Long Island University Brooklyn Business Case Study

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Business Finance

Long Island University Brooklyn

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Read the Case “United Airlines – Navigating a Social Media Storm” at the end of Chapter 19 and response to the following:

  1. What was the impact of the incidents described in the case on United Airlines’ reputation?
  2. Did these incidents impact the firm’s corporate identity or corporate image, or both, as described in the chapter?
  3. Did these incidents constitute a crisis, as defined in the chapter?
  4. Did United Airlines engage in effective crisis management, and why or why not? If you were the public relations manager at United Airlines, what steps would you have recommended the company take when these incidents occurred?
  5. What should the company do now to regain its customers’ trust?

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C H A P T E R N I N E T E E N Managing the Public and the Corporate Reputation How the general public perceives a business firm can have a major effect on its performance and its ability to remain in business. Therefore, building a positive public reputation for providing superior products or services is of great importance. Most companies employ many people to help establish and maintain a good reputation. Their job is to formulate a strategy that includes, at a minimum, the careful management of the brand, interaction with the media, managing key issues that may arise, and successfully responding to any unanticipated crises. Ultimately, maintaining a positive public reputation depends on acting in an ethical and socially responsible manner. This Chapter Focuses on These Key Learning Objectives: LO 19-1 Recognizing why the general public is an important organizational stakeholder. LO 19-2 Understanding what constitutes a good corporate reputation and why it is important. LO 19-3 Knowing the basic elements and activities of a firm’s public relations department. LO 19-4 Assessing how brand management can best manage a firm’s reputation. LO 19-5 Evaluating a firm’s crisis management plan as an effective tool for handling an unexpected situation. LO 19-6 Recognizing tactics that enable businesses to engage with the general public and other stakeholders to enhance the firm’s reputation. 419 420 Part Six Business and Its Stakeholders In 2017, Pepsi, the 125-year-old beverage company, apologized for a controversial advertisement that borrowed imagery from the Black Lives Matter movement. The ad showed young people smiling, laughing, clapping, hugging, and high-fiving while holding generic signs saying, “Join the conversation.” In the ad’s climactic scene, a police officer accepts a can of Pepsi from Kendall Jenner, the daughter of television personalities Kris and Caitlyn Jenner and half-sister to Kim, Khloe, and Kourtney Kardashian, setting off loud approval from the young people and an appreciative grin from the police officer. Many people argued that the ad trivialized the widespread protests against the killing of black people by police and minimized the danger protesters encounter and the frustration they feel. Marsha P. Johnson, a former Black Lives Matter organizer, said, the ad “plays down the sacrifices people have historically taken in utilizing protests.” A Pepsi spokesperson said, “Pepsi was trying to project a global message of unity, peace and understanding. Clearly, we missed the mark and apologize.”1 21st Century Fox, the parent company of the conservative news show Fox News, encountered multiple sexual harassment scandals. Gretchen Carlson, a former Miss America and anchor of a Fox News show, accused long-time Fox News’s CEO Roger Ailes of publicly making harassing comments about her. Ailes reportedly made negative comments about Carlson’s legs and suggested she wear tight-fitting outfits on camera. She tried to ignore him but finally complained to her supervisor. When Ailes heard of her criticisms, he responded by calling Carlson a man-hater and killer who “needed to get along with the boys.” After this conversation, Carlson’s role on Fox News diminished, as she was demoted to Fox & Friends, a lower-rated afternoon show. The incident went public and, according to Vanity Fair magazine, which initially broke this story, Fox agreed to pay Carlson $20 million. A year later, a New York Times investigation revealed that Bill O’Reilly, the anchor of Fox’s most popular show, The O’Reilly Factor, and 21st Century Fox had settled multiple sexual harassment complaints against O’Reilly, resulting in $13 million in payments to five women. In response, BMW, GlaxoSmithKline, and Allstate Corporation joined a long list of other Fox programs’ advertisers to withdraw their commercials from The Bill