Trust is an essential element in satisfying your customers and keeping them in your camp. Volkswagen has now lost this trust by admitting it installed programs in their diesel vehicles designed to falsify the vehicles’ capacity to record and report emissions.
It will take considerable effort and money to regain this trust.
Almost as soon as this situation came to public attention, VW’s CEO Martin Winterkorn resigned. This was a good move by a CEO who is ultimately responsible for his company’s activities. His replacement, Matthias Mueller, began his term by claiming that four employees were suspended over the deception. He added, however, that he did not believe that top management could have been aware of the scam that has been ongoing for a few years.
Michael Horn, the company’s CEO for North America, called his company’s admission “deeply troubling”. He went on to say “We have broken the trust of our customers, dealerships, and employees, as well as the public and regulators.”
He added, however, that, “This was not a corporate decision. There was no board meeting that approved this”.
When a company is caught misleading its clients or selling faulty products it should assume full responsibility, announce in great detail what it plans to do to rectify the problem, and face the consequences head on.
In this case, Horn and Mueller distanced themselves from the company’s behavior, saying they felt personally deceived by actions they blamed on unknown individuals, thus making themselves the victims rather than VW’s clients.
Mitigating the apology and resignation by passing the blame onto others is not effective crisis communications and only dilutes the sincerity of the message.
VW’s CEO should have limited himself to assuming full responsibility and outline what the company would do to address the issue.
Contrast VW’s poor messaging with Johnson and Johnson’s handling of the Tylenol crisis some thirty years ago. Then, J & J took full responsibility for the poisoning of a number of Tylenol bottles that killed several people. It immediately withdrew all Tylenol products from the shelves at a cost of $100 million and designed a tamper proof bottle prior to reintroducing the product to the market. Although J&J had no responsibility for what had happened, the quick action by senior management set a new standard for corporate social responsibility, and Tylenol today remains the top-selling analgesic worldwide. Despite the increased magnitude of VW’s exposure in the billions of dollars, the key elements of J&J’s successful strategy remain the model for corporate behavior in such crises.
In crisis communications, the cardinal rule is to empathize with the victims, accept full responsibility for the actions of those you lead, and underscore your plan of action to rectify the situation.
In this case, VW’s messaging has been hesitant and unclear, and the effect on its reputation is going to be harsh.