If crisis was a fairy tale, reputation would be the Prince Charming
1 Introduction on crisis management
Crisis has been the most used word by newscast over the last few years. Since 2007 our economy has been facing the worst global crisis we have ever seen. In this climate of instability, companies, exactly like people, are losing mental clarity and makeing mistakes, remedying very clumsily at them. A crisis is a disruption that puts the future at risk. It makes you reconsider your position, strengths, weaknesses and your attitude. If you know how to handle it, a crisis can open your mind. It is a concept that can be applied to a lot of subject - this is the reason why crisis management has become a topic of discussion in the university courses, in all strategic meetings, and in private settings. The aim of this essay, is the way companies can not only manage crisis but even exploit it with communication. In this sense, we will consider cases of reputation crisis, that in the long run can severely affect the business. Before to face the real case-history, we will explain renowned theories about prior reputation to get the proper analysis skills. This is what crisis management concerns: it is about implementing a series of short and long-term strategies aimed at the best possible management of a company’s crisis. The enterprise, the issue, the strategies, the tools are all character of a new kind of fairy tale. In the real world they masked the princess, the antagonist, the helper. Understanding these roles is going to be the new “ace in the hole” for who wants to be a leader into the whole manager generation. For those clever managers who will let the Prince Charming come in the story not only in the ending. This is a wide subject because there are technical crisis along with communicational crisis. A communicational crisis can be generated just from human error and negligence. A company can live in a crisis of image for multiple reasons such as a management scandal, a wrong campaign, an error against its employees or made by the employees themselves, and a lack of quality of its products or assistance to customers. These causes are not new but today they can be uncontrollably amplified by the web and of course by social media. You can have a latent crisis when a problem exists but it’s perceived just by the narrow circle of experts and does not spread outside the company. The real crisis is the overt one, where knowledge of the problem spreads online and offline and becomes public.The main source of problems is linked to the control of the dissemination of information. The timeliness required to address the crisis raises the need of a non-stop flow of information. Information about the progress of the procedures for managing the crisis or the consequences, not only reputational, for all the stakeholders should circulate very fast. Communication is fundamental for both resolution of the problem and relation with stakeholders. Indeed, communication is the rail that allows the business to continuously run. Before, meanwhile and after a crisis. 2 It’s all about reputation When a corporate is going to be listed, 70% of its value is based on intangible assets ( 4marketing, Vecchiato Giampiero, 2012). This means that wide economic empires are based on variables not easly measurable and predictable. Literally, they are castles in the air. In these years of uncertainty and distrust, intangible assets allow a manufacturer to remain standing, to push down negative results and to bridge the gap between how a company perceives itself and how others view it. Like a treasure, they have to be controlled and enriched, never took for granted. Everything could be under evaluation by the stakeholders point of view- for example, even the executives’ personal reputation can be seen like a synonym of the brand’s one- but the variances most examined in the surveys conducted at international level are the following: - Leadership and vision, which expresses the degree to which the company dominates the market and refers to how the company shows a clear vision of the medium/long term role it wants to play in the environment in which it is inserted; - Customer focus, which examines the ways in which the company takes care of its customers and is committed to the satisfaction of their needs; -Quality of products, which focuses on public perception of the ability to maintain continuously high standards of quality, innovation and reliability in products and services; -Emotional appeal, which expresses the degree to which the company turns out to be appreciated, admired and respected by its public, as a result of emotional long-term relationships that it has established with its stakeholders; -Social responsibility, which examines the relationship of the company with the community and the environment, in order to assess its overall level of good citizenship; - Employees, which refers to the perception of the effort made by the enterprise to ensure the quality of its staff and the working environment; - Quality of the management, which refers to the level of efficiency of the current management and of clarity in the vision on the future of the company; - Financial performance, which relates to public perceptions of the profitability of the company, its future prospects for growth and the degree of risk associated with any investment; -And also reliability, values and differentiation. ( Bergen, 2000) To decrease the pain, limit the damages and speed up recovery it’s important to activate these incentives before crisis. This is possible also thanks to internet. Of course it is a perfect arena to draw on information, data and early warning signals, where communication campaigns implementation becomes possible, where you can learn from consumer reactions, results and engagement dynamics. If reputation is so important it’s because it can support enterprise in many ways. First of all, it is gasoline that activates the engine of purchasing choice. If I know that a brand is making efforts about a social issue or about employees’ environment or if it is a “lovemark” brand, I will be emotionally attached to it. So, in a purchasing situation full of stimuli like in a supermarket, I will follow these “engagement paths” if visually activated by a good brand management. A favor reputation helps the consumer before the company, that’s why it is so useful. If a product carries for full term its own promises, it will give a good experience to the user and it will get back loyalty from him. A satisfied and loyal client it’s an informal promotion way: he will trust the brand and he will start the Word Of Mouth recommending it through his web, talking about the product, the experience and the consequent esteem. A peer-to-peer advise works better than an advertising campaign - even if outstanding - cause we trust more who talks from our own side, the customers’ side, without purposes to gain. Building a favor prior reputation is like opening a bank account full of reputational capital: you raise it with interaction and communication with stakeholders so you can withdraw from it when there will be need. This is called “the halo effect” and there are many researches about it. One of these, made by Fombrun and van Riel (2004) suggests two possible explanations for a reputation halo effect in a crisis:
- halo as benefit of the doubt;
- halo as shield.
