In terms of the rules of crisis communications, Wells Fargo and Samsung have been following all of them, although sometimes they’ve moved slowly. Still, both brands issued apologies, took action, offered compensation—and nothing has worked. The problem in these cases is that no amount of abject apologies can make up for a lack of ethics and an overabundance of bad choices. In other words, both brands primarily are facing crises of culture, not communications.
Samsung
It isn’t hard to imagine the conversation in the boardrooms at Samsung when board members heard that the highly anticipated Apple iPhone7 wasn’t as exciting as people expected it to be. They quickly chose to capitalize on the opportunity and rush the new Note 7 phone to market in advance of the iPhone launch. The design and production folks probably said something along the lines of, “That’s three months ahead of schedule. We can’t do that!” And someone higher up the ladder said something like, “That’s your problem to solve. Make it happen.”
Regardless of who said what, the competitive ethos of the company ruled the day: The Note 7 was rushed to market. In the process lower-quality batteries were used. Shortly after the launch, batteries in the new phones started to catch fire. A massive recall was ordered and several major airlines banned passengers from carrying them on planes. And as luck and timing would have it, Apple released its latest iPhone 7 and provided the perfect alternative for all those unhappy Samsung customers. As a result of those bad boardroom choices, some $14 billion in shareholder value was lost. The Samsung brand will be the butt of jokes for years to come.
| Brand | Grade | Comments | Advice |
| Extent of Coverage | F | When the FAA bans your product, and every traveling passenger is warned that their phone can catch fire as they buckle their seat belt, you’re going to receive a ton of negative publicity. | Just because you are managing things internally does not mean you are in control. Government actions, celebrity comments, YouTube videos—almost anything can, and likely will, exacerbate your crisis once it hits the national news. |
| Effectiveness of Spokespeople | F | It seems there are no official spokespeople at Samsung. Since suffering a heart attack several years ago, the CEO has been invisible, and although his son was designated vice chair, clearly he was not speaking to the media. Mobile phone business chief D.J. Koh announced the recall but the company has remained tight-lipped, allowing analysts and other “experts” plenty of room to weigh in with their opinions. | Just because you or your CEO wants to avoid commenting, it doesn’t mean there isn’t an army of “experts” dying to put their views in front of the media. Experts are a dime a dozen, whether they’re university professors, industry analysts or random blowhards. They can and will fill the void left by your CEO when he or she declines to tell your brand’s story. |
| Communication of Key Messages | D | The only cohesive positive message Samsung conveyed was that it would replace all of the million-plus phones that were affected. | When a major crisis hits, keep your messages to the bare essentials. Make sure the “why it happened” and “what we’re doing about it” can be expressed in 140 characters. |
| Management of Negative Messages | F | Absent a good crisis PR strategy it took just weeks for the inside story of what really happened to come out. Subsequent stories about the intense competitive pressure and bad choices made it nearly impossible for Samsung to control the negative messaging. | There are no secrets today. Whatever torture you’re putting your employees and/or suppliers through to achieve an impossible goal is only one disgruntled person with a Twitter account away from the front page of the Wall Street Journal. |
| Impact on Customers and Potential Customers |
F | There are few people today who are happy to put aside their new cell phone for one month or two and patiently wait for the replacement to arrive, especially if they traded in their old one. Preliminary sales figures indicate that they’re not sitting around waiting for the replacement—they’re buying iPhone 7s. | Shoppers have far more money than patience. The instant-gratification crowd will not wait for you to fix your problems unless you have built up an enormous trust bank of unwavering loyalty. And even then, patience wears thin pretty quickly. |
| Impact on Stakeholders |
F | Samsung shares lost some $14 billion in value shortly after the recall was announced. Shares have yet to fully recover even though new phones are shipping. | Institutional investors and financial analysts are the go-to source for the business media. Brief them on everything you do, find a potential supporter and give him or her the full story. That way there’s at least one person who will get it right, and with luck, others will follow. |
| Overall Score | F | Samsung’s problems started with a competitive culture that enabled people to make bad choices. An invisible CEO and a reluctance to come clean to the media exacerbated the situation. | Reporters, customers and employees need to hear from a strong, compassionate and caring leader in times of crisis. If you don’t have one, you need to find one, make one or get a different job. |
Wells Fargo
While the shenanigans at Wells Fargo began earlier than Samsung’s bad choices, it is highly likely they started with similar dynamics. The CEO probably was saying to his collected VPs, “We did well during the recessions, and we need to leverage that and grow, grow, grow.” That edict was translated into a system of strict sales quotas brutally enforced on salespeople, who, desperate to meet quotas, began opening 2 million accounts for clients. The problem: Their actions were unbeknownst to the account holders.
