crises develop. I was listening to a very engaging podcast by the Gulf News business team, with communications professional Omar Qirem (check out the post here).

While the conversation touched on a host of crisis issues and triggers, there were three big issues that are relatively new, and which are shifting the crisis communications landscape.

Hacking and Emails

Long gone are the days when whistleblowers would walk out of offices with a suitcase full of papers. Today, information is conveyed electronically, and all it took for Chelsea Manning to leak hundreds of thousands of US military documents to Wikileaks was a single USB drive. Hacking is becoming a real problem for both governments the world over, as well as corporates (just ask Sony).

Hacking is developing from the well-understood concept of the ethically-troubled whistleblower to groups-for-hire who are ready and willing to hack email servers, or public domain accounts in the search of damaging information. Hackers can also attack websites and social media accounts to fake news, or even create fake sites which are mirrored on the real thing.

We’re going to have to become more aware of these threats, and develop mitigation strategies, including better security (at the very least, please use two-factor authentication as much as you can and don’t use the same password for every single account), and also educate executives on the need to communicate differently. What you write can be leaked; are you willing to see that email on the front page of a newspaper, or a website?

The Rise of Values-Based Communication

Consumers aren’t just interested in what brands make and sell. They want to know what we stand for. This public interest has partly been driven by the political climate in the US and Western Europe and by the behavior of millennials and their increasing skepticism of established institutions. For brands, value-based communications is a key point of differentiation, particularly for industries which have been impacted by technology-driven commoditization. Think of Paul Unilever’s Polman and his passionate belief in sustainability.

Conversely, executive behavior which is looked down upon by the public can have serious business implications. Whilst the official reasons for Uber being stripped of its London license were due to questions around passenger safety and drivers’ rights, the behavior and words of former CEO Travis Kalanick haven’t done Uber any good. The apology proffered by the new CEO, Dara Khosrowshahi, seems to have gone a long way to defusing some of the tension between Uber and Transport for London which oversees the company’s license to operate.

Data and Online Regulation

We’ve been living in the internet age for over two decades now, and business has benefited from a relative lack of legislation and regulation about what can and can’t be done online, particularly with data. That has slowly changed as governments have sought to understand how the internet has changed our lives. Upcoming legislation in Europe, the General Data Protection Regulation (GDPR), is going to change how corporations monitor and store data (it’s been covered in some detail by Rachel Miller for the CIPR). There’s no doubt in my mind that the online and social media networks will also have to deal with more governmental oversight. There’s been a string of scandals around issues such as extremist content on YouTube,  Facebook and the Trump election, and Twitter’s lack of action on far-right hate speech.

Whilst I’m certain that more regulation is coming, and soon, it’s far too early to say how this will change how we as communicators operate online. There will be more data-related crises, either due to how data is collected and used, or due to an inability to adhere to these new rules.

As always, I’d love to know your thoughts. What issues do we need to better understand when it comes to modern-day crises? Please do share with me your thoughts.

A crisis of competence or character? How to understand (and prepare for) crisis basics

crisisahead

Are you prepared for the worst? (image source: http://www.adweek.com)

The past 18 months has been a remarkable time for crisis watchers. We’ve watched as global brands and leaders have become embroiled in crises. Some of these have been of their own making (think Sepp Blatter and FIFA, or Volkswagen and emissions). Others have been due to unfortunate circumstances, such as with Emirates flight 521.

As communications professionals out there know, there’s nothing like working on a crisis. In an excellent piece for the Financial Times by David Bond, Rupert Younger, director at the Oxford University Centre for Corporate Reputation, sorts crises into two basic definitions – a crisis of competence or a crisis of character. To quote from the piece:

Examples of competence scandals include Toyota’s 2009-11 recall of 4m of its cars because of defective accelerator pedals, or the battery defaults on some of Boeing’s Dreamliner aircraft. These, according to Mr Younger, can deliver a direct, and in some cases short-term, hit to a company’s sales figures.

A character crisis calls into question the culture and behaviour of a company and its senior executives and often arises out of media scrutiny or criminal or regulatory investigations. Fifa and News International were both crises of character.

The worst type of crisis involves both. The BP Deepwater Horizon oil spill in 2010 is a case in point. It was triggered by a disastrous oil rig explosion that called BP’s offshore drilling competence into question. But the company’s response turned the crisis into a far wider issue of trust.

As communicators, our roles have traditionally covered managing the fallout from a crisis. However, whether we like it or not (I hope the former), we’re also becoming the conscience of our organizations. It’s incumbent on us to speak up when we hear about or see an issue that could harm an organization’s reputation. This is easier said than done. Volkswagen is a great example of a crisis of character – dozens of VW employees must have known about the manipulation of data, and yet no one spoke up (or, if they did, the information didn’t get to the right people).

To tackle such a crisis, communicators need to work with executive management to create an ‘incident aware culture’. Employees should feel that they can report issues without reproach or fear of retaliation. Employees also need to feel that they’re working for and in an ethical organization that cares about doing the right thing. This requires continuous communication from and engagement by the board and management, as well as support from legal and HR teams. If things do go wrong, communicators and management need to proactively engage with stakeholders to explain what has happened and why, a strategy known as stealing thunder. This is best defined as an organization “breaking the news about its own crisis before the crisis is discovered by the media or other interested parties” (Arpan & Roskos-Ewoldsen, 2005).

Unfortunately, as has been noted by academics such as An-Sofie Claeys, this type of self-disclosure is rare in practice. As with the case of VW, organizations are tempted to conceal the crisis rather than make it public.

Crises of competence are easier to deal with. However, many of us still aren’t prepared for what happens when this type of crisis occurs. Here’s a simple crisis communications assessment grid developed by the communications team at US firm Timken, which establishes crisis severity based on the type of incident and the involvement of various stakeholders, as well as who needs to be involved.

timken-crisis-comms-framework

For a more detailed look at how to handle a crisis (pre, during and post), then have a look at this post I wrote after meeting with crisis communications expert Caroline Sapriel. And, if you have any feedback on how do deal with a crisis, please do share. I’d love to hear your views.