In The Wall Street Journal on August 30th 2016, CommCore CEO Andy Gilman discusses a recent communications crisis with Welspun in India.
What do you think of the situation?
“This is a weekly commentary by external experts.
Textile supply company Welspun India Ltd. is under the crisis microscope after Target Corp. cut ties with the company after alleging it was selling the retailer fake Egyptian-cotton sheets. Welspun’s stock price plunged after the news, and trading in the shares was halted temporarily. Wal-Mart and other retailers followed, saying they wereinvestigating whether the sheets they buy from Welspun contain Egyptian cotton.
The company issued a statement calling the situation “an issue of highest priority for us,” and announced the hiring of an outside auditor to review its supply chain systems and processes. The company defended its products and held a conference call to allay investor concerns in which it took responsibility. According to the transcript of the call with investors, Managing Director Rajesh Mandawewala said: “Without any ambiguity the fault is on our side and so it is, let’s say, the error is from our side so I guess we have to take responsibility for it.”
The experts break down the effectiveness of Welspun’s message, and evaluate how well it communicated that message.
Andy Gilman, chief executive, CommCore Consulting Group: ‘When faced with a 40%-50% drop in stock price and the loss of all of its business from Target–not just the products in question–Welspun’s comments have been both technically textbook appropriate and woefully inadequate. As news reports call this fake Egyptian cotton issue a ‘sheet storm,’ the company appears to be moving slowly and calmly while its reputation and business is on fire.
‘Of course it’s appropriate to say, ‘We have initiated actions to investigate the root cause.’ It’s also commendable to say you are appointing an external auditor; that normally shows commitment to solve a problem. However, by the time the auditor finishes the investigation, more business will have been shredded. Poor word selection causes another problem. When [a top] executive uses an Indian-English phrase ‘fiber provenance issue’ instead of a more understandable phrase such as supply chain for U.S. customers, it sounds lame and like the company is soft-pedaling the issue.
‘In answer to a question on the investor call, Rajesh Mandawewala took responsibility for the problem and the fact Target canceled its business: ‘So there has been, let’s say, a failure on our part, so without any ambiguity the fault is on our side.’ What was missing in his response was a passion or concern for shareholders, employees or the successful business they had built.’ “