Organization Failures and Trust Repair - Case Study Example

Corporate Communication and Branding Name Institution Corporate Communication and Branding Importance of Trust Trust is one of the most critical aspects of management in the contemporary institutions or organizations. It refers to the judgment of ‘confidence reliance’ either in a person or within an organization. The trust model has three ideal dimensions: ability, benevolence, and integrity. These attributes are essential in increasing the willingness of the customers to take risks in dealing with the business entity in the course of trusting their operations. Trust is vital in the reduction of costs by organizations in the process of handling demands and expectations of the consumers. In addition, trust is essential in the improvement of the image and reputation of the business entity in the market and industry of transaction. From this perspective, trust contributes through development of an appropriate relationship with the business stakeholders and consumers for quality delivery of products and services. Siemens and Toyota have the opportunities to exploit trust in the development and improvement of appropriate reputation and image in the global context. Additionally, trust is valuable in the creation of appropriate environment for the increase in the productivity of the employees while reducing costs of operations at the end of the fiscal period. In the course of executing this research assignment, the focus will be on diverse cases of trust with reference to Siemens and Toyota with the purpose of understanding the mechanisms for the improvement or repairing of trust. The analysis will consider assessment of the root causes for the loss of trust for each incident. Moreover, the analysis will incorporate investigation of the effectiveness of the mitigation actions and consequences of failure to take these precautions. Case Study I: Siemens Root Causes of the Trust Issues In 2006, Siemens faced diverse accusations in relation to systematic bribery, which was vital in forcing the German engineering giant to overhaul its structures, leadership, processes, and culture. According to the regulatory investigations of the German engineering giant, Siemens, hundreds of employees had been siphoning off millions of Euros into ‘phoney consultants’ contract, false bills, and shell firms with the intention of offering massive bribes to acquire contracts. This was an illustration of organized irresponsibility, which brought humiliation to thousands of the employees, as well as fury among the shareholders. The scandal was a challenge to the operations and transactions of Siemens. This is through intense scrutiny of Siemens’ trustworthiness, questioning of the organization’s integrity, as well as the benevolence of the senior leaders expressing high level of incompetence in tolerating such practices. Response/Mitigation Actions In the course of curbing this scandal, the organization focused on adopting and implementing a systematic approach. In relation to immediate response, the organization focused on playing down the affair as a matter of few million Euros, which led to estimation of the sums to about 420 million within a month. The executive members focused on denying awareness or involvement in the issue with the intention of protecting trust, image, and reputation of the firm in the industry of transaction (Dietz & Gillespie, 2011). From this perspective, it is essential to note that the organization focused on implementation of the defensive acknowledgement in relation to downplaying the scandal prematurely. The mitigation actions were self-serving, thus did little to enhance stakeholders’ impressions of the Siemens’ integrity and trustworthiness. Most stakeholders viewed it as incompetent promoting the senior executives to make public pledges in the course of restoring the firm’s damaged reputation. Siemens focused on integration of internal inquiry to enable it have in place a system, which will be vital in the prevention and detection of unethical, as well as illegal conduct while serving as a benchmark for other entities. In addition, the organization concentrated on the need to adopt and incorporate reforming interventions through using the board to appoint Michael Hershman to act as its adviser in the act of trustworthiness demonstration in the course of minimizing corruption incidents. Siemens had to develop new set of strict rules and process with the purpose of guiding anti-corruption, as well as compliance across the global business to affirm trust within the institution. Another aspect of the mitigation action was hiring over 500 full-time compliance officers for improvement and controlling of the trustworthy conduct. These attributes relate to the ability of the institution to develop and incorporate new processes, personnel, procedures, leadership, and culture with the intention of improving effectiveness and efficiency of the organization to curb such issues in the future. Siemens focused on integration of a comprehensive program to aid training and educating employees on relevant anti-corruption practices. Consequences of Failure to address publicly the Issues and Make Changes Siemens would have diverse implications in relation to failure to address the issues publicly while making changes. In the first instance, Siemens would experience massive reduction in production with reference to decrease in trust from the relevant stakeholders (Dietz & Gillespie, 2011). In addition, the organization might have suffered from negative or damaged reputation because of the perception of the customers on the activities, as well as operation of the company. Moreover, Siemens might also experience adverse relationships with shareholders and stakeholders in the market and industry of transaction. There is also opportunity for massive loss of customer loyalty, which translates to the reduction in the profitability