reputation management in a crisis annabel wren millward brown
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REPUTATION MANAGEMENT IN A
CRISIS
Annabel Wren
Millward Brown
Corporate Practice
May 2014
“If you lose dollars for the firm I will be understanding.
If you lose reputation for the firm, I will be ruthless.”
Warren Buffett
BIG/MRS conference
2014
Corporate reputation matters; it is essential because it drives advocacy which we know from
extensive research to be the highest measure of success in terms of enhancing the value of brands. A
strong reputation plays an essential role in the conversion of customers (both B2B and B2C) from
considering your company to purchasing and, ultimately, recommending your products and/or
services. We know that a strong reputation stems from trust in a brand amongst its key
stakeholders, which once established can lead to far more than simply boosting sales for a company.
It can also help to:
But what role does reputation play when things go wrong for companies? As Justin King, CEO of
Sainsbury’s recently explained “It’s astonishing how a robust reputation will be resilient against fact”
in reference to the horsemeat scandal in 2013. He described how the whole industry became
stigmatised even though many of the supermarkets, including Sainsburys, did not have any
horsemeat in their supply chain. Of the supermarkets who did find horsemeat in their products,
there was a marked difference in their responses to the situation. Tesco did not attempt to shirk the
responsibility and was quick to respond and apologise for their mistake, with whole page
advertisements in local and national newspapers, whereas Aldi deflected their accountability and
emphasised that the wrongdoing lay within their supply chain. It is clear that Tesco wanted, and
needed, to be seen to be taking action in a serious situation to restore the trust of their customers
and stakeholders because the scandal came at a time when their reputation overall was suffering. In
contrast, Aldi arguably did not react as honestly, but their reputation during the scandal was
safeguarded by their overall reputation at that time; they were seen as unable to do wrong in the
eyes of the consumer as discount supermarkets are becoming increasingly popular.
Over the past few years we have witnessed scandals across various industries including; major
environmental disasters, manipulation of LIBOR by banks, vexing questions for multinationals about
corporate taxation, supply chain issues in supermarkets and alleged bribery within the
pharmaceutical industry. All of these examples have impacted the reputation of the companies
involved and in many of these cases Millward Brown has conducted research to understand the
damage caused and identify routes to recovery. This paper will draw on examples of our research,
along with guidance from leading experts in reputation and communications, based on interviews I
have conducted and will reference throughout the paper, to demonstrate how companies should
react in a crisis to maintain and restore a strong reputation.
Expert advice for managing reputation in a crisis
1) Don’t wait until something goes wrong to think about reputation
As Stephen Pain, VP Reputation Strategy, at Unilever describes, there are many preventative
measures that companies can take to help provide reputational security if a crisis was to hit. Using
Unilever as an example, Pain describes three key points that companies should consider in order to
have a solid reputational foundation.
Internal transparency
It is essential to have a strong understanding of the business internally in order to be
transparent about identifying any potential issues and whether they could lead to a
crisis. In an ideal scenario, companies would have an internal governance system to
manage and monitor the situation internally, which in turn should help to inform the
communications team.
Having a clear vision for the business
Companies need to have a clear direction on how the business is managed and the
issues that are important to them. For example, at Unilever, there is a strong emphasis
on what it calls the Sustainable Living Agenda and how they can help to mobilise the
industry to take action on subjects that they feel are important in terms of long-term
growth and well-being for people. Sustainability has become ingrained in the DNA of
Unilever which gives them a strong vision to leverage and use as an engagement tool
with key stakeholders. This emphasis on higher human values is now understood to be a
key driver of success for companies. Research conducted by Millward Brown and Jim
Stengel, outlined in his book ‘GROW’1, looked at over 50 000 brands and discovered a
direct link between the financial performance of a company and fundamental human
values. As Stengel explains, "Maximum profit and high ideals are not incompatible.
