Every business failure, scandal or catastrophe has at least two phases. There’s the event itself, and then there’s the response to it.
The consequences of the first are bad enough. The consequences of the second can be even worse.
We’re getting an illustration of these rules of life with three companies or corporate executives that are always in the news anyway just because of their size and prominence, but are especially deep in the news at the moment, and not for reasons of their choosing.
The three are Boeing, Wells Fargo and Amazon’s Jeff Bezos.
Rehashing the mistakes these companies and their executives make is not an exercise in gratuitous wallowing in bad news. Those mistakes in judgment, before and after, have real consequences for customers, employees, investors, other companies in the same business, and the communities reliant upon those companies.
Nor are these case studies that only apply to the biggest of companies or most famous of executives. Every business — for that matter, every family and household — will face a calamity at some point. The type and size of that calamity matter. So does any preparation in advance.
But as we’re seeing, the actual response counts for a lot, too.
Boeing’s commercial aviation side entered 2019 in a good position, with rival Airbus tied up with issues including what to do with the A380 program and integrating Bombardier into its operations.
Boeing, meanwhile, had issues of its own, such as waiting on supplier shipments to finish 737s at Renton, but it appeared to have made sufficient progress on that issue, and was comfortable enough with the status of other programs to consider taking on a new airplane model.
Barely a quarter of the way into 2019, Boeing is facing criticism not just for whatever it did that contributed to two fatal crashes of its 737Max passenger jet but for its response in both cases.
The crashes have immediate effects beyond those lives lost and the victims’ families. The response threatens orders for the plane (Boeing’s website says there are orders for about 5,000 Max jets currently on the books), development of its next model and Boeing’s relationship with regulators not only in the United States but around the world.
Not that the public had a high opinion of banks anyway, what with the housing-finance debacle morphing into the Great Recession, but Wells Fargo took what reputational equity it had out to the parking lot, poured gasoline on it and tossed a match in its direction.
It was an odd thing to do, given that Wells Fargo wasn’t one of the banks accused of the sort of lending shenanigans that led to the recession (see: WaMu). But it was spending time making up millions of accounts, many assigned to existing customers that hadn’t asked for them.
Making bad loans in a quantity sufficient to threaten a bank’s existence may mean only a lack of skill at banking. Making a lot of bad loans because of slipshod practices is an order of misfeasance higher. And outright fraud — of customers, investors and regulators — is several orders of magnitude beyond that.
Wells Fargo has been running acres of ads touting its reform efforts and the community-minded things it does. That doesn’t seem to be helping. The accumulated impact of that scandal, irregularities found in other operations and what’s been seen as the bank’s inadequate response has led to regulators limiting how much the bank can grow, and the departure of a second CEO.
Wells can survive if there are enough customers unaffected by the various schemes and who like whatever the bank has to offer in service and convenience. But the bank has done such an inept job not only with the scandals but the follow-up that repairing its reputation even to the level of the rest of the industry is a decade-long project.
Of the three examples, Bezos’ mid-life crisis is the one with the least short-term consequential damage. Amazon customers may find Bezos’ conduct distasteful, but they’re unlikely to drop their Prime membership just because he’s been, at a personal level, a lout.
In normal circumstances one might expect the most prudent response to be to stay out of sight, say nothing publicly and hope the public soon forgets. Instead Bezos has chosen to increase the public’s awareness of the scandal by publishing his own letter, and by pronouncements of his purported security adviser, about a convoluted plot involving stolen phone messages, the brother of the woman he was “seeing,” the National Enquirer and the Saudis.
To which the public can reasonably be expected to reply, “Sure, Jeff, whatever, but let’s get back to what got you into this mess in the first place.”
Will the public’s continued interest in the story have a measurable long-term effect? Maybe, if that effect is to make people question his judgment or embolden them to challenge Amazon competitively.
It’s been some decades since business consultants and public-relations advisers began adding crisis management to their portfolios of services offered to business. Time is proving the need, if not the efficacy, of that training. Bad things are always going to happen because or in spite of a company’s conduct. But a problem is never so bad that a botched response can’t make even worse.