KFC – A management cock-up?
David Rubens examines the supply chain disruption caused by Kentucky Fried Chicken (KFC) switching distributors in its UK operations, while Emily Hough makes some initial notes on how the company's social media handled the crisis
Up to 575 of the company's outlets were closed at the peak of the chicken shortages (Lucian Milisan/123rf)
As someone who makes his living travelling round the world talking about, teaching and consulting on risk and crisis management, writes David Rubens, one of my lessons is that crises are in themselves often unique, but the reasons for crisis are depressingly predictable. In the vast majority of cases, the causes of a crisis are not external events (though those can be large scale, dramatic and with significant impacts), but rather the management failures of the organisations responsible either for preventing the crisis from occurring, or for responding once they have.
We use a wide range of crises as case studies. In almost all cases, once specific details identifying each case have been removed and the summaries of the post event reviews and enquiries are attached to a different event, it is fascinating to observe how the swapped around notes are equally applicable to the new crisis they have been attached to.
Thus the post-event report on the Space Shuttle Challenger identifies exactly the same reasons for failure as the report on BP’s Deepwater Horizon disaster, and the reports on the Utoya Island massacre in Norway could be equally applied to the organisational and management failures that led to the crisis in New Orleans following Hurricane Katrina.
The recent events involving fast food chain Kentucky Fried Chicken (KFC) switching suppliers for its logistical delivery services, leading to the closure of hundreds of KFC branches across the UK, is an example of a significant organisational failure that has catastrophic impact in terms of both revenue and, possibly, reputation. Despite the supposed management capabilities that are held by both KFC and its new supplier DHL, the reasons for the failure were not only predictable, but given the circumstances of the project, almost inevitable.
Firstly, it should be questioned why KFC decided to change suppliers from Bidvest, a specialist food supplier with a nationwide network that had held the KFC contract for many years, to DHL, a general supplier that had no previous experience working with KFC, and which was attempting to manage the national distribution from a single distribution centre. If, as has been reported, the reason for the change was because DHL was prepared to undercut Bidvest and provide the service for a cheaper fee, then it has to be asked which part of the operation it was cutting back on, and whether, even if the operation had been carried out smoothly, the potential cost savings would have been worth the additional risk and disruption.
Reading through the various press reports, a number of points that reflect some of the core principles of strategic risk management keep coming up. These are not issues that should be considered as ‘clear in retrospect’, but should have been front and centre of the considerations of the KFC management team when considering switching from a known, tested and experienced supplier to one that is not only unknown and untested, but one that lacked experience and was promising ‘cutting edge innovation’ – a scary phrase whenever it is used in reference to complex operational management.
"We’ve brought a new delivery partner on board, but they’ve got a couple of teething problems – getting fresh chicken out to 900 restaurants across the country is pretty complex," KFC Statement
Bringing your client’s operations to a standstill, damaging its reputation and creating a situation where it is held up in front of a global audience as an example of weak management and general inefficiency, does not come under the heading of ‘teething problems’. The correct phrase is ‘catastrophic failure’. There was nothing that was involved in the delivery of the chicken that was not known at the time of the bid that was put in, and there were no outside influences that could be blamed for the failures. It was simply a matter of bad management, weak oversight, unrealistic expectations and an inability to recognise completely predictable critical failure points that should have been identified, reinforced and controlled in order to ensure the smooth running of what is, in its essence, a rather simple three-stage operation – receive order, collect chicken, deliver chicken.
Some of the points that should have been covered in the pre-launch risk assessment include:
Managing the transition
All transitions are complex, challenging and create unforeseen problems that themselves can quickly escalate to critical crisis status. This is true of even the most simple transition process, but anything that involves the integration of high levels of technology, critical dependencies and dispersed centres, as the KFC operation does, should consider critical failures to be an inevitable part of the transition process.
The ability to integrate complex technology is always a high-likelihood failure point; in fact, it should be presumed that technology will fail to deliver that which it promises. It can then be accepted that there will be an inevitable period of settling in during which, rather than supporting and enhancing operations, technology will actively disrupt them.
For something as complex as an individual just in time booking system based around 900 separate stores, and involving a completely new process with which the local shop owners are unfamiliar with (and may have not received sufficient training in), mean that not only will such failures happen, but they will have a critical impact on the ability to keep those 900 shops stocked with their single most important commodity.