levels at the end of the fiscal period. This relates to reduction of the revenues and profits in relation to sales operations. Customer loyalty might also have substantial impact on the base of the consumers in the niche and industry of transactions, thus limiting the ability of the consumers to achieve goals and objectives with reference to competitive advantage. The scandal would also affect the image of the company, thus depriving Siemens on the exploitation of the potential and creative employees within the niche of engagement. This is vital in the reduction of the market share and penetration of the institutions in handling the images and reputation for appropriate profitability levels. There is also opportunity for massive reduction in the morale of the employees because of the increased essence of humiliation concerning corruption issues. These make it ideal for the organization to address the issues publicly while managing the image and reputation of the institutions for the achievement of competitive advantage. The loss of trust from the scandal would have social, economic, and psychological implications in relation to the operations of the organization in the market and industry of transaction. From this perspective, it is critical for an organization to handle these issues publicly with the intention of reducing damage to the customer loyalty, reputation, creativity, and morale of the employees while handling demands and expectations of the consumers (Karl, 2009). Re-building of the Companies Reputation I believe that the reputation and image of Siemens will improve because of the ability of the institution to incorporate appropriate and four-stage process in relation to trust re-building or repair. In the first instance, Siemens focused on incorporation of immediate responses such as integration of interventions against known causes, as well as utilization of verbal acknowledgement of the incident while expressing regret and announcement of the full investigation. Another element of improvement of the reputation is incorporation of accurate and systematic for effective and efficient re-building of the trust (Esterl, 2006). Additionally, Siemens focused on incorporation of appropriate reforming interventions such as administration of verbal apology and training of the employees on anti-corruption issues and aspects. These attributes are critical in improving the trust of the employees on the organizations prior to enhancement of the loyalty of the customers at the end of the fiscal period. Furthermore, Siemens will have the opportunity rebuild its image and reputation because of the ability and potentiality to integrate new leadership, processes, procedures, and culture with the intention of promoting new operations and structure of the business entity in the market of engagement. Similarly, the institution should consider execution of evaluation techniques and processes to ensure that the new structures are appropriate and effective in the achievement of competitive advantage in the market and industry of engagement (Esterl, 2008). Case Study III: Toyota Root Causes of the Trust Issues In the case of Toyota, the institution had to contend with substantial criticism in relation to its initial response to the own product recall crisis in 2009-2010. The business entity focused on exploitation of a subsequent program under the influence of reforms to recover or rebuild the trust or lost reputation of the organization in the modern context. On 28 August 2009, the emergency services in San Diego received a terrifying phone call from the back seat of a Toyota Lexus. It is essential to note that the car was accelerating out of control. During the encounter, the caller could be heard crying ‘we are now approaching the intersection! Oh, pray. Hold on and pray!’ Everyone in the car was killed (Dietz & Gillespie, 2011). Despite of its impeccable reputation for quality, as well as reliability, Toyota was in a sudden huge crisis concerning trust. The organization failed to act or react appropriate through integration of belated recalls, ineffective communications, inappropriate disclosure, and belated public apologies. These elements did substantial damage to the reputation in comparison to the tragic accident, thus massive reduction in the sales, market share, and customer loyalty or confidence. From this perspective, the root cause of these ethical issues is the perceived delay in identification and addressing the situation in the first place, thus the approach to ignore the situation until expressing of force to take action. Effectiveness of Mitigation Actions In attempts to minimize these trust and reputation issues, Toyota focused on issuing a statement two days after the crash with the intention of acknowledging the accident, expression of concern, and illustration of regret for the loss of life. In addition, the organization promised on the need to organize and execute full investigation while associating with the National Highway Traffic Safety Administration, as the regulator. Nevertheless, Toyota declined to comment substantially on the possible causes through informing stakeholders to eliminate or avoid speculation and allowing investigation to run its course. Moreover, Toyota was forced to issue explicit warnings, as well as advice to customers while providing the platform for recalling 3.8 million of the affected vehicles, one month after the San Diego crash. The actual recall had to wait for another one month. These mitigations did not prove effective or appropriate since Toyota had to deal with further humiliations from the regulator deeming the information to the public as inaccurate and misleading. The organization focused on integration of public apologies with the purpose of encouraging the employees and customers, as well as relevant stakeholders on the potential direction by Toyota towards repairing the trust. The mechanisms towards handling the issue