Doing right if things go wrong

With numer­ous high-pro­file busi­ness pub­lic rela­tions (PR) dis­as­ters in recent mem­o­ry, it is easy to see why glob­al busi­ness­es are con­tin­u­ing to splash out on exter­nal agen­cies to man­age and pro­tect their cor­po­rate rep­u­ta­tions.

Accord­ing to the 2012 Holmes Report, which mea­sures fee-earn­ing income for the world’s largest pub­lic rela­tions agen­cies, every sin­gle agency in the top ten largest PR firms had increased their fee income year-on-year.

In total, the glob­al pub­lic rela­tions indus­try grew by just under 8 per cent in 2011, mak­ing it a £6.5‑billion (US$10-billion) glob­al busi­ness and illus­trat­ing the glob­al appetite for ser­vices such as rep­u­ta­tion pro­tec­tion and cri­sis man­age­ment.

Recent exam­ples of these “spin” ser­vices in action include the tax eva­sion furore which engulfed Star­bucks last Decem­ber. It had been wide­ly report­ed that the com­pa­ny had legal­ly avoid­ed pay­ing large amounts of cor­po­ra­tion tax in the UK by util­is­ing inter­na­tion­al tax-effi­cient account­ing struc­tures.

This par­tic­u­lar “scan­dal” was a clear illus­tra­tion of how quick­ly pub­lic sen­ti­ment can force change, quick­er than any legal process.

How­ev­er, the group’s PR oper­a­tion respond­ed and vol­un­teered to increase the amount of tax it pays in the UK, allow­ing the spot­light of media cov­er­age to drift to oth­er com­pa­nies who were still legal­ly side­step­ping a large tax bill.

James Hen­der­son, chief exec­u­tive of Bell Pot­tinger Pri­vate, says glob­al chief exec­u­tives are increas­ing­ly real­is­ing that multi­na­tion­al busi­ness­es need to be able to recog­nise and react quick­ly to what can be very rapid changes in the media agen­da.

“The recent sharp focus on the dis­par­i­ty between the very low lev­els of UK tax paid by multi­na­tion­al busi­ness­es, on what appear to be healthy prof­its gen­er­at­ed here, is a great exam­ple of this,” he says.

“Com­pa­nies that are reliant on the con­tin­ued good­will and sup­port of con­sumers now recog­nise they must make greater efforts to prove they are wor­thy of their cus­tomers’ trust. You only have to look at the unwel­come atten­tion received by Ama­zon, Star­bucks and Google late last year to see the kind of dam­age that can be inflict­ed when busi­ness­es are caught with­out a clear, con­cise and cred­i­ble expla­na­tion for their actions.”

The tax issue that affect­ed these com­pa­nies grew quick­ly because of the access cus­tomers have to social media and chief exec­u­tives must appre­ci­ate the pace at which a neg­a­tive sto­ry can get out of hand.

Antho­ny Dana­her, chair­man of cor­po­rate com­mu­ni­ca­tions at FTI Con­sult­ing, under­lines the fact that the rules have changed, not­ing that the eth­i­cal stan­dards required of the cor­po­rate world are get­ting more and more strin­gent.

The lack of reg­u­la­tion and speed by which social media can mobilise neg­a­tive sen­ti­ment has a grow­ing num­ber of cor­po­rate casu­al­ties

“Behav­iour that was once seen as accept­able is being frowned upon,” he says. “Just in the past year, we have had Leve­son [an inquiry into the press], exec­u­tive remu­ner­a­tion, the Star­bucks cor­po­rate tax scan­dal and Libor rig­ging. Com­pa­nies need to be think­ing about what is around the cor­ner and what they are per­ceived to be account­able for.

“Social media has been one of the biggest game-chang­ers. The lack of reg­u­la­tion and speed by which social media can mobilise neg­a­tive sen­ti­ment has a grow­ing num­ber of cor­po­rate casu­al­ties.”

Of course, rep­u­ta­tion­al man­age­ment extends far beyond the finan­cial affairs of a com­pa­ny. Sun­der­land Foot­ball Club jumped from the back pages to the front pages of the nation­al press ear­li­er this year when the club hired Paulo Di Canio as its new man­ag­er. It found itself at the cen­tre of con­tro­ver­sy when reports sur­faced that Di Canio had once made a fas­cist salute while he played at Lazio in Rome and alleged­ly told an Ital­ian news agency that he was a “fas­cist, not a racist”.

Ini­tial­ly the club was slow to respond to the sto­ry and sim­ply hoped the bad news would go away. In the mean­time, its rep­u­ta­tion was at risk of harm.

Ruth Set­tle, direc­tor at pub­lic rela­tions group Freud Com­mu­ni­ca­tions, explains: “You only have one chance to get it right – so lis­ten to the experts. By refus­ing to com­ment on fas­cism alle­ga­tions, Sun­der­land fuelled a man­age­able sto­ry for days before the even­tu­al denial.

