How to Survive a Product Recall
A product recall doesn’t have to be the complete disaster it sounds like. Here’s how to limit the damage to your company and reputation.
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Despite a business owner's staunch commitment to safe practices, product recalls can and do happen. Given how many parties are typically involved in getting a consumer product to market, there are a myriad of places for something to go wrong. (Just ask Toyota.)
In fact, more than 2,500 product recalls occur in the United States each year, according to Dirk Gibson, an associate professor of mass communication at the University of New Mexico who has conducted extensive research on product recall practices. 'Recalls are perennial. They are always out there, so it's something we ought to plan for.'
A full-blown product recall is a complicated and highly regulated process, with the potential for more than just bad press—legal complications also arise when a company realizes one of its products has the potential to cause harm or injury to consumers. To get an unsafe product off the market as quickly as possible and with minimal fallout to your customers -- and your reputation -- follow our guide to surviving a product recall.
How to Handle a Product Recall: Plan Ahead
The best way to handle a product recall is to plan for one ahead of time.
'Trying to figure out everyone's roles and what steps to take during a massive recall with gathering media attention is very difficult to do on the fly,' says Dave Wix, founder and managing partner of the Wix Law Group, a law firm based in Deerfield, Illinois, that specializes in product recall and product safety consulting.
To start, make sure you know the ins-and-outs of the legal and regulatory requirements in your industry for safety. 'It sounds very basic,' says Katherine Cahill, a risk consultant for Marsh, a risk consulting firm owned by New York City-based Marsh & McLennan, 'but it is often frightening to me when I go to a company and ask what are the regulatory requirements for safety of their product, and they look at me like they have no idea what I'm talking about.'
Outside of understanding the legal and regulatory standards governing your product, the cornerstone of your preparation is the product recall manual, which should be a detailed guide to walk you through every step of the process. Include the following information:
- A chain of command for recall situations that clearly defines responsibilities and tasks. Nominate a product recall or quality control manager, and a product recall task force, laying out what each member needs to do as a part of the investigation.
- Contact information for each member of that task force, including cell phone and home numbers. 'It's amazing to me the number of product recalls that happen at 3 o'clock on Christmas Day,' Cahill says.
- The process and procedures for identifying a safety issue. Have a system for analyzing customer complaints, warranty returns, and product testing to uncover a potential safety issue.
But don't stop at just writing the manual. In order for it to be effective, you also need to test it by conducting a mock recall at least once a year. (Doing so will put you ahead of the curve: less than 10 percent of companies actually practice their recall or general crisis plans, according to Gibson.)
It's also essential that you know where your product comes from and have protections in place with your manufacturers. (Case in point: Toyota wasn't the manufacturer of the faulty accelerator pedal at the heart of its massive car recall.) You should even dig all the way down to your materials suppliers. 'You need to truly understand where your raw materials are coming from,' Cahill says. She advises companies to include process change protocols in their contracts with raw materials manufacturers. The protocols require those manufacturers to inform a company in writing if anything in the raw materials provided is different from the specifications previously agreed upon.
Cahill also says that a large number of recalls result from issues with the widgets used to manufacture products. Partner with manufacturers you can trust to properly maintain and clean tooling, so parts of the tooling don't end up in food products, for example. And purchasing product recall insurance is a no-brainer.
Dig Deeper: Lessons from the Firestone tire recall.
How to Handle a Product Recall: Investigate the Safety Issue and Report It
Oh no! You've discovered a potential safety hazard with one of your products. The good news is that you don't have much time to dwell on the bad news.
You need to immediately begin a thorough investigation to determine what went wrong, and how many products are affected so you can set the scope of the recall. 'These need to be very specific measurements,' Gibson says. 'You don't want to over recall, because it can be scary, and expensive. But you can't under recall because then it's ineffective.'
First, find the root of the issue. Was it a problem with the product design, or is it a manufacturing defect? From there, you need to quantify the damaged goods. 'Ask yourself, is this limited to a specific batch or a certain day or week of production?' Wix says. 'Is this an anomaly not likely to occur again?'
A thorough investigation can help you avoid what Wix calls a 'rolling recall' situation, in which you have to expand the initial recall after several weeks once you've realized you didn't capture everything the first time around.
Depending on what your investigation reveals, you may have a legal duty to report it to the government agency that regulates your industry. (Just because you do a report doesn't mean you will have to launch a full-blown recall, Cahill says.) But make sure you do it quickly. 'It's a matter of days, not weeks,' Wix says.
'There's a lot of criticism for the amount of time it takes corporations to call the feds after they realize they have a problem,' Gibson says. 'That's not in anybody's best interest.'
Most product recalls are actually 'voluntary recalls,' in which a company realizes it has a safety issue and works to investigate and solve the problem in tandem with a federal agency. In a small number of cases, federal agencies will tell a company that a product needs to be taken off the market, in what is known as an 'involuntary recall.'