Fees and fines accumulated, hitting customer credit scores, borrowing ability and jobs. CEO John Stumpf initially blamed “rogue employees,” some of whom subsequently told the media about the toxic culture that encouraged people to cut corners to meet quotas. Ultimately, the Consumer Financial Protection Bureau fined Wells Fargo $100 million, the CEO forfeited $41 million in bonuses and 5,300 employees lost their jobs, which is what happens when a CEO fosters a culture that prioritizes growth at the expense of ethics.
| Brand | Grade | Comments | Advice |
| Extent of Coverage | F | When your CEO is called in front of Congress repeatedly and gets yelled at by a highly visible senator like Massachusetts Democrat Elizabeth Warren, it is unlikely that anyone in the U.S. and most of the developed world won’t have heard the news. | Unfortunately, professional communicators generally can’t control their organization’s tendency to do stupid stuff that will cause the Senate or House to open investigations into questionable practices. They can, however, raise red flags, especially in an election year when every crisis can and will be used against whichever candidate can be tied to it. |
| Effectiveness of Spokespeople |
D | Give CEO John Stumpf credit. He eventually tried to sound repentant. Stumpf “took full responsibility” in front of the Senate and later forfeited $40 million in bonuses. But blaming the problem on “rogue employees” marred his performance. It’s unclear if anyone was convinced. | In the end, apologies are just a bucket of words unless you can convince key stakeholders you’re sincere. The standard full-page apology ad in the New York Times may reach a lot of eyeballs, but they have no value if they don’t persuade anyone to even consider forgiving you. |
| Communication of Key Messages | C | By firing 5,300 employees before the announcement, Wells Fargo sent a clear message that it had taken action to rectify the problem. Yet the bank’s statements raised more questions than they answered. In the end, despite Wells Fargo’s best effort, the image lingers of an ethically flawed financial institution. | In most circumstances, taking action that supports and reinforces your messages is generally the best strategy. Those actions need to address the full scope of the problem, however. And when the problem is cultural or systemic within a corporation, the person at the top will be held to blame. The media and the public need a sacrificial lamb. |
| Management of Negative Messages | F | Between disgruntled former employees and customers who felt cheated, there was no shortage of negative messages. Adding in lawmakers from both parties eager to score points prior to November didn’t help either. | It is much easier these days for employees and customers to express their frustrations or anger in places where the media can see it. Be prepared in any crisis for lots of negative messages emanating from unexpected places. |
| Impact on Customers | F | Given the large number of customers with fraudulent accounts set up in their names, and the impact that the fees and charges had on credit scores, this is a problem that won’t go away soon. The fact that some members of the media were personally affected doesn’t help. | Too often, organizations think they can issue an apology and move on. We’re no longer in a one-and-done world. Today crises linger much longer thanks to Google and YouTube. Customers will be reminded of it for years to come. |
| Impact on Stakeholders | F | Wells Fargo stock is lower than it’s been in years. It shows no sign of improvement. Before the crisis Wells Fargo was the world’s largest bank by market capitalization. It’s now lost that title. | Make sure the IR and PR teams are in lockstep about how to position the impact that a crisis will have on share price and investor confidence. Too often these two departments operate independently. |
| Overall Score | D- | The more we learn about this crisis, the clearer it becomes that the problems were systemic and leadership-induced. Changing leadership may be the only way to get Wells Fargo off the bad news front page. | When internal culture is the cause of a crisis, or it’s clear that flawed ethics are involved, you need to demonstrate a willingness to change the culture and the leadership. Only with this shift will people begin to forgive you. |
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