2012. 1. 3. 13:18
[Business]
The story
In July 2007, Robert Eckert, chief executive of Mattel, got the call no CEO ever wants to get. A European retailer had found evidence of toxic lead paint in Mattel toys.
The company’s own investigation had then revealed that the problem could involve millions of toys. Mr Eckert knew that what he did next could determine whether his company, maker of brands such as Barbie, Fisher-Price, Hot Wheels and Disney, would survive.
The challenge
Lead paint, which had been outlawed in the US and Europe for decades, had found its way into an unknown number of Mattel toys made in China. How could the company ensure that children were safe? How many millions of toys would it have to recall? And how much would its efforts cost? More important, how could Mattel convince parents to trust that their children would be safe with a Mattel toy in the future?
The strategy
Within a few days of initially hearing from the retailer, Mattel employees had identified the factory that produced the tainted toys, stopped production and launched an investigation to determine the scope of the problem. That investigation concluded by the end of July and by August 2 the company had alerted the public and begun taking back about 1.5m toys. Mattel then voluntarily expanded the scope of its investigation and issued two more recalls, one on August 14 and another on September 5. In the August 14 recall, Mattel decided to head off another potential safety problem by recalling 18m toys with magnets that could hurt children if they became dislodged and were ingested.
To prevent any future lead paint issue, Mattel adopted a new test procedure where every production batch of every toy had to be tested before it could be released to go on sale. It also named publicly the contractors in China that had been involved in producing the toys with lead paint, severed many supply relationships and installed more Mattel people in contract manufacturers’ facilities.
During this period Mattel also created a post of senior vice-president of corporate responsibility to oversee audits of all subcontractors.
It also called for more regulation and for more resources to be allocated to the Consumer Product Safety Commission in the US. The company consistently communicated with all stakeholders and communications generally began with “I’m sorry...” as the company acknowledged the failure of trust.
What happened
Mattel’s surveys showed 75 per cent of people felt it did a good job handling the crisis. Mattel was praised by the media and in Congressional hearings for facing the crisis with speed, honesty and a laudable lack of corporate denial or defensiveness.
There have been no further lead paint incidents and the company remains the global leader in the toy industry. Mattel consistently scores well in rankings of trustworthy companies.
Key lessons
Have a plan. When a company’s actions radically diverge from expectations (such as safety failure, corruption, deception, permitting fraudulent or criminal behaviour), its revelation can go viral. In 2011, when Netflix shocked customers by increasing prices 60 per cent, the outrage multiplied via social media and the company lost nearly 1m customers.
When the crisis hit Mattel, Mr Eckert was ready with a 114-page crisis plan prepared in advance that enabled him to shape the response and the narrative.
Second, put doing the right thing for regulators, retailers, customers and suppliers ahead of damage control or profits. Mattel’s investigations were rigorous and expanded as needed; additional recalls were undertaken as the facts warranted them. This publicly aligned Mattel’s interests with those of parents and regulators.
Third, communicate often, sincerely and transparently. Mattel’s communication helped retailers and parents feel the company truly understood it had violated trust and that it was determined to make it right. Mattel sought the help of regulators in making genuine change rather than stonewalling them.
Fourth, there are nearly always systemic flaws that allow such trust failures: be ready to investigate the root causes and take action.
- Financial Times, 2 Jan 2012
In July 2007, Robert Eckert, chief executive of Mattel, got the call no CEO ever wants to get. A European retailer had found evidence of toxic lead paint in Mattel toys.
The company’s own investigation had then revealed that the problem could involve millions of toys. Mr Eckert knew that what he did next could determine whether his company, maker of brands such as Barbie, Fisher-Price, Hot Wheels and Disney, would survive.
The challenge
Lead paint, which had been outlawed in the US and Europe for decades, had found its way into an unknown number of Mattel toys made in China. How could the company ensure that children were safe? How many millions of toys would it have to recall? And how much would its efforts cost? More important, how could Mattel convince parents to trust that their children would be safe with a Mattel toy in the future?
The strategy
Within a few days of initially hearing from the retailer, Mattel employees had identified the factory that produced the tainted toys, stopped production and launched an investigation to determine the scope of the problem. That investigation concluded by the end of July and by August 2 the company had alerted the public and begun taking back about 1.5m toys. Mattel then voluntarily expanded the scope of its investigation and issued two more recalls, one on August 14 and another on September 5. In the August 14 recall, Mattel decided to head off another potential safety problem by recalling 18m toys with magnets that could hurt children if they became dislodged and were ingested.
To prevent any future lead paint issue, Mattel adopted a new test procedure where every production batch of every toy had to be tested before it could be released to go on sale. It also named publicly the contractors in China that had been involved in producing the toys with lead paint, severed many supply relationships and installed more Mattel people in contract manufacturers’ facilities.
During this period Mattel also created a post of senior vice-president of corporate responsibility to oversee audits of all subcontractors.
It also called for more regulation and for more resources to be allocated to the Consumer Product Safety Commission in the US. The company consistently communicated with all stakeholders and communications generally began with “I’m sorry...” as the company acknowledged the failure of trust.
What happened
Mattel’s surveys showed 75 per cent of people felt it did a good job handling the crisis. Mattel was praised by the media and in Congressional hearings for facing the crisis with speed, honesty and a laudable lack of corporate denial or defensiveness.
There have been no further lead paint incidents and the company remains the global leader in the toy industry. Mattel consistently scores well in rankings of trustworthy companies.
Key lessons
Have a plan. When a company’s actions radically diverge from expectations (such as safety failure, corruption, deception, permitting fraudulent or criminal behaviour), its revelation can go viral. In 2011, when Netflix shocked customers by increasing prices 60 per cent, the outrage multiplied via social media and the company lost nearly 1m customers.
When the crisis hit Mattel, Mr Eckert was ready with a 114-page crisis plan prepared in advance that enabled him to shape the response and the narrative.
Second, put doing the right thing for regulators, retailers, customers and suppliers ahead of damage control or profits. Mattel’s investigations were rigorous and expanded as needed; additional recalls were undertaken as the facts warranted them. This publicly aligned Mattel’s interests with those of parents and regulators.
Third, communicate often, sincerely and transparently. Mattel’s communication helped retailers and parents feel the company truly understood it had violated trust and that it was determined to make it right. Mattel sought the help of regulators in making genuine change rather than stonewalling them.
Fourth, there are nearly always systemic flaws that allow such trust failures: be ready to investigate the root causes and take action.
- Financial Times, 2 Jan 2012
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