When problems snowball

In the corporate world, it never rains – it pours.

Late last year we learned this lesson when Qantas – an airline with an impressive safety record – suffered a major incident on one of its A380 jets, and then endured a run of subsequent problems and PR issues.

In 2011, we are learning it again with Vodafone.

Late last year, law firm Piper Alderman announced that it was looking at running a class action against the company to get compensation for customers affected by a stream of network problems over the last few years, including calls dropping out, delayed delivery of SMS messages and long delays accessing customer help and technical support lines.

Now, Vodafone is dealing with something much more serious – alleged security and privacy breaches that are alleged to have resulted in customers’ personal and financial details being accessed.

The company, which said yesterday that it appeared an employee’s password had been used to access the internal database, says it is now investigating the matter.

Australia’s Federal Privacy Commissioner is too, and the watchdog is clearly far from impressed.

Leaving aside the problems that Vodafone has, an interesting management question here is: Why do these problems seem to come in twos or threes?

One PR disaster strikes, and then invariably another issues arises. Every situation and company is different, but it seems to me there are few key reasons the floodgates can open. Here are three to start with:

• Scrutiny. When a big company stuffs up, the media and other groups immediately start looking for other problems. More often than not they find them.
• Distracted management. When a crisis strikes, most companies usually throw everything they can – including top management – at the problem to fix it. Unfortunately, that can allow existing problems to fester or new ones to go unnoticed.
• Change fatigue. These problems do seem to occur at companies where there has been a big change, such as a new CEO, or a major merger (in Vodafone’s case, with the Australian operations of former rival Hutchison). With management focused on giant tasks such as strategy change or business restructuring, things slip through the cracks.

Vodafone appear to have done a pretty good job at managing this security breach issue, with chief executive Nigel Dews appearing front and centre.

But as many battle-hardened CEOs know, battling one crisis is hard enough – managing through multiple crises will be a huge test.