They’re inseparable. Companies with ideals of improving lives at the centre of all they do
outperform the market by a huge margin."
Governance of dialogue
When companies have internal transparency and a clear vision for the business they are
able to form an active dialogue with key opinion formers, such as NGOs, the media and
1 ‘GROW: How Ideals Power Growth and Profit at the World’s Greatest Companies’ Jim Stengel (2011)
government etc. on topics that are relevant to their company and to society. Therefore,
through improved connectivity in the business and with opinion formers, if a crisis hits, it
can be managed through communications with subject experts because the relationship
has already been established and a level of understanding about the business has been
developed. This is particularly important because, as Pain explains “In a lot of cases,
crises are based on a lack of knowledge or misunderstanding”.
This approach, demonstrated by Unilever has been adopted by many companies and is described by
van Riel and Fombrum2 as a “Reputational platform; the root positioning that a company adopts
when it presents itself to internal and external observers”. This reputational platform rests on “a
rendering of the company’s history, strategy, identity and reputation that rings true to internal and
external observers”.
Having a reputational platform strengthens the position of companies with stakeholders because it
enables them to build on their corporate narrative and develop strong relationships. However, not
all companies are sufficiently prepared for a crisis and a lack of internal transparency can be a major
issue when a crisis occurs. Therefore, before actions can be taken, it is essential to:
2) Be prepared internally to investigate the issue and have a crisis manual in place
As Christopher Storck, Managing Director at Hering Schuppener and Professor of Strategy and
Communication Management at Quadriga University Berlin explains, there are some key questions
that need to be addressed immediately in times of a crisis. It is essential to find out exactly what is
going on internally; is there any substance to the allegations? If so, how widespread throughout the
company is it? How can we ensure that it will never happen again?
Yet, before a company responds in a crisis, they have to have a strategy in place. In an ideal
situation, companies have a crisis manual available so they can establish the best course of actions -
but unfortunately this is not always the case. Leading industry publication CorpComms magazine, in
association with Nexus Communications Group, conducted a survey among 150 communications
professionals to understand the internal preparedness of companies for a crisis. They found that,
almost one in six organisations do not have a crisis manual in place to consult in times of crisis and
over one third of communications professionals are uncertain whether their companies have the
correct processes in place to cope with a crisis if one was to occur.
Employees of any organisation and particularly those involved in communications need to be aware
of how they should respond, so preparation is key. Until the facts are established and a strategy for
how to handle the situation is put in place, companies should limit the amount of information
shared publically. This becomes a challenge when both mainstream and social media become
involved because events can then move at lightning pace.
This highlights that companies need to prepare internally and have a crisis management strategy in
place so that they can act as quickly as possible when something goes wrong to fully understand the
extent of the situation and respond accordingly.
With forward planning, companies are in a stronger position to respond quickly and think about
communications with their key stakeholders.
2 ‘Essentials of Corporate Communication’ Cees B.M van Riel and Charles J. Fombrun (2007)
3) Inform key stakeholders before the media does
With business to business companies, influential stakeholders can be a relatively small group
compared to consumer facing companies. These include the company’s main customers, the supply
chain, regulatory bodies/ governments and institutional investors. Therefore when a situation occurs
within B2B companies, the opportunity exists to engage with the key stakeholder groups in a direct
way, before the media spreads the story. Of course, a company’s reputation amongst the general
population is very important, but for b2b companies, maintaining a strong relationship with key
stakeholders in times of crisis can help to reduce the impact of the crisis on reputation and restore
trust in the company more quickly.
