How much damage can a corporate crisis do? Quite a lot, it turns out. In 2018, The Economist looked at eight of the most notable crises from this century and found that the companies involved were worth, on average, 30% less today than they would have been had the crisis in question never occurred. Indeed, while most businesses will survive a scandal in the short-term, their financial value—and reputation—may take years to recover.
This makes it all the more surprising that many businesses use crisis communications only in reaction to a reputational risk and opt for mitigation rather than prevention. This passivity is apparent in how many companies feel about their ability to respond to a crisis. A recent survey found that while 59% of businesses have experienced a crisis, only 54% have a plan to deal with them.
At the same time, corporate crises are becoming increasingly common. They’re also getting more costly. In 2010, U.S. corporations paid $11 billion in penalties for regulatory infractions. Six years later, they paid $59 billion. Throw in the reputational cost—and its impact on the stock price and on retaining and attracting customers, suppliers and employees—and you can see why reputational risks give corporate decision-makers sleepless nights.
But the reputational impact of a crisis can be reduced, largely by embarking on a journey of rebuilding trust, engaging with all stakeholders, keeping employees motivated and bringing about deep-seated internal change, if need be.
For PR professionals, this might mean taking the following steps when a crisis erupts.
- First, remember the cardinal rule: “Fail to prepare—and prepare to fail.” The comms team should already know who will engage stakeholders and how—from briefing the C-suite to communicating with employees to putting up a media-trained spokesperson.
- Good preparation also means knowing one’s cheerleaders: the employees who’ve been through a similar crisis and can pitch in, the external stakeholders who can provide visible public support, and the crisis comms agency who should already be on speed dial.
- Finally, PR teams should remember that authenticity is critical. Whatever their company says shouldn’t just be honest, it should ring true to their values and purpose. Truth and transparency matter in a crisis, too. Internal comms teams can help keep spirits up by keeping employees in the loop, rather than allowing misinformation to circulate.
Leverage Technology to Track Stakeholder Perceptions
The best way to prevent a wildfire, though, is to extinguish the embers before they catch. To mitigate any crisis, corporate leaders should—preemptively—try to stay on top of stakeholder perceptions and better safeguard their company’s brand and reputation.
By leveraging technology that supports stakeholder tracking in real time, corporate decision-makers can gauge both emotional and rational perceptions of their brand and reputation, along with the expected behavior of stakeholders, and observe how they’re changing in response to their strategic decisions, corporate communications and external events. Using an always-on stakeholder perception tracker can tell them what is or isn’t working, allowing them to pump the brakes, hit the gas—or change course entirely.
Smart companies track these perspectives on a continual basis, of course—and use them to make decisions that build trust.
Why? Having a strong reputation can help a company in countless ways, from increasing customer loyalty to attracting high-quality talent to retaining employees. Understanding how stakeholders feel about certain issues—both those that directly and indirectly impact the business—can flag a potential crisis and encourage internal reevaluation of relevant strategies or decisions.
High levels of stakeholder trust are also a defense during a crisis. Not only can it mitigate reputational damage and make the crisis recovery shorter and easier, but it can also guide a company’s internal activities and external communications in real time, allowing it to explain its positions and actions widely and in a way that will resonate with each stakeholder group.
Finally, as Winston Churchill said, “Never let a good crisis go to waste.” Companies that find themselves in the mire can demonstrate their values and purpose, and see in real time that it’s having a positive impact. Incidents happen—but it shouldn’t mean your business can’t prepare or respond accordingly.
Shahar Silbershatz is CEO and Co-Founder of Caliber.