- A corporate crisis response that best protects the image of the company and a response that best protects the image of its CEO may not align.
- Apologizing for the crisis is typically the safest response if the company is unsure what to do.
- A denial can prove risky, since the company's responsibility may later come to light, creating a bigger crisis in the future.
In business, as in life, how people respond to a crisis situation can influence whether they emerge unscathed.
When faced with a corporate crisis, ranging from automotive safety issues to public concerns over “pink slime” in beef, a company’s response can influence the perceptions of its customers, shareholders, and employees. But choosing what to say publicly — and how to say it — is far from clear cut.
That’s because a response delivered by the chief executive that best protects the image of the company and a response that best protects the image of its CEO may not align, according to research conducted by Robert A. Peterson, marketing professor at the McCombs School of Business and vice president for research at the University of Texas at Austin.
Four Response Types
His paper, “When Things Go Wrong: Account Strategy Following a Corporate Crisis Event,” was published in 2012 in the reputation and strategic positioning journal Corporate Reputation Review. In the paper, Peterson and his coauthors, professors Deanne Brocato of Iowa State and Victoria Crittenden of Boston College, considered four different types of public-facing responses to corporate crises, and provided examples of each:
- Apologize. Toyota’s CEO apologized (see sidebar video) to Congress and company shareholders for safety defects in the company’s cars.
- Deny. Fannie Mae’s CEO denied his organization manipulated its numbers prior to a disclosure that Fannie Mae had hidden billions of dollars in losses.
- Justify. Nike’s CEO justified paying low wages to overseas workers based on their lower cost of living.
- Excuse. Ford’s CEO excused its tire problem by placing the blame on tire manufacturer Firestone, rather than the auto maker.
It isn’t difficult to find additional examples of recent corporate crises. For example, Beef Products Inc. was forced to close several processing plants in the wake of the online uproar regarding its low-cost ground beef product, which was dubbed “pink slime.” The company’s efforts to communicate the safety of its product were drowned out by social media complaints regarding its inclusion in food.
Both the messenger — and the message — matter. The findings by Peterson and his coauthors suggest that the CEO who provides the response is judged separately from his or her company. “Basically, the CEO benefited from using apologies and excuses to the detriment of the corporation as a whole,” their paper explains. “But when denial or justification accounts were given, perceptions of the CEO became more negative and the corporation was seen as relatively less negative.”
The most appropriate response, therefore, depends on the context of the situation. Still, Peterson acknowledges that certain responses may do a better job of preserving the reputations of both a business and its chief executive. “Overall, an apology is probably the most conservative or maybe the safest one to use if the company doesn’t know what to do,” he says.
On the flipside, he warns that a denial can prove risky. As in the case of Fannie Mae’s denial of number manipulation, the reality may later come to light — something Peterson characterizes as an “Oops, gotcha”-type moment.
In that way, “short term responses can destroy a firm in the long run,” says John Daly, professor in the College of Communications and the McCombs School. Like children who lie when caught doing something wrong, Daly says adults may also employ the “I didn’t do it” defense. “So in a crisis, people often try to cover things up,” he says. “That might resolve the first crisis, but it will create a bigger one later.”
Although the research from Peterson and his coauthors looked at what is said publicly, other experts note that a company may instead remain silent in the wake of a crisis.
That can be a dangerous approach. “If a company does not respond, or is not consistent with its message, other parties will likely define the narrative surrounding the crisis,” says Dan Laufer, MBA ’94, Ph.D. ’02, an expert in crisis management and associate professor of marketing at Victoria University of Wellington in New Zealand. “Does a company want its competitors, disgruntled workers, and other stakeholders to define the crisis in the eyes of the public?”
Crises are really battles of competing stories, Daly explains. “The media has a story and you have a story. Whoever’s story gets tractions, wins,” he says. “That is why crisis managers are often told to get in front of the story [and] announce the problem before the media find out about it.”
However, if dealt with early enough, the crisis doesn’t ever need to become public knowledge, explains Terry Hemeyer, a lecturer in the College of Communications and public relations professional who has handled hundreds of crises during his career. “If we catch a crisis quickly enough, we don’t have to go public and we can solve it internally,” avoiding the need for press conferences or speeches, Hemeyer says.
Once a corporate crisis does go public, however, “you need to clean up the mess,” Hemeyer says, noting that luck can also play an important role. “Depending on the other events taking the media 's attention, many crises never get much public attention. But on a slow news day, [if] you have a crisis, you’re in big trouble," he says.
What You Say Can Be Used Against You
A company must also consider how its message could play out in court. “The lawyers are going to be involved, as well as the public relations people and probably the top management team, to get the proper message out but not to make them appear liable or even culpable,” Peterson says.
However, other experts say problems may arise when legal counsel gets involved. “Lawyers are trained to advise companies to minimize legal exposure,” Laufer says. But that’s not always a good thing when dealing with the public. “Lawyers encourage companies to say as little as possible, which gives others an opportunity to frame the crisis in the eyes of the public to the detriment of the company,” he says.
Another consideration? It’s important that what is said both before and during a crisis remain consistent. “What you have said in the past can absolutely be used [in court] if you contradict yourself,” Hemeyer says.
In the end, Hemeyer lays out a straightforward measure of successful crisis communication.
“If the crisis visibility goes away quickly and you’re still in business successfully, you’ve handled the crisis correctly,” he says.