The reaction to Marriott International’s listing of Tibet, Hong Kong, Macau and Taiwan as separate countries on a rewards club survey demonstrates the double-edged nature of visibility and success in China.

Marriott has built a tidy business in China and it’s speedy and wholesome apologies may have dampened the furore a little. However, legitimate questions remain as to how the company allowed such a basic error to happen in the first place (it was apparently a supplier fault).

Nikkei Asian Review asked for my thoughts on how foreign organisations operating in China should prepare for the risks that come with the territory – some of which have been tackled previously on this blog.

Here is Nikkei’s article.

And below is my full response to the journalist – whose questions have been edited for clarity.

Do you think foreign companies are becoming more vulnerable to political mistakes in China with the popularity of social media and rising nationalist sentiment?

Foreign companies operating in China have long been exposed to rumour-mongering and allegations of various types, from poor product safety and customer service to unfair pricing, corruption, sexual misconduct and threats to security.

Social media certainly fans the flames faster and makes these kinds of accusations inherently more emotive.

Yet most of these accusations have been – and remain – tacitly encouraged or directly started by Beijing, often through the mainstream media, which gives them a high level of credibility, not least at a time when the nationalist pot is being actively stirred.

Do you think these companies are aware of the political sensitivity of certain topics in China? What most common mistakes they made besides categorising Taiwan, Hong Kong and Macau as countries? Can you give an example?

Most companies are aware of the many challenges of doing business in China and do their best not to cross political red lines such as Tibet, or to leave themselves open to accusations of discrimination against the Chinese people.

However, mistakes continue to be made.

Over-pricing and under-investment in customer service are common errors, leading foreign firms open to accusations of profiteering, ineptitude or arrogance.

And not instilling in foreign employees working in the country high standards of professional and personal behaviour can be a recipe for disaster – as Daimler discovered in 2016 when a senior executive was caught delivering a racist tirade against locals in a Beijing car park.

How can foreign companies doing business in China avoid political risks?

The huge size of China’s market, the unpredictability or Chinese consumers, and the opaque nature of much decision-making in the country means it is essential that companies operating in the country develop a close understanding of the local political, socio-economic, cultural and media context.

They must also proactively build relationships with the authorities and opinion-formers of different kinds.

China’s newfound significance on the world stage also poses risks. Like it or not, foreign companies need to appreciate that all their business activities – and not just those in China – are now more likely to be seen in a Chinese context, and that their foreignness will play out in any resultant incident or crisis in the country.

Accordingly, corporate governance at all levels must be increasingly sensitive to this new reality, and companies able to react quickly and appropriately when trouble happens.

A ruling that UK supermarket chain Morrisons is ‘vicariously’ liable for a payroll data leak of almost 100,000 staff by a disgruntled former employee has many legal ramifications. It also has significant potential reputational implications.

To reiterate: Aggrieved that he has been discovered running an eBay sales business through Morrison’s mailroom, then senior auditor Andrew Skelton copied and uploaded the salaries, bank details, national insurance information, postal addresses and telephone numbers of nearly 100,000 of his colleagues to a file-sharing website.

Three months later, seemingly unable to attract a buyer, Skelton sent the data to three newspapers (all of which covered the story but refused to publish the data). Within days, Skelton has been identified and arrested. He was convicted and imprisoned in July 2015.

5,518 current and former employees subsequently decided to take Morrisons to court in the first data leak class action in the UK and, in December 2017, they won on the basis of vicarious liability (in which Morrisons, as his employer, was seen to be responsible for Skelton’s actions as the data controller). The ruling is seen as unusual as the leak did not result in any reported concrete financial loss for employees.

Legal commentators have noted that while the ruling can be contested at Courts of Appeal (Morrisons have confirmed their intention to appeal), and compensation is yet to be determined, an increase in data privacy class actions in the UK and a rise in legal payouts is now possible.

The ruling also potentially poses greater reputational risks for companies suffering employee-driven data leaks, including:

  • The threat of significant negative media coverage as a result of class action litigation
  • Increased scrutiny from regulators, politicians and other decision-makers
  • The perception that leadership is insufficiently knowledgeable about and/or invested in IT/cybersecurity
  • The erosion of staff loyalty and the company’s ability to recruit new talent
  • Reduced customer loyalty and loss of sales.

As if they haven’t got enough on their plates with GDPR, the Morrisons data leak ruling adds to pressure on companies to:

  • Reinforce their overall IT/cybersecurity governance and management
  • Strengthen their Incident Response and Crisis Communications Plan(s) 
  • Enhance their leadership and employee data privacy communication, training and education programmes.

Plenty for communicators, as well as for company leaders, lawyers and IT/cybersecurity teams to sink their teeth into over the coming weeks and months.

Are you ready for a data breach? Test your reputational defences with Charlie Pownall’s Data Breach Preparedness and Response advisory and training services.

Once again, politics is the least trusted profession in the UK, according to Ipsos MORI’s latest Veracity Index. Just 17% of people trust politicians, who rank below footballers, journalists, estate agents in the Pinocchio rankings.

