When Bad Things Happen to Good Companies

Printed in Whatcom County Business Pulse, February 2001 Issue

You’ve run a tight ship, were always careful, established good policies, etc., and now something has gone terribly wrong. Perhaps it was a delivery truck driver making a bad decision, or an operator making a serious mistake. Maybe it wasn’t your fault at all, but suddenly you face an attack by activists or critics trying to build a career by blaming your company.

So now you are in the news. And you’re beginning to discover just how quickly a good reputation, earned with hard work and over a long period of time, can be almost instantly destroyed. Companies like ValuJet, Exxon, W.R. Grace, and Firestone have been so damaged by crises that their very ability to operate as a business is put into question. This situation is happening with increasing frequency so it is important for company leaders to understand how and why it happens and what can be done to prepare for the reputation crisis.

Why does this happen? There are a combination of factors. Infotainment, the Internet, and activist careers are three of many reasons for this.

Good guys vs. bad guys
Infotainment describes what has happened to our news media in the past few years. It used to be it was easy to separate news from entertainment, but now all news is treated as entertainment. The change was really spurred by the prime time news magazines such as 60 Minutes, 20/20, Dateline and their numerous cable imitators. In prime time they competed with drama and comedy for an audience.

In an entertainment format you usually have the good guys and bad guys and they are fighting over something—a girl, a treasure, or a worthy ideal. To be truly entertaining, news adopted this same simple format. For almost every news story there needs to be the good guys, the bad guys and something they are fighting over. Usually, they are fighting over “the public good.” Safety, security, health, the environment, etc.

Now, if there is someone making accusations about someone putting the public good at risk, whom do you think is going to end up with the white hat? Of course, it is the one making the accusation. If you pay attention to news stories, especially those involving corporations, they follow a pretty simplistic almost melodramatic format.

The Internet is another risk to reputations because it can be and frequently is used to quickly spread accusations, information or false information to networks of people who have a special interest in the event. Malicious information can be spread almost instantaneously, and opposition groups can be formed almost as fast. Before a company knows what happens, its reputation may be already at risk.

The news media’s need to have “white hats” corresponds nicely with the desire of many community and issue activists to build careers. We have in our own community several examples of how activism has led directly to political careers. Some of our elected officials right now blur the line between legislating and activism. The ability of some to gain wide media attention by making irresponsible accusations represents a real risk to almost any business.

Be ready to act
So what do you do when the mikes are shoved in your face and you know very well you’ve already been given the dreaded “black hat?”  There are three things you should consider immediately:

•             Tell it like it is quickly
•             Communicate directly with stakeholders and influencers
•             Don’t let accusations and misinformation go unchallenged

As hard as it may be, tell what you know as quickly and straightforwardly as you can. The right information given too slowly is almost as bad as false denials or false information.

This is a real problem because in many crisis situations, legal issues are involved and what is right to do for your reputation and public opinion may be the wrong thing for your legal position. Far too often executives make the decision that legal considerations should always be primary. What they forget is that a company without a reputation is essentially worthless so losing public confidence in order to win a lawsuit is pointless. There is no substitute for a strong, decisive executive who understands the balance between reputation and legal demands and who has the ability to make the best business decisions.

A mistake frequently made in a crisis is to think that once the reporters have left, your public communication task is taken care of. That is just the beginning. There are a large number of people who need to hear directly from you and preferably before they read about it in the newspaper or hear about it on radio. Family members of those involved, employees, community leaders, elected officials, customers, government agency employees, etc. This is all the more important when you do not believe the news media is going to treat you fairly in their news stories. You don’t counter that by stonewalling them, but communicate as directly as you can to as many stakeholders as you can.

If you find yourself in a sustained battle, your opponents will keep up the pressure and will say things that you don’t like or are not true. The old doctrine used to be “ignore them and they will go away.” There was a desire to not blow up a story unnecessarily. In certain cases, that is still appropriate. But more often charges, accusations and false information need to be answered and answered quickly. A lie repeated often enough becomes the truth. The responses need to be factual, unemotional and never directed to the person—but the facts need to be communicated.

Reputation equity helps
All that deals with what to do when a crisis unexpectedly hits. But some companies seem to be able to keep a good reputation during a lengthy attack and others seem to crumble quickly. Part of it has to do with how well the crisis is handled, but a big part also has to do with whether or not the company has “reputation equity” in the bank. For certain, the equity is going to be drawn on in the event of a major crisis, but if there is a good reserve it will certainly help overcome a lengthy attack.

A good example is Alaska Airlines. They not only had to contend with the tragedy of Flight 261, but there emerged a seemingly endless sequence of accusations and news stories about safety concerns. This is typical.

Opponents such as disgruntled former employees see the opportunity to pounce and suddenly everything your history and everything about you falls under the relentless scrutiny of the news media. Despite this Alaska’s reputation has emerged damaged but not destroyed. This is due in part to the considerable reputation equity they had about good service, an excellent safety record, community involvement, etc.

Company leaders frequently have a hard time justifying the cost of good community and stakeholder reputations--things like community contributions, cultivating relationships with elected officials and community leaders, communicating the good news about the company, etc.. But when they understand that doing these things builds that reputation equity and it may very well make the difference between being able to survive or not, the modest investment required starts looking reasonable.

Bad things happen. Accidents do happen and individuals with their own agendas can make life miserable or even impossible for a company. Preparation is the key—preparing to respond effectively and building reputation equity.

Gerald Baron is the President of Baron & Company and CEO of PIER System, Inc. Baron & Company provides marketing and public relation services to clients in the Pacific Northwest and Canada, and PIER System develops and markets an Internet-based public information and emergency response communication system. Both are based in Bellingham.