It would be an understatement to say that September 2016 was a bad month for Samsung. Every iteration of the news cycle brought another story about the company’s exploding smartphones, bans from bringing the phone onto airplanes, and regulatory actions aimed at limiting damage experienced by the phone’s owners as well as the company. How well the company is able to survive this situation will not be known for several months or years, but at least five principles can be distilled from Samsung’s public crisis management efforts. Any company that faces a crisis would do well to absorb these principles.
1. The customer’s safety is a paramount consideration.
Tylenol pioneered this lesson in the 1980’s and it remains time-tested through to the present day. Samsung reacted a bit more slowly and inconsistently at first, but when the problem continued it doubled down on its efforts to recall all of its smartphones that may have been affected, first offering replacement phones and then a cash refund. In the process, Samsung earned a small measure of goodwill as its efforts were perceived, in part, as a concern for the safety of its customer base.
2. Accurate communication is important.
Samsung was less successful on this front as it delivered mixed and contradictory messages in the early days of the crisis. For example, Samsung initially reported to its Hong Kong customers that their phones included a battery that was not prone to overheating and explosions, but within twenty-four hours, the company retracted that statement when reports of exploding phones in Hong Kong arrived at the company’s headquarters. Samsung’s also initiated its voluntary recall in the United States without coordinating those efforts with the Consumer Products Safety Commission (“CPSC”). The company then did communicate with the CPSC, as it was required to do under applicable regulations. Its quick but contradictory early responses had a serious adverse effect on the company’s balance sheet.
3. Meet your investor’s expectations.
Public and private companies each face very different investor expectations, but in all cases, investors will be more likely to be satisfied and to keep their money in the company if the company demonstrates efforts to understand investor concerns. Few investors will expect company management to have perfect answers during the initial outbreak of a crisis, but they will want to see that management is devoting adequate resources to crisis control and that management’s efforts are being communicated to investors. A company may find it difficult to communicate with investors when the crisis is exploding everywhere, but management needs to appoint a person or team to reach out to investors to answer and quell their concerns.
4. Manage the flow of information.
Samsung’s quick initial response might have created an impression that the company was fully ahead of the crisis and that it was operating with a complete basket of information. Samsung may have been better served by issuing a less aggressive initial communication with a later follow-up that reflected the company’s intentions after it had digested the full scope of the problem. Too much information can be as detrimental as too little information during the early part of a crisis. Try to understand how each communication will be received and interpreted and frame the communications to build on each other, rather than to create unrealistic expectations.
5. A complete recovery will take time.
Samsung is slowly getting its crisis under control. The company’s bigger problem will now be to sustain its reputation and the reputations of its other products in markets that were not affected by the crisis and to recover its reputation in the smartphone market. Many companies, including Tylenol, have demonstrated that recovery is possible. Audi, which faced problems with unexplained acceleration problems with its cars in the 1980’s, not only recovered but came back stronger and with greater value and prestige. Full recovery will extend over a period of years, however, and will require patience and careful management. A company’s managers will also need to exercise extreme diligence to prevent further crises that can wipe out any interim gains.
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