Role Of A Leader In Managing Crisis. Toyota case study - Essay Example

? TOYOTA Table of Content ROLE OF A LEADER IN MANAGING CRISIS 4 External forces 5 Internal forces 5 Dysfunctional organisation culture 6 Crisis cannot always be spun 6 Leaders should work along with the members 6 Leaders are required to serve organisation and the community 6 CRISIS MANAGEMENT 7 1.Prevention 8 2.Preparation 8 3.Response 9 4.Revision 9 ROLE OF INTERNAL COMMUNICATION 9 A.Audience targeting 11 B.Lobby groups 12 C.Spin 12 D.Meet and greet 12 IMPACT OF CORPORATE CRISIS 13 Reference 16 Bibliography 18 ROLE OF A LEADER IN MANAGING CRISIS Crisis management is the process which needs to be institutionalised by a leader. A leader’s qualities lie in foreseeing and preparing for the crisis that may occur in the near future. An effective leadership involvement and support is very essential for the crisis management method. A leader’s primary role is to set the goals for the crisis management strategy which requires to be based on the organisation’s values. Leadership qualities are measured through the commitment involved in drafting crisis problem along with the firm’s top management. Further identifying the levels of problem related to crisis management will enable a leader to create a friendly and supportive environment in the organisation. The next step for the leader lies in identifying the team to lead the crisis management. The purpose of the team will be to identify the crisis in the organisation. The main role of the leadership here will lie in empowering the team and making the team competent to analyse the crisis by different components such as process, location, pressure, market place and industry (Goel, 2009, p. 247). The tertiary role of the leadership is to implement strategy leading to effective communication with both internal and external sources such as employees, stakeholders, partners, etc. Apart from this regular training to the employees regarding crisis management is another important aspect to measure the leadership attributes. External forces An organisation’s ability to identify external forces which can impact the internal environment of the organisation is an important mechanism related to crisis management. This requires the incorporation of scrutinising mechanism by the leadership to continuously analyse the external forces and convert them into values for the organisation and the members associated with it. Example: A hospital’s ability to foresee the impact of technology advancement and the ability to adopt the latest technology in its various departments can be adjudged as the modification in its internal atmosphere to convene the fundamental change in the external force related to technology (Porter-O’Grady & Malloch, 2010, p. 230). Internal forces Like external forces, the internal forces too have an impact on the organisation and its ability to adapt itself in the changing environment. It is important for the leadership to maintain a balance between work and process to be able to change the work mechanism as demanded by both internal and external forces. This concept of liveliness is very important for the leadership to understand the current dynamics of work. Example: Distribution channel of pharmacy, supply chain management of materials are the representatives of internal work structures and needs to change with the changing environment. Akio Toyoda’s response in related to the Toyota crisis can be examined in a more illustrated manner in the following manner: Dysfunctional organisation culture The leaders of Toyota are the main culprits as they are the ones responsible for the crisis. Akio Toyoda took the control of the organisation when it was not in best of shape; expert advice was often neglected over safety measures which ultimately had an impact on organisation. Crisis cannot always be spun Akio Toyoda made the mistake of taking the situation lightly and not paying much heed to the consequences. Instead of responding that the organisation is replacing the faulty parts and will keep doing the same in the near future, Akio Toyoda should have emphasised on not making the mistake again. It was more like trying to spin the crisis situation than handling it (Hbr, 2012). Leaders should work along with the members Akio Toyoda was late in realising the fact that he needs to work together with the members of organisation to build trust and loyalty and develop a crisis management mechanism. Leaders are required to serve organisation and the community Innovation has always been the prime motive for Toyota along with safety measures in its vehicles which made it the largest company in the world. But off late innovation was given more priority over safety which resulted into major crisis for the company. Akio Toyoda should have been more alert in noticing this fact and acting upon it before it was too late. CRISIS MANAGEMENT Toyota was well on the road to become the most trusted brand in the car segment when suddenly the things turned for them. The crisis first began with the former CEO Katsuaki Watanabe being ousted for the company’s poor development and safety issues. But the major problem erupted when Toyota had to recall its vehicles for the faulty floor mats. Toyota was unaware of the big crisis awaiting and was more concerned in replacing the faulty parts. Soon the problem related to the vehicle parts turned into major crisis as the company was being criticised all over the world. More and more people were coming up with the problem in their vehicles. Toyota which was till now being hailed as the best company in terms of safety measures soon saw its brand image being diminished. The company is to be blame for such crisis. Toyota, though facing problem never anticipated that the problem could turn into a major crisis for them. Moreover the company was itself waiting for the crisis to happen as it lacked any preventive measures to manage the crisis when it just started. Toyota as a company never imagined that it would have to face the criticism to such extent. The floor mat problem soon extended to the accelerator paddle. It was not the problem of company’s usual model but with the brand such as Lexus which is known for its reliability in the market. The company’s anticipation in judging the crisis was wrong; the leadership