O’Reilly Factor show. Shortly thereafter, O’Reilly was fired.2 Both the Pepsi and 21st Century Fox examples illustrate the importance of maintaining a good reputation with the public. In an era when information travels at lightning speed through both conventional channels—television, radio, and newspapers—as well as social media outlets—blogs, websites, Twitter, e-mails, and others—reaching thousands, if not millions, of people, reputations can be lost in an instant. While businesses seek publicity and spend millions of dollars annually to improve their image and reputation, company executives must navigate many minefields as they compete for the hearts and minds of the consuming public. This chapter will define the general public as a stakeholder and present a variety of tools that businesses can use to build and protect their reputations and brands. The General Public The general public is broadly defined as an organizational stakeholder comprised of individuals and groups found in society. As described in Chapter 1, the general public does not deal with business organizations through an economic exchange with the firm, but it does affect the firm through its opinions of the firm’s activities or performance. These opinions 1 “Pepsi Pulls Ad Accused of Trivializing Black Lives Matter,” The New York Times, April 5, 2017, www.nytimes.com. “The Revenge of Roger’s Angels,” New York Magazine, September 2016, nymag.com; “BMW, Glaxo and Allstate Join Wave of Advertisers Withdrawing from Bill O’Reilly’s Show,” The Wall Street Journal, April 4, 2017, www.wsj.com; and, “Fox Is Preparing to Cut Ties with Bill O’Reilly,” The Wall Street Journal, April 18, 2017, www.wsj.com. 2 Chapter 19 Managing the Public and the Corporate Reputation 421 in turn help shape the firm’s public image or reputation, as initially discussed in Chapter 3 and later in this chapter. The public may utilize its own stakeholder networks—consumer advocacy groups, employee labor unions, or local community action groups—and engage with government agencies, special interest groups, or the media to demand a certain level of performance or to condemn or praise a firm. The public may react strongly against a business firm, even when its intentions are good, as the following story shows. Parents, consumer advocates, and health professionals called on the Academy of Nutrition and Dietetics, one of the world’s largest groups of health professionals with over 100,000 credentialed practitioners, to address the issue of child obesity and nutrition. They developed the “Kids Eat Right” program to spread the message that children need more calcium and vitamin D in their diets. Kraft Foods, an American producer and marketer of foods products, sponsored the Kids Eat Rights program, and was given permission to print the Kids Eat Right logo on packages of its Kraft American Singles packages. Some supporters of Kids Eat Right were outraged at the Kraft brand associated with the program. They noted that Kraft Singles is a “pasteurized prepared cheese product” and not a “healthy food” for children. Opponents also pointed out that the Academy and Kraft were in a financial partnership, in which Kraft agreed to provide a grant to support research or public education initiative undertaken by the academy.3 Companies should be aware of how their actions may be portrayed in the media. The media is understood as the collective means of communicating to an audience. It traditionally included television, radio, and newspapers, but has grown to include the influential communication networks found on the Internet and through social media. Through the media, the firm can establish its reputation, repair a tarnished image, manage its public relations, address an organizational crisis, or engage with multiple stakeholders in a variety of ways. These topics will be addressed throughout this chapter. What Is Reputation? It may seem obvious that business organizations want to cultivate a good reputation. The term corporate reputation refers to desirable or undesirable qualities associated with an organization or its actors that may influence the organization’s relationships with its stakeholders. It relies on the collective perceptions of past actions, results, and future prospects.4 The importance of a good reputation is certainly obvious to Warren Buffet, owner of conglomerate Berkshire Hathaway. He reminds his managers each year in a now famous memo that their top priority must be to guard Berkshire’s reputation: “As I’ve said in these memos for more than 25 years,” Buffet wrote, “we can afford to lose money—even a lot of money. But we can’t afford to lose reputation—even a shred of reputation. It takes 20 years to build a reputation and five minutes to ruin it.”5 Scholars have noted that reputation is related to corporate identity and corporate image and that these sometimes reinforce each other. Corporate identity refers to the way in which 3 “‘Eat Right’ Meltdown for Kraft Singles,” The Wall Street Journal, March 23, 2015, www.wsj.com. Also see Eat Right Pro, the website for the Academy of Nutrition and Dietetics, at www.eatrightpro.org. 4 Charles Fombrun and Cees Van Riel, “The Reputational Landscape,” Corporate Reputation Review, 1 (1997), pp. 5–13. 