Crisis Case Study: The Lush Royal Flush in Crisis Management
By Georgia Comensoli and James Fitzpatrick
It’s not often we see a company successfully manage and bounce back from a crisis as well as Lush has over the past twelve months.
The Australian cosmetics giant has been dealing with a scandal involving the underpayment of employees across the company. The issue traces back to 2010 with nearly 6000 employees affected.
In August last year, an employee of the franchise raised concerns with their head office, detailing how employees were being underpaid. That concern initiated a report that concluded the company had underpaid workers a total of around $2 million.
It’s not just us praising their reaction, Chief Executive of the Australian Retail Association, Dominique Lamb told Fairfax Media that:
“…while compliance issues are clearly regrettable, Lush’s response has been a textbook example of how a business should recognise its mistakes, take ownership of them and fix them”
In 2010, the company changed its payroll system from an old manual format to the Modern Award System. The investigation, led by the Australian Retail Association and the Fair Work Ombudsman, found that following the transition, employees were being underpaid for overtime rates (amongst other errors).
What they did next
Within one year of the first initial complaints being lodged, the company has released their plan of paying back almost $2 million to their staff. Publicly, they’ve admitted they’re wrongdoing and identified how the issue occurred.
Lush Australia Director, Peta Granger told the media on Tuesday:
“Whether it’s $1 or $1000, we are committed to connecting with every employee who’s been affected by our mistake… We are doing everything in our power to pay the money we owe as quickly and as transparently as possible. We know we’re far from perfect, but we always strive to do the right thing.”
Since becoming aware of the incident, Lush has:
Launched a national payback scheme, to pay back all employees they owe, with interest. Estimated to cost up to $2 million.
Reported themselves to the Fair Work Ombudsman and relevant government departments when they knew they had the issue.
Identified and acknowledged where the fault lies; in a payroll systems error dating back 8 years ago.
Publicly acknowledged their mistakes and proved transparency in their actions and resolution processes.
Released an apology through the media, and publicly on their website to their customers and employees.
Finally, they asked for forgiveness to their customers and employees.
Lush has dedicated a personalised webpage, explaining how it happened, and what the company’s plans are to pay back every employee.
Lush did what many companies are afraid to do; they acknowledged fault and took full responsibility.
Along the way, they followed the Crisis Shield Message Response model by finding the facts (through a proper investigation), explaining the conclusions and admitting fault (following the investigation), and detailing how they’ll rectify the problem.
People make mistakes. If you’re willing to acknowledge and (quickly) resolve them, then there’s little room for a crisis to spiral out of control.