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Lessons from Marriott: How to avoid political risk in China

January 21, 2018
Reputation management
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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.

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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.

How Asia differs to the west when handling crises online

August 27, 2016
Crisis communications, Reputation management
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Part 2 of an interview with a Chinese PR student on crisis communications and social media.

Here is Part 1.

3. Does social media impact crisis communications in different ways in Asia versus the UK? Are there any characteristics exclusive to the UK?

In my experience social media can indeed impact crises differently in Asia, and much of this comes down to speed – parts of Asia are very highly networked – and the culture of the web, which can be immensely volatile, especially in a country like China. Compounding matters there’s the fact that customer and stakeholder opinion is evolving quickly across the region, not least concerning expectations about corporate good behaviour and transparency, while government attitudes towards foreign companies, in particular, can be hostile, and control of the internet notoriously uneven. These aspects – and plenty of others – require a close understanding of the context in which you are operating.

Operationally, the main difference is that Asian organisations tend to be more conservative, hierarchical and slow to make decisions, which can make the management of a crisis challenging. And where there is a culture of strong local political control, and a pliant local media, local companies may well have little experience of having to manage serious negative events in public and online – a notable example being Taiwan Formosa and the Vietnamese governments’ inept handling of a toxic spill earlier this year that ravaged hundreds of kilometers of coastline and damaged the livelihood of thousands of local Vietnamese fisherman.

Equally, some multinationals operating in Asia are reluctant to devolve crisis decision-making to their local businesses, resulting in precious time being lost when you need to respond quickly and appropriately at the start. And for the reasons pointed out above, foreign companies must be mindful of throwing the standard western crisis playbook at what may be a very different business, media, political and legal environment.

I’m not convinced there’s anything intrinsically unique about the nature of crisis communications in the UK – at least in a western context – other than perhaps the behaviour of the mainstream media, specifically the tabloid press, which can be very single-minded in their willingness to build up and then attack an organisation, and whose views tend to bleed quickly and deeply into the social web.

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See also my Primer on Crisis Communications, which covers similar territory.

 

How social media impacts crisis communications

August 25, 2016
Crisis communications, Reputation management
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A resourceful Media and Public Relations student from China at a UK university recently asked me for my thoughts on crisis communications and social media for her dissertation.

In the spirit of sharing, here’s the first part of my response. The second – on how crisis communications differs in Asia and the west – is here.

The questions have been edited for clarity:

1. To what degree is social media impacting crisis communications? How is it changing traditional crisis communications?

Social media has had a significant impact on crisis communications:

  • Most obviously, news and information travel much faster, meaning organisations need to track issues and potential crises more regularly and respond more quickly when something bad happens
  • There is much more misleading and false information to track and consider, some of which is deliberate
  • Online opinion tends to be very volatile and polarised during a crisis, making it difficult to know when and how to try to manage perceptions
  • The lifecycle of crises has become much more unpredictable with so much information constantly swirling online and getting picked up by the mainstream media, and the ease with which confidential information now leaks
  • Perhaps most importantly, the nature of the social web means people nowadays expect organisations to be open and responsive during a crisis – which may have profound implications for crisis strategy, important at a time when many large organisations are not trusted and when the facts are unclear when a crisis first breaks.
2. What are the advantages and disadvantages of social media on crisis communications strategy?

The main advantages are that, thanks to social media:

  • Organisations now have greater insight into what various different stakeholder groups think about them and behave towards them
  • Crisis strategy and messaging can be tested and revised more or less in real-time, rather than having to commission custom market research surveys
  • Relationships with stakeholders can be handled direct, bypassing ‘traditional’ gatekeepers such the mainstream media
  • Using video, photographs and other tools, it is now possible to communicate factually and, critically in a crisis, emotionally
  • You can involve more people more closely in an organisation’s recovery once the worst of a crisis is over using crowdsourcing and other web and social media-based techniques.

On the other hand, social media presents many strategic risks and operational challenges during a crisis. These include:

  • Organisations have to respond very fast while ensuring their messages are consistent across many channels
  • Then there’s the huge volume of comments and feedback to manage, while knowing what is important and what should be left alone
  • Online opinion and feedback may be skewed, inaccurate and not as insightful or nuanced as conventional market research
  • An analogue leadership team which does not understand digital/social media and can be very jumpy during a crisis, leading to poor decision-making
  • If social media is not treated seriously and strategically, the necessary procedures and skills may not be in place before and during a crisis.