Christopher Storck, highlights a case study of research that his team carried out for a leading
pharmaceutical company amongst their stakeholders. Through a comparison of their reputation
survey and media monitoring that they undertook, they were able to assess whether there was
statistical proof to show that the changes in stakeholder perceptions of the company were
influenced by media coverage. The results showed that there was only a correlation between the
media coverage and a change in perception for 3 of the 9 key stakeholder groups. These three
stakeholder groups were students, retail pharmacists and NGO representatives, among which none
of them had privileged access to information from the pharmaceutical company. Amongst the other
stakeholder groups, for example doctors and healthcare policy makers, there was no statistical
correlation and these were the groups who had a continual dialogue with the pharmaceutical
company. Therefore, companies who do not actively engage with their stakeholders leave their
reputation more vulnerable to perceptions formed from what is written in the media.3 This is
supported by reputation studies conducted by Millward Brown Corporate which also reveal
stakeholder dialogue to play a critical role in driving advocacy of a company. In a crisis, stakeholders
require transparent, timely information that is based on facts. If these needs are not met by the
company and an information vacuum occurs, companies lose control of the situation and
reputational damage is very likely to occur.
A major issue nowadays though, is the speed at which information is spread. Stories can become
global within hours of an event because of the influence of the internet and specifically social media,
bloggers and 24 hours news sites. It can be an extremely useful tool for companies in a crisis;
communications teams have multiple channels to defend themselves against allegations, but more
often the speed in which stories are spread means that companies have less time to prepare a
response and are faced with the complicated situation of being both initiators of sharing information
and responders at the same time.
To maintain reputational control, companies therefore have to:
4) Understand the importance of new information channels and be internally prepared to
engage with a diverse set of powerful opinion formers
Vivian Lines, Global Vice Chairman of Hill and Knowlton Strategies cites the example of the Costa
Concordia cruise ship disaster in January 2012. In the 3 day period following the collision, there were
35,000 tweets, 11,000 blog mentions, 34,000 news mentions online, and more than 4,000 YouTube
video mentions. This rapid spread of the story globally, through the power of the internet, shows
3 ‘Reputation Management’ Sabrina Helm, Kerstin Liehr-Gobbers and Christopher Storck (2011), p. 19 f.
how companies have less control over their reputation than ever before and so it is essential that
they are internally prepared to respond as quickly as possible.
Some companies have succeeded in managing their reputation in a negative situation through their
social media handling. A great example of this, reported in CorpComms magazine was when O2
experienced a service outage in 2012. Nicola Green, director of communications and reputation for
Telefonica, parent company of O2, explained how they had a crisis plan in place and had practiced a
full scale network outage scenario the summer before. They understood the importance of
communicating as soon as a crisis occurs and so the press team are always among the first people
within the company to hear about any issues. In this situation, customers were quick to respond,
tweeting complaints and anger towards O2. Green describes how internally they already had an
established tone of voice for the customer facing teams where the emphasis was on ‘being human’.
They therefore maintained this in the way they monitored and responded to tweets, which had
extremely positive results.
O2 realised that they had to relate to people on a personal level, to show that they were concerned
and to calm their customers without irritating them further. Their light-hearted approach meant that
customers began retweeting the O2 responses and a positive buzz spread throughout Facebook and
Twitter which was remarkable given the situation. The marketing agency, Wunderman, calculated
that the number of negative tweets after the first day was approximately 1.7 million, with a 4,836
percent uplift in people talking about O2. However, O2 were able to turn the situation around and
the tone of tweets changed from anger and irritation to happiness. It was a risky strategy but
demonstrated the internal preparedness of O2 and their clear understanding of their customers.
However, an important point to consider is that, there is a huge difference in how communications
should be managed depending on the type of crisis. In the Costa Concordia example, 54 people were
killed so it wasn’t simply a reputational issue for the operating company but a situation which
involved a legal investigation. In any situation where lives are at risk or deaths occur, the potential
for long term reputational damage through a drastic loss of trust is even greater. In these situations
it is essential that companies:
Customer (@gay_platform): "@O2 We're still waiting for that apology…or maybe they texted me and I can't see the message because my phone DIDN'T WORK" O2 response: "@gay_platform Firstly, here are our deepest apologies. Network should be back up and running for you. How's your service?"