Was the system tested properly?
It would be interesting to know what sort of testing process was put in place, and, if there were testing programmes, whether they were realistic in terms of the pressures they placed on various parts of the system, or if they were ‘nominal’ testing, more symbolic than realistic.
This is exactly the problem that was a root cause of the London Heathrow Airport’s Terminal 5 opening day fiasco, when the complex ticketing and baggage handling systems failed, leaving both the British Airports Authority (BAA), which is responsible for the building and management of the terminal and British Airways (its only client and user), facing a disastrous operational and public relations crisis.
Take this quote from the report of Terminal 5 opening failure: “Despite the rigorous tests that took place, it was inevitable that once real passenger bags were introduced into the system, there would be bedding-in issues. As Colin Matthews, Chief Executive of Heathrow Airport said in his evidence to the committee: ‘It may have been that the baggage we were testing was too uniform….[M]aybe the reality of the baggage that people put into the system was more diverse than our test represented’.”
Management of complexity
To claim that one reason for the failure is that the operation was complex is simply not acceptable. It is precisely the distribution company’s ability to manage complex delivery operations that is its core service. Builders build, engineers design, and delivery companies deliver. It would not be acceptable for the engineer of a bridge that collapsed to make the excuse that ‘t was really complex engineering, so why is that considered an excuse here?
This is exactly the same point that was made after the G4S failure at the London 2012 Olympics. Nick Buckles, CEO of G4S, repeatedly explained in a House of Commons Home Affairs Committee hearing into the failure of G4S to deliver the security personnel it was contracted to, that one of the reasons for this failure was: “It was an extremely complex operation,” the Chairman Keith Vaz, clearly losing patience, said that he knew that it was complex – that was why it was the company’s job to deliver it.
High reliability and zero failure
Although this did not involve a nuclear power station or an aircraft carrier – typical ‘zero failure’ organisations that are associated with high reliability theory – it is clear that reliability, ie the ability of the service provider to provide the service week in, week out, without interruptions, disruptions or the need to make excuses, was at the heart of the contractual agreement. Whatever else was being discussed, the reliability of the chicken delivery was actually the only critical issue. It seems that in the desire to describe the new contract as a ‘groundbreaking’ move that would see DHL ‘re-write the rule book’ and ‘set a new benchmark for delivering fresh products to KFC in a sustainable way’, DHL forgot what the company was actually meant to do. The fact is that delivering chicken does not necessarily benefit from ground-breaking (ie untested) technology but, when done well, it is a rather old-fashioned (and fundamentally boring) service.
At the end of the day, whatever the reasons for the DHL failures, the ultimate responsibility rests with KFC management, which is responsible for the company, the brand, shareholders and its franchisees. You can outsource services, but you can never outsource responsibility.
It would be interesting to know how involved the KFC management was in overseeing the development of the DHL package, and ensuring – through rigorous testing and validation – that all its assumptions were realistic, and that when the day came to give it the green light, it was actually ready to go.
Like so many of the management disasters that we see on a regular basis, in both the public and private sectors, this cannot be blamed on anything except personal and organisational incompetence. The issues that were central to this failure are the critical issues that are studied as part of any management, risk management or crisis management programme.
The causes of this fiasco were completely identifiable prior to the event happening, and in fact should have been flagged up early in the development process as specific points that needed to be monitored and managed. They will, undoubtedly, be exactly the same critical failures that will be the root cause of the next management disaster we see…. And the one after that…
KFC social media response: Pretty clucking good…
It is an interesting exercise to observe how KFC’s online communications responded to the crisis, writes Emily Hough. It is a given that, in any crisis, the media and communications teams will be at the frontline of response; it is their task to manage reputation as well as to keep customers, the media and stakeholders informed.
The initial consensus seems to be that the company’s messages, especially on social media, struck the right balance between apology, appreciation of customer loyalty, keeping customers updated, and maintaining a sense of humour, whatever might have been going on behind the scenes.
In general, the agreement is that KFC’s Twitter feed has risen to the challenge.
As often stated in CRJ, especially with regard to social media, it is imperative to engage with all stakeholders in a crisis, including victims, customers, employees, regulators, politicians and shareholders. In the case of KFC, this also includes franchise holders.
