There is a common theme to two of last week’s tales of corporate woe – the cyber hack at TalkTalk, and the publication of the independent report into the Thomas Cook tragedy, when two children died from carbon monoxide poisoning from a defective boiler while on holiday in Corfu in 2006.
In the TalkTalk incident, the personal and financial details of 157,000 customers were put at risk following an elementary cyber attack traced to three teenagers. The original estimate of customers affected was over four million, leading to the company’s shares falling some 10%. The share price has been see-sawing since, investor confidence shaken by the fact that the critical Christmas trading period is fast approaching, with the risk of customer growth and revenue targets being missed in a competitive and difficult market.
The company’s CEO, Dido Harding, came in for criticism for subsequently admitting that it could have invested more in its cyber defences.
In the Thomas Cook case, an inquest found, in May, that the company had breached its duty of care. The independent inquiry by Justin King, former CEO at Sainsbury’s, states that parts of the company had “a tendency to protect cost rather than maximise the customer experience”, a “cultural as much as a financial challenge”.
Peter Fankhauser, the CEO who joined the company last year, reversed the policy, and attitude, of his predecessor, Harriet Green. He acknowledged that “It took us nine years to correct the mistakes of the past and to do what everyone would have expected of us; treat the family with the respect and empathy they deserve”.
Both cases highlight the damaging effect on trust when a company does not live up to stakeholder – particularly customer – expectations. Protecting sensitive data, and providing a safe holiday environment, are basic elements of the customer proposition. CEOs need to put time aside to reflect on whether the appropriate balance has been found between cost efficiencies and customer focus. This is not an easy judgement, but making the wrong call will impair the company’s reputation, and brand. It will damage trust and, as a consequence, destroy value – whether in terms of share price, or children’s lives.