Can companies contain damage in the social-media age?

Executive Summary

Why do some companies emerge from a crisis with a minimum of harm to their reputations and long-term profitability while others suffer severe damage to their names and finances? Damage-control experts say the outcome of a corporate crisis hinges largely on the type of situation and the public’s perception of the company’s response to it. Is the company a victim of the crisis or its creator? If it is culpable, does it accept blame and try to make things right, or evade responsibility and place its own interests first? And how does a company deal with the ubiquity of social media, which can amplify a corporate misstep or even manufacture a crisis through rumor or innuendo?

Here are some key takeaways, based on guidelines developed by corporate-crisis counselors and other experts:

  • Prepare for crises before they happen by anticipating risks and developing detailed plans to cope with them.

  • Take control of the crisis narrative before social media, news outlets and competitors do.

  • Above all, put the interests of customers and the public first.

Resources for Further Study

Bibliography

Books

Barton, Laurence, “Crisis in Organizations II,” South-Western College Publishing, 2001. A crisis management expert emphasizes the need for consistency in messaging when companies and organizations in crisis communicate with the media and the public.

Benoit, William L., “Accounts, Excuses, and Apologies: A Theory of Image Restoration,” State University of New York Press, 1995. An Ohio University communications professor offers examples of image restoration that are useful in the context of reputation repair during and after a crisis.

Coombs, W. Timothy, “Code Red in the Boardroom: Crisis Management as Organizational DNA,” Praeger, 2006. A communications professor at the University of Central Florida provides a clear and well-documented primer for organizations that are undertaking crisis management planning for the first time.

Articles

Augustine, Norman A., “Managing the Crisis You Tried to Prevent,” Harvard Business Review, November-December 1995, http://tinyurl.com/vyy4aop. The former Lockheed Martin CEO tracks the different stages of a crisis, stresses the need for a tested crisis management plan and reinforces the need to learn – and profit – from the crisis.

Barnett, Tyler, “Chipotle Knows What It’s Doing By Closing its Stores,” Fortune, Feb. 10, 2016, http://tinyurl.com/u6j99g7. This article traces Chipotle’s successful management of its 2015 food-poisoning crisis.

Boston, William, “Volkswagen Reveals Strong First Quarter Operating Profit,” The Wall Street Journal, April 18, 2017, http://tinyurl.com/yxx2lqpl. Volkswagen’s strong first-quarter 2017 earnings suggest consumers have moved on from the company’s 2016 emissions scandal.

Bowman, Jeremy, “What the E.Coli Outbreak Means for Chipotle Mexican Grill Inc.,” The Motley Fool, April 25, 2015, http://tinyurl.com/sqpjo33. A financial writer looks at how foodborne illnesses have affected other restaurant chains, suggesting Chipotle is likely to recover.

Gara, Antoine, and Maggie McGrath, “How Chipotle’s Comeback Attracted Big Data Robots and Value Investors Alike,” Forbes, April 25, 2017, http://tinyurl.com/qqtr6b3. A shaky hedge fund bet more than $1 billion on Chipotle’s comeback from its food poisoning crisis – and won.

Kellerman, Barbara, “When Should a Leader Apologize – and When Not?” Harvard Business Review, April 2006, http://tinyurl.com/yx2r9zv8. A Harvard Business School professor outlines the circumstances that require a business or political leader to show contrition.

McCann, Erin, “United’s Apologies: A Timeline,” The New York Times, April 14, 2017, http://tinyurl.com/lhoo7oa. A timeline traces United Airlines’ public statements following its forced passenger removal scandal, from CEO Oscar Munoz’s initial defense of the company’s behavior to his belated apologies.

McGrath, Maggie, “Chipotle Closes The Books On ‘Most Challenging Year’ in 23-Year History With 13% Drop in 2016 Revenue,” Forbes, Feb. 2, 2017, http://tinyurl.com/rnbnfm7. A journalist who covers the U.S. restaurant industry sums up the year-end damage to Chipotle’s stock value in the wake of its food-poisoning crisis.

McGrath, Maggie, “Chipotle Stock Spikes More than 6% After Q1 Earnings Surge Above Expectations,” Forbes, April 25, 2017, http://tinyurl.com/sgqxzmz. McGrath sees unmistakable signs of Chipotle’s recovery after reporting a strong first-quarter 2017 performance.

Rehak, Judith, and The International Herald Tribune, “Tylenol made a hero of Johnson & Johnson: The recall that started them all,” The New York Times, March 23, 2002, http://tinyurl.com/l7xlwxe. The Times traces how drugmaker Johnson & Johnson successfully managed the crisis that erupted after seven people died from taking cyanide-laced capsules of the company’s top pain reliever, Extra-Strength Tylenol.

Temin, Davia, “How United Became the World’s Most Hated Airline in One Day,” Forbes, April 11, 2017, http://tinyurl.com/utfakj5. An authority on corporate damage control breaks down all the ways that United Airlines and its leadership made its forced-passenger-removal crisis worse at every turn.