Customer (@24vend_Ltd): "@O2 had to travel to Italy to get signal -- desperate times!!!" O2 response: "You can come back now. We're back in business :)"
@Carole29 tweeted As much as I really don't like @O2 you really have to give whoever handles their twitter, massive credit lol. O2 response Thank you for the massive credit! We'll hang it on the massive credit wall.
5) Act quickly and communicate frequently to inform and reassure the public, whilst being
honest and compassionate
Johnson and Johnson and the Tylenol scandal is a long-standing yet useful example of how
companies can maintain trust and a strong reputation, even when the crisis has caused serious
negative consequences. In 1982, seven people in Chicago died after taking extra-strength Tylenol
capsules that had been reportedly contaminated with cyanide. Immediately after the connection
between the Tylenol capsules and the deaths was made, J&J conducted a product recall throughout
the US which amounted to approximately 31 million bottles and a loss of more than $100million as
well as halting all advertisement for the product4.
Even though J&J knew that they were not responsible for the tampering of the product, they
remained loyal to their company values and put the needs and well-being of the customers first.
When Tylenol products were re-introduced into the market, J&J had developed the packaging to be
tamper resistant; as a result, they became the first company to comply with the Food and Drug
administration regulation of tamper resistant packaging.
When the CEO during the time of the Tylenol crisis, Jim Burke, died in 2012, his obituary in the New
York Times described his success as a CEO with reference to the scandal. The response that he led
became his legacy, because the company delivered on their promises over the history of the
company.
“Nothing good happens without trust. With it you can overcome all sorts of obstacles. You can build
companies that everyone can be proud of.” Jim Burke
Burke understood the importance of maintaining the trust of customers and J&J were able to do so
by a quick response to the situation and consistent communication to reassure the public that they
were taking the situation seriously and taking measures to stop any further fatalities. Their
reputation was managed effectively and even today they are consistently seen as one of the Fortune
Top 20 World’s Most Admired Companies.
From the J&J example we can also see that the public can feel reassured and admire a company
when they make changes to a process that is widespread across an industry. J&J led the industry on
updating the packaging to be tamper-proof to protect the public. In many company crises, although
one company may be implicated initially, it often develops that other companies within the same
industry have acted in a similar way or are equally liable. In that situation, to restore reputation
more quickly, companies can:
6) Take the lead and start an enquiry to make widespread industry changes
There are examples of this across many industries including the finance industry with the LIBOR
scandal, the pharmaceutical industry and its recent bribery allegations and also within the clothing
industry. Nike was heavily criticised for many years and developed a negative reputation for its use
of sweatshops for manufacturing clothing. Between 1992 and 1993, Nike received a great deal of
negative media attention, from protests at the Barcelona Olympics, an exposé report by Jeff
Ballinger highlighting the number of Indonesian workers who were paid less than 14 cents an hour,
followed by other negative media provoked by the ‘Press for change’ NGO.
4Lazare, Chicago Sun-Times (2002)
Initially Nike resisted the criticisms but in 1996 it began to take the allegations more seriously and
set up a department within the company to improve the lives of factory workers. However, it
continued to receive unrelenting criticism and protests against it were widespread, prompting Nike
to commission a report into their labour practices abroad. It wasn’t met with a positive response
since the report was mainly favourable and considered to be biased towards Nike.
A positive shift for Nike occurred in 1998 with a speech from their CEO at the time, Phil Knight. He
showed that he understood the gravity of the situation and that he was prepared to do something
about it. “The Nike product has become synonymous with slave wages, forced overtime, and
arbitrary abuse. I truly believe the American consumer doesn’t want to buy products made under
abusive conditions”. In 1999 Nike began the creation of the ‘Fair Labour Association’ which aimed to
independently monitor factory conditions, minimum age requirements of workers and 60 hour
work-weeks, and they encouraged other brands to join.
