Toyota's Reputational Risk

A friend and colleague from Oxford (Mike Barnett, Director of the Saïd Business School Center for Corporate Reputation) sent me a brief Op Ed he penned about the challenges Toyota faces in preserving its reputation for quality (see Toyota Can Still Save Reputation). Mike writes:

A good reputation is a dangerous thing.  If no one thinks highly of you, and you do something bad, it makes little difference. You have nothing to lose: but if you are standing high on a pedestal and you do something bad, causing you to wobble and waver, you have a long way to fall.

Toyota was high on a pedestal, reputed for its superior quality, and then life-threatening defects captured media attention.  How far will Toyota fall?  It depends upon how quickly Toyota can capture the conversation.

To stop its descent and recover its reputation, Toyota must give people something positive to talk about.  Errors are inevitable, especially in something as complex as automobiles; recalls are a regular feature.  It is the hesitance and delay in initiating a recall, not the recall itself, which has made this into a bigger reputation destroyer than it might have been otherwise.

Toyota has an opportunity to show that, even though it may sometimes mess up, it will always make good.  This will turn the conversation to, “Hey, even when Toyota hits a bump, it is always looking out for the customers’ welfare”, and away from “Toyota screwed up and won’t admit it, so I can’t trust them”.   Do this, and the public is quick to forgive, or at least forget.  Where Toyota does not want to get bogged down is in publicly battling over fault with its sticky pedal supplier.  Avoid the Ford-Firestone trap, as the conversation will continue to drag on in the negative.

Interesting. And some wise advice.

Toyota is taking some well-deserved heat for its delay in issuing a recall in the face of evidence that problems existed with its accelerators. In fact, Toyota long maintained that there was nothing wrong with its accelerators. At first it cited driver error, until the evidence suggested that there could not possibly be so many horrible drivers. Then they shifted the blame to faulty floor mats. Strike two.

At this point, Toyota would be wise to issue (and reiterate) mea culpas. Toyota cannot apologize too much. It should then, as Mike Barnett suggests, handle the situation in an honest and transparent way – keeping the public apprised on an almost daily basis. And once it identifies the defect, claiming that a solution has been found is not enough. The problem (and its solution) must be described in detail, and in a way that customers can understand. They need to detail what happened, and why. They then need to describe how their fix remedies the problem in a non-technical way.

Halting production until they find a solution is certainly a good (however costly) first step; but along the way, Toyota ultimately needs to redeem itself in the eyes of the consumer. It is important for Toyota to understand that how it bounces back is not simply a function of how quickly it can find a fix, but also in how quickly it can win back the public trust.

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2 Responses to Toyota's Reputational Risk

  1. V P Kochikar says:

    It’s certainly true that “the higher they go, the harder they fall”. All large companies walk on this knife edge on a daily basis.
    As for Toyota’s current travails, I have always been astounded at the ease with which big auto companies can release cars with life-threatening defects (such as faulty gas pedals) and then glibly recall them. That said, it may be unfair to single out Toyota now for harsher action (as the US govt. appears to be contemplating), given that such sloppiness has been more or less standard auto industry practice for decades.

    I think all things considered Toyota has managed the fallout reasonably well, and probably has enough goodwill built up over the past few decades to tide over this situation. Had Toyota built its reputation on a singular safety plank (such as Volvo has, for example) it may have been in a far harder situation today.

  2. Timur Sakayev says:

    I believe it was Toyota that had to make a recall on Lexus in ’89 and managed to do it in a very short time winning praise in the industry for handling things. I wish they could do it, though, of course the numbers are different by few orders of magnitude. Nevertheless, I think they could still save the face.
    Unfortunately, at the rate it’s going, it’s going to hurt reputation of all japanese cars.
    Some irony – here is something I was told when I mentioned I’m not interested in buying american cars – “Then you should buy japanese, but be prepared for recalls” (coming from owner of a Ford Explorer)

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