In the first type, a general favorable stakeholder’s view of the organization will affect how he attributes responsibility for a crisis. A weaker attribution of responsibility implies a lower withdrawal from the “account reputational”. The halo as shield deflects reputational harm using the psychological phenomenon of expectancy confirmation. The research of Traut-Mattausch (Traut-Mattausch E., Schulz-Hardt S., Greitemeyer T. and Frey D., 2004) suggests that people are reluctant to revise initial expectations even with a clear disconfirming evidence. With positive prior reputations, stakeholders may could discount or ignore the negative information about the organization and dismiss the crisis, too. Usually, the halo as shield will emerge just in cases of extremely high reputation. On the other side, the effect provided by an unfavorable prior reputation is called, instead, “the velcro effect”: an unfavorable prior reputation acts like velcro and attracts additional reputational damage because of the grater crisis responsibility attributed, following the Coombs and Holladay theory. This kind of effect is more easy to get, one set of manipulated messages might be enough to create a velcro effect but not a halo effect. The article “Unpacking the halo effect: reputation and crisis management” (W. Timothy Coombs and Sherry J. Holladay,2015) talks about two different frame error: human error and technical error. Of course, the second one is graver because we trend to blame humans, who have the first responsibility. In this case the halo effect will prevent differences in organizational reputation scores even when perceptions of crisis responsibility differ because of the frame. If the case has a no cause condition, the crisis responsibility attributions and the post-crisis reputation scores will be similar to the technical-error frame, that in the researches appears to be the less harsh. So, even if each crisis is different from the other, with theoretical basis, few experiences and good flair is possible to identify a series of actions and reactions to integrate and adapt each time.
3.1 How to build your prior reputation
As said before, there are a lot of details to whom pay attention if you want to manage you reputation building. Each company should find its own balance, reminding that it will probably change as soon as new issues appear. It also must be remembered that although reputation it’s not just online, the social media, the blogs and the forums today are like a square where a single weak voice can be amplified: pay attention to negative voices that can generate a disaster. 1. Aim to relationship: many people talk about Customer Relationship Management, but the best results to get a brand awareness come from taking care of every type of stakeholder, from participating in real life, from showing you personality. And avoid automization: because people are not just a number and they like to feel special for you. Thus: don’t disappoint them. 2. Listen and be present: pay attention to every opinion cause you cannot know which one could be the next bomb, answer as much as you can and keep calm with negative reviews - try to learn from them. 3. Build your PLAN of crisis management: a solid plan preserves the company reputation, gives advantage of time, and confirms you care about customers. It can be very useful to use here the Plan-Do-Check-Act method. 4. Coordinate Pr and Social media: since they are your image, they have to express your brand essence trough different channels or different environment situations. 5. Build a system of governance and social media policy: be sure that all your employees are aware of the allowed use of the social media. Is better to set a protocol of responding and a tool to control the accesses to the company accounts and the post by them. 6. Keep employees informed: they are your first client, and in order for them to satisfy the company, the company need to satisfy them. 7. Keep suppliers informed: they have a strategic role for your business, working with them can be extremely profitable. 8. Form a highly skilled teams: instead of a big generalist team, it’s better to have different teams, smaller but more specialized, that can mix to work on special projects. 9. Learn to recognize emotions and to engage your community: instead of deleting negative comments or answering back, try to understand the point of view of the customer and what you can learn from the situation: showing empathy - always with professionalism - will let you engage more than ever. 10. Say who you are and make consistent choices: people like to know what you stand for, which are your values, your strengths and sometimes even your weaknesses. And then, carry on the story of your brand trough investment, sponsorship, testimonial and co-branding choices, trough initiatives about social responsibility. 11. Do what you say, say what you do: don’t create false expectation, but share every participation, success or news about the enterprise. 12. Compelling and quality content: it’s not easy to stand out from all the overloading information flow, but a useful, sharable, informative, captivating and entertaining content will help you for sure. (Forbes, Walter, 2013; Instituteforpr, Coombs Timothy,2007; Webcentrica, Saini, 2014)