In 2005 Nike became the first company in the industry to publish a full audit of its factories, the
conditions within them and the wages they pay their workers. Nike was certainly not the only
company to use sweatshops, but Nike was the name that everyone remembered and they were
used to set an example by the media. Their reaction, ultimately to accept responsibility, become
more transparent and be the leaders in changing the overall process within the industry meant that
they were able to regain respect and restore their reputation. Over the past few years their
reputation continues to improve, moving from the 26th World’s Most Admired Company on the
Fortune list5 in 2012, to 13th in 2014.
For Nike, the response to the negative media coverage and widespread criticism was not an
immediate reaction, but over time the strategy that they developed was very successful and they
managed to restore the trust and respect of consumers. We can therefore see that it is often difficult
to know the correct course of action to take when a crisis occurs but there are various ways that
companies seek advice to understand the best method to take in a specific situation. Therefore
companies need to:
7) Consider the resources available in a crisis to understand the extent of the situation and
plan what to do next
The next case studies outline how three companies invested in different types of research in order
to inform their strategies during their specific reputational challenges.
Global consulting firm’s sponsorship of internal sportsman
Our client needed to assess how widespread negative media coverage about the international
sportsman it sponsored had affected the views of their brand amongst clients. We therefore
undertook a research project, speaking only to C-Suite actual and potential clients of the consulting
company in 5 markets. Through this, we were able to determine the impact of the media coverage
on their brand as well as others associated with the sportsman. Without suggesting any links
between the individual and the different brands sponsoring him we interviewed 50 senior executives
in 5 markets across a range of industry groups to better understand how the reporting was colouring
their views of the brands linked to him, and how differing responses by them might be
received. Understanding that the company needed to make a decision on the future of the
sponsorship in very short timeframe, we were able to feedback back responses in real time which
5 Source: World’s Most Admired Companies by Fortune Magazine (2012, 2014)
enabled our client to identify how opinions were altering as the stories unfolded over the course of
several weeks.
Through our research, we were able to draw a conclusion that suggested the sportsman was no
longer an appropriate personification of the brand values of our client. The global consulting
company reassessed its strategy and severed links with the sportsman in question who no longer
features in their advertising or promotional material. Our research therefore helped the client to
quickly assess the most effective actions to take to ensure the reputation of their company was not
damaged.
Bribery within Pharmaceutical industry
In 2013, many global pharmaceutical companies were implicated in alleged bribery scandals with a
focus on operations in Asia. We conducted a crisis response research project for one particular
company after widespread negative media suggested that some of their senior executives were
involved in bribery allegations.
Our research aimed to understand the reputational damage of the allegations and the perceptions of both the parent company and its individual brands as the news stories developed. We found that, although customers felt more negative towards the organisation, the resulting impact on the purchase intent of customers of the associated brand’s products was largely unaffected. There was an advantage because the organisation’s products are better known for their individual product brands rather than the corporate brand.
We concluded that there was a reputational challenge to address, but the immediate effect on the sales of their consumer products had not been as negative as for other major companies that have faced similar challenges. Our client therefore understood the implications of the allegations on their corporate reputation and they were able to feel confident that they could take time to fully assess the situation internally to restore their reputation. The results also provided a useful tool for benchmarking any future corporate communications effectiveness that aims to reduce the negativity surrounding the alleged bribery.
As Christopher Storck explained, once a scandal is uncovered and the allegations are verified, companies have to repair the damage internally through definite actions. Stakeholders are unlikely to feel that changes internally are credible until the actions of change are demonstrated. This is a longer term process in reputational recovery and the perceptions of it can be tracked over time through research.
Long term tracking for when a crisis hits
As Vivian Lines explains, when a company goes through a crisis, it is important to understand the
impact it has had and to see where reputational repair is necessary. Research can be used to help
support communications to establish priority areas for action and to track reputational recovery.
