‘Radical honesty’ and Nestlé’s Noodle Crisis
May 13, 2016
In their book on what makes organizations authentic, two business school professors, Rob Goffee and Gareth Jones, coined the term “radical honesty” to describe a new approach to corporate communications.
In this WikiLeaks era, where the public is deluged with information and has little trust in public institutions and respect for authorities, corporate spin is a fool’s game and corporate secrets are a thing of the past, the two argue. Better to share more information and more often—whether it’s good or bad—and use as many channels as possible to reach all the key audiences.
Radical honesty, as they put it, is “proactive rather than reactive; it is speedy; it surprises people with its candor; it encourages dissent; and finally, it means engaging with employees and with a wide group of stakeholders – shareholders, customers, suppliers, regulators and the wider society.”
Sure, there will be times to keep competitive information confidential, they acknowledge, but that should not be the default mode, not at a time when “reputational capital is more important and more fragile than ever before.”
I thought about the idea of radical honesty when I read in this month’s issue of Fortune about Nestlé’s mishandling of a crisis over safety concerns about its instant noodle product in India, which cost the company an estimated half a billion dollars. The piece is destined to be taught in business schools and should be required reading for crisis communications professionals.
To be sure, this is not a story of an evil corporation trying to hide facts from the media or regulators or a company engaging in corporate spin for that matter. Ultimately the facts may be on Nestlé’s side.
But it is a story of a company that failed to proactively engage and share information with the public and the media when they needed assurances. And in our world of fast-moving information and volatile public sentiment, that can be a recipe for disaster.
In case you need the CliffsNotes version: Nestlé India spent decades developing Maggi 2-Minute Noodles into one of India’s most successful and trusted food brands. In terms of cultural significance, Maggi Noodles in India are what Coca-Cola is in the U.S.
But one day in 2015, Nestlé received test results by health regulators in one of India’s 29 states showing that its noodles contained MSG and seven times the permissible level of lead. According to Fortune, Nestlé was dismissive of those findings and sent the regulators its own tests and told them that no further action was needed.
Not only did the response annoy the regulators, but it ignited the Indian press—which includes some 400 news networks—and ultimately frightened and enraged the public. For two weeks Nestlé sat by without issuing a statement. And when it did, it said there was “no order to recall Maggi Noodles being sold” and that the product was “safe to eat.”
Where Nestlé saw a pesky technical problem with regulators using unsophisticated techniques, the rest of India saw a faceless multinational corporation putting the health of Indians at risk.
The story continued to spiral out of control for weeks, igniting a tremendous public backlash against the company, dragging in more regulators and spurring rumors. Ultimately, Nestlé would voluntarily pull the product off the shelves even as it fought a government-imposed ban. The legality of the ban is still being fought in court.
There is some good news for Nestlé. It has since been able to relaunch Maggi Noodles. But clearly, the damage has been done in lost sales, an expensive recall and a depreciation of the Maggi brand.
Interestingly, while Nestlé executives acknowledge that the crisis was not handled perfectly, Fortune reports that they “defend their decision-making generally—particularly the choice to privilege communication with regulators over reaction to the media.”
It’s about taking the long view, they argue, and the most important audience for them are regulators.
At least they’re being honest.