lacked the commitment and involvement towards crisis management. The leadership of the company was more interested in offering the reason for the problem rather than finding a permanent solution to it. This behaviour of the company’s leadership led to the crisis become a major issue which otherwise required a quick action. The company through planning and implementation of crisis management could have prepared itself in a better way to minimise the impact of crisis. Crisis management involves four important components which could have been adopted by Toyota 1. Prevention Prevention or mitigation is the response which involves the leadership’s action in preventing the crisis. The leadership at Toyota should have looked for the preventive measures in the crisis situation. The company was required to recall all it units with faulty parts before it caused any serious injury to the customers. It’s not new that a company gets some clue regarding the upcoming crisis, but important factor lies in taking required action before its too late. Moreover prevention goes unnoticed by the public but can help a company to prevent its brand image from being tarnished. Toyota failed to do so which led to bigger trouble for the company. 2. Preparation Preparation is the next step involved in minimising the impact of crisis. Preparation is related to the planning with respect to crisis management. Crisis management plan is something which every company needs to have in its itinerary. Preparation is not only about crisis management plan but it involves crisis assortment, communication selection as well. Toyota lacked the preparation factor which involved crisis management plan to overcome the crisis. This affected the company to a great extent (Coombs, 2011, p. 5-6). 3. Response Response can be defined as the function in context to the preparation process during crisis. For a successful crisis management plan it is important to analyse the preparation factor regularly. Toyota’s response to the problem was late and this was the prime reason for the development of the big crisis which hampered the company’s image globally. 4. Revision The revision component involves the assessment of the company’s response to the crisis. The evaluation involves the practices carried out by the company in tackling the situation and analysing the result at the end. The result emphasises on the methods which were successful and which needs to be upgraded. Toyota’s leadership could have adopted this component to evaluate its prevention, preparation and response factors. This would have allowed Toyota to come up with different action plan and eventually helped it to minimise the impact of crisis. ROLE OF INTERNAL COMMUNICATION Internal communication can b defined as the process of exchange of information between the management of an organisation and its internal staff. Internal communication can help the company to manage crisis in a better way. Communication between the internal staff and the management has become an important tool in today’s business scenario. Toyota which faced serious crisis should have emphasised on improving the internal communication within the company. The process of internal communication does not only focus on the relationship between the employees and the management, but in a true sense it is also the process which leads to the improvement of relation between the stakeholders and the company management as well (Butterick, 2011, p. 103). Internal communication is an important process in fulfilling certain roles: Efficiency: A good internal communication would have helped Toyota to circulate the required information of the company related activities. Shared meaning: Toyota further should have employed internal communication to improve the understanding of the internal staff about the objective and the goal of the company. Connectivity: The Company would have also benefitted in clarifying the relationship between the internal staff and Toyota’s various activities through internal communication (van Riel & Fombrun, 2007, p. 188). Satisfaction: To overcome crisis a company needs the support of its employees. Internal communication was the right tool for Toyota to build trust and loyalty amongst the employees and its stakeholders. Public relation is an important tool in context to the internal communication for an organisation. Public relation can be defined as the process of managing the sharing of information between the clients and the organisation. The practice of public relation is to gain trust for the company amongst the stakeholders. Public relation plays an important role in obtaining the objective of the company. Toyota could have used the public relation practice towards effective internal communication process. The main aim of the public relation in maintaining the internal communication is as follows: i. Product awareness through various public relation activities involving the employees as well ii. Creating interest about the product amongst the public iii. Sharing information about the product with the customers and internal staff iv. Stimulating the demand of the product v. Brand reinforcement is important to build or maintain positive image of the company The practice of public relation is not limited to the consumers or stakeholders, employees are an important part of the public relation process. Internal staff is the force behind any company’s success or downfall. Toyota’s crisis can be very much related to the lack of company’s public relation practice which had a great impact on the company’s image in the global market. There are various public relation methods which could have been applied by the Toyota Company to build an effective internal communication between the internal staff, stakeholders and company along with the customers. These public relation methods can be discussed below: A. Audience targeting The primary technique which is used in the process of public relation is targeting specific audience. The target audience can range from employees to the stakeholders. For a company like Toyota which is facing one of the biggest crises should have opted for the target audience preferably focusing on its customers, employees and stakeholders to reassure them that the company is bringing in the change to overpower the