Reports and Studies

Benoit, William L., “Image Repair Discourse and Crisis Communication,” Public Relations Review, Vol. 23, Issue 2, Summer 1997, http://tinyurl.com/unakhdf. The Ohio University professor discusses corporate image-repairs strategies that also can be used to protect reputations during a corporate crisis.

Coombs, W. Timothy, “Crisis Management and Communications,” Institute for Public Relations, Oct. 30, 2007, http://tinyurl.com/mtcj4x4. Coombs reviews the basics of crisis management, including the types of crises a company or organization might encounter; the levels of blame that are attached to each; and the best strategies to blunt their impact on a company’s reputation and bottom line.

Pearson, Christine, “A Blueprint for Crisis Management,” Ivey Business Journal, January-February 2002, http://tinyurl.com/y88awbh9. This report emphasizes that in most industries, many crises are predictable and that the best firms wisely prepare for these events before they occur.

Winokur, L.A., “Breakdown and Repair: The Wells Fargo Reputational Crisis and Its Aftermath,” Global Association of Risk Professionals, April 17, 2017, http://tinyurl.com/y9nh9vy5. This detailed study examines how Wells Fargo’s corporate culture led directly to its fraudulent accounts scandal and the difficulties the bank now faces as it tries to recover the public’s trust.

The Next Step

Social Media

Majoo, Farhad, “How Battling Brands Online Has Gained Urgency, and Impact,” The New York Times, June 21, 2017, https://tinyurl.com/y8luk7kl. Social media have given consumers a power that makes them more influential than corporate marketing, and both conservatives and liberals have used social media to push companies to make changes.

Marshall, Jack, “Backlash to Botched Ads Erupts Faster Than Ever,” The Wall Street Journal, June 19, 2017, https://tinyurl.com/y7ukoy58. Buying an advertisement is no longer a guaranteed boost for companies, as social media can quickly amplify a backlash against an ad that some view as offensive or inappropriate.

Pierson, David, “How a social media campaign helped drive Bill O’Reilly out of Fox News,” Los Angeles Times, April 21, 2017, https://tinyurl.com/ybvu5jkb. The social media component of the campaign to oust Fox News host Bill O’Reilly was key in the drive’s effectiveness because social media were not around when sexual harassment allegations were previously raised against O’Reilly.

Uber

Chase, Robin, “What Uber’s Next CEO Needs to Say,” Wired, July 5, 2017, https://tinyurl.com/ybrhfv6k. Former Zipcar CEO Robin Chase writes a mock first speech that Uber’s next CEO should give to demonstrate what the company must do to rebuild its brand, including establishing that it is trustworthy, a great place to work, willing to work with others and financially sound.

Feldman, Brian, “Voting With Your Wallet Won’t Fix Uber,” New York Magazine, June 14, 2017, https://tinyurl.com/yal7s26l. A columnist argues that because Uber’s business model is funded by investors, a consumer boycott of the company is not a viable way to hold it accountable. Instead, people must use their civic power, such as voting and getting involved in local politics, to pressure the company to change.

Hawkins, Andrew, “How Uber can emerge from its scandals as a more ethical company,” The Verge, June 30, 2017, https://tinyurl.com/ybfmu5qz. A coalition of accessibility advocates, consumer rights groups and labor unions wrote an open letter to Uber calling for the company to make changes, such as paying higher compensation to its workers, being less antagonistic to local governments and providing equal service to all.

Organizations

Global Association of Risk Professionals
111 Town Square Place, 14th Floor, Jersey City, NJ 07310
1-201-719-7210
http://www.garp.org/#!/risk-intelligence
International professional association of risk managers that provides education and training on best practices for crisis and risk management.

Institute for Public Relations
PO Box 118400, 2096 Weimer Hall, Gainesville, FL 32611-8400
1-352-392-0280
www.instituteforpr.org
Nonprofit research organization that focuses on crisis management and reputational damage control.

International Association of Business Communicators
155 Montgomery St., Suite 1210, San Francisco, CA 94104
1-415-544-4700
www.iabc.com
Membership organization of communication professionals from 70 countries that conducts research and education on effective strategic communication, including crisis management.

National Communication Association
1765 N St., N.W., Washington, DC 20036
1-202-464-4622
www.natcom.org
Scholarly association that supports crisis communications research.

Public Relations Society of America
33 Maiden Lane, 11th Floor, New York, NY 10038-5150
1-212-460-1400
www.prsa.org
Private organization for public relations professionals.

Working Knowledge
Baker Library, Bloomberg Center, Soldiers Field, Boston, MA 02163
1-617-495-6040
1-617-495-6791 (fax)
http://hbswk.hbs.edu
Harvard Business School website that provides research and new ideas on dozens of business topics, including corporate damage control and crisis management.

DOI: 10.1177/237455680321.n1