Stay grounded or be grounded: managing a runaway crisis in China

China’s recent spate of commercial, legal cases, which has snagged Qualcomm, Accenture and Audi among a growing list of international firms, serves as a reminder of the complex cocktail of risk served up at the business world’s most popular happy hour.

Yes, the rewards for success in China can be great. The price however, whether calculated in executive time lost to fighting fires or using the more ominous parameters of lost sales revenue, diminished brand equity and low customer loyalty is high as well. How is risk managed in such an issue-rich environment?

There are two abiding truths about doing business in China, which should never be neglected. First, politics permeates everything. No matter the industry or situation, political considerations and complications will accompany every major decision you make on China, and politics also demands decisions that many expatriate businesses are not accustomed to making. Second, whereas there are innumerable, persistent issues facing businesses in China, the impact of these issues changes with the underlying context. China is far from static, and much of what made sense for a business just a few years ago is less effective today.

That being said, the lessons of history are telling. They provide a rich vein of truths to temper our understanding of how to succeed in a market that is sometimes unwelcoming and hostile. 

In the nineties, one North American airline had led the industry by expanding rapidly into China and was operating daily flights from Beijing. For many early mainland Chinese travelers, their experience with the airline was their first direct encounter with American culture. For some of the new waves of Chinese overseas travelers, unaccustomed to the inevitable discomforts of long-haul air travel, this was not a pleasant introduction.

One such customer (we’ll call him Mr. Wang) found himself high over the North Pacific, or more likely the frozen Canadian plains with a nagging hunger. Although the main meal had already been served, Mr. Wang attempted to negotiate a second hot meal with the cabin crew who, although veteran employees, neither spoke Chinese nor were prepared for the awkward, cultural mismatches that can occur when new Chinese customers engage with an “international” product or service. Apparently, according to Mr. Wang, at some point in the various exchanges between himself and the flight attendants, one of the latter wondered aloud, “Why are you Chinese always so hungry?”

Clearly this was an embarrassment for the airline. Even if the utterance was not intended as an insult, but was rather an off-handed comment, it was certainly insensitive and unnecessary. Even so, an immediate apology may have easily sufficed to close the matter, yet none was offered. Mr. Wang was angry. Upon returning to Beijing, he proceeded to tell all his friends, including several journalists about the experience, presumably to dissuade them from patronizing the airline and potentially exposing themselves to similar insult.

In response to Mr. Wang’s subsequent, repeated calls to the airline’s Beijing office, the company issued a formal apology along with a discount voucher. Mr. Wang however was not satisfied. He demanded a personal letter of apology from the flight attendant involved, a public statement to the same effect printed in the morning newspaper and finally for the flight attendant to be dismissed. Clearly, the airline was unwilling to submit to these demands, and in fact was constrained by U.S. labor law from taking such severe punitive action against its employees. Still, Mr. Wang persisted, indeed he escalated, granting interviews to several publications, and curiously securing front-page stories about his case.

Flustered by this turn of events, the airline dispatched its regional vice president for Asia to Beijing to meet with Mr. Wang in an attempt to demonstrate their sincerity and the importance they attached to his complaint. Unappeased, Mr. Wang stuck with his demands, threatened to raise the volume on his media campaign and even invited journalists to join him in the discussions with the airline’s vice president. The airline was at an impasse, unable to satisfy the disgruntled customers’ demands, receiving constant calls and office visits from journalists and waking up each day to strident criticism in the public sphere.

As this conflagration smoldered and grew, the airline’s PR team toiled in the background, fielding calls from journalists, preparing statements and seeking answers to what had now become a major crisis of public perception. And all along, the question kept coming up, “How could a customer complaint (which in fact, happen with some regularity) explode so dramatically into a major, existential threat to our brand?” Op-ed pieces in China Daily, no less, were holding up the airline as an example of how American companies exploited Chinese customers and harbored deep hatred toward them.

And then came a breakthrough, when one of the PR team suggested that perhaps Mr. Wang’s case had made the “guidelines”. For the uninitiated, the Central Propaganda Department distributes guidelines to major media groups describing how certain stories should be treated. Apparently, these guidelines provide key themes and messages for major stories, official positions and even the magic “kill switch” for stories, which the Ministry does not deem appropriate for Chinese readers. Although these guidelines are widely known to exist, they are highly confidential and rarely discussed “out of shop” for fear of potential repercussions.

