Japan has long been associated with quality products. But as companies like Toyota, Takata, Mitsubishi Motors and now Kobe Steel have shown, product-related scandals are also a fact of life. The latter company is now under investigation for the falsification of data relating to the durability of its metals.
Understanding how to communicate effectively in times of crisis, particularly overseas, can make the difference between restoring corporate reputation and allowing it to sink without trace. Kobe Steel’s share price, for example, has fallen around 40 percent since the issue came to light in early October.
Against this backdrop, we asked Michael Gross, the New York-based vice-chairman of WPP communications consultancy Finsbury, who was in Tokyo this week, for a perspective on the strengths, weaknesses and essential requirements of Japanese companies when communicating in major markets such as the US. Japanese corporations Finsbury has worked with include Toyota, SoftBank, Sumitimo and Takeda.
How well do you think Kobe Steel is handling its crisis from a communications point of view?
It’s very early in the crisis so we’re going to have to see how it plays out. Problems have come to light and they’ve said they’re investigating those problems and they need to be careful what they say. They need to get their ducks in a row. It’s a question of getting the facts together and really trying to do some serious scenario planning for all eventualities, taking into account whatever legal or customer challenges they might face. It could be Japan-centric but it could be on an international stage, so they have to plan for all contingencies, for all audiences and for all markets.
Are Japanese companies getting better at dealing with crises?
Some Japanese companies have gotten better. I certainly think Toyota [a long-standing Finsbury client] has learnt from its experience, in particular with the recall crisis. Generally speaking, Japanese companies still face the issue of being very consensus-driven and tend to be slow moving in developing business and communications strategies. Different companies have varying degrees of control over their international operations, and that complicates dealing with crisis situations, because [crises] by definition move very quickly. You need to have an ear to the ground to make sure whatever messages you give are resonating. The same goes for acquisition opportunities. It’s an increasingly protectionist environment under Trump and in Europe, so you need to be mindful of the political situation and outside stakeholders who can have an impact on the outcome.
Do you think the elements required for effective communications vary dramatically between Japan and the US?
In the US what we’re seeing are crises that are culture-driven. Think about the sexual harassment cases at Fox and at Uber. Those cultural concerns are very important in the US market. Even highly regarded companies like Facebook and Google are being held more accountable. The bar of accountability is continuing to rise, and Japanese companies doing business in the US need to understand that. The litigation environment keeps getting more complex and it’s not necessarily the same in Japan. Shareholder activism is also on the rise: no company is too big to challenge. P&G is the latest example of a mega company challenged by shareholder activists. These are trends Japanese companies need to be mindful of, because they can also be exported to Japan.
You have worked with Japanese companies over several decades. How have you seen them change their approach to communications to be more successful in dealing with major problems?
Toyota in my view has done a terrific job of rebuilding trust post-recall. In 2010 they were subject to increased scrutiny and very complex litigation, and as a result they’ve changed the way they do business and communicate in the US. In particular, they changed the way they communicate their corporate story. They never really focused on getting that across to stakeholders as much as they did the quality of their vehicles, so they had to engage more aggressively in telling their corporate story. They became more proactive.
Is the average Japanese company proactive enough in telling its story?
Generally speaking they are not. They have not necessarily developed global communications strategies that are consistent across the board. There are differences between companies but as a general rule, Japanese companies can learn from international best practices. Communications is still a science they haven’t embraced. There are cultural issues and a tendency not to be boastful, but sometimes that results in saying too little.
What’s the impact of saying too little?
If a company has an issue and doesn’t defend itself, it allows the narrative to be defined by others who may be hostile to its interests. We work with law firms and we’re seeing increasing sophistication among them in realising that saying nothing is not always the best policy. Lawyers have come to realise that working with communications professionals, you can say things to educate the media behind the scenes and get the key points across that can help contain public reputational damage over years before the issue comes to court.
What common mistakes do you still see companies (not limited to Japanese companies) make in their communications?
Underestimating the impact of an issue; trying to push it down the line [to more junior staff]; being tone deaf—saying the wrong thing, which may indicate insensitivity to consumers; not appearing to take something seriously enough. By the same token, companies can get in trouble by acting too fast and then having to retract. Equifax made a crisis worse: they didn’t have the infrastructure set up, and they made the cardinal error of charging customers to fix the problem. That’s what I mean by being tone deaf.
How big a role does the CEO need to play in getting the right message across when dealing with an issue?
With the rising bar of accountability, CEOs need to be very mindful as company leaders—they have to make a judgement when and where to be in the public eye, whether to fight back… Those are decisions they have to make and their communications advisers need to be careful about what situations to put them in. Communicators need to make a careful assessment of a CEO’s strengths and weaknesses. Sometimes it may be better to have a written statement than putting the CEO in front of a press conference. We’ve seen many situations like that. Think about the BP oil spill: he felt he needed to go to the scene, said the wrong things and that got him fired.