China problems create rewards (and disasters) for PR risk takers

Note: This was originally two posts, published within a few days of each other.

Part 1: China problems create rewards for PR risk takers (July 30, 2007)

All PR has an element of risk to it. That’s one of the things that separates it from advertising. Ultimately, much as we might like to be able to control the press, we can’t. Any time we agree to an interview, or put an executive together with a journalist or reach out to a blogger there is a degree of uncertainly. The wrong thing said, a spot of bad luck, or someone simply having a bad day can turn what should have been good coverage bad.

Risk is part of the PR bargain. We surrender final control over the message in return for the credibility that third party coverage can create and advertising cannot. We’re in the business of getting other people to say nice things about our clients. But other people continue to have minds of their own despite the best efforts of me, my dark brethren and the entire television industry.

Much of PR is the art of managing communication risk. We look for journalists and publications that offer the right mix of favorable attitude and credibility. We coach executives to give interviews and speak publicly. We prepare briefings and talking points, trying strike the balance between preserving the liveliness that makes a discussion interesting and preparing for the curveballs that can derail a discussion. We develop crisis manuals so that less is left to chance in the heat of a corporate disaster.

As is true in so many other aspects of life, larger risks are often the price of larger rewards. I can always do a softball interview in a small-circulation industry trade. Or I can try to get something in the Wall Street Journal, with a correspondent who will ask much tougher questions. I risk a less positive article or no article at all for much wider and more credible coverage. Willingness to assume a calculated risk can often be the key to a big payoff.

I detected such a calculated risk last week when I came across a New York Times article on how the American toy company Mattel quality-controls the products it has manufactured in China. Written by Dave Barboza, who has been omnipresent on this issue, and the US-based Louise Story, the article is based largely upon a visit by Barboza to Mattel’s facilities in Shenzhen.

The article drags up some bad memories from Mattel’s past in Asia, but it is largely positive. It sets Mattel up as an example of how to manage overseas manufacturing, dwelling at length on what the company has learned from its experiences and what distinguishes it as a leader today:

[In] 1997, Mattel took a significant step to improve its image and working conditions. The company hired S. Prakash Sethi, a professor at Baruch College, part of the City University of New York, who had an international reputation as a critic of worker mistreatment.

Mr. Sethi would make unannounced visits to Mattel’s factories and vendors’ plants. He insisted that he would only monitor Mattel if the toy maker let him post his reports publicly and uncensored.

Mattel agreed.

Ten years later, Mr. Sethi says Mattel, unlike most companies operating abroad, still gives him 100 percent independence in his reports, which are often critical. “Mattel is the gold standard,” he said.

Today, industry analysts tend to mention Mattel’s commitment to worker conditions in the same breath as its commitment to product safety.

“Mattel talks about this with a passion, and it is not just lip service,” said Sean McGowan, managing director and toy industry analyst at Wedbush Morgan Securities.

That’s a nice boost for Mattel’s reputation in a way that no advertisement will ever buy.

What makes this article interesting is that the topic of quality control in China was one that many companies wanted to stay away from. In response to a request from a journalist a couple of weeks ago I tried to find a client that would speak about how it ensures quality in Chinese supply chains. No one wanted to go on the record. Even an industry association told me it was too radioactive to touch. Companies didn’t want to remind the public back home that they manufactured in China, even if they were doing so to show how thorough their quality control was. They all judged the risk too high.

Mattel, however, took the risk, based presumably on confidence in their QC systems and processes. They thought they had a good story to tell and they found a way to tell it to a journalist who was interested. That’s the essence of good PR, and to my eye it has paid off nicely for them. In fact, in the article Barboza and Story take pains to point out the companies that did not cooperate:

Mattel was one of only two major toy makers that agreed to allow a reporter for The New York Times to visit one of its factories in China — or even to put an executive on the phone to discuss the issue of Chinese product safety. Hasbro, LeapFrog and Zizzle — the maker of Pirates of the Caribbean toys, among others — all declined requests.

Lego does not manufacture in China, but it declined a request to visit factories elsewhere. Aside from Mattel, only MEGA Brands of Canada said it would permit a visit.

Those paragraphs make Mattel look like a well-managed company with nothing to hide. By contrast, Mattel’s reticent competitors come off looking insecure by comparison even though they may simply have been being cautious.