5 “Warren Buffet on Ethics: We Can’t Afford to Lose Reputation,” The Wall Street Journal, May 31, 2011, blogs.wsj.com. 422 Part Six Business and Its Stakeholders an organization presents itself to an audience, while corporate image refers to the way organizational members believe others see the organization.6 For example, the way an organization presents itself to it stakeholders (identity) may influence the stakeholders’ perceptions of the organization (image). Each of these concepts is important to keep in mind when crafting a reputation-building strategy. Few companies start with a reputation of distinction, simply because such a reputation must be built over time. Firms may have name recognition—an identity—but that is not the same as having a good reputation. So, firms need a strategy for building a good reputation. Building a reputation can be thought of as a step-by-step process beginning with the very product(s) or service(s) the firm offers. Therefore, managers must first strive to become a company that is perceived by its stakeholders to offer significantly better products and services than its competitors. This perception is largely based on image. For example, the success of Apple products or Lexus automobiles is based in large part on their reputation for superior performance.7 Next, managers must aim to create and convey an identity: a consistent and compelling story about who the company is and what it stands for. This story needs to grab the attention of the news media, online media, and opinion leaders. The L.L. Bean company consistently tells the story that its products, designed for the outdoor enthusiast, are durable. Its policy of allowing consumers to return items, indefinitely, helps it uphold that reputational claim. One consumer has been returning her L.L. Bean backpacks for two decades whenever a zipper breaks. According to Steve Fuller, L.L. Bean’s chief marketing officer, “If she believes her zippers should last a longer time, we’ll respect that and we’ll refund her money or give her a new product until she’s happy,” he said. Fuller believes that the real value of the policy is in how many times the woman tells people about her backpack returns.8 REI, also a maker of outdoor clothing and gear, had the same policy but noticed that the amount of questionable returns was increasing after people talked about it on social media. In contrast to L.L. Bean, REI thought it was getting a reputation as a sucker. Nicknames like “Rental Equipment Inc.,” “Rent Every Item,” or “Return Every Item” began popping up on Facebook and Twitter. REI decided to change its policy to a one-year limit.9 These two different examples illustrate that a company’s story must be a message that it can uphold and one that echoes the strong ethical values and beliefs of the company. Why Does Reputation Matter? Academic researchers and practitioners share a consensus that organizations with strong positive reputations, such as L.L. Bean, outperform their competitors. Respected organizations are generally more successful because they (1) receive more opportunities to advance their interests, (2) are given the benefit of the doubt in uncertain circumstances, and (3) are generally more immune to the long-term effects of harsh criticism than their less-respected 6 See Reggy Hooghiemstra, “Corporate Communication and Impression Management: New Perspectives Why Companies Engage in Corporate Social Reporting,” Journal of Business Ethics 27, (2000), pp. 55–68; Cees van Riel and C.B.M. van Riel, Principles of Corporate Communication (Harlow, England: Pearson Education, 1995); and The Reputation Institute at www.reputationinstitute.com. 7 8 9 See “Why Is Reputation Important in a Business?” ThriveHive, January 23, 2017, thrivehive.com. “10 Retailers That Will Let You Return Anything,” Business Insider, September 23, 2013, www.businessinsider.com. “REI Return Policy Changes: Items Must be Returned within 1 Year,” The Denver Post, June 4, 2013, blogs.denverpost.com. Chapter 19 Managing the Public and the Corporate Reputation 423 counterparts. Research also shows that a sound reputation allows firms to charge premium prices; enhance their access to capital markets and investors; and obtain better credit, trust, and social ratings.10 Likewise, stakeholders want to engage with respected companies. In short, a good reputation can help firms gain