“Strat­e­gy must be insight-dri­ven and prepa­ra­tion rig­or­ous. Any busi­ness that has steered through chop­py rep­u­ta­tion­al waters will agree – good cri­sis man­age­ment is invalu­able.”

In the same way as busi­ness­es have spe­cif­ic insur­ance poli­cies and dis­as­ter recov­ery plans in case of nat­ur­al dis­as­ters, fires or mass tech­nol­o­gy fail­ures, cri­sis man­age­ment plans are invalu­able for when the worst hap­pens.

Any busi­ness that has steered through chop­py rep­u­ta­tion­al waters will agree – good cri­sis man­age­ment is invalu­able

While the best PR prac­tice is to be open, hon­est and con­sis­tent in your mes­sag­ing, a good cri­sis man­age­ment plan will ensure your organ­i­sa­tion weath­ers any rep­u­ta­tion­al storm if your organ­i­sa­tion­al cul­ture sup­ports your plan.

Derek Wynne, head of engage­ment at rep­u­ta­tion man­age­ment group Cir­rus, says: “Dur­ing a cri­sis, it helps if every­one has a shared view of the way for­ward. This comes from clear and con­sis­tent lead­er­ship. It also helps if indi­vid­u­als have free­dom to act.

“If you have clear val­ues and high lev­els of trust, peo­ple are like­ly to act with integri­ty. If your peo­ple aren’t very engaged with your goals and don’t real­ly care about your rep­u­ta­tion, they’re unlike­ly to be very on-mes­sage, and more like­ly to say things that can fur­ther dam­age your rep­u­ta­tion. This is par­tic­u­lar­ly dan­ger­ous in our social-media age.”

While work­ing from a known issues list can assist com­pa­nies in man­ag­ing their rep­u­ta­tion­al risks, there is no cure-all when rou­tine “issues man­age­ment” becomes “cri­sis man­age­ment”.

How­ev­er, a company’s own “tox­ic issues list” can be a good basis on which to rehearse cri­sis man­age­ment sce­nar­ios.

Paul Tweed, rep­u­ta­tion­al man­age­ment lawyer and senior part­ner at John­sons Solic­i­tors, says organ­i­sa­tions should have sol­id pro­to­cols which dic­tate who does what as a cri­sis is dealt with, based on sce­nario plans which envis­age a range of poten­tial sit­u­a­tions the com­pa­ny may find itself in.

He says: “These are mapped out in advance, so that a team can be assem­bled quick­ly and sit­u­a­tions dealt with in an effec­tive man­ner. The pro­to­cols, if well thought through and based on real­is­tic sce­nar­ios, act like an insur­ance pol­i­cy – hope­ful­ly nev­er need­ed – but invalu­able when they are.

“Espe­cial­ly at the begin­ning of a cri­sis, time is of the essence and it is impor­tant that engage­ment, par­tic­u­lar­ly with the media, is not done in haste, but in an order­ly, calm man­ner so as to avoid cost­ly mis­takes.”

GOOD PRACTICE

TESCO TAKING CONTROL

While British super­mar­kets and meat sup­pli­ers across Europe found them­selves under scruti­ny as a result of the horse­meat scan­dal, Tesco man­aged its response bet­ter than most.

In fact, when horse­meat was dis­cov­ered in beef prod­ucts at super­mar­kets and in food prod­ucts across the UK, Tesco showed how cri­sis man­age­ment should be exe­cut­ed.

Brand man­age­ment researchers at Media Per­cep­tion Insight (MPI) com­mis­sioned research into how the reac­tions of the brands involved in the scan­dal affect­ed their rep­u­ta­tion in the eyes of the media.

The pan­el of trade jour­nal­ists pro­vid­ed insight into the com­par­a­tive impact of Tesco’s and Find­us’ rep­u­ta­tion man­age­ment strate­gies.

While both brands yield­ed low­er scores for cor­po­rate social respon­si­bil­i­ty, the pan­el did recog­nise a marked dif­fer­ence in the two com­pa­nies’ brand­ing and mar­ket­ing. Tesco scored high­er at 77.6 per cent for how its brand was pro­tect­ed in the scan­dal while Find­us polled just 46.6 per cent in this cat­e­go­ry. In fact, every jour­nal­ist asked agreed that Tesco has suc­cess­ful mar­ket­ing and adver­tis­ing cam­paigns in place.

George Robin­son, chair­man of MPI, says the results of the poll show that, regard­less of the alle­ga­tions being thrown around, it was Tesco’s proac­tive approach to com­mu­ni­ca­tions that allowed it to pre­serve its posi­tion­ing among the key trade media audi­ence.

