Reputational Crisis Management: How to Recover from Failure

In today’s world, no one is exempt from the risk of a reputational crisis, as even a small spark can ignite a fire. Having a large team of PR and risk managers does not guarantee complete immunity from such crises. So, let’s discuss what can provoke a crisis and how to deal with it. 

What is reputation crisis

Typically, when a reputational crisis comes, it is hard to confuse it with something — you will quickly realize that it is one. However, let’s define it more precisely.

A reputational crisis refers to a scenario in which one or more sources of negativity dominate a significant part of a company’s media space, leading to negative interpretations of the company’s future activities as a whole. 

It occurs when negative information, events, or actions associated with the entity become widely known and create a negative perception among stakeholders, such as customers, employees, investors, and the public. A reputational crisis can result in loss of trust, credibility, and business opportunities, requiring strategic measures to manage and repair the damaged reputation. During a reputational crisis, the negative information or events can spread rapidly through various channels, including traditional media, social media platforms, and word-of-mouth. This can amplify the impact and reach of the crisis, making it challenging to control the narrative and mitigate the damage.

What can trigger a reputational crisis

When facing a reputational crisis, it is essential to swiftly identify the underlying causes that led to the crisis. Let’s explore the primary factors that commonly contribute to such situations.

• Product or service failures. When a company’s product or service fails to meet expectations, it can result in customer dissatisfaction, safety concerns, or legal issues.
• Ethical misconduct. Unethical behavior by employees, executives, or the organization as a whole, such as fraud, corruption, greenwashing, etc., can severely damage a company’s reputation.
• Data breaches and cyber-attacks. Data breaches and cyber-attacks can expose sensitive customer information, erode trust, and lead to reputational damage.
• Public controversies. Involvement in public controversies, such as discriminatory practices, controversial statements, or political affiliations, can trigger a reputational crisis, especially if they conflict with the values and expectations of stakeholders.
• Negative social media campaigns. The power of social media can amplify negative sentiments and trigger a reputational crisis if a company becomes the target of a viral negative campaign or backlash.
• Legal issues and regulatory violations. Involvement in legal disputes, regulatory violations, or non-compliance with industry standards can tarnish a company’s reputation and erode trust among stakeholders.

Reputation crisis cases

The reputational risks associated with any misstep increase proportionally with the size and recognition of a brand. Let’s take a look at a couple cases of PR-scandals of big brands and explore how they managed these challenging situations.

Burger King

Burger King, a brand renowned for its daring advertising campaigns that often resonate well with its customers, faced a significant backlash in 2021. On International Women’s Day, the company’s UK office posted a controversial tweet that included the phrase, “Women belong in the kitchen.” This tweet sparked widespread criticism and drew negative attention to the brand.

Despite Burger King’s attempts to clarify their intentions and announce the Burger King Foundation’s H.E.R. Scholarship for female employees, the damage had already been done. The incident quickly escalated into a full-blown scandal, with the online community expressing strong disapproval of the brand’s creative approach. As a consequence, Burger King became the subject of over 140,000 online mentions in just one day.

Acknowledging their failure, the brand took responsibility and removed the controversial post. They clarified that their intention was to bring attention to their new scholarship program for women. Fortunately, within a week of the incident, the scandal subsided and lost its momentum.

Volkswagen

In 2015, Volkswagen, one of the largest automotive brands globally, found itself embroiled in a scandal that cost the company €30 billion. 

It was revealed that 11 million Volkswagen cars worldwide were equipped with special devices designed to manipulate emissions tests, concealing the true levels of harmful emissions. This revelation had a profound impact on the brand’s reputation, particularly as concerns about global warming were gaining increasing public attention.

The consequences were swift and severe, with investors reacting strongly to the news. Volkswagen’s shares plummeted rapidly, reflecting the loss of confidence in the company.

In an attempt to address the crisis, the brand initially released a two-minute video featuring company employees, including the CEO, taking responsibility for their actions and offering apologies. However, this video message proved to be unsuccessful and failed to bring about any significant changes.

To rebuild the brand’s reputation, Volkswagen embarked on an ambitious global program to transition to electric motors. The company committed to investing $20 billion in the development of electric and hybrid car models by 2023. The results of this program have been largely positive, with Volkswagen making significant progress in the electric vehicle market. However, the scandal continues to be frequently mentioned on social media platforms worldwide, often in a negative context.

Specific steps to overcome a reputational crisis

When facing a reputational crisis, there are specific steps that can be taken to overcome the situation timely and effectively.

• The initial step in is to identify the underlying cause. This involves determining whether the crisis was triggered by a poorly received advertisement or social media post that offended a specific audience, or if it stems from a genuine issue with the product or delivery. (In the latter case, it is crucial to conduct an internal investigation, thoroughly examining all aspects of the company’s operations, from warehouse workers to PR personnel.)
• Once the nature of the problem has been identified, promptly acknowledge the existence of the crisis and take full responsibility for any mistakes or wrongdoing. This demonstrates accountability and a genuine commitment to resolving the issue at hand.
• Evaluate the extent of the damage caused by the crisis, as well as the sentiment and perception of the stakeholders involved. Assess the impact on the company’s reputation, financial standing, customer trust, employee morale, and relationships with investors and the public. 
• Create a comprehensive plan that outlines the steps to be taken, roles and responsibilities of the crisis management team, and strategies for communication and resolution.
• Establish open and transparent communication channels with stakeholders. Provide regular updates, address concerns, and sincerely apologize when necessary. Transparency helps to rebuild trust and credibility.
• Proactively engage with stakeholders, including customers, employees, investors, and the public, during the crisis. Actively listen to their concerns, address their needs, and demonstrate a commitment to rectifying the situation.
• Constantly monitor the situation, evaluate the effectiveness of the crisis management plan, and make necessary adjustments as the crisis develops. Be vigilant and react quickly to emerging events.
• Conduct a post-crisis analysis to identify lessons learned and areas for improvement. Implement changes to prevent similar crises in the future, such as enhancing risk management practices and ethical standards.

Conclusion

Reputational crises can present significant challenges and induce stress, but with a carefully crafted crisis management plan, adept communication, and a resolute dedication to resolving the issue, companies can successfully navigate through the crisis and emerge stronger.

To minimize the impact and safeguard their brand image, organizations must proactively identify and address potential triggers of reputational crises. By implementing robust risk management strategies, adhering to ethical business practices, and employing effective crisis management plans, companies can reduce the likelihood and severity of reputational crises. Taking these proactive measures is essential for maintaining a positive reputation and successfully managing any potential crises that may arise.