Faculty & Research -How to Avoid Making a PR Drama out of a Business Crisis

How to Avoid Making a PR Drama out of a Business Crisis

“Transparency is key to maintaining trustworthiness as disclosure tends to win back stakeholder faith and brand belief more quickly than caginess or, worse still, denial. “

When the Columbian multinational company DCOL became embroiled in an unprecedented case of coal pollution in 2013, their response was to try to save face and sweep the environmental crisis under the carpet via tardy and inconsistent PR. Little did they realise that this lack of responsiveness, consistency and transparency would cost the company and its reputation dearly. Managers from companies and industries of all types should take notice of this example of mismanagement and others the next time they have to explain, apologise for and put right instances of underperformance, conflict or crisis.

It is a widely-accepted fact, regardless of the type of business, sector or geographical location that an erroneous or ill-adapted response to a problem for which a particular company is responsible will serve only to compound the problem. Depending upon the kind of crisis, environmental damage may have to be cleaned up, personnel relations repaired, financial loss accounted for or reputation re-built. All such operations are costly in time, energy and resources, so it is of paramount importance that crisis management teams get their strategy right and implement it properly.

Reputation at stake

In some cases, companies that enjoyed a very positive image prior to the crisis may recover more quickly than their less well-regarded counterparts. This “reputational balance”, as it is known in research circles, can be viewed as a virtual form of credit in the bank, giving companies in a full-blown crisis a certain margin. However, this does not change the fact that their reputation remains at stake, just that they can buy themselves a little more time in the eyes of stakeholders and the general public before then providing the necessary explanations with a view to regaining trust.

Bad PR on shaky ground a “no-no”

The afore-mentioned Columbian example is an especially revealing one from a business culture perspective as the country is renowned for its people placing far greater trust in private companies than public bodies to clear up problems and provide direction to Society. Unfortunately, DCOL’s pre-crisis reputation was already open to question due to suspicions of preferential treatment by the government, high levels of air and water pollution as part of the company’s previous operations, and possible associations with paramilitary groups. These were not the cleverest grounds on which to then make delayed PR statements underplaying the scale of the coal disaster, contradictory information released 2 years later in the company’s own sustainability report, and a general “non-apology” approach to the matter. This “no disclosure = no incident” strategy had anything but the effect DCOL desired of dodging a bullet.

Managerial steps to take

What DCOL and any other company managing such a situation should do first and foremost is front up. Transparency is key to maintaining trustworthiness as disclosure tends to win back stakeholder faith and brand belief more quickly than caginess or, worse still, denial. However, pre-emptive steps can also be taken by companies to insist that their crisis management house is in order in advance of having to tackle any such situations. Scenarios can be enacted in simulation format in order to prepare team members, a dedicated crisis unit appointed, official policy formulated, and responsibilities assigned to ensure that if or when the fateful day comes, the company in question will be equipped to deal with the PR fallout and also clear up any other actual, material issues as soon as is humanly possible. Crisis management can be a very costly operation, so the better prepared a company is, the less resource-intensive it should prove to be.

The crisis scale

Many high-profile cases in recent times have also underlined that the scale and repercussions of a crisis can also impact the potential consequences for the company under-fire and the time and efforts it may require to put things back together. France Telecom had to answer a lot of questions and calls for a long period of time 10 years ago when a spate of employee suicides occurred due to allegedly unbearable working conditions and pressure. Nestlé has been hit hard by boycott campaigns against its promotion of formula milk over breastfeeding, Nike has had serious fingers pointed at them over supposed use of under-age workers in certain countries, Starbucks has been one of many giants accused of tax avoidance, and Google and Facebook are now regularly under the microscope on major issues of data privacy and respect. What future research could investigate is to ascertain whether the nature of the problem is then directly linked to the scale of the crisis, its public perception, and the size of the clean-up operation required. What is already clear is the need for companies to be well drilled in advance of any such situations arising in the first place.

This article draws inspiration from the paper Mired in deception: escalating an environmental disaster in Columbia, written by Orlando E. Contreras-Pacheco and Cyrlene Claasen and published in the Journal of Business Strategy Vol. 39 (2018).

Cyrlene Claasen is an assistant professor of Management and Organisation at Rennes School of Business, France. Her research interests include CSR, Public-Private Partnerships, Governance and Accountability, and Stakeholder Issues.