Foreign companies in China are in the cross hairs. Food quality scandals, allegations of bribery, product recalls, and other issues have arisen in quick succession, a reminder that multinationals doing business in China must be ready to respond to the unexpected, at any time. A few examples from 2013:
Chinese police charged GlaxoSmithKline with paying or facilitating payment of bribes to doctors and health officials to sell more of the pharmaceutical company's products.
Chinese regulators forced Volkswagen to recall more than 384,000 vehicles after a state-sponsored TV program criticized VW for not acting more zealously to protect Chinese drivers from defective gearboxes in some of its models.
The CEO of Apple apologized to Chinese consumers and promised to change its local customer service policies. This apology, like the VW recall, came after heavy criticism from state-run news media.
In China, concentrated government power and a hyper-social consumer base combine to make crises all but inevitable for foreign companies.
A case in point is KFC. The fast-food chain has had a rough time since December 2012, when a report by state-run China Central Television (CCTV) accused it of selling chicken that had been given unapproved antibiotics and growth hormones. A followup report by CCTV in May 2013 said the ice in KFC's soft drinks contained more bacteria than toilet water.
Those reports have caused many Chinese consumers to avoid KFC's more than 4,400 restaurants in China. The year-long decline in sales has hurt the financial performance of KFC's parent company, Yum Brands, which generates more than half its global revenues in China.
KFC's problems could have been greatly reduced by better communications. Instead, it learned that the consequences of a misstep in this market can be huge.
Some guidelines for crisis communications:
Build your crisis strategy around social media. Like consumers elsewhere, Chinese are quick to use the power of social media to put pressure on companies. In May 2013, a dissatisfied Maserati owner hired a team of men to smash his Quattroporte at the high-profile Qingdao Auto Show. Video of the demolition went viral and Maserati found itself in damage-control mode – all because of a single irate customer. A corollary to the rule above: Don't skimp on social media monitoring. Staying on top of company-related buzz can be hard in China, as Western executives who can't read Chinese won't be able to get a feel for the situation by looking at Sina Weibo. Make use of a good social media listening tool – one that works in different languages, translates accurately, and can track issues (and antagonists) in real time.
Shorten the chain of command. Crises are measured in tweets per second, and reputational damage in a crisis is often directly proportional to speed of response. Make local employees your first responders by empowering them to communicate in a crisis – rather than waiting for them to email New York, and wait for Legal to draft something, which gets circulated amongst a dozen people and approved three days later. Train them, ensure they know the company's key messages, and authorize someone local to speak to media as soon as the story breaks.
Become your own media outlet. Use "owned media" to show what you're doing to solve the problem. During China's recent milk scandals, New Zealand's government and its dairy producers could have posted online videos about their quality assurance programs, staff training procedures, maintenance, hygiene, and operations. Milk suppliers could have used staff as spokespersons to talk about their commitment to putting out safe products.
Remember who's boss. China's single most exceptional feature is that its one-party government wields unchallenged power. Apple should have recognized that earlier. Once state media went on the attack, Apple should have delivered a quick response. Instead, it took more than two weeks to issue an unequivocal apology. More baffling, the criticism began on World Consumer Rights Day (March 15), an occasion that Chinese news media and watchdog organizations have been reporting since 1986. Apple should have been prepared; instead, it was caught flat-footed.
Don't be afraid to apologize. PR experts and lawyers tend to lock horns over this, as an apology is often viewed as an admission of guilt -- with all the attendant legal implications. In China, however, an apology can often end a public crisis. But it has to be sincere. A heartfelt apology may have kept Apple's crisis in China to one news cycle rather than a fortnight of reputational damage. KFC, in its initial responses earlier this year, seemed to follow the same path as Apple, which issued several equivocal statements that only made things worse. Far from an admission of guilt, an apology can show concern and humility – qualities that can go a long way toward restoring calm in a crisis situation.