crisis situation. B. Lobby groups Another public relation method which could have been implemented by Toyota to establish groups which can presumably influence the opinion of public, government, stakeholders and employees. The lobby groups would have been a successful method in revamping the image of Toyota during the crisis time (Debasish & Das, 2009, p. 134). C. Spin This method of public relation needs to be opted very carefully by an organisation. Toyota was facing criticism from every corner and this technique would have been very resourceful in portraying itself in a positive manner. Sharing certain information to divert the attention from the main topic is an important aspect of this technique. D. Meet and greet This technique is about increasing the communication level by organising meetings. It will allow employees and stakeholders to become an important part of the decision making process of the company. Moreover, employees will be greeted with incentives to further enhance the communication level and building loyalty and trust amongst them. IMPACT OF CORPORATE CRISIS The world is changing, so is the corporate world. The companies no more get the leverage of functioning at will. The corporate world has come under the radar of internet which has enabled people around the globe to measure the credibility of the companies. It can be said that companies have become a part of democracy where people chooses and elects the best company based on performance. Further media has become the voice of the people and constantly scrutinises the companies for their wrong doings. The companies and their performance are no more hidden facts to the public and the shareholders. A major corporate crisis can directly be linked to the reputation and image of the company. The reputation of the company is badly affected after being involved in a major corporate crisis, which eventually affects the success rate of the company. Company’s image has become all more important in terms of its share price, customers, employees, stakeholders, etc (Firestein, 2009, p. 12). A major corporate crisis is more of a long term effect than short term as it has a great impact on the reputation of an organisation. The people associated with an organisation starts losing faith in the company. It takes time to build trust but a slight mistake and the image can be tarnished. The company then have to start all over again to win the trust and faith of people in the company and its products. In some cases the impact is short term also depending on the kind crisis management plan implemented by a company. Toyota soon after overtaking General Motors and becoming the world largest car manufacturing company was being hailed as the pioneer in reliability and safety measures. But, soon the company was badly affected by a major crisis involving faulty parts replacement which forced the company to recall as much as 4.4 million cars. The company faced even bigger crises when the problem related to sticking of accelerator paddle was reported in its most trusted luxury brand Lexus. The impact was huge. Toyota faced criticism for its negligence from all over the world. The leadership of Akio Toyoda was doubted in restructuring the company fortunes by implementing a crisis management plan. But the company though being late in responding acted well to use effective public relation method. The impact of the crisis was short lived as the very next year company topped the sales of car beating its rival General Motors. Another example of major crisis is British Petroleum which was involved in oil spill in the Gulf of Mexico. This crisis faced by the British Petroleum (BP) is bigger than can be imagined. The oil spill case is regarded as top most catastrophes occurring in USA which resulted into environmental concerns. The impact of this crisis was huge on the company as its image further depleted in the market. BP was adjudged as the one the worst companies to neglect the safety measures. Though BP is reckoned as one of the largest oil exploration company in the world, its reputation has taken a backseat. BP’s public relation methods have failed miserably to improve the image of the company. People still feels that another such incident may occur. BP constantly tried to convince its shareholders, consumers, employees, legal authorities by spending heavily on the public relation activities. The company’s plan failed, BP has lost the faith and this is to remain for a longer period of time considering the fact that it was no ordinary crisis (Vidal, 2011). Other companies like Ford, General Motors have also faced crisis but was short lived as their crisis was similar to the Toyota’s which resulted in the recall of cars with faulty parts. The effects of crisis whether major like BP’s or one related to Toyota have equal impact on the reputation of the company. The outcome for the companies is same as every company has to face the criticism regarding their involvement in the crisis. Reference Butterick, K. (2011). Introducing Public Relations: Theory and Practice. USA: SAGE Publication Ltd. Coombs, W. T. (2011). Ongoing Crisis Communication: Planning, Managing, and Responding. USA: SAGE. Debasish, S. S & Das, B. (2009). Business Communication. New Delhi: PHI Learning Pvt. Ltd. Firestein, P. (2009). Crisis of Character: Building Corporate Reputation in the Age of Skepticism. USA: Sterling Publishing Company, Inc. Goel, S. (2009). Crisis Management: Master the Skills to Prevent Disasters. New Delhi: Global India Publications. Hbr. (20120. Five Leadership Lessons from the BP Oil Spill. [Online]. Available at: http://blogs.hbr.org/corkindale/2010/06/five_lessons_in_leadership_fro.html. [Accessed on 7 April 2012]. Porter-O’Grady, T & Malloch, K. (2010). Quantum Leadership. USA: Jones & Bartlett Learning. Van Riel, C. B. M & Fombrun, C. J. (2007). Essentials of Corporate Communication: Implementing Practices for Effective Reputation Management. USA: Routledge. Vidal, J. (2011). BP's PR campaign fails to clean up reputation after Gulf oil spill. [Online]. Available at: http://www.globalexchange.org/news/bps-pr-campaign-fails-clean-reputation-after-gulf-oil-spill. [Accessed on 9 April 2012]. Bibliography Trench, R & Yeomans, L. (2009). Exploring Public Relations (Ed.2). London: Prentice-Hall. Read More