The Crisis Management Lesson from Toyota and GM: “It’s Our Problem the Moment We Hear About

It” 11/03/2025, 2:52 PM

Crisis Management

The Crisis Management

Lesson from Toyota and GM:
“It’s Our Problem the Moment
We Hear About It”
by Ben W. Heineman, Jr.

March 20, 2014

Leer en español

Delay in confronting crises is deadly. Corporate leaders must have

processes for learning of important safety issues. Then they must
seize control immediately and lead a systematic response. Crisis
management is the ultimate stress test for the CEO and other top
leaders of companies. The mantra for all leaders in crisis
management must be: “It is our problem the moment we hear
about it. We will be judged from that instant forward for
everything we do—and don’t do.”

These are key lessons for leaders in all types of businesses from
the front page stories about Toyota’s and GM’s separate, lengthy
delays in responding promptly and fully to reports of deadly
accidents possibly linked to product defects.

The news focus has been on regulatory investigations and

enforcement relating to each company, but the ultimate question
is why the company leaders didn’t forcefully address the possible
defect issues when deaths started to occur.

https://hbr.org/2014/03/the-crisis-management-lesson-from-toyota-and-gm-its-our-problem-the-moment-we-hear-about-it Page 1 of 5
The Crisis Management Lesson from Toyota and GM: “It’s Our Problem the Moment We Hear About It” 11/03/2025, 2:52 PM

On the recent regulatory front:

Toyota just agreed to pay $1.2 billion in a deferred prosecution

agreement with DOJ and accept a safety monitor for failing to
disclose to regulators—and indeed misleading them—about
accelerators that became stuck on certain types of floor mats or
because of certain elements in the accelerator itself. The
problem of uncontrolled speeding and deadly crashes began to
appear in 2007, but it took four years, and deceptive statements,
before Toyota disclosed earlier understandings about the
causes and recalled millions of vehicles. The company has also
settled class actions and has individual suits still pending.

GM delayed from 2005, when the issue first appeared, until

recently to recall 1.6 million Chevy Cobalts with an ignition
defects that, under certain conditions, would turn off the
engine suddenly and disable airbargs, leading to a number of
crashes and at least 12 deaths. The company is now facing the
prospect of multi-front investigations from Congress, the
National Highway Safety Administration and the Justice
Department about why and how years passed before GM
addressed the issue. New GM CEO Mary Barra has personally
taken over the internal investigation, oversight of litigation and
the response to government entities. She has said in a video to
employees: “Something went very wrong in our processes in
this instance, and terrible things happened.” Although, in
contrast to Toyota, GM is just at the beginning of extended

https://hbr.org/2014/03/the-crisis-management-lesson-from-toyota-and-gm-its-our-problem-the-moment-we-hear-about-it Page 2 of 5
The Crisis Management Lesson from Toyota and GM: “It’s Our Problem the Moment We Hear About It” 11/03/2025, 2:52 PM

regulatory and possibly enforcement actions, the delay in

dealing with the ignition issue is, like Toyota’s accelerator issue,
likely to be a major problem for the company in years to come.

But, the deeper question is why these delays occurred in the first
place. And it is on this question that business leaders should
ponder whether they have robust systematic processes in place
for personally leading or overseeing these threats to people and to
the company.

The importance of thinking seriously about this set of issues is

driven home by the failure of GM to address the ignition issue,
even though the example of Toyota’s delay and lack of candor on
the accelerator issue was a huge international story three plus
years ago.

In a nutshell, CEOs and other top business leaders (with oversight

of systems and processes by the board) must have a well-thought
out approach to managing this type of health and safety crisis.

Preventive systems and testing should be in place to reduce the

issues to an absolute minimum.

As Toyota and GM have belatedly done, the CEO should appoint

a head of safety and rapid response teams to receive reports of
serious harms to persons or property that may be linked to
product issues.

Just as the general company ombuds system reports concerns

to the top of the company about serious commercial, legal or

https://hbr.org/2014/03/the-crisis-management-lesson-from-toyota-and-gm-its-our-problem-the-moment-we-hear-about-it Page 3 of 5
The Crisis Management Lesson from Toyota and GM: “It’s Our Problem the Moment We Hear About It” 11/03/2025, 2:52 PM

ethical issues, the rapid response team should take any issue of
potential consequence to the CEO or other high business
leaders.

Most importantly, the CEO or top business leaders should then

form appropriate multi-functional teams relating to: design
problems and solutions; internal personnel and processes;
duties to regulators; management of litigation; a
communications strategy with various constituencies; and any
other relevant functions.

The CEO or top business leaders must have prompt, periodic,

direct reports until there is a good understanding of the
interrelated issues. Then they must make decisions on an
appropriate response. On these important safety issues, the
CEO should also keep the board informed.

Both during formulation of the strategy and after, the CEO or

top business leadership must ensure that all communications
to all constituencies must be strictly accurate. It is better to say
nothing—and develop accurate facts—than to issue deceptive
or incomplete statements.

Once decisions are made about strategy, the CEO must oversee
implementation to make sure, as appropriate, that it is
meticulously carried out, changing systems both with respect
to specific issues and more broadly as necessary, dealing
humanely with people injured, and communicating fully and
transparently with regulators, media, and other constituents.

https://hbr.org/2014/03/the-crisis-management-lesson-from-toyota-and-gm-its-our-problem-the-moment-we-hear-about-it Page 4 of 5
The Crisis Management Lesson from Toyota and GM: “It’s Our Problem the Moment We Hear About It” 11/03/2025, 2:52 PM

To take these fundamental steps is to pass the stress test. And the
striking examples of Toyota and GM are an occasion for
companies to review whether processes are in place to ensure that
they are taken in the event of such a crisis.

Many commentators are speculating about whether the Toyota

settlement with the Justice Department will be the template for a
future GM resolution. To me, the more critical question for all
companies is how expeditiously to handle these crises at the
outset in order to avoid the unconscionable delay—and the
searching regulatory problems that follow, as the Toyota and GM
cases show.

It is our problem, the moment we hear about it.

Ben W. Heineman, Jr. is former GE General

Counsel and is a senior fellow at Harvard
University’s schools of law and government. He
is author of the new book, The Inside Counsel
Revolution: Resolving the Partner-Guardian
Tension, as well as High Performance With High
Integrity.

Read more on Crisis management or related topic Business

communication

https://hbr.org/2014/03/the-crisis-management-lesson-from-toyota-and-gm-its-our-problem-the-moment-we-hear-about-it Page 5 of 5