By Doug Pinkham
Public Affairs Council President
October 20, 2010
Why do some companies get pilloried by reporters and politicians while others, facing the same controversy, escape unscathed? What makes one firm a target and another a bystander?
Researchers at the Thunderbird School of Global Management and Arizona State University have a theory. They suggest that three elements predict public perception of corporate irresponsibility: the victim, the effect and the firm.
"Fair or not, some victims naturally generate more sympathy than others - even when pain or suffering is comparable," writes Thunderbird Professor Nathan T. Washburn in a recent article. Sometimes the public pays more attention simply because the issue (for example, the Gulf oil spill) is closer to home, or because victims in the U.S. have easier access to media and activists.
Washburn also observes (as I discussed in my June 23 blog) that public outrage is always higher when children may be victims (as with the Mattel toy recall three years ago). The authors expand on this notion to include victims who are perceived as "innocent" - people who don't know what's happening to them or who feel they don't control their situation. In my post, we noted the research of David Ropeik and George Gray, who call this "imposed risk vs. chosen risk."
The new study's second category, the nature of the harmful effect, refers - as only an academic can - to "a highly visible, dramatic effect concentrated in space and time" (in other words, a plane crash or something big blowing up). Scattered reports of less dramatic bad news, such as the thousands of highway deaths that occur each year, don't incite the same outcry.
The last element predicting public reaction is the reputation of the offending company. Washburn notes that a positive corporate image can help a company, but it also can "go the other way when people hold the firm to a higher or unrealistic standard." Because Toyota has a reputation for quality and reliability, for example, politicians and journalists accused the company of hypocrisy when it was forced this past year to launch the largest auto recall in U.S. history.
While useful for its organizing principles, the Thunderbird/Arizona State study neglects some of the nuances that explain why two similar companies have different experiences when facing controversy. There are other factors at work, including the way a company manages a crisis, its reputational awareness, political timing and even the "rhythm" of media coverage.
Certainly, as we discussed last week and in my March 3 blog about the Toyota recall, there is a right way and a wrong way to handle public outrage. Companies that listen respectfully to their critics, express regret, take responsibility and involve the community in solutions often recover with their reputations intact. Firms that coordinate communications, government relations, corporate citizenship and other external functions have an advantage because they can be consistent about messaging and issues management. No one wants different people in the same company saying different things; but all too often, that's exactly what happens.
We all know that reputation matters. And we've all heard the adage that companies that make deposits into the "bank of goodwill" will be able to draw on those deposits when times are bad. But reputation is much more complicated than that. Many factors affect a company's long term reputation, including customer relations, employee loyalty, brand strength, management integrity and the firm's commitment to social responsibility.
Washburn acknowledges that, "[different] segments of the population will have different relationships with any firm, which helps explain why perceptions sometimes vary."
Few companies offer the "complete package." A company with tremendous brand strength may be weak on social responsibility. A firm with strong employee loyalty may have problems with key customers.
Therefore, it's tough to generalize that a positive corporate reputation can help a company in a crisis. Smart corporations analyze all of these factors - through internal and external surveys and benchmarking - to fully understand their risk profile. That way, depending on the type of crisis they face, they'll know their strengths and weaknesses.
Given the scrutiny facing big corporations these days, it's always better to be aspirational ("We aim to be the best") than to declare victory ("We are the best"). The public likes humility and respects firms that believe they can improve. A corporation that claims it's already on top invites criticism from news reporters and activists, who will undoubtedly search for examples of corporate hypocrisy.
It is difficult to plan for the last two factors I mentioned - political timing and the rhythm of media coverage - because controversy is often beyond one's control. For example, announcing a round of layoffs on a day the national unemployment rate spikes will put a company in the headlines. The same will happen to an energy firm that reports record profits the day gasoline prices rise 10 cents a gallon.
Media coverage of crises sometimes follows patterns. One product recall may draw little attention, but the third recall in a month will convince reporters to write about a "trend." Such stories may draw extra attention to the company with the latest recall, which may be a firm with a good reputation.
It's also helpful to understand how news ebbs and flows. When several accusations of corporate irresponsibility crop up across an industry, for example, a firm with a strong track record can offer a counter-narrative that differentiates it from competitors - in the same way a political candidate contrasts his or her behavior with an opponent's. We've seen this strategy used in a variety of industries, from forest products to automobile manufacturing to financial services.
But be forewarned: Even if you have a strong story to tell, a communications strategy that lacks humility in a time of crisis may tear you down faster than your good works will build you up.
Comments? Email me at http://pac.org/contact/blog.
