History tells us brands can come back from the brink of a company crisis, yet it takes serious and long-term communications, vision and commitment to get there.
While the reputations of Australia’s financial services companies might be copping a hammering right now at the hands of the Royal Commission, they might take take heart from the knowledge that no matter how bad things, there is usually a way back.
Most of the time, at least.
Australia’s corporate history is littered with examples of brands that have been publicly pilloried and have carried on regardless. In some cases, they’ve even come back stronger than before.
Just look at Vodafone, whose customers were particularly savage in their treatment of the company during its ‘Vodafail’ period earlier this decade. Since then, it’s been gradually regaining marketshare, climbing back above 15 per cent of the market last year (although it did have to spend more than a $1 billion improving its network to do so).
In 2009, iconic clothing brand, Bonds, experienced a massive backlash when its owner, Pacific Brands, decided to relocate manufacturing to China and cut just under 2000 jobs. But soon after the decision was announced, CEO, Sue Morphet, said the resultant drop off in sales lasted no more than two or three weeks.
For online lender, Direct Money, meanwhile, a crisis moment came two years ago thanks to increasing distrust of the financial services sector and specific questioning of whether the so-called peer-to-peer lending could survive. This was reflected in a story in the Sydney Morning Herald questioning whether the company was able to fund new loans.
The response was the appointment of a new management team, including CEO and CMO, and rebrand to Wisr, with an expanded focus based on financial wellness and doing more for customers.
The company has subsequently achieved record growth, and has actually benefitted from some of the pain that its larger rivals are now experiencing.
“As a brand, we needed something that could reflect that,” its CMO, James Goodwin, tells CMO. “Direct Money made a lot of sense during the P2P period, but we needed a brand that could speak more broadly to the other ambitions we had around products and services that go beyond just personal loans.”
Goodwin’s advice is to look at the purpose and what are you trying to achieve. “For us, it is about putting the customer at the heart of what we build and what we do.
“When there have been big hits in the newspapers around the Royal Commission, we are actually seeing spikes in traffic across our website, so people actively going out for searching for alternatives to the traditional lenders.”
Not all companies can change their brand, but that still doesn’t stop most from finding a way back.
Of course, not all are so fortunate. UK-based data analytics firm, Cambridge Analytica, is the most prominent recent example, appointing insolvency practitioners in May following revelations it had misused Facebook user data and the emergence of footage of its CEO discussing the use of entrapment to influence elections.
When a company experiences a crisis, the most obvious measure of the damage is to its share price, and then its revenue. But sometimes the damage can be deeper, and longer lasting. Companies that have experienced a crisis often also suffer low staff morale, leading to staff attrition and difficulties in hiring replacements.
Whether a company bounces back obviously has plenty to do with the seriousness of the crisis that it finds itself in. But if it is to have any hope at all, the quality of its communications team is also a crucial factor.
According to Louise Ingram, an associate director with Temple Executive Search and former communications executive with the Commonwealth Bank and Nokia, organisations are increasingly realising the value of a good corporate affairs teams for managing through and beyond possible crises.
“The reality is that post these incidents you cannot simply advertise or comms your way out of a long term reputational loss,” Ingram says. “It is a long road back and it requires a comprehensive focus from the board and the business leadership.
“As Sarah Wynn-Williams [director of global public policy] from Facebook said recently at the Corporate Affairs Summit in Sydney, ‘Your customers decide when you get your life back’.”
Facebook is a company that knows a thing or two about managing a crisis.
Ingram stresses recovering from a crisis is a long-term process that requires a CMO working closely with their corporate affairs counterparts as well as customer relations functions to develop and deliver a narrative not over days, weeks and months – but over years. This is especially true in an era now where trust in many institutions has plummeted.
“And that narrative must be built on the both the organisation’s purpose and the actual experiences of the customer,” she says. “We are certainly seeing in the heads-of-function roles that we recruit that organisations want more rounded individuals with very strong skills and experience in all areas of stakeholder management, including marketing and public affairs.”
While the history of organisations suffering crises of a criminal or financial nature stretch back for centuries, the digital era has given rise to another form – the social media crisis.
Adelaide-based publicist, Morgan Spencer, had direct experience last year when a client launched a campaign linking religion to its brand in the context of the same-sex marriage debate.
“The client had really good intentions and objectives for what they wanted to achieve,” Spencer says. “It was a little bit off-brand for them, but the key message was close to what the business believed in. But it went horribly wrong.”
It was an experience that reinforced in her mind the essential requirements for diffusing a crisis as it plays out in the public sphere.
“My advice is always that you have to come out and explain your reasoning, and be honest to the community and the people around you as to what you wanted to achieve, and apologise for any misconception that has happened around that” Spencer says. “You have to come out with an honest statement and apologise. Many organisations don’t do that.
“That is the biggest mistake I see organisations make. They get really defensive and make it all about them.”
Former Telstra senior insights manager and now founder and managing partner at strategy and insight agency Barr None, Stephanie Barr, says the playbook for crisis and reputation management is well-worn.
“The first step is planning for the worst and having an action plan in case something does happen, so that your management isn’t put on the spot when they are talking to media,” she says.
Many organisations implement a stoplight system to assess the risks they face, and then identify and train their spokespeople, while also ensuring that statements are prepared in the event that any of the amber lights from the risk assessment exercise suddenly turn red. When statements are made, they need to factual, with any progress against goals clearly communicated.
More mature organisations will conduct simulation training, to ensure that when things do go wrong, that the recovery plan actually works.
Critical to all of this is, says Barr, is honesty – even if the message is that you honestly don’t have all of the answers.
“Whenever there is an open, honest communication, it is a breath of fresh air and well received,” she continues. “Even if you don’t have the answers right now, you need to make a commitment and demonstrate the fact that you are looking to take this seriously and make sure it doesn’t happen again. Follow through on that action plan and keep communicating openly through the process.
“Taking actions in a very proactive way and appointing someone to make sure it doesn’t happen again is a very good signal to your customers, your shareholders and the media.”
Even the language used can play an important role in re-establishing a bridge of trust.
“People appreciate open and honest communication and every day we are seeing more and more we are seeing everyday language be really appreciated by the general public,” Barr says.
But none of this seems to step some organisations doing their level best to make the worst out of a situation. One clear example is Ardent Leisure. Having experienced the tragedy of four guests at its Dreamworld theme park losing their lives on a ride, the company issued confusing statements to the media in relation to the park’s reopening, and handled the communications process poorly overall. This led to significant financial losses and the resignation of the CEO.
The Ardent example demonstrates the fine balance organisations face between the need to communicate clearly, and the dangers of communicating too quickly, and without a clear plan.
Barr believes the reason why large organisations deviate from procedure – or fail to even have one - is that their marketing teams are focused only on the positive ‘wins’.
“There is not so much investment in risk management from a commercial perspective, and less from a communications perspective,” Barr says. “So the majority of investment is in telling a positive story rather than planning for a crisis.
“But if the organisation is fudging information or lying, that is when you need to get into the change of management and changing the culture as well.”
Still, there are situations where brands have demonstrated that a potential crisis can be turned into a win. When American actress Roseanne Barr was widely censured for tweeting racist remarks, she attempted to lay the blame for her behaviour partly at the feet of Sanofi, the makers of the sedative drug Ambien.
Ambien also chose to respond via Twitter: “People of all races, religions and nationalities work at Sanofi every day to improve the lives of people around the world. While all pharmaceutical treatments have side effects, racism is not a known side effect of any Sanofi medication.”