There are a few key points that illustrate positive ways that this event was handled, although these are merely initial observations, primarily based on analysis of the company’s Twitter feed.
In any crisis, there are key points to be remembered when it comes to communication:
Rapid and consistent response
Robust internal communications
Understand stakeholders and customers in advance, through monitoring and engagement
Engage during a crisis
Debunk false reports and prepare to be mocked, especially by competitors
Always have recovery in mind – a crisis can be a turning point, from which the organisation can emerge stronger
Trending under the hashtag #KFCCrisis, news of the company’s chicken distribution issues trended rapidly. Indeed, some politicians reported that their constituents had contacted them about the event, and several UK Police Forces took to Twitter saying they had received calls about the chicken shortage and reminding the public that this was not a police matter.
The KFC Twitter team responded rapidly and with humour, acknowledging there the problem – and the farcical fact that a chicken-based fast food organisation had run out of chicken.
The post began with humour, was gracious in not excessively blaming its new distributor, but rather it focussed on admitting the problem, emphasising that KFC would not ‘compromise on quality’ and paying tribute to its restaurant team.
The feed also directed customers to a website, which was updated every 15 minutes, indicating which outlets were open. It repeatedly posted this with the hashtag #wheresmychicken
Robust internal communication
There is no point in responding to a crisis and handling it perfectly, having a wonderful relationship with the media, running a fantastic social media response, engaging with customers online and getting the facts out there if staff on the ground haven’t been told what is going on. This gives rise to contradictory information, frustrates both customers and staff and can store up further organisational problems down the line – put simply it does not aid recovery.
Evidently, we are not in a position to comment on KFC’s internal communications. From an outside perspective, it does appear that communication and operations seemed to work well with each other.
Understand stakeholders and customers in advance
Social media is not merely a sales tool, nor is it a one-way street. Prior to the distribution issues, KFC engaged with its customers in a witty, yet informative manner, which has probably contributed towards building reputation and customer loyalty and, in all likelihood, and will therefore aid recovery.
It is vital to be aware of the different sources that the public, media, customers and other stakeholders will go to for information – these will be different according to their needs and demographic. Monitoring what is being said about a brand – and from the tweets and replies before the crisis struck on February 14 it is clear that KFC did this consistently – can pay great dividends should a crisis occur.
Engage during a crisis
Never, ever, go quiet. If people are connecting with you through social media, it is vital to engage with them. Be polite and helpful – if you don't know something, admit it, but let them know you are working to get more information as soon as possible. This is an excellent way of defusing detractors, and a good way of enhancing already positive feelings about the organisation amid loyal customers – they can correct misconceptions for you and will often enter into the spirit of things if humour is being demonstrated. Show sympathy and understanding, and tailor responses as much possible.
In a prolonged crisis fatigue is a formidable enemy, across all teams and in whatever the department. Judgement can become clouded, decisions can be difficult to take and paralysis in terms of management can become a real threat. Scalability is essential in communications teams – day-to-day operations are simply not the same as dealing with a crisis and require greater resources, as the British Airways computer glitch showed in May 2017.
Debunk false reports and prepare to be mocked
It is important that customers have a degree of trust in the information provided. But some individuals could post false content or push their own agendas.
This happened to KFC, but the company was quick to correct Twitter users who posted that staff were not being paid or who questioned the quality of its raw products.
And with regard to being mocked – humour can be cutting, even devastating. In the private sector, competitors may also join in. And indeed, they weighed in with KFC – as is shown below. The response was light-hearted banter, yet challenging - many a word is said in jest, but the underlying message was clear: don't poach our customers. KFC demonstrated the fundamental tenets of social media communications: Be empathetic, human, and never rude or insulting. It corrected falsehoods or misunderstandings, but did not censor or react aggressively (and yes, there are many examples of where companies have done just that, always to the detriment of their reputation).
The company also took the step of taking out full-page advertisements in the national media to apologise, rearranging its initials, to produce an advertisement whose humorous approach neither detracted nor diminished the strength of the apology and acknowledgement of the problem.
Finally, judging from its replies to Twitter posts and memes, KFC is, indeed, planning for recovery. The social media team has been asking people asking if they can re-use their tweets, as the company is: “Putting together a little something for when the KFC Crisis all blows over.” It will be fascinating to see what is being planned…