Mattel CEO Outlines History of Toy Recall to Eller Audience

UA grad Bob Eckert told business students and faculty about "What I did on my summer vacation."

When Robert Eckert took over as the CEO of the multinational toy giant Mattel, in 2000, the company was already in big trouble.

Mattel was hemorrhaging $1 million a day in cash. In addition to facing increasing competition, the company had bought The Learning Company, a promising educational electronics and software firm that Mattel expected to fill an important niche in their pantheon of toys.

But The Learning Company soon became one of the most visible casualties of the dotcom era, soaring to unimaginable heights and crashing along with countless other high-tech firms.

Even though it took a bath on The Learning Company, Mattel was still the powerhouse in the industry, making and selling more toys than anyone else. Still, Eckert caught flack from industry analysts for paring down the company and outsourcing operations overseas, but he said the move was inevitable.

“The way the company was doing things at the time was not sustainable and we couldn’t continue in perpetuity losing money like that,” Eckert said during a lecture on campus Feb. 25. His talk, "What I Did During My Summer Vacation," was  part of the Distinguished Speaker Series at The University of Arizona Eller College of Management.

“We made some tough decisions. Today 80 percent of toys are made in other countries. Mattel makes toys in China, Indonesia, Thailand, Malaysia and Mexico. And our manufacturing footprint continues to move,” he said.

In 2007, Mattel’s Fisher Price subsidiary reported that many of its toys made in China had dangerously high levels of lead paint. Others had parts that could easily come loose and choke small children.

In all, Mattel recalled more than 18 million individual toys and spent a considerable amount of time and energy on damage control.

Eckert, who graduated from the UA with a degree in business, recounted what life was like at the top of a corporation under siege.

“We started with a significant outreach program to let parents know what toys had problems and what parents should do with those toys that were problematic,”Eckert said.

“We connected directly with parents, took out full-page newspaper ads, paid ads on Google, Yahoo and other search engines and Web sites. And then we worked through the media, talking to any news outlet who wanted to talk to us – television, radio, newspaper – to make sure the word got out on what the problem was, why we had the problem, and most importantly what we were doing to prevent future recurrences.”

What worked, he said was being candid and straightforward. Eckert said he opened every public session with “I’m sorry.”

“The fact is that parents shouldn’t have to be worried about these kinds of things. When they buy a toy, they should be able to assume that the toy is safe and high quality, especially if it’s from Mattel. And they shouldn’t have to think about whether there’s a problem.

“Not surprisingly, when you’re straight with people, they’re forgiving. It’s when you try to obfuscate what happened that gets people in trouble."

What also worked was getting ahead of the problem. Everyone in upper management at Mattel had a crisis communications notebook outlining responsibilities in the event of a disaster.

“We were meeting seven days a week at 7 a.m throughout the summer. It pays to be planful. You may not pick the correct problem to scenario plan, but being prepared is really important. Sixty to 70 percent of the work is done up front before the problem ever hits,” Eckert said.

Eckert said the key was delegating responsibilities. Eckert was out in front dealing with the public issues. Others on the team were running the business day to day.

“In spite of it all, our sales were up last year. Our earnings did well. We continued to sell more toys and make more money than anyone else in the toy business,” Eckert said.

“At the end of the day, it was a good year for Mattel. The reason is that we were able to divide up and some people worked on this problem, others worked on the toy business, and we didn’t run into each other.”

Mattel officials says the company has increased oversight on its overseas operations. Eckert said it was unfortunate that, had manufacturers followed specifications, “we wouldn’t have had these problems.”

Do business schools prepare their grads for recalls and other crisis issues? Yes and no, said Eckert. Business school curricula do well on issues such as ethics and sustainability, and on broader issues about capitalism and profitability.

Eller, for example, offers crisis communications through its business communications program.

“But I think what guides most leaders through a situation like what we faced last year is the relationship you had with your parents and the environment in which you were raised by your parents,” Eckert said. “Schools can only do so much. It is the parents’ responsibility to teach their children.”