a competitive advantage over other companies in the same industry. Unfortunately, numerous opinion polls like those conducted by Edelman (Trust Barometer), Fortune (World’s Most Admired Companies), and the Reputation Institute (Rep Trak) indicate that relatively few organizations have a reputation of distinction. Harris Insights and Analytics, the public opinion pollster, annually conducts an evaluation of a company’s reputation quotient, that is, how a company is perceived by the public. The 2018 findings are shown in Figure 19.1. Some businesses—such as Amazon, Tesla Motors, Chick-fil-A and Patagonia—earned a high reputation quotient, based on their company’s vision and leadership, social responsibility activities, financial performance, consumer support and workplace environment. In a separate poll, conducted by The Reputation Institute and reported in Forbes Magazine, Amazon, the holder of the top position for the past three years, was unseated by the Swiss luxury timepiece producer Rolex. Another top performer in the 2018 list included Lego, which jumped to second place from sixth the previous year. Respondents to the survey, in gauging reputation, were more positive toward some industries than others. Companies that garnered the most respect came from the consumer goods, food and beverage, transport, and automotive industries. Meanwhile, firms that operated in the financial, health care, telecom, and energy sectors were viewed less favorably.11 The task of building a corporation’s reputation, and protecting it against various risks, is often entrusted to the firm’s public relations department, as discussed next. FIGURE 19.1 Select Companies from the 2018 Harris Poll Reputation Quotient Rankings Source: 2018 Harris Poll Reputation Quotient Rankings. “The company’s ranking is shown in parenthesis.” For an explanation of the methodology of the ranking scores, see theharrispoll.com/reputation-quotient. Amazon (1) Tesla Motors (3) Chick-fil-A (4) Patagonia (9) Whole Foods (23) Google (28) Johnson & Johnson (40) eBay (48) Starbucks (54) McDonald’s (59) Walmart (69) Uber (76) ExxonMobil (80) BP (94) The Trump Organization (96) Wells Fargo (97) Takata (100) 0 10 20 30 40 50 60 10 Reggy Hoogheimstra (2000) and Charles Fombrun and Cees van Riel (1997), ibid. 11 “The World’s Most Reputable Companies in 2017,” Forbes, February 28, 2017, www.forbes.com. 70 80 90 424 Part Six Business and Its Stakeholders The Public Relations Department Given the importance of the general public to business and the potential for business to significantly benefit or harm the public, firms often create public relations departments, appoint public relations officers, and develop public affairs strategies to manage their relationship with the public. Josh Ong, director of marketing and communications at app developer Cheetah Mobile, explained the importance of developing a strong public relations team in today’s environment: “The public relations [PR] team has become both the teller and the guardian of a brand’s story; in order for them to fulfill each of these roles successfully, PR practitioners must be able to insert themselves into each of the touchpoints going out to the public in a healthy way. This requires thinking holistically about public image, what the brand does and what the brand stands for, among other things, and ensuring that these ideas are present in every communiqué that is released.”12 The role of the public relations department is to manage the firm’s public image and, more generally, its relationship with the public. This department may also be called media relations, since much of its work involves interacting with the media. It does so through direct communications with the public (for example, through its website) and indirect communications with them through various media outlets. Most public relations officers have close links with top managers. According to a study by the Foundation for Public Affairs, nearly half of the public affairs executives surveyed report directly to the CEO, chairman of the board of directors, or company president, and another nearly 30 percent report to the company’s general counsel. According to the report, because of this access, public affairs executives have been able to persuade CEOs to become increasingly involved in corporate public affairs activities.13 The specific major activities carried out by public relations managers include advertising, corporate sponsorship, external and internal communications, and publicity.14 Public Relations in the Internet and Social Media Age Historically, public relations officers worked mostly through contact with traditional media outlets. An organization worked to enhance its public image by seeking positive coverage in news reports and feature stories, or by paid advertisements via