Supporting this tips, you can have others more specific if your reputation acts like a shield halo, or if your reputation acts like benefit-of-the-doubt halo. 3.2.1 How to exploit a halo as shield As said before, a halo effect acts like a shield when a company gets a very favorable prior reputation. With a greater esteem, a greater responsibility will be attributed in case of human error. But, because of the esteem it is improbable to change the expectations, lightening the negative news. So, the reputation score will decrease as with a technical error. In the event that you are in a crisis with these features, it may be useful to keep up your reputation to fuel the halo effect. You can follow these steps: · Keep on with a transparent and honest communication · Respond fast and thoughtfully to your community · Admit your own faults · Activate practical actions such as compensation and public appearances in support of the expressed concern. (Forbes, Walter, 2013) 3.2.2 How to exploit a halo as benefit of the doubt According to the studies, we know that a halo effect is like a benefit of the doubt. It is useful in case of reputational accident whose causes are not clear. With this benefit, customers will bestow less responsibility to the company so that the damages will be minimized. To maintain this doubt, it is important for the brand to act in a neutral but not indifferent way. Remember: · Never lose control on reacting or you will cancel out the effect of the halo · Do not please or act guilty, you just have to count on a powerful internal advocacy and on your lovemark out-side role, that can generate more than simply loyalty. (Forbes, Walter, 2013) 4 Case-study: Nestlè and its last three crisis 4.1 Nestlè and the palm oil The fist crisis we are going to explain sparked in 2010 from a Greenpeace report on how Nestlè’s source of palm oil was damaging rainforest in Indonesia. The video was already spreading on Youtube when an altered logo of Nestlè started becoming a popular profile photo on Facebook. At the beginning, they had fans expressing their support to the company. After a while they asked Greenpeace to withdraw the video and post a status on the fan page telling people not to use the sub- advertized logo. Otherwise their comments will be deleted, claiming copyright. Of course, this post raised a huge issue about the freedom of speech from fans. Nestlè kept on getting defensive giving rude and sarcastic replies to the customers, showing disregard for environment and lack of CSR. In the end, Nestlè updated his statement and started a collaboration with Greenpeace. They suspended sourcing from Sinar Mas and held a meeting with Greenpeace to discuss the details about oil supply chain and joined the roundtable for sustainable palm oil. Of course, they have learned from the experience and have started bolstering the company, improving communication, and setting up a digital acceleration team, starting a training program for employees all over the world in social media communication, and digital marketing. (Ft, 2012) To sum up, we can say that they were wrong at the beginning using censorship, being rude and insulting, and creating a crisis on top of the current one. But then, they have been good loading constant updates, diverting attention from the Facebook crisis, and providing a website to answer about the matter. 4.2 Nestlè and Pedobear The second crisis is strictly on social media. In 2012, Nestlè has been forced to take down an image from its Kit Kat fan pages. The picture had the aim to promote Kit Kat Bars on Facebook and Instagram pages of the Nestlè-owned chocolate bar. "Drum roll please...Kit Kat is on Instagram" was written under the picture with a nut brown-colored bear at a drum set with Kit Kat chocolate bars in its paws in the place of drumsticks. After a while, it emerged that it was similar to an internet icon. Suddenly, the company said it had no idea that the image matched that of “Pedobear” – the pet that marks sites with inappropriate overtones towards minors. The company said: “We produced this photo of a real guy in a bear suit to launch Instagram through our Facebook community. The picture is not Pedobear. We had never heard of Pedobear, but when the possibility of its similarity to the so-called 'Pedobear' was raised with us, we immediately removed it.” Fortunately, Nestlè just invested a little budget in the Facebook photo and had not funded a multimillion dollar campaign. And with the power of social media they had known immediately what was turning around badly, without investing a big budget to find out what and why. (Smh, 2012) But this case study is interesting even because it shows up how social media had changed the rules of communication. Since they are under consumer’s domain, outside the corporate standards, they have logic to which we are not used to and that we start to understand now. Nestlè was faulty of poor understanding of symbolism as well as poor knowledge of contemporary culture. Saying you do not know the phenomena and icons of the digital world today means to admit a certain distance from the consumer, which is a big disadvantage. At least, they have been honest in taking responsibility and quick in responding. 