 

The recent tidal wave of allegations about sexual misconduct will not have aided their cause, nor will it have been helped by politicians like Roy Moore and Damian Green framing what they claim are untrue allegations about their own and their colleagues’ conduct as political – as opposed to personal – smears.

Of course, below-the-belt political jibes are par for the course in Westminster, Washington and elsewhere, especially when the heat is on, and are more or less expected of politicians. But even those who appear to have successfully (see my earlier post) repudiated claims about their conduct cannot resist poking the opposition in the eye.

Given the degree of public unease about the issue, profound disillusionment about the state of politics, and deep distrust in so many politicians, allegations of sexual misconduct of one sort or another – be they true or false – are an opportunity for public figures to connect with the general public on an issue people truly care about, and to rebuild some much-needed trust.

 

 

 

Tim Bell has been widely – and rightly, in my opinion – excoriated for his ‘car crash’ Newsnight appearance before Kirsty Wark defending his role in Bell Pottinger’s demise.

With his (former) company on the verge of bankruptcy, his own name being dragged through the mud, and mindful of the potential impact of his own consultancy Les Frontieres, Bell set out to distance himself from events, and from his sparring partner James Henderson.

Arguably, he just about managed it, even if he also came across as arrogant, dismissive, and shifty.

 

He also made a notable gaff by leaving his phone switched on.

But was this the silly, cringe-worthy error it appeared?

Bell is a seasoned PR hand who prepped Margaret Thatcher, amongst others, for media interviews.

There is almost zero chance he would accidentally have left his phone on. And even less chance that he would have failed to turn it off again during a high-profile, high stakes interview.

Bell deliberately left his phone on and enlisted friends to call and message him in order to disorientate and distract his interviewer from the outset.

The diversionary tactic failed. Wark stuck doggedly to her task and proved she was not for turning – leaving Bell in an even deeper hole.

Thatcher can only be turning in her grave.

Crisis Proofing - How to Save your Company from Disaster, by Tony Jaques

Whey protein concentrate (‘WPC 80’) may not be the best known or sexiest product, but it is certainly big business. Deriving from cow’s milk, and a by-product of cheese production, it is used in baby formula, beverages, and a host of food supplements, including for bodybuilders.

Like other dairy products, WPC 80 is susceptible to contamination, the result of which can be deadly when digested. So when Fonterra, New Zealand’s largest company and the world’s largest dairy products producer discovered in July 2013 that 38 tonnes of concentrate had tested positive for botulism, a recall was quickly announced.

The trouble was, later tests by the government found no evidence of botulism and that the recall had been a false alarm. However, considerable damage had already been done to Fonterra, with several countries announcing milk product import bans and the company’s reputation for product quality in severe jeopardy.

The company’s independent inquiry (summary – pdf) into the incident concluded that, among other things, Fonterra was ‘not ready for a crisis of this magnitude’, that there had been a ‘failure to join the dots’ between botulism, infant food products, consumer sensitivities and the firm’s reputation, and that the company’s risk and crisis processes needed overhauling.

Fonterra’s top brass would have done well to have read Crisis Proofing, Tony Jaques’ book on how organisations should reduce the chances of a crisis happening and minimise the damage that may arise should a crisis occur.

While he gives many useful tips on crisis response, including how to navigate legal advice on apologies, Jaques’ background in issues management means his insights and practical tips on the leadership mindset, strategic approach and planning processes that enable companies to avoid train wrecks in the first place are particularly valuable.

In my experience, many companies place undue emphasis on identifying risks (especially, given their slippery nature, reputational risks), at the expense of ensuring their issues management processes work properly – an area Jaques excels in. For example, he lambasts the probability/impact and significance/influence issue prioritisation models as crude and over-simplified and instead sets out a more comprehensive and nuanced proprietary model based on an issue’s Impact, Salience, Visibility, Affectability, Proximity and Profile.

Jaques also takes aim at the reactive and ad hoc approach taken by many organisations to managing issues. Too often, he says, companies are overly focused on recording and tracking risks, and tweaking the identification, tracking and decision-making processes for the benefit of management and risk committees, as opposed to actively working to resolve them in a clear and strategic way. By contrast, his Do-it issue management model (chapter 8) is a model of clarity, practicality and focus.

At the heart of Crisis Proofing is a call for mindful leadership of the top-down variety that can seem contrary to the open and horizontal forms of organisational decision-making pushed by some contemporary management thinkers. Yet, as Jaques argues, effective crisis management demands hands-on, decisive and swift decision-making at the very top of the organisation, and a willingness to learn from mistakes and make changes.

As such, while many of the tips in Crisis Proofing are useful in day-to-day risk, issues and crisis management, the book is especially relevant to those leaders and senior decision-makers directly responsible for their organisation’s strategy, culture and reputation.

It is a book I recommend wholeheartedly.

 

Disclosure: I was asked by the author to review the chapter of Crisis Proofing on social media, and was subsequently provided with a review copy of the book by Oxford University Press. I also discuss Fonterra’s WPC 80 botulism scare in my book Managing Online Reputation

 

%d bloggers like this: