Luckin COO Fabricated Sales Data

Luckin’ Coffee, China’s largest coffee chain, is suffering the consequences of publishing false sales numbers. Ernst & Young discovered the misconduct, which took place in 2019, during an audit, concluding that “management personnel engaged in fabricated transactions which led to the inflation of the Company’s income, costs and expenses.” An investigation blames the chief operating officer and others.

A report details “the fraud and the fundamentally broken business,” including “smoking gun” evidence and “red flags.” The anonymous authors compare video recordings of store foot traffic to reported sales.

In response to the news, Luckin’s stock declined between 75 and 80%. Starting in February, when the anonymous report was made public, the company has been posting notices about the situation on its website.

Discussion:

• Analyze the anonymous report, including the audiences, objectives, organization, writing style, etc. What works well, and how would suggest that the writer improve the report?

• How well did the company address concerns? Begin with the first response in February.

• What leadership character dimensions does this situation illustrate?

Does Persuasion by Scarcity Work?

Business communication students may learn about Robert Cialdini’s Six Principles of Persuasion, including scarcity. For example, a online retailer indicates “Only two left!” or “Only one left at this price!”

In a Wall Street Journal article, a researcher questions whether the “quantity scarcity” strategy works under all conditions. Dr. Christopher Tang explains new research:

“…scarcity messages work best with time-sensitive and perishable products such as hotel rooms or plane tickets, as well as unique items like collectibles or limited editions.

“They are less effective with durable goods such as home-improvement products or kitchenware, in part because they can give shoppers the impression that the product is being pushed because it is undesirable, lower quality, obsolete or discontinued. And in the case of items typically bought in larger quantities, such as partyware, lightbulbs and batteries, we found that scarcity messages can actually hurt sales by making shoppers believe they won’t be able to buy as much of a product as they want.”

To use the scarcity principle effectively, Dr. Tang suggests that retailers highlight quality, promote urgency, and offer product bundles

Discussion:

• When have you seen the quantity scarcity at work? Did it persuade you to purchase something?

• Think of a specific product that you might buy. How would you recommend that retailers use this strategy effectively to move remaining products?

WHO Official Bungles Interview

World Health Organization (WHO) senior adviser Bruce Alyward wanted to avoid a reporter’s question about Taiwan becoming a member of the organization. A video of the interview shows an awkward exchange, with Alyward remaining silent (but we still see him moving and hear sounds), saying “Sorry, I couldn’t hear your question,” asking the reporter to move onto another question, and then, finally, ending the call. During a follow-up call, Alyward refers to China and then abruptly ends the call.

Taiwan has had good success in controlling COVID-19, and the government claims to have warned the WHO back in December 2019 about the contagion.

As of today, Alyward’s name is removed from WHO’s website listing advisers to the organization.

Discussion:

• What is a better way for Alyward to have handled the reporter’s question?

• Why do you think the WHO ignored warnings from the Taiwanese government?

Starbucks Communication

The Starbucks website has been updated regularly with news about the company’s response to COVID-19. Near the top of the page is a link to “At-a-glance: What customers need to know about Starbucks response to COVID-19.”

The big news is that stores will offer only drive-thru service for the next two weeks. In a letter to Starbucks partners (employees), the company promised 30 days of pay whether they work or not.

Discussion:

• Analyze both the public website and the letter to partners. Describe the audiences and communication objectives of each.

• What organizational structure is used for these bad-news messages?

• What does Starbucks do well in its communications? How can communications be improved?

• How well does the company balance emotional appeal and logical arguments?

• In this post, you see “Starbucks response” on the company’s website and “Starbucks partners” in my text. Neither has an apostrophe. Is that correct?

Tourism CEOs Meet with President Trump

President Trump invited CEOs of major tourism companies to discuss the COVID-19 response.

Hilton CEO Christopher Nassetta began by highlighting issues in the industry:

“Hilton’s been around 100 years -- we’ve never closed a hotel that wasn’t going to be demolished or rebuilding, The bulk of our hotels in the major cities are closing as we speak.”

Nassetta was also complimentary to President Trump and Vice President Pence and said that he wanted to protect employees. The president reassured him that they’ll be up and running soon, although both said the situation is currently a “disaster” “all over the world.”

Discussion:

• How would you describe the purpose of this gathering? What are President Trump’s objectives?

• Assess each of the CEOs during the meeting. How well did they represent their brand?

Confusing Pie Chart

A former student sent me this chart, and he didn’t have a source, but it’s a good example of what not to do when creating pie charts. What problems can you identify?

Discussion:

• What principles of creating pie charts are followed, and how does the chart fall short?

• Is the pie chart the best choice for this data? What would be a better choice and why?

• What does the text imply?

More Toyota Recalls

About a month after the last recall, Toyota announced another recall for a total of 1.8 million vehicles. The issue is a fuel pump that fails, causing the car to stall and possibly not restart.

In both statements, Toyota calls the recall “voluntary,” but the number of models is significant, dating back to 2013. Like most recall messages, Toyota’s is straightforward and focuses on affected vehicles and the remedy—in this case a new fuel pump for free.

Image source.

Discussion:

• Analyze the recall message. Who are the primary and secondary audiences, and what are the communication objectives?

• Analyze Toyota’s website. How easy is it to find information about the recalls? What, if anything, could be improved?

Email Scammers

Remember those quaint email scams that were riddled with grammatical errors? A Wall Street Journal article describes new, sophisticated training for email scammers in Africa. A Nigerian is quoted: “You know how you guys play baseball when you are growing up? Here many of us learn fraud.”

Former scams involved people sending email asking for money for people in trouble or promising big returns on small funds. Today’s scams involve hacking into accounts and people learning about connections, for example, what vendors a company uses. A fake invoice to a known vendor is more likely to get paid. Using a grandson’s real name could lead a grandmother to Wal-Mart to send money to him, which happened to my friend’s mother.

About $1.7 billion was lost to email scams in 2019, and complaints are rising steadily. The article describes a “grooming” process “like organized crime.”

Discussion:

• We hear a lot about victims’ vulnerability, but what creates a culture of scammers? What makes people vulnerable to commit this fraud? For more about this, watch The Weekly documentary about love scams on Facebook.

• What’s your view of the bar chart in the WSJ article? How could it be improved? Would you prefer a more creative graphic, or does this work as is?

Comparing Headlines About the Market

How does the media describe the recent stock market decline? Let’s compare a few headlines:

• Dow falls 1,191 points -- the most in history (CNN)

• Coronavirus Drives Stocks Down for 6th Day and Into Correction (New York Times)

• U.S. Stocks Slide Into a Correction as Virus Fears Show No Sign of Easing (Wall Street Journal)

• Dow's point drop worst on record as stocks fall into correction (Fox News)

• Dow drops 1190 points amid coronavirus fears, S&P 500 sees fastest correction in history (Yahoo Finance)

Of the five, Fox is the only one that didn’t place a headline about the market at the top of its web page.

Discussion:

• What do you make of these headline choices, including placement? What might the wording indicate about the media group’s beliefs or audience?

• In class after a previous decline, I took issue with headlines like CNN’s. Do you see an issue? (Hint: What does a raw number tell us?)

Quantifying a Tweet

When someone in an organization goes rogue and sends a tweet, what’s the potential damage? The NBA found out the hard way that the financial impact could be significant.

In October 2019, Houston Rockets General Manager Daryl Morey supported Hong Kong protests in a tweet. As a result, Chinese advertisers pulled their ads and broadcasters wouldn’t air games. Now, NBA commissioner Adam Silver admits the loss will total “hundreds of millions” of dollars and “probably less than $400 million.” Silver expanded on the damage:

“It’s substantial. I don’t want to run from that. We were taken off the air in China for a period of time, and it caused our many business partners in China to feel it was therefore inappropriate to have ongoing relationships with us. But I don’t have any sense that there’s any permanent damage to our business there.”

Image source.

Discussion:

• Review the situation from October. What lessons can managers learn?

• What’s your view of Silver admitting the loss? What are the arguments for and against his honesty?

Report Criticizes Airline Safety and Oversight

A U.S. Department of Transportation report criticizes the Federal Aviation Association and Southwest Airlines for lax safety standards. A New York Times article summarizes the report findings:

“The report found that the Federal Aviation Administration had allowed Southwest to routinely provide inaccurate data to pilots and to operate more than 150,000 flights on planes whose airworthiness had not been confirmed.

“The agency also failed to investigate concerns raised by its own representatives ‘ranging from senior executives to local inspectors’ over Southwest’s safety culture.”

The DOT includes “Four SMS Components,” the FAA’s own description to fault safety culture in both organizations.

Discussion:

• What business communication principles are illustrated in the report? Who are the primary and secondary audiences, and how well does the report meet its communication objectives?

• The report does a particularly good job of using “message titles” (also called “talking headings”). What are some examples?

• What else do you notice about the report? Consider the writing style, organization, and other features. What could be improved?

Wells Fargo Former CEO Banned

In what the Wall Street Journal calls “unprecedented” and “an extraordinary sanction for a top executive at a large bank,” former CEO John Stumpf has been barred from the banking industry. The decision—and a $17.5 million fine—were part of a settlement between Stumpf and the Office of the Comptroller of the Currency (OCC) for millions of fake bank accounts created at Wells Fargo.

The OCC concluded that Stumpf should have known of the systemic problems and that “there was a culture in the Community Bank that resulted in systemic violations of laws and regulations.” When the scandal became public, employees complained of extreme stress because of pressure to sell more bank products. This pressure led employees to create fake accounts for customers.

Other Wells Fargo executives have been fined and charged, but none have been banned from the industry.

Image source.

Discussion:

• Do you think the decision is fair? Why or why not?

• This decision represents a shift from the 2008/2009 financial crisis, when banks paid significant fines but very few individuals were charged. What’s your view of the change?

Emails Show USC's Potential Role in the Admissions Scandal

Actress Lori Loughlin and her fashion-designer husband Mossimo Giannulli have been charged with bribing University of Southern California athletic officials to get their daughter admitted. Now emails from USC show that the school was courting them by asking for donations and arranging for personalized campus tours. In one email, a university official wrote, “I’d also be happy to flag her application.”

A New York Times article summarizes how accused parents plan to defend themselves against charges:

Motions by several of the defendants suggest they will argue, essentially, that they could not have defrauded the university, as prosecutors say, because the university was actively seeking such donations and offering a leg-up in admissions in return.

In a statement, USC downplayed the special treatment:

“What was being offered to the Giannullis was neither special nor unique. Tours, classroom visits and meetings are routinely offered. The primary purpose of a flag is to be able to track the outcome of the admission review process. It is not a substitute for otherwise being qualified for admission to USC.”

Parents are expected to say that their donations were legitimate, but USC is expected to say that the bribery was specific to the crew team official, who “agreed to pass the couple’s two daughters off as coxswains.”

Image source.

Discussion:

• What’s your view of this situation? Do you agree more with the parents’ or with the school’s perspective?

• What, if anything, do the school’s emails reveal? Consider this message to the parents: “Please let me know if I can be at all helpful in setting up a 1:1 opportunity for her, customized tour of campus for the family, and/or classroom visit?”

Carlos Ghosn's News Conference

Former head of Nissan Motor Co. and Renault SA Carlos Ghosn delivered a news conference from Lebanon after his escape from Japan. Ghosn was arrested in Tokyo in 2018 for misreporting income and misusing company funds. He left through a well-orchestrated exit in a box by private plane to his home country.

In what the Guardian calls “a lengthy and often rambling press conference in Beirut,” Ghosn spoke in four languages to defend himself. He criticized the Japanese criminal justice system and accused the Japanese government of working with Nissan executives to conspire against him.

Ghosn was adamant about his innocence:

“I don’t consider myself as a prisoner in Lebanon. I prefer this prison to the one before. I am ready to stay a long time in Lebanon, but I am going to fight because I have to clear my name.”

The Japan Times reports that the new conference “will have done little to turn the tide of public opinion in Japan and restore his reputation, which has been tainted by his alleged financial wrongdoing.” A former prosecutor in Japan said, “Ghosn didn’t have anything substantive to say. If he wants to restore trust, he shouldn’t do a self-absorbed speech like he did, but he should calmly make specific explanations and present evidence supporting those explanations.”

Discussion:

• Watch parts of the news conference. How well does Ghosn restore his image and prove his innocence?

• How should Ghosn communicate differently if he wants better outcomes?

WSJ Opinion About Boeing Emails

A Wall Street Journal writer argues that Boeing employee emails “explain nothing.” A previous WSJ article concluded that emails demonstrated a “cavalier attitude towards safety,” and a Reuters article concluded that employees “distrust the 737 MAX” and “mock regulators.”

The opinion writer, Holman Jenkins Jr., argues, “all of corporate America, not just Boeing, lives these days by employing creative, freethinking people who spout off acerbically, critically and colorfully in electronic messages.” Jenkins questions the reporting of these emails and what is omitted.

Jenkins also asks why these employees didn’t write about MCAS design flaws: “If the hypercritical people seen in these messages had known about MCAS’s design flaws, it never would have gotten through.” He also notes that the only emails referring to MCAS were from 2013, although system changes were made in 2016.

Image source.

Discussion:

• Read Jenkins’ article. What do you consider to be his strongest and weakest arguments?

• Based on his argument and your own reading of media reports, what’s your opinion about the significance of the emails?

• What issues of integrity does this situation raise?

Boeing's Crisis Communication Plan

During the holiday break, several news items about Boeing were relevant to business communication and character. In one article, the New York Times revealed internal Boeing documents showing a company trying to rebuild its image after two MAX crashes within a year..

The documents give us an inside view of how the company plans to use persuasive strategies to win back customers. In one graphic, we see customers’ willingness to fly. In another, we see customer concerns and ways Boeing can address them, for example, with FAQ cards, “pilot confidence videos,” or personal connections (for example, “Flight attendant offers comfort and information on the safety of the MAX”).

Discussion:

• What persuasive strategies does the company plan? Try to find examples of logical argument, emotional appeal, and credibility.

• What are the consequences of this information becoming public? Does it likely endear the public to the company’s concerns, embarrass the company, or something else?

Data in the Uber's Safety Report

Uber published its first safety report, and the company is lauded for its transparency. A Wall Street Journal article leads with the number of sexual assaults reported during the last two years: 5,981. Of course, any number is too many—no one should be assaulted in an Uber or anywhere else. And sexual assaults are notoriously underreported, so we have no idea how many have actually occurred.

At the same time, a skeptic might want to know the total number of rides in order to put the number of reports in context. The report does provide this information (see the report for footnotes):

View fullsize

The report makes additional attempts to put the numbers in context:

All of that work culminates in the Safety Report that we are sharing with you, the public, today. To put US safety challenges in context:

• In 2018, over 36,000 people lost their lives in car crashes in the United States alone (3)

• Approximately 20,000 people were the victims of homicide in 2017(4)

• Nearly 44% of women in the US have been a victim of sexual violence in their lifetime—which means that more than 52 million women live with that experience every day (5)

Every form of transportation is impacted by these issues. For example, the NYPD received 1,125 complaints of sex offenses in the transit system during the same time period covered by this report.(6,7) In the United States alone, more than 45 rides on Uber happen every second. At that scale, we are not immune to society’s most serious safety challenges, including sexual assault. Yet when collecting data for that portion of our report, we found there was no uniform industry standard for counting and categorizing those types of incidents.

The 84-page report is incredibly detailed and includes external reports for credibility and the number of charges for various types of assaults.

Discussion:

• Analyze the report: the audience, communication objectives, organization, writing style, format. What works well, and what could be improved?

• Does the context in these examples convince you that the numbers aren’t so bad? Why or why not?

• Otherwise, how well does Uber address the safety issues? How do you assess the report credibility? What other questions do you have?

