Tagged: Product Recalls

Mattel’s Product Recall Lessons

In my blog posts of 15 September 2009 https://deonbinneman.wordpress.com/2009/09/15/product-recalls-done-properly-reduces-reputation-risk/ and https://deonbinneman.wordpress.com/2010/01/25/is-your-company-ready-to-deal-with-a-product-recall-a-checklist-for-your-convenience/; I discussed the importance of product recalls and the type of planning and preparation that needs to be done to make this process a success.

The following video, although of low quality is a must watch and features Bob Eckert, CEO of the world’s largest toy manufacturing company and he has some real lessons to share about this process, including some real reputation risk reduction lessons using adequate communication and crisis preplanning and the risks that emerge from subcontracting.

Those readers who are interested to learn more about product recalls and the steps needed to prevent unnecessary reputation risk, will want to attend a special workshop that will be held on the subject at the end of July in Johannesburg, South Africa.

What: 27 July – A Product Recall Workshop (Planning for and Managing a Recall)
The challenges of dealing with a product recall is immense and resource challenging. Not only is there the challenges of dealing with the recall itself but the challenges of communicating with all stakeholders and minimising reputational fallout is high. The Toyota and now wider recall issues in the motor vehicle industry (Honda, Land-Rover, etc) is serving a warning to other operators and manufacturers in other industries of the need to prepare for a recall long before if it happens. The issues in dealing with a recall goes back long before the actual recall event. Prior preparation, risk management, attention to quality and communication issues need to be addressed, and will be scrutinised if such a recall ever takes place. Since a recall is always a possibility despite of quality controls and risk management, companies are well advised to plan to handle potential recalls well in advance, as handling product recalls professionally can go a long way to safeguard reputation.
When: Tuesday, July 27, 2010 (all day)
Where: Hotel Indaba

Johannesburg, Gauteng   South Africa

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Minimise Reputation Risk by Complying with the Consumer Protection Act

Yesterday I had the opportunity to facilitate a workshop on Reputation Risk and the Consumer Protection Act at a conference held at the Indaba Hotel in Fourways, Johannesburg by the Intelligence Transfer Centre (http://www.intelligencetransferc.co.za/).

Not wanting to overdo the legalities of the Act itself (since that was covered by other speakers) I focused on the implications of this Act and its potential impact on the reputation of an organisation.

Since the audience consisted of mainly legal advisers, I focused on the court of legal opinion versus the court of public opinion.

What struck me in the interaction with the audience was the disconnect between the two. Obviously this act brings a number of difficulties to the table, but it seemed that the focus by companies is minimum legal compliance, i.e  doing only what is necessary in terms of the specifications of this Act.

The audience found it interesting when I showed them why the Act was promulgated in the first place, namely that it was because companies paid lip service to the reasonable expectations of the consumer stakeholder. The Act now codifies basic rights such as the right to safety, the right to not be taken unduly advantage of and so on.

j0382683In my presentation I also focused on the importance of having proper and tested product recall procedures, adequate product labelling, communicating in a crisis situation and I showed them how lack of compliance with this Act could be equated with the lack of commitment to show that you care about the consumer, could lead to public naming & shaming on top of penalties, an increase in lack of trust, a damaged Reputation and ultimately lead to an increase in unnecessary cost.

I also emphasised the point that an organisation will have to address the thinking processes in the company through increased awareness training of this Act and Consumer focused thinking training sessions.

What got me though, was the lack of understanding and preparation amongst the audience when I gave them a simple exercise to do:

Think about communicating about a defect to consumers. What would you need to have in place?

Granted the audience were mainly legal advisers, but they did not know where to start. They did not know where a strategic communications plan would start or end. I just hope that they do have skilled PR or Communications personnel in their companies, otherwise they will find themselves in a pickle over their lack of adequate communication when the time comes.

Ultimately this Act does pose Reputation Risk in that a lack of compliance or adherence to public opinion demands will raise questions about the ethics, values and practices in an organization.

In 2010 I will be assisting companies with this compliance by facilitating in –house workshops on the importance of the Consumer Protection Act. This compliance needs to be viewed as part of the Stakeholder Management processes of a company and should not just be seen as a Compliance issue to be handled by the Compliance Officer or Legal Advisers.

Advertisement: I do offer a Crisis Manager Toolkit that can be used by companies as part of their preparation for product recalls and other incidents. See https://deonbinneman.wordpress.com/toolkits/ for more information or contact me.

Product Recalls done Properly reduces Reputation Risk

Many companies fear that widespread disclosure and publicity of product recalls may be harmful to their reputations.

It could be but it depends on how product defects and recalls are handled. These days stakeholders ask for no less, namely that they be informed, especially if the product carries a health & safety danger.

Since a good reputation for product safety and reliability is an essential ingredient of a company’s sales efforts. Handling product recalls professionally can go a long way to safeguard that valuable asset.

The new South African Consumer Protection Act will impact on recall procedures.

However there are other factors to consider:

1. Recall communications is an expensive exercise. It will necessitate the use of mass media techniques depending on the circumstances, and the role of advertising agencies and other role players in this exercise will have to be factored in.

2. Negative publicity about a product before a company can officially respond can be damaging and may lower trust in the product name.

3. A Recall can have a ripple effect, as it may tarnish the reputation of the organisation and its other products. Act speedily and with resolve is key.

4. There may be product liability expenses. In many cases in the USA, litigation resulting in class action law suits have been extremely expensive. (Study Merck and its Viox withdrawal, which has run into billions of dollars).

As with any crisis, there are two things to remember, namely the reality of dealing with the crisis and the perceptions created during the crisis.

The reality of the situation involves dealing with the actual withdrawal and the perception side deals with informing various stakeholders about the withdrawal.

Here then is a short checklist that I have prepared that you may find handy. My advice is to do your homework before a recall occurs. Remember bad things happen to good companies (Murphy’s Law).

The checklist is by no means comparable to a a proper guide compiled by an external consultant working with your crisis team, but should at least prompt your thinking before a recall actually happens..

Product Recall Checklist

1. Because product recall communications and actions are complicated, close coordination of all the activities of various managers will be needed. Many managers will be affected; Sales, Distribution, packaging, quality control, customer service, PR and legal counsel. Outside stakeholders  such as the Media, Advertising Agencies and the authorities such as the SABS may be involved. Who will act as Coordinator?

2. Where outside specialists might be involved, do you have them readily identified as well as SLA’s drawn up, before a recall happens? Consultants and experts identified at the last minute can be very expensive and often there is no professional working relationships between the parties.

2. Who will issue a general statement issued to the widest possible publicity distribution, spelling out the reasons and steps for the implementation of the recall as well as the steps taken to prevent recurrence?

3. Who will prepare the Recall procedure? How will customers return the product? (This protocol should be created prior to a recall)

4. What about Dealer logistics?

5. How will you keep your stakeholders informed about the success of the recall? Remember that some stakeholders will want to know how many products have been returned and at what cost?

6. Who will monitor Media reaction?

Product Recalls executed professionally can go a long way in allaying the fears of the consumer stakeholder and will bring and instil much needed trust.