In the aftermath of the global financial crisis of 2008–09, communicators everywhere are trying to come to grips with the “new normal” of crisis management. This is no small feat, in part because of the emergence of a new reputation economy in which people make decisions in the marketplace based (heavily) on their perceptions of companies. In fact, these perceptions can be shown to explain as much—or more—of customer behavior than product perceptions can.
While all crises are unique, since the emergence of mass media in the 20th century they have shared the following four common traits: the element of surprise, insufficient information, a quick pace of events and intense public scrutiny. Some observers—including Irv Schenkler, the director of communication management at New York University—have noted that not all problems constitute a crisis; some situations severely affect an organization’s normal work flow and distract senior management, while others affect the organization’s financial well-being, and still others hurt the organization’s image and reputation in the eyes of critical constituencies. In some instances, all three occur simultaneously, but in many cases (at least at the onset) one is more pronounced or prevalent and tends to define the crisis.
When problems turn into crises, they usually fall into the following four areas, where they crystallize and start to take on lives of their own:public opinion, financial difficulty, litigation and events. Social media has become a “force multiplier” by globalizing local crises within minutes and, in recent years, testing the reputational resilience of a number of the world’s most powerful companies.
With the world’s largest normative database of reputation research and rankings on thousands of companies over a 15 year period, Reputation Institute has some pretty advanced assumptions about reputation resiliency based on how stakeholders view the company pre-crisis. Some findings include the following:
- If stakeholders view the company as having an excellent reputation (80 or higher on a 100-point Reputation Pulse scale, which measures the amount of trust, admiration, good feeling and esteem which together comprise corporate reputation), that company should have high resiliency to a crisis and can expect significant support from stakeholders.
- Companies with strong reputations (with Reputation Pulse scores between 70–79) will have some resiliency and can expect stakeholders to be receptive to hearing the company’s perspective and to offer some active support.
- Those companies with average reputations (between 60–69) will experience volatility in resilience, with many stakeholders questioning the company’s perspective. The organization can expect limited receptiveness to its management of a crisis as well as some skepticism, along with some active detractors.
- The majority of companies that have below average or weak reputations (below 59) are operating in a low-resilience and high-risk environment. In these cases, the organizations can consistently expect significant stakeholder skepticism about the company and its behavior in a crisis, with high levels of active detractors acting as a clear and present danger to the company’s survival.
These tiers are not absolute, however, and the old mutual fund disclaimer about “past performance is no guarantee of future results” certainly holds true in two recent high-profile corporate responses to a crisis in the U.S.: Toyota and Domino’s Pizza.
Toyota became the world’s largest automaker for the first time in 2009, receiving excellent or strong reputation scores in dozens of countries around the world where it conducted business “the Toyota way.” In fact, Toyota was voted the “World’s Most Reputable Company” in 2008 based on receiving the highest Reputation Pulse score of the largest 600 companies in the world in its home country.
However, in early 2010, when millions of Toyota's vehicles were recalled for safety reasons in the U.S., its reputation for quality was challenged by stakeholders in the world’s largest automotive market for the first time in decades. The company managed to squander much of the reputation capital it had banked over the years by giving meager responses on Capitol Hill and in social media. As a result, its sales, customer satisfaction and reputation scores tanked in short order. With U.S. consumers, Toyota now has a below average reputation in 2011, badly trailing Ford (strong) and even falling behind General Motors (average).
In April 2009, Domino’s Pizza was the victim of an employee prank, which was posted on YouTube, leading to a 10 percent drop in the company’s stock price in the first week and a customer satisfaction crisis for the pizza delivery giant. Domino’s had a new chief marketing officer at the time, and the initial social media verdict was that Domino’s was tone-deaf and doomed to be the first casualty of the reputation economy.
However, Domino’s (with a legacy of an average reputation with consumers) was able to turn the corner and become the fourth largest e-commerce site in the U.S. by the summer of 2010 by relaunching its web site, leveraging social media and the Internet, and changing its pizza recipe to rave reviews. Its bold integrated marketing campaign used self-deprecating humor and a fair amount of soul-searching and transparency to take the starch out of its detractors. Domino’s created a level of post-crisis reputation resiliency usually seen only in the most admired companies in the world, and was able to successfully overcome this crisis precisely because it went against the grain.
When a great product literally breaks down and the company behind the service promises can’t deliver, a crisis can have a transformational effect on corporate reputation, and it isn’t pretty. When a maligned product is first mocked, as with Domino’s, then tossed out and replaced by one that consumers had a say in creating, a once-pedestrian reputation can be turbo-charged in the wake of the crisis. Earning the benefit of the doubt from stakeholders is key to reputation resiliency, but even the strongest of reputations can be undone by shoddy crisis communication. How resilient is your company’s reputation?