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See also my Primer on Crisis Communications, which covers similar territory:

Practical lessons in crisis communications from a toxic spill in Vietnam

July 13, 2016
Crisis communications, Government communications, Online reputation management, Reputation management
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That thousands of people took to the streets across Vietnam early May 2016 to protest the contamination of hundreds of kilometers of Ha Thinh province coastline was the culmination of a catalogue of errors by the alleged culprit – a Formosa Plastics steel plant – and the Vietnamese authorities, that inadvertently turned a serious incident into a major public crisis.

The spat also raises questions about how fit for purpose Hanoi and major companies in Vietnam are when it comes to managing disasters and crises.

When people first started complaining on Facebook about dead and rotting fish and shrimp in early April, Formosa Plastics initially said nothing and then denied wrongdoing. Two weeks later a company PR official antagonised local fisherman by arguing the Vietnamese had to make a choice between catching and selling fish or developing the steel industry.

Officials in Hanoi failed to make matters better by initially defending the company and then arguing there was no proof it was to blame and suggesting human discharge or ‘red tides’ of algae could be the problem, prompting local protesters to take to the streets and even to petition Barack Obama to launch an independent investigation. Vietnamese authorities were also found to be blocking Facebook and Instagram during the protests.

 

Perhaps Formosa Plastics and Hanoi were taken aback with good reason. After all, ordinary Vietnamese are little known for publicly opposing issues seen as detrimental to their interests and livelihoods, however controversial or potentially damaging they may be.

And thanks to highly controlled political, media and business environments, very few Vietnamese organisations have any experience of having to manage and defend their reputations in the open court of public opinion.

Yet one does not have to look far to see how the expectations and behaviours of citizens, consumers, local communities, activist groups and other stakeholder groups have been transformed by the internet and social media.

Even in China, any and all of these groups now regularly take to the social web to make their voices heard, galvanise support, raise funds and organise protests – virtual and physical. And they do so instantly and often in large numbers.

While China may have had considerable success limiting online chatter, institutions across the region are struggling to contain internet-based grassroots movements, despite the many tools and techniques available to block, limit or otherwise disrupt news, information and commentary.

With the accountability genie out of the bottle and with little way of stuffing it back in, how can governments and businesses better manage disasters and crises?

Fortunately, the strategies, tactics and techniques required to manage issues and crises in today’s flat, open, digital world are becoming steadily clearer. And while complaints, allegations and smoking guns frequently first manifest themselves online, the rules of how to deal with them as they escalate are not wholly dissimilar to what they were before smartphones and Facebook took over.

Like for ‘traditional’ issues and crisis management, much comes down to good listening and having the ability to spot potential problems before they escalate into incidents or even crises, and the internal processes to be able to assess these issues quickly and thoroughly before identifying the appropriate response.

While there are many free tools that can help companies keep abreast of what’s being said about them and about issues relevant to them, there are also now a host of paid online and social media listening tools such as Synthesio, Meltwater or Vietnam’s Boomerang that enable companies to identify, track and analyse potential problems online in real-time.

Furthermore, the more sophisticated listening tools will send email or SMS alerts to team members when mentions of a given keyword or phrase hits a specified level, and/or turns from negative to very negative, enabling companies to hone in quickly on what really matters when it comes to assessment a problem: the motivation of the user, the credibility of the complaint or allegation, and the broader context in which it is being made.

Much also hinges on getting the response right, which can be challenging when everyone seems to be talking about the issue, it is quickly going viral, corporate leadership has gone missing and the scope for denying or ‘spinning’ a story is increasingly limited.

And in a medium that values emotion over facts, it is doubly important that the initial response to an escalating issue or a bone fide crisis gives the impression of openness and honesty, that it is being treated seriously and as a priority, and is crafted in a language and tone that ordinary people can understand, relate to and appreciate.

Had Formosa Plastics and the Vietnamese government responded quickly, honestly, constructively and empathetically to the pollution allegations in Ha Thinh province, they would far more likely have been given the benefit of the doubt. Instead, both found themselves caught in the headlights of searing public distrust and with little obvious place to turn for comfort.

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An abbreviated version of this article was first published in the Vietnam Investment Review (in Vietnamese).

UPDATE: Taiwan Formosa has admitted responsibility for the toxic spill, and will pay USD 500 million in compensation.

 

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