Business Strategy

Crisis management: How to come back from a PR scandal

Crisis management: How to come back from a PR scandal

Volkswagen is having a terrible week. On September 18, the automaker received notification from the United States Environmental Protection Agency that it was in violation of the Clean Air Act. The government agency alleged that Volkswagen had installed software on 11 million vehicles worldwide that circumvents pollutant emission standards.

According to the EPA, the company used a “sophisticated software algorithm” on its vehicles that “detects when the car is undergoing official emissions testing, and turns full emissions controls on only during the test.” The software is classified as a “defeat device” because “the effectiveness of these vehicles’ pollution emissions control devices is greatly reduced during all normal driving situations,” says EPA. The company could face up to $18 billion in fines.

The market reacted swiftly—and viciously—to the report. Volkwagen’s shares plummeted 19 percent almost immediately, prompting CEO Martin Winterkorn to resign on September 23rd.

While avoiding a PR crisis like this is the best precaution, smart companies plan for the worst. Here are four things companies like Volkswagen could do in this situation:

  1. Own up to your mistakes.

The first step is to determine what went wrong and apologize if necessary.

“Apologies are tricky because companies must determine their level of accountability, and to what degree they will assume liability for what has happened,” reputation strategist Ruth Kinzey tells Communication World Magazine. “There are legal implications. Organizations must balance ethical obligations, liability issues and reputational concerns when determining the type of response they should issue.”

So far, Volkswagen is following this crisis management playbook. The company released a video on September 22nd where the CEO promised full cooperation with EPA’s investigation. Communicating with the public is certainly a good first step for the company, but the automaker will need to continue to engage with its customers to make sure that its messaging is resonating and to optimize how it communicates updates to the public as it continues to deal with the crisis.

  1. Get the gut reaction of your customers.

Not all PR firestorms require the resignation of top executives. In fact, sometimes the public prefers if the leadership stays on board and fixes the problem. What if most customers wanted Winterkorn to stay on—to take the bull by the horns and to take responsibility not only for the alleged fraud but to rectify it? The fact is Volkswagen does not know.

Companies like General Motors and Maple Leaf Foods have done a great job weathering PR crises without a change in leadership. It’s critical for companies like Volkswagen to take a step back and listen to customers. What are their main concerns? What do they want the company to do? Instead of guessing, Volkswagen could engage with customers directly.

  1. Build a plan of recovery meeting customer needs.

Volkswagen will need time to rebuild trust with customers. To fix its relationship with the public, the company needs to make sure that its next steps are truly customer-centric. All of its next steps—whether it’s related to products, marketing or something else—need to be informed by customer insight to make sure that those actions help rebuild—not further harm—its reputation.

  1. Engage with your customers to avoid future PR disasters.

The allegations against Volkswagen have serious ethical and legal implications, but it’s critical to remember that not all PR crises are due to unethical behavior. Some of them happen due to mishaps or misinformation. Many advertising-related crises, for instance, are due to lack of ad or messaging testing.

In the end, a more robust system of getting customer feedback can help companies like Volkswagen get the insight they need to avoid further PR fiascos, regain customer trust and start their journey towards recovery.

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