I wonder whether Mattel simply spotted the opportunity when they took a call from theTimes, or if they actively pitched the story. If the latter, they earn an extra measure of respect from me.

I suppose this story could back to haunt Mattel if they have a China-based problem in the next few months. But that seems unlikely –or at least an acceptable risk– and in the meantime they’ve earned themselves good coverage out of a situation that many other companies simply hoped would blow over.

Note: Mattel is not Imagethief’s client. Nor are any of the other companies named.

Dan Harris has also remarked on this article in China Law Blog, from a slightly different perspective.

Part 2: …And sometimes they blow up in the faces of PR risk takers (August 2, 2007)

A few days ago I wrote a post [above] about how Mattel appeared to have seized the opportunity to generate some good PR for itself out of the China product situation. I framed it as a PR risk vs. reward equation, and thought that Mattel had done a very good job of bolstering its reputation by taking the risk of inviting journalists to tour its facilities in China.

The problem with those risks is that they are so darn risky. At the end of my post I wrote:

I suppose this story could back to haunt Mattel if they have a China-based problem in the next few months. But that seems unlikely –or at least an acceptable risk– and in the meantime they’ve earned themselves good coverage out of a situation that many other companies simply hoped would blow over.

I was wrong. It was not unlikely. It was, in a perfect illustration of Murphy’s Law (or Sod’s Law if you are anglicized), inevitable. The news broke this morning that Mattel is recalling nearly a million toys for problems with lead-based paint. It was first reported by AP, but one of the two journalists who wrote the story I commented on last week has written it upmore extensively for the New York Times:

On July 18, Mattel took a reporter for The New York Times on a tour of a factory in Guanyao, China, and of Mattel’s toy safety lab in Shenzhen. At that time, Mattel executives say, it was unclear whether Mattel was facing a widespread lead paint problem, or if the European case was an anomaly.

Last Thursday, the same day this newspaper ran an article on the subject of preventing safety violations in Chinese factories that focused on Mattel, the company’s executives say they received conclusive data that convinced them to recall the 83 products. Then, the company contacted retailers who stocked the toys.

“This is a vendor plant with whom we’ve worked for 15 years; this isn’t somebody that just started making toys for us,” Robert Eckert, the chief executive of Mattel, said in an interview. “They understand our regulations, they understand our program, and something went wrong. That hurts.”

Boy, does it ever.

What does this mean for Mattel? They seem to be doing a pretty good job of handling the recall, and they have a history of managing this kind of situation fairly well. But the timing is disastrous and the episode will undo the reputational boost they got from the story last week. Furthermore, they now face the extra scrutiny that will come from having showcased (the PR man in me hesitates to use the phrase “boasted about”) their quality control mechanisms in such detail. If you’re so good, why didn’t you catch this?

One of my regular commenters, a lawyer, pointed out:

[You] raise a good point about what happens if a problem occurs in the future, e.g. a product liability claim based on their China-made toys.  Having established for broad public view their set of standards, the potential for deviation from those standards could form the basis for negligence issues.

I wonder whether Mattel had internal communication issues. Last week’s article was apparently in development for about a week, before being published on the 26th. Today’s article notes that Mattel received information of the problems on same day that the report ran. Now that’s bad timing, and, if this was a surprising result from routine testing, perhaps just colossally bad luck. But if anyone in Mattel suspected problems or knew before the article ran –or, especially, before the journalists were invited to tour Mattel’s facilities–  that the results might be problematic, then Mattel had an internal communication breakdown that might have substantially affected their PR decision making. All this is simply speculation on my part, and should be taken as such.

PR people should take calculated risks, and I still admire Mattel’s decision to work with the Times journalists for last week’s story. I think it was gutsy and had until now yielded good results. But PR people also need to do their own due-diligence on these kinds of risks. What test results do we have pending? Are there any known issues that might break in the next few weeks? What’s my level of confidence? Mattel’s PR squad may well have done this and more, but I’m still happy I’m not the person explaining the decision making to Mattel’s senior management this week.

I’ll be interested to see how Mattel handles communication around the recall. I also hope that companies don’t take the wrong lesson from this and become even more cautious in communicating about their China QC and sourcing. In general I still think there is a lot to be gained from showing consumers what you do to protect them, even if the systems aren’t perfect.

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