In the past two weeks, we have been following the saga of SME/MME Family Business owner Mr. Mbanje and his transport business. We have looked at his company registration and the issue of contracts, outlining shareholding as well as monies borrowed and what that debt constitutes of and how it can affect a company. We also explored the hiring practices of the Family Business owner. This week I would like to continue the journey of Mr. Mbanje's transport business. As I pointed out last week, Africa's logistics sector holds so much potential and presents a significant opportunity for anyone willing to build their business in that industry. Millions of commuters travel every day across the continent and require transportation.
As the company expands its routes, The Mbanje buses are by far the most prevalent on the roads countrywide. The Mbanje family becomes a well-respected member of society with great wealth and stature. Their wealth is growing, and it is visible through the lifestyle they now live. Their kids attend good schools, they go for holidays in foreign lands , their house is now in the plush parts of town, and their cars are the latest top of the range vehicles.
As time goes on, Mr. Mbanje decides to diversify his risk and invest in real estate and other small businesses. Diversification is a technique that reduces risk by allocating investments among various financial instruments, industries, and other categories. It aims to maximize returns by investing in different areas that would each react differently to the same event. In simple terms, diversity is a strategy used by investors to manage risk by spreading their money across different assets and sectors. The thinking is that if one area experiences turbulence, the others should balance it out. It is the opposite of placing all your eggs in one basket.
As with all businesses that have a monopoly of trade in any industry, they also start to have a monopoly of problems if standards are not kept high. Mr. Mbanje's hiring practices start catching up with him. The rise in inexperienced drivers on his payroll, coupled with the bad road networks, lead to an increase in bus accidents with a high increase of fatalities. Also, because of the structure of his organization, Mr. Mbanje does not have a PR department or a board of Directors or Advisors to share the burden of decision-making when his company is hit with problems.
A board of Directors or Advisors are critical to the growth of a company. This group of experts is a sounding board that acts as an objective decision-making mechanism when business owners find themselves incapable of making sound decisions. Even when the business owner is incapable of running their company if the business owner makes clear what their vision and mission of the company is, a board can assist in ensuring that this vision and mission are adhered to. A board that is attuned to and capable of carrying out the founder's vision can assist in redefining the company's purpose if and when necessary.
Moreover, despite having taken short business courses and an MBA, Mr. Mbanje also does not have appropriate expertise in brand building and crisis management to assist him in his decisions. He also is not sure where to get the right qualified professionals to help him, so he turns to his wife and other family members who have no experience in business management for advice. His business decisions are now more emotive rather than quantitative. Consequently, the growing number of customer disgruntlement rises, and there is a rumor that the Mbanjes use witchcraft to grow their business. Dissatisfied customers out of fear, start boycotting the Mbanje buses. The Mbanje family despair as they feel that they have not made enough investments in other sectors, and they feel their financial cash cow dying (cash cow: a business, investment, or product that provides a steady income or profit).
The truth is actually not what the family is thinking. If they:
brought in seasoned professionals
adjusted their hiring and
looked at taking an appropriate crisis management strategy
would be in a place where they could save their business and further grow it to be more prominent than it was when the problems started developing.
Steps they could take to combat the situation include:
Rebuilding Customer trust by taking a public stance issuing PR methodology to share more about their business and what drives them to serve their customers.
Rebuilding Customer Trust by creating or complying with standards for hiring drivers, repair staff, and buying buses. They needed to ensure all their buses are better equipped for the bad roads and maintaining higher standards for their drivers and getting them to take defensive driver courses.
Showing customers reliability by creating loyalty programs and ensuring that these benefit the customer and continuing business as usual. Customers need reassurance.
An excellent example of Business Crisis Management is the Johnson & Johnson cyanide-laced Tylenol capsules in 1982.
The crisis: Seven people died after taking extra-strength Tylenol capsules that had been laced with potassium cyanide, a deadly poison. The killer was never found.
How J&J responded: The company put customer safety first. It quickly pulled 31 million bottles of Tylenol -- $100 million worth off the shelves and stopped all production and advertising of the product. It also got involved with the Chicago Police, FBI, and FDA in the search for the killer, and offered up a $100,000 reward. Post-crisis, the company reintroduced Tylenol with new tamper-resistant packaging and $2.50-off coupons.
The result: A go-to case study in MBA classes worldwide, Tylenol's response to the tragic 1982 Chicago murders, is regarded as one of the most successful sequences of crisis management in history. The media appreciated the lengths J&J went to and its concern for the public interest, so the company was portrayed generally in a good light, helping the Tylenol brand to recover.