were effective and appropriate, but did not come on time in accordance with the expectations and demands of the customers and employees following damage to the reputation and image. Consequences of Failure to address the Issues publicly and Make Change In the first instance, inability of Toyota to address these issues publicly would have adverse limitations and implications in relation to the image and reputation of the company. For instance, employees and customers would lose substantial confidence and loyalty concerning the operations and activities of the company in pursuit of competitive advantage in the market and industry of transaction. It is also critical to note that the institution could face massive reduction in the market share and penetration while adhering to the demands and expectations of the consumers (Carroll & McCombs, 2003). The reduction in the number of consumers would contribute to the reduction in the profitability levels at the end of the fiscal period. The scandal would also reduce trust among shareholders and stakeholders in their interactions and transactions with the business entity in the market and industry of engagement. The public had a negative perception of the Toyota business entity because of the failure of the institution to act on handling demands and expectations of the target audiences. The failure to handle the trust scandal effectively was vital in deterioration of the image and reputation of Toyota in the global context, thus reduction of its ability to compete appropriate against other players in the automotive industry (Quelch et al, 2011). From these illustrations, it is critical for the Toyota to adopt and incorporate appropriate mechanisms in handling deterioration of the trust and reputation of the organization in the global and domestic contexts in addressing demands and expectations of the consumers. Re-building of the Company’s Reputation I believe Toyota has the ability to rebuild its reputation and image. This is through focusing on the quality and incorporation of appropriate mechanisms with the intention of curbing the problem in future encounters. In addition, the ability of the organization to offer quality apologies to the public has been critical in ensuring that the organization concentrates on convincing customers and employees into incorporating diverse change elements. Toyota has the potentiality of handling these issues in the course of building its reputation through ensuring that it acts effectively and efficiently in accordance with the demands and expectations of the consumers. The attribute will be ideal in the improvement of the image and reputation of the firm, thus the opportunity to increase profitability levels at the end of the fiscal period. Toyota also focused on integration of the most appropriate immediate response approach in handling or minimizing the issue of trust among the customers (Fan et al, 2011). The approach is critical in the integration of the platform for the improvement of the image and reputation while motivating employees to promote implementation of the new structures and culture in the course of handling the needs and preferences at the end of the fiscal period. These attributes are ideal in the improvement of efficiency and effectiveness while providing quality services and products in the global and domestic contexts. From these illustrations, I believe Toyota will have the opportunity to improve its impeccable image and reputation in the global context. Recommendations Conclusively, Siemens faced diverse accusations in relation to systematic bribery, which was vital in forcing the German engineering giant to overhaul its structures, leadership, processes, and culture. According to the regulatory investigations of the German engineering giant, Siemens, hundreds of employees had been siphoning off millions of Euros into ‘phoney consultants’ contract, false bills, and shell firms with the intention of offering massive bribes to acquire contracts. On the other hand, Toyota had to contend with substantial criticism in relation to its initial response to the own product recall crisis in 2009-2010. The business entity focused on exploitation of a subsequent program under the influence of reforms to recover or rebuild the trust or lost reputation of the organization. These entities should focus on implementation of the four-step process in relation to improvement of the image and reputation with the intention of improving profitability levels and maximization of the customer loyalty and confidence at the end of the fiscal period. In addition, appropriate and immediate response is vital as the first step towards ensuring that the organizations improve their reputation following the occurrence of any scandal or incident affecting its transactions in the global and domestic contexts. References Dietz, G & Gillespie, N. (2011), “The Recovery of Trust: Case Studies of Organization Failures and Trust Repair.” Institute of Business Ethics, 1-40. Dietz, G & Gillespie, N. (2011). “Building and Restoring Organizational Trust.” London, Institute of Business Ethics. Karl Sidhu, (2009). “Anti-Corruption Compliance Standards in the Aftermath of the Siemens Scandal.” German Law Journal, 1343-1354. M. Esterl, (2006), “Corruption probes threaten Germany’s image.” Wall Street Journal, p. 3. M. Esterl & D. Crawford, (2008), “Siemens pays huge fine in bribery inquiry.” Wall Street Journal, p. 1. Quelch et al, (2011), “Toyota Recalls: Hitting the Skids.” HBS Case 9-511-016, Boston: Harvard Business School Publishing. Fan et al, (2011), “The Toyota recall crisis: Media impact on Toyota’s corporate brand reputation.” Paper presented at the 2011 conference of the American Association for Public Opinion Research. Carroll C, & McCombs M, (2003), “Agenda-setting effects of business news on the public’s images and opinions about major corporations.” Corporate Reputation Review, 6 (1), 36-46. Read More