Two very different CEO sagas have recently rocked the business world: the latest was the ousting of LendingClub's CEO, Renaud Laplanche, for unsavory business practices that violated the company’s standards. The second was the firing of J. Walter Thompson's CEO Gustavo Martinez for alleged racist and sexist behavior.
CEOs are often viewed as the anchor of a company. They are positioned as leaders, innovators and in the case of Laplanche, category creators. The CEO is often the public face of their company. So, when the leader fails, must the company fail too?
The bottom line is no. CEOs are human, after all, but their shortcomings do not have to sink their companies. While leadership failures will undoubtedly “ding” a company’s reputation, the manner in which a company handles a crisis, both in the near term and long after the crisis occurs, typically makes all the difference. Unfortunately, Lending Club and JWT made some major missteps when it came to communicating what had happened, what was being done to fix the problem, and what the plan was for moving forward. With respect to JWT, it was a case of “too little too late,” and while LendingClub crisis is still in its early days, the lack of communications isn’t doing them any favors.
As the managing director of a strategic communications agency, here are a few lessons to learn from the recent LendingClub and J. Walter Thompson PR crises:
Control the message. Don’t let it control you. LendingClub announced Laplanche’s resignation via its earnings release. While public companies are legally obligated to share this type of news, combining the “resignation” with the company’s quarterly results was likely perceived by investors as burying the news, or even worse, perceived as being taken lightly by management. This issue is unlikely to go away anytime soon, as investors will continue to revisit the issue well into the future.
Additionally, while a small amount of information was disclosed, it did not provide the context or reassurance that the company was now in capable, well-intentioned hands. Perhaps what's most damaging is that after announcing the news, LendingClub has remained tight-lipped. The company hasn’t used its blog or social channels to reassure customers, nor has it publicly laid out a plan to regain Wall Street’s trust. Instead, executives have retreated, further perpetuating a negative sentiment.
Act swiftly. When allegations first arose about JWT’s Martinez, the business moved at a snail’s pace, first denying the allegations. When days turned into weeks with a minimal response, the company continued to appear disorganized and uncommunicative.
Show transparency. Both companies launched internal investigations as opposed to seeking expert, impartial external guidance. Understandably, internal investigations don’t bode well in the court of public opinion. From my experience, only third-party investigations hold the type of legitimacy necessary to overcome any negative perceptions that ultimately set the stage for regaining stakeholder trust.
Do more than the bare minimum. In the face of a crisis, constituents just want a path forward. They want to see that the company is taking steps not to repeat its mistakes. In the case of JWT, months after the scandal broke, the agency launched a Diversity and Inclusion Council and hired a third party to review its policies and procedures. It will be interesting to see how the organization communicates its progress in the coming months.
A company’s swift, transparent and proactive actions shape the way the public perceives it when its key leaders fail. While no one likes preparing for a rainy day, companies should know who they will turn to in the face of a crisis. Who will be the decision makers? Is legal counsel lined up? If a key leader is at the center of a crisis, the company needs to determine whether or not he or she should remain in office in the near term, or be (temporarily or permanently) sidelined so that a valid review and investigation can take place. Regardless of movement at the top, it is imperative that the company provide immediate, consistent and transparent communication throughout the process. After all ,stakeholders not only deserve this, they demand it!
The fault of one doesn’t have to equate to the downfall of an entire organization. However, the way in which a company communicates throughout this situation can either help it rise up from the ashes, or put a nail in its coffin. The choice is theirs.