4.3 Nestlè and the lead flavored Maggi. Maggi is a famous easy-to-cook Indian snack, often used in management case study for its rapid success. Maggi is the symbol brand of Nestlè being able to express the history and the character of the corporation. During this year the company has been battling a crisis rocked by allegation of containing seven-times the permissible level of lead. After that, the company started rejecting the accusations, sure about their quality and safety controls at the factories, saying on their website and social media accounts that there had been no order to recall any products. For a while, they continued to keep customers up to date on the investigation into the safety of Maggi noodles in India. For example, on the official Maggi India Facebook page, Twitter and website, Nestlé stated that extensive testing revealed no excess lead in the noodles. They also paid much attention to customers, thanking them for supporting, answering each tweet and creating a FAQ page on the Nestlè website to keeping an active dialogue. Then, abruptly, Nestlé backtracked and recalled all Maggi noodles from India. The CEO, Paul Bulcke, spoke to the media to explain this U-turn: “We are working with authorities to clarify the situation and in the meantime Nestlé will be withdrawing Maggi noodles from shelves.” And they really did it, they destroyed $50million worth of Maggi Noodles deemed unsafe by regulators. After one month testing the noodles, levels of lead within food safety levels were found. The issue was over and Nestlé also explained the science behind the reason for the ban in simple terms so customers could understand. (Digitaltraininacademy, n.d.) Even if in this case Nestlè’s behaviour toward the issue and the customers was really exemplar, there are other few advices they could follow the next time. At first, in a crisis involving its most iconic product, Nestlè was wrong not to engage mass media and social media properly, that are indispensable to be credible. About credibility, it would have been better to accept the allegation and show openness to criticism instead of remaining in denial. After all, they missed some good communication practice like sending representatives at retail stores, or sharing unusual videos or campaigns to educate the loyal patrons. 5 Conclusion In this report is told you the story about crisis. It is called a fairy tale, not because it is easy to overcome but because crisis could even have the same trail but the story themselves are always different in the end. In the chapter 1 we have talked about the internal working and the external shapes a crisis can have. Sadly, one of the most important character, like the Charming Prince, is always hard to find because it tends to appear too late. So, to transform crisis from bad-story to a real fairy tale, companies have to learn how to reach their “Charming Prince” before hard times come. The chapter 2 is aimed to show how and how much reputation can be useful to handle a crisis. This theoretical excursus provides enough knowledge to stop waiting and start acting: to don’t be the sleeping beauty anymore. Examples of Action plan can be found at the chapter 3. A good Action plan allows great companies to ride the wave of the moment and to anticipate it. The three cases-study in the chapter 4 show how the international company Nestlè has learned it to its’ cost. But the more you act, the more you are exposed to risk, that is why you need more prevention. Long time ago risk management involved only financial variables, today we know that bankruptcy can be generated by a wrong move in any field. Prior reputation is not just image, it is an asset on which you have to invest a lot to get a halo in return during the crunch. Before, you had to build your defense using a stakeholder centric approach, communicating with the primary and the secondary stakeholders and not just consumers. Let the whole society know your personality, your mission, your vision, your activity, and your results. To hear about them is not enough, you have enable people to experience them because emotions are the new communication elements. During a rough patch it is important to measure your reputation score, find out the frame (human or technical) of the error, and share the right content about the issue. In that way, you will know which kind of effect the halo will bring to you. Knowing if your halo acts like a shield or like a benefit of doubt, as explained in chapter 2, will bring you to the right steps which you can follow to not fall. Of course, the steps advised during this report are just the beginning. Many others variables have to be crossed and studied in order to have an inclusive prospectus. Plenty of work about prior reputation is still needed. A company’s reputational account requires incessant deposits. The great challenge is to fulfill the expectations of the stakeholders during a crisis: then, you will be creating reputational capital in an adverse situation, which is worth double. In these mature markets it is necessary for the companies, also, to reach maturity and full consciousness of their actions and the consequences. Crisis, as turning point, is the best way to get them both. Communication, consistency and contents are the keys for a successful business in this economic storm. Even after a crisis you have to be present through all the available channels and stand for what you want to share your values and do not disappoint your community. Building a favorable reputation is a commitment without breaks because in this fairy tale there is no “…and they lived happily ever after” but just, “ …and they chose the investment worth more, which is people”. 6 Sources
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