If indeed, the airline had made the guidelines, coverage of the case with Mr. Wang could be encouraged, with further guidance that reporting on the matter should focus on the hypocrisy of U.S. companies seeking profit and market position in China, while caring little for their customers’ well-being. Now, within the span of a few weeks, the airline had gone from a global airline with a single, albeit vocal dissatisfied customer to a whipping boy for all that was unfair and unjust about American corporations operating in China. Clearly, as the saying goes, there was more to this story and the hunt was on for a reason beyond the immediately obvious for all of the airline’s travails.

The hunt ended with MFN, the annual U.S. Congressional debate over renewing China’s Most Favored Nation (MFN) trading status. Prior to China’s accession to WTO, this annual ritual gave U.S. lawmakers an evergreen stump upon which to stand and bash China, and gave their counterparts in China a persistent headache, which effectively maintained a gap between China’s growing aspirations as a global player and the reality at the time that China remained an unreformed Communist country and economy just emerging from self-imposed economic exile. Apparently, the airline had unwittingly become a pawn in a much larger game … unfortunate timing to say the least. Still, the clarity of context was refreshing and suggested a new strategy.

From that point, the airline’s response changed. No longer did they treat the case as solely a customer complaint. Although the company continued to engage with Mr. Wang, additional allies were simultaneously nurtured, including officials from the U.S. embassy in Beijing, who presumably would lobby their counterparts in Beijing to tone down the rhetoric. The airline had clearly run afoul of the twin truths of persistent politics and constant change, and the company’s response had to adjust to this new reality. Within days of initiating this new strategy, the situation changed, coverage of the story dried up and the siege was lifted. The airlines was able to resume normal operations and deal with Mr. Wang as they would any customer complaint.

This case shows how seemingly small issues can be hijacked by politics and context and steamrolled into a full-blown crisis. Astute managers will anticipate the potential escalation paths for issues/crisis in China and plan accordingly. On a general level, this suggests several approaches:

Consider the Context

When issues bubble to the surface in China, managers should seek visibility from multiple angles, including the political, social and cultural as well as the commercial. Whereas this maxim is generally followed when companies conduct planning for positive developments, it is often unintentionally thrown out when a crisis breaks. In the heat of the moment, it is tempting to seek the shortest path out of the woods. However, abandoning the successful principles of cross-cultural management when fear, uncertainty and doubt prevail can turn an uncomfortable issue into an existential threat.

Be Prepared

Perhaps the most obvious sounding of the suggestions for good crisis managers in China is to act like the Boy Scouts and remain “always prepared”. Over the twenty years I have spent consulting with firms in China, it never ceases to amaze me how woefully unprepared most companies are to handle crisis situations. I am reminded of a weekend spent with the China management team from a multinational company to ostensibly fine tune their crisis management skills. Once every director and functional manager was seated around a large conference table, the China President threw out a basic crisis scenario and asked his team to respond. Not one of them had read the weighty crisis manual which sat in front of them, and many were obviously unfamiliar with basic principles of crisis management.

Refresh your Understanding

As noted above, perhaps the only constant for businesses in China is that things always change. These changes are sometimes unpredictable and often have major impact on the business community. It is thus, important for China managers to regularly review the assumptions underpinning their crisis preparedness plans, update their plans according to the latest regulatory and political changes and make every effort to stay ahead of the curve.

Know your Allies

Although they may not be on your Christmas card list, key influencers from the public sector, the media and other influential stakeholder groups can come to your aid in times of crisis. Neglect these relationships at your own peril. It may not even be immediately obvious how a particular ally can assist when a crisis breaks, but keeping them abreast of developments and seeking their counsel is a good way to uncover the hidden strength in your own “guanxi” network. A well-tuned ear can benefit from the advice of a friend in times of need.

Although the anatomy of each crisis is unique, there are core attributes that are evident for companies dealing with crisis scenarios in China. These attributes demonstrate across multiple cases and industries though, that being prepared, flexible and broad-minded will serve you well negotiating choppy waters and steering your business true with minimal disruptions and chaos.

Author: Chris Millward

Chris Millward is a twenty year veteran of public relations in China. He has worked on issues and crisis for numerous multinationals across the consumer, technology and industrial sectors. He is fluent in Mandarin Chinese and highly experienced with the nuances of cross-cultural communications.

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