Communications Criticized at Syracuse University

A Chronicle of Higher Education article says that communications at Syracuse University “didn’t help” the racial issues. In the past few weeks, videos, slurs, and drawings, such as swastikas, culminated in a rumor that a “white-supremacist manifesto” was sent to students’ phones. The manifesto was said to be a copy of the one associated with the March New Zealand shootings, and Chancellor Kent D. Syverud responded, “It was apparent that this rumor was probably a hoax, but that reality was not communicated clearly and rapidly enough to get ahead of escalating anxiety.”

The response didn’t address student concerns, which have been bubbling for years. Syverud was criticized for his response in 2014 during campus protests about climate. To the recent racist incidents, students are demanding quicker and more direct action. The chancellor’s choice of words is also at issue, as expressed by Mona Lisa Faz, a graduate student of communications:

“Since when did calling someone the n-word or creating a swastika in the snow ever count as bias?” she wrote in an email to The Chronicle. She called Syverud’s response “a whitewashing and playing down of what is really happening. I get you don’t want to alarm people, but I’m a Latina, and when you play down a hate crime, THAT is alarming to me and my community.”

The University is trying to catch up, posting a chart showing students’ demands and actions taken.

Notes image source.
Protest image source.

Discussion:

• Read more about the Syracuse University situation. What were the administration’s major missteps? How can they best recover now?

• What’s your view of the chart? What works well about this approach, and how might it fall short?

• Some are calling for the chancellor to resign. Should he? Why or why not?

• What leadership character dimensions are illustrated by this situation?

Prince Andrew's BBC Interview Does Not Go Well

Prince Andrew took a BBC interview to explain his relationship with Jeffrey Epstein, who had served prison time for having sex with a minor. The Duke of York spent a night at Epstein’s mansion, which some victims called a ”House of Horrors.” The Duke is shown in photographs, along with photos of young women coming into and leaving the house. One woman claims that, when she was 17, she was forced to have sex with Prince Andrew. Since that time, Epstein committed suicide in jail, where he was facing sex trafficking charges.

Prince Andrew told the BBC interviewer, “I kick myself for on a daily basis because it was not something that was becoming of a member of the Royal Family and we try and uphold the highest standards and practices and I let the side down, simple as that."

When asked about his stay at the mansion, Prince Andrew replied, "It was a convenient place to stay. I mean I've gone through this in my mind so many times. At the end of the day, with a benefit of all the hindsight that one can have, it was definitely the wrong thing to do. But at the time I felt it was the honourable and right thing to do and I admit fully that my judgement was probably coloured by my tendency to be too honourable but that's just the way it is."

He also referred to Epstein’s behavior as unbecoming: “Do I regret the fact that he has quite obviously conducted himself in a manner unbecoming? Yes.” When questioned, he said, “I’m sorry. I’m being polite. I mean in the sense that he was a sex offender.”

Responses to the interview have been negative. Since the interview, AON, Cisco, KMPG, and a British charity have removed or are considering removing their brand affiliations with the prince’s name and his work.

Prince Andrew has since tweeted his sympathy and decision to “step back from public duties for the foreseeable future.”

Discussion:

• Describe the arguments for and against Prince Andrew’s decision to take the BBC interview.

• Looking at the BBC interview, do you think he could have handled the situation better? What could he have done differently?

• Analyze the prince’s tweet. What’s your view of that decision and communication? How well is the prince managing the fallout?

• What leadership character dimensions are illustrated by this situation?

Microsoft's Diversity and Inclusion Report

Microsoft’s 2019 Diversity and Inclusion report is the company’s sixth since 2014.

In the introductory letter, we learn about positive changes in demographic data:

In technical roles alone, we have 49% more women, 48% more Hispanic/Latinx, and 67% more African American/Black employees than we did three years ago. And beyond population growth, this year’s snapshot shows diversity representation has risen in every demographic category we track.

The report includes a few dazzling graphics, such as the one shown here.

Discussion:

• Read the entire report. What principles of business communication are followed?

• What suggestions for improvement would you suggest to the report authors?

• What’s your view of the graphic shown here? What is the main point? How else could the data be shown?

• Although the report writers acknowledge that some of the diversity increase in technical roles is attributed to employee growth, what other questions might a skeptic ask?