A major investment bank that was involved in the LIBOR scandal in 2012 used their current research
with Millward Brown to understand the damage it had had on their key brand health metrics.
Speaking to C-suite individuals and Institutional Investors we were able to look specifically at the
likelihood of their stakeholders considering using the bank and the extent to which they would
recommend them.
Using the tracking data we had gathered over four years we were able to see whether the negative
PR had had an impact on the bank’s results, measured against the leading competitors, many of
whom were also implicated in the scandal. We were also able to tailor the research to understand
the bank’s scores on brand attributes such as being a trustworthy bank and the extent to which
being trustworthy is a key driver of advocacy.
The results showed that in the bank’s two main markets, the UK and US, the allegations did not have
a negative impact on the bank’s key metric scores. In fact, the spontaneous awareness scores for the
bank increased which was most likely linked with the media buzz at that time. We were therefore
able to conclude that for our client, their involvement in the LIBOR scandal did not have a negative
impact on their brand metric scores. Our research further demonstrated that, because it was an
industry-wide issue, many of the other banks we measure performance against were also involved
and therefore the negative effects for our client specifically were reduced. In addition, we were able
to understand that amongst the investment bank’s key customers; Institutional Investors and C-suite
executives, attributes such as strong client service are more likely to drive advocacy than
trustworthiness.
Through our research we were able to reassure our client that they remained amongst the top
consideration set for investment banks despite the allegations and they were able to use our results
to help inform their strategy for the following year. We were then able to measure the impact of the
new marketing strategy over the past year and the impact it has had on their performance against
competitor banks.
Conclusion
This paper has highlighted key actions that need to be taken into consideration when companies are
suffering a reputational crisis, based on experiences of companies in similar situations as well as
insight from leading in corporate communications professionals. They provide advice on how
companies should react when they find themselves in a crisis and how actions should develop as the
crisis unfolds. However, it is important to note that even when companies are not sufficiently
prepared to act in the model way, all is not lost. There are numerous examples of when companies
have been heavily criticised for their response in a crisis, which have then gone on to recover their
reputation; Exxon Mobil and the Exxon Valdez oil spill in 1989 demonstrates this. In 2004, Exxon had
to pay £2.5bn in damages for the oil spill which killed over 250 000 animals and birds. It emerged
that the oil spill was the result of a crew master who was under the influence of alcohol, combined
with an insufficiently trained crew.
Exxon did not respond to the crisis immediately; their chairman at the time, Lawrence G. Rawl did
not fly to Alaska until two weeks after the spill. In the meantime, the flow of information had been
insufficient because Exxon has chosen to only communicate with the local people, rather than
publically and the official spokesperson had responded with ‘no comment’. This led to a lack of trust
amongst the public and a loss of respect for Exxon.
However, the incident did not permanently damage their reputation; for the past three years Exxon
Mobil has been amongst the 30 World’s Most Admired Companies on the Fortune ranking6 as well as
being ranked within Millward Brown’s BrandZ Top 50 most valuable brands7 globally.
6 Source: World’s Most Admired Companies by Fortune Magazine (2014)
7 Source: BrandZ™ Top 100 Most Valuable Global Brands by Millward Brown (2013-14)
This research has demonstrated how key actions can have a huge impact on corporate reputation in
a crisis, many of which stem from sufficient preparation for a crisis and the actions taken post-crisis
to restore a reputation. These are all elements that our corporate reputation research focusses on,
because, as the final three case studies showed, many companies invest in research at different
stages which can help to manage reputations, through:
As John F. Kennedy once said:
If companies are sufficiently prepared and engage in research at different reputational stages, then
the emphasis in a crisis can lie within opportunity rather than danger.
REPUTATION MANAGEMENT IN A
CRISIS
Annabel Wren
Millward Brown, Corporate Practice
24- 28 Bloomsbury Way
London
WC1A 2SL
Tel: +44 2071265148
BIG/MRS conference
2014