He explains: “While many experts com­ment­ed that Find­us tend­ed to keep qui­et as the scan­dal unfold­ed, Tesco was praised for fac­ing the cri­sis head-on in the media – and this has been clear­ly reflect­ed in the sur­vey results.

“We can see the impact of Tesco’s mar­ket­ing strat­e­gy on its rep­u­ta­tion, even at times where its respon­si­bil­i­ty to the pub­lic is being ques­tioned.”

The Food Stan­dards Agency’s find­ings in the horse­meat scan­dal affect­ed every major super­mar­ket in the UK, either direct­ly – through the sup­ply chain – or indi­rect­ly because of a change in shop­ping habits. How­ev­er, Tesco’s speed of response, clear, direct mes­sag­ing and will­ing­ness to take own­er­ship of the key issues, pro­tect­ed its rep­u­ta­tion.

Fred­die Bavey­stock, man­ag­ing con­sul­tant at Rufus Leonard, says adopt­ing the “active” approach enables large com­pa­nies to respond to a cri­sis quick­ly by instill­ing the val­ues of clar­i­ty, sim­plic­i­ty and human­i­ty.

“Brands need to be defined in clear and sim­ple terms that every­one with­in an organ­i­sa­tion can remem­ber and act upon,” he says. “This enables a PR team to adopt a posi­tion that is read­i­ly iden­ti­fi­able as a mean­ing­ful and deci­sive response, not an eva­sion or quib­bling over respon­si­bil­i­ties that can be inter­pret­ed as ‘play­ing for time’.”

BAD PRACTICE

G4S AND THE OLYMPIC ‘HIGH JUMP’

Rep­u­ta­tion­al dam­age hit secu­ri­ty group G4S last sum­mer when the pub­lic react­ed with anger after the com­pa­ny was unable to ful­fil its oblig­a­tions to pro­vide secu­ri­ty to the Lon­don 2012 Olympics.

Hav­ing land­ed the con­tract to han­dle the secu­ri­ty for var­i­ous Olympic venues, the com­pa­ny became the focus of glob­al head­lines when a dis­grun­tled employ­ee turned whis­tle-blow­er.

In the June before the Olympics, the employ­ee claimed staff secu­ri­ty vet­ting had not been com­plet­ed ade­quate­ly and that many employ­ees were effec­tive­ly self-cer­ti­fy­ing.

Ini­tial­ly, the com­pa­ny denied the alle­ga­tions, before even­tu­al­ly admit­ting it had strug­gled to find suf­fi­cient num­bers of suit­able staff and, there­fore, was under pres­sure to ful­fil its oblig­a­tions.

The delay in own­ing up to the prob­lem enabled the scan­dal to rum­ble on for weeks, even­tu­al­ly becom­ing a source of huge embar­rass­ment for the British gov­ern­ment and G4S chief exec­u­tive Nick Buck­les.

In not deal­ing with the neg­a­tive sto­ry at the ear­li­est oppor­tu­ni­ty, the com­pa­ny saw its share price sub­se­quent­ly tum­ble by $1.1 bil­lion. Worse still, it lat­er tran­spired that con­cerns had been raised inter­nal­ly long before the com­pa­ny was “shopped” by one of its own staff.

Mr Buck­les would lat­er become the sub­ject of anoth­er round of head­lines after his per­for­mance in front of the inves­ti­gat­ing House of Com­mons select com­mit­tee was less than flat­ter­ing.

Gavin Ing­ham Brooke, cri­sis com­mu­ni­ca­tions spe­cial­ist and chief exec­u­tive of con­sul­tan­cy Spa­da, says Mr Buck­les’ tele­vised com­mit­tee appear­ance was uncom­fort­able view­ing.

He explains: “The per­for­mance made me squirm. It showed lit­tle prepa­ra­tion and the company’s mes­sag­ing was fun­da­men­tal­ly wrong.”

Mr Ing­ham Brooke says to fail to plan is to plan to fail. “Reg­u­lar reviews and drills involv­ing the major deci­sion-mak­ers are crit­i­cal. It is true that few plans escape unscathed from first con­tact with the ene­my, but being rehearsed means a multi­na­tion­al will be bet­ter able to dis­tin­guish a prob­lem from a true cri­sis, and deploy accord­ing­ly,” he says.

“Your cri­sis man­age­ment team must be senior, tight­ly-man­aged and empow­ered to make seri­ous strate­gic deci­sions; events can devel­op too quick­ly to allow deci­sions by com­mit­tee.

Estab­lish shift pat­terns if the cri­sis demands it – a multi­na­tion­al will have to con­tend with scruti­ny across time zones, as well as a domes­tic 24-hour news cycle.”

With G4S, like many com­pa­nies, it appeared that too few hours had been spent con­sid­er­ing the rep­u­ta­tion­al risk of win­ning an Olympic con­tract. How­ev­er, that plan­ning could have been invalu­able and should be a les­son for any chief exec­u­tive.