Thursday, September 16, 2010

Why Do Some Companies Survive Crises and Others Don’t?

I sure wish I knew for sure.

It is obvious in many cases. The organizations that were prepared and had a plan and practiced with it, almost always come out on the other side on their way to recovery, even if the disruption was of their own making.

It is equally obvious when a company screws up, doesn’t know how to manage it, doesn’t take responsibility and doesn’t know what to do and say, or refuses to do the right things.

Then there is Toyota, BP, Firestone and Exxon.

Ten years ago there were many who had written Firestone off – history, gone, done, stick a fork in ‘em! It was the second time in less than 20 years that Firestone had a defective product and major tire recall. They almost disappeared after the Firestone 500 Tire recall, but Japan’s Bridgestone Tire Company bought Firestone in a “fire sale” and kept it afloat.

Then in the 90’s management ignored all the warning signs and continued to sell the Firestone ATX tire even after reports it was causing Ford Explorers to crash and kill and injure people. All of the lawsuits in that 2000 recall have not yet been settled.

Exxon’s Valdez oil spill in 1989 was the epitome of an environmental disaster up to that time.

Bob Irvine, founder of the Institute for Crisis Management, was in Alaska for several weeks assisting another company that feared fallout from Exxon’s spill. He says Exxon did a really good job of cleaning up the bay, but did a poor job of communicating what happened, what they did and what they were going to do. He stood on the shore one day with an Exxon senior executive and suggested they needed to do a better job of telling their side of the story.

The Exxon executive looked up at Bob and said “we don’t have to say anything all we have to do is a good job.” That didn’t work for them.

Yet Exxon survived and is one of the most profitable companies in the world, even though they are still vilified by people around the world.

The BP story is still being written, but there’s little doubt the company will survive and continue to be profitable, even while being the butt of criticism and possibly hundreds of lawsuits for years to come.

Toyota is another recent case.

When the year began with a massive automobile recall of nearly 10-million vehicles, Toyota lost $30-billion of its “value” in a matter of weeks, but by August, the company was recovering.

Toyota is a little easier to understand. It is a company with a ton of banked goodwill and a solid reputation. It took a hit and it has a long road to recovery, but it will make it, unless management takes its eye off the ball again.

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