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Who’s Sorry Now? CEO’s that do more harm than good

October 14, 2009 Comments

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This week something extraordinary happened. Akio Toyoda, president of Toyota Motor, apologized. Actually, he did far more than that. Here’s what he did:

1. He came clean. Akio admitted Toyota was shamefully unprepared for the global economic crisis and is a step away from “capitulation to irrelevance or death.”

2. He confessed declaring that the automaker had gotten too arrogant on “the hubris born of success” and the “undisciplined pursuit of more.”

3. He apologized to the local community impacted by their closure of a factory in California. Most importantly, he offered a heartfelt apology to the family and friends of those killed in a crash in August due to a floor mat jamming the accelerator. He apologized to reporters that were gathered there.

4. He articulated a renewed sense or purpose, stating “I want Toyota to return to profit, so we can start paying taxes and go back to contributing to society.”

5. Finally, he expressed humility saying, “I’m sorry I am standing on a podium, standing above you. But my seniors always taught me that I must stand when addressing those who are above me.”

We are all aware that such humility and apologies are a staple of Japanese corporate culture but even by their standards, this was a serious public statement. Yet my focus is not the cause of the apology but rather his willingness to do so.

As both the NYT’s and Dan Robles have noted, there has been a deafening absence of contrition by CEO’s in the banking, insurance and corporate world despite blatant self-interest and mismanagement that contributed to the loss of jobs, homes and livelhoods throughout the country and around the world. Not to mention the enormous damage (sometimes irreparable), they did to their brands.

Instead, the defiance of industry leaders like Rick Wagoner and their reluctant apologies have come to symbolize a breed of CEO’s committed to indentured thinking and practices. Such thinking cost GM an enormous amount of goodwill that the brand had spent years and millions of dollars to earn, and ultimately cost Wagoner his job. Yet CEO’s, even in the most difficult economy or after the most aggregious mistake, have the power to greatly benefit or harm their brand depending on how they handle it.

The role of a CEO is not just to put a corporate face on the brand for shareholders, but to put a human face on the brand for consumers.

An honest apology can be as effective as consistent profit in engendering consumer goodwill. It demonstrates that the CEO, corporation and its brand recognize their responsibility to consumers. It demonstrates that the CEO (and the brand) have an inclusive mentality that informs how consumers think they create their products, and it recognizes an awareness that the dynamics of communication between a brand and consumer have been changed forever by social media.

The power of social media was evident this week when Pepsi apologized for AMP’s new iPhone app that is disrespectful to women. This is already an enormous problem for the brand but is compounded by the fact that consumers are venting their fury like wildfire across social media. That’s why Pepsi had the good sense to send their apology directly to those most upset using the twitter hashtag #pepsifail.

Mr. Toyoda’s apology could never make up for its sales losses, the terrible loss of life in the accident or the damage that’s been done to its brand’s reputation, but it does minimize the damage, establish a place from which the brand can rebuild and credit consumers with an important role to play in the conversation.

As social media goes mainstream, brand stewards would do well to follow his lead as they seek to re-earn the trust and loyalty of consumers. Customers armed with social media don’t just want something to buy from a brand. They want someone to talk to, someone who listens and, yes, someone willing to apologize. Do you agree?

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