Resiliency lessons from Toyota recall crisis

The Toyota Recall Crisis

For the second blog post, I will be writing about resiliency because I think it is highly relevant to us as individuals and also to organisations as sudden changes in the macro environment or internal operations of the firm can easily result in failures that require them to “bounce back” and be integrated once again into the global economy.

Coincidentally, in another MNO class I am currently taking, we discussed about the Toyota recall crisis which I believe is highly relevant and would like to share with the class. I have also attached the case at the start of this blog post for referencing. Key issues that led to Toyota being sunk into this situation involve its over-confidence and complacent mentality. Post recall crisis, Toyota admitted that it grew too big and too fast and has let standards fall. Not only that, they over stretched their supply chain management and had poor supplier management. However, it is important to note that Toyota was unable to recover fast because of the deficiencies in effective communication. Thus this case will act as a negative example of how poor communications management led to delay in recovery of the firm and also emphasizes on the importance of proper communications as a way to assist in crisis recovery.

The lack of communication led to confusion amongst employees that affected company morale. This also did not sit well with the general public who lost confidence in the company and product quality. Such negativity will sink Toyota further instead of aiding in the company’s recovery. In fact, I believe that the company requires higher transparency and communicate more effectively to their employees and stakeholders not only when crisis appears, but even before the happening of crisis to help build resilience.

Communication should have taken place in three stages:

Stage 1: Pre-crisis
The company should actively communicate company goals to employees to instill faith in company. Current performance of the firm and future possible challenges may also be addressed to allow staff to have a better understanding of the current positioning of the company. The company should also actively look out for potential sources of crisis to avoid such happening in the first place.

Stage 2: In the midst of crisis
When crisis happens, the company should actively search for the source of problem and at the same time, communicate with staff to be more involved in company decisions. At the same time, the company should inform stakeholders of the crisis and assure them of efficient management of such a crisis. Empathy and emotional support should also be communicated to those affected to show that the company is there for them and will be answerable for the crisis. This should be done as soon as the crisis strikes to prevent speculations and help clear up possible misunderstandings.

Stage 3: Post-crisis
The company should continue to communicate to different stakeholders to demonstrate that the company is working hard to eradicate the root of the problem and is toiling towards preventing future repeats. The sincerity of the company will allow stakeholders to see that the company is open about mistakes and willing to change for the better of the people. The company should also communicate effectively to staff to regain back any lost confidence and bond everyone together to be better equipped for future crisis should it happen. This will also facilitate understanding and acceptance, and allow staff to collectively build common agenda for actions.

However, from the above, we can also see that a purpose driven leader is important to help make the company more resilient because he has to have a clear sense of mission in order to allow the company to communicate efficiently. The leader may also use culture, moral spirit and management support to help support actions in order to improve resilience of employees and improve their overall beings. It is also necessary for the leader to strengthen the psychological capital of employees by injecting a sense of self-efficacy and enhance feelings of hope and optimism that the company will recover from the crisis soon enough. The leader may also try identifying “shock absorbers” such as social support from peers and family or recognition by customers or superiors that will help the staff tide over the tough times and build resiliency in the face of crisis and challenge.

In conclusion, effective communications is the key to building resiliency in a company. It is only when the crisis is addressed in a timely manner can employees and the stakeholders instill confidence in the company and assist in its recovery. Unnecessary speculations are detrimental to the company’s image and is hard to recover once damaged. A purpose driven leader is also crucial to help direct the company and lift it out of the crisis with a clear direction.

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