A crisis response that’s good for the CEO may not be good for the corporation.
In a networked world, company response to a crisis has become key to institutional reputation. Companies are judged not only on what happened but how they managed the crisis itself. Thirty-some years later Johnson & Johnson continues to get credit for the way it handled the Tylenol case, whether or not that case is relevant to today’s crises.
Amid today’s real-time media landscape, crisis response elicits more interest and involvement by stakeholders who are not directly affected by an event. As members of the public weigh in on a crisis response via social media, their comments can spread as quickly and influence perceptions as much as those of the company, CEO and others directly involved.
Comms pros are faced with a limited set of strategy choices in many crises, including:
Additionally, there is that perennial question of whether the public face of the company in crisis should be the CEO or a lesser god.
New research published in the Corporate Reputation Review provides some context and guidance that can be applied by practitioners.
“When Things Go Wrong: Account Strategy Following a Corporate Crisis Event” by E. Deanne Brocato (Iowa State), Robert A. Peterson (University of Texas) and Victoria L. Crittenden (Boston College) examines the impact of crisis-response strategy on stakeholder perceptions. (The article can be purchased directly from the journal’s publisher.)
The article looks at the important decisions a strategist must make in a crisis and provides data regarding stakeholder reaction – among those not directly affected by the situation. This research provides surprising insight, especially regarding the potential tension between a corporation’s reputation and the CEO’s.
The authors studied four distinct types of strategies: denial, justification, excuse or apology, and provided some examples:
- Franklin Raines, CEO of Fannie Mae, denied that his organization would ever manipulate numbers – just before the disclosure that it had hidden billions of dollars in losses.
- Phil Knight of Nike justified low wages for overseas workers based on a lower cost of living.
- The CEO of Ford excused its tire problem saying Firestone, not Ford, should shoulder responsibility.
- Toyota’s CEO apologized both to Congress and shareholders for its problems.
Framing your response
Denial suggests that the event never happened; it is a refusal of responsibility, the authors contend.
Justification means taking responsibility for an event but not expressing regret. This strategy is designed to minimize the event’s severity.
An excuse strategy claims responsibility because of extenuating circumstances, deflecting causality to another party or event. The authors cite a manufacturer accepting responsibility for a product failure while blaming it on a supplier.
An apology acknowledges responsibility and expresses regret.
“Denials and justification are the most aggressive (in terms of blame) and excuses and apologies are the most assuaging,” according to research cited.
Role of the CEO
The authors note that the CEO is typically seen as the most credible source of information in a crisis but not the most objective, and that stakeholders are influenced by the actions of both the CEO and the corporation itself. An apology mitigates negative impressions of the CEO and helps that person build trust (but perhaps not trust in the corporation). Denial is most likely to mitigate negativity for the corporation.
To protect the CEO’s reputation, practitioners should first consider issuing an apology, and secondarily an excuse.
To protect the organization’s reputation, practitioners should consider justification and denial. These strategies decrease negative impact for the corporation, although they increase it for the CEO. If a denial or justification strategy is the path chosen for a corporation, the message should be offered by someone other than the CEO such as a technical expert.
Practitioners can use this research in conjunction with a program that measures stakeholder perceptions and sentiment to frame a crisis response strategy that may bring about a better outcome.
Linda Locke, principal at Reputare Consulting, subscribes to journals from which she draws inspiration and concepts for clients of her corporate reputation consulting practice. If you wish to suggest a research article for her review, contact her at Linda.Locke@ReputareConsulting.com, or DM her on Twitter @Reputationista.