Arnie Weissmann
It may be cold comfort to United CEO Oscar Munoz, but the airline's tone-deaf public responses in the immediate aftermath of the David Dao incident is not the worst "duty of care" crisis to have hit the travel industry.
Nor will they likely be the most prolonged public relations nightmare for a travel company. Both those distinctions go to U.K.-based Thomas Cook Travel which, for nine years, was pilloried by British tabloids over its refusal to acknowledge any liability in the deaths of two children on one of its tours.
I recently spoke with Thomas Cook CEO Peter Fankhauser about that episode, the lessons learned and whether he had any advice for Munoz and United.
His company's reputation-damaging incident began after Christie and Bobby Shepard, ages 7 and 6, respectively, died of carbon monoxide poisoning while staying at a hotel on a Thomas Cook packaged holiday on Greece's Corfu Island in 2006.
Thomas Cook maintained that the hotel had lied to the company about the existence of a faulty gas boiler and therefore had no responsibility. A trial in Greece found three hotel employees guilty of manslaughter by negligence but cleared two Cook employees, providing legal cover to the tour operator and justification for maintaining that no apology was necessary.
But the court of public opinion had drawn a different verdict, with outrage fueled when it was revealed that Cook had received $4.5 million in insurance payments -- $1.9 million more than its actual expenses related to defending itself.
The issue was brought up in Parliament. Ex-U.K. prime minister David Cameron met with the parents and expressed sympathy. An inquest was held in Great Britain, with Cook executives frequently refusing to answer questions to avoid self-incrimination while maintaining they had nothing for which to apologize. The jury returned a verdict of unlawful killing and found Cook had breached its duty of care, but Crown prosecutors also concluded there was insufficient evidence to pursue a criminal case.
Fankhauser had been CEO for only six months when the inquest ended, and said he felt deeply conflicted. His corporate attorneys advised him not to apologize, but he concluded that their advice was destroying, not protecting, shareholder value.
"At a certain point, I said, 'I don't want to talk about the family, I want to talk with the family,'" Fankhauser said. He scheduled a meeting with the parents -- "one of the most difficult meetings I've had in my entire life" -- and ended up establishing a foundation to address issues related to travel safety, funded by the excess insurance payout. Both he and the children's mother are trustees. And in the end, "we could somehow find a certain respect for each other," he said.
Looking back, he sees the incident as a catalyst for personal and corporate change. "I act now as a human being," he said.
During the prolonged crisis, morale at Cook had plummeted, with employees often expressing their embarrassment at working there. He refocused the company to a guest-centric orientation, with executive bonuses linked to improvements in customer service.
He found that the pivot to service helped the 175-year-old packaged tour operator stay relevant and add demonstrative value beyond what a consumer can get when putting together trip components on their own. Duty of care -- what Fankhauser calls "a care package" -- has become the centerpiece of marketing and operations.
Last week, I spent some time with Dan Mahar, CEO of Tauck, at the company's Connecticut headquarters. Listening to Mahar describe his management philosophy, it struck me that although Tauck's culture isn't designed specifically to avoid reputational damage, its tenets would likely protect its name.
The company is guided, he said, by a sense of purpose: Uniting to serve others. "No matter where you are, what the circumstances are, you do the right thing," he said.
He observed that many executives struggle to decide who is more important, the customer or employees.
"We put our people first," he said. "They can't take care of customers unless we have taken care of them."
Every effort is made to extend the culture to the "broader ecosystem" of partners, he added, from bellmen to coach drivers to the concierges at hotels with which they contract.
"It pays huge dividends," he said, noting that half their guests are repeat customers, and half of new guests are referrals.
Cook CEO Fankhauser declined to give any direct advice to United CEO Munoz; clearly the airline moved into the apology/culture-change phase much more quickly than Cook had.
With so many examples of reputational damage in and out of the travel industry, one wonders why more companies don't take Mahar's proactive approach before trouble starts.
I think the reasons are complex, but often executives, feeling pressure from analysts and shareholders, reflexively give more weight to calculable risk-associated costs vs. less easily quantified goodwill. Mahar, on the other hand, told me that there are plenty of grandchildren who may be interested in joining the family-held business and that decisions affecting reputation carry tremendous weight.
Still, although there are plenty of examples of what not to do, foggy thinking in the trenches of business can rival that produced by the fog of war. United has not, I'm afraid, written the final chapter in the book of corporate cautionary tales.