television, radio, magazines, newspapers, or billboards. Public relations may still utilize these interactions, but as technologies have evolved, the variety of available channels of communication has grown dramatically. More and more people are finding their news, marketing, or other public relations information through Internet-related vehicles, such as blogs, e-mails, social networks, podcasts, and other technology-based communication sources. A study of about 50,000 people across 26 European counties reported that 18- to 24-year-olds used social media sites as their main news source, compared with 24 percent who used television.15 As shown in Figure 19.2, most Americans acquired their news from cable, local or network nightly news television, but more and more, especially people under 50 years of age, were turning to online sources, such as social media websites or apps on their laptop, computer, or cellphones. Coupled with the growing trend by younger generations to access information via social media or other new technology, businesses have turned to social media influencers to get 12 “PR’s Role in the Company: Chief Storyteller,” Forbes, July 6, 2017, www.forbes.com. See the Foundation for Public Affairs at pac.org. 14 “Public Relations Activities,” MediaMiser, www.mediamiser.com. 13 15 “Social Media ‘Outstrips TV’ as News Source for Young People,” BBC News, June 15, 2016, www.bbc.com. Chapter 19 Managing the Public and the Corporate Reputation 425 FIGURE 19.2 Public’s Access to the News by Platform Television (cable, local, network nightly) Source: “Pathways to News,” Pew Research Center, July 7, 2016, www.journalism.org. Online (social media, web sites/apps) All Ages 18–29 30–49 50–64 Radio 65+ Print newspapers 0 20% 40% 60% 80% 100% their message out to the public. A social media influencer is a user on social media who has established credibility in a specific industry. This individual has access to a large audience and can persuade others by virtue of their authenticity and reach. A company’s public relations strategy that relies on social media influencers can identify topics of influence that speak to the company’s target stakeholders, vet influencers who are a good contextual fit with the company’s message, encourage social media influencers to build mutually beneficial relationships with target stakeholders, and enable the company to measure the impact their social media influencers and decide if they should be retained or select different influencers moving forward.16 Many firms, from chocolate makers to pharmaceuticals, are using social networking to connect with their past or potential customers, prospective employees, and others in the communities where they operate as shown in this example. The state of Bahia in Brazil had a blood shortage and needed to change consumer attitudes to inspire more people to become blood donors. The Hemoba Foundation (Blood Foundation) in Brazil decided to make a brand connection between giving blood and a passion shared by vast numbers of people—football. The Hemoba Foundation collaborated with the leading football club of the region—Esporte Clube Vitoria—to run a campaign called “My Blood is Red and Black.” The club removed the red color from their iconic shirts and only added the red color back as the volume of blood donations increased. The campaign reached 130 million people and recorded a 46 percent increase in blood donations. Fans were encouraged to post on social media when they had donated blood and to post photos as each new stripe of red color was added back to the football team’s shirt. The campaign captured the attention of all media channels. There were 935 minutes of television exposure and significant print news coverage.17 16 “Social Media Influencers,” GroupHigh, www.grouphigh.com. 17 “Four Integrated PR Campaigns that Really Worked,” WorldCom Public Relations Group, n.d., worldcomgroup.com. 426 Part Six Business and Its Stakeholders Public relations strategies increasingly assume a global focus, since business interactions with the public through media channels frequently transcend national boundaries. Therefore, many businesses have extended their public relations strategies globally, as shown in the following example. P&G (formerly Procter & Gamble), based in Cincinnati, Ohio, is the largest consumer packaged goods company in the world. P&G created a comprehensive, yet unified network of public affairs departments to address the flow of information from the company to and from its stakeholders around the world. At P&G, public affairs is broken down into functions (corporate communications, global marketing and consumer and marketing knowledge, corporate digital communications, and global business services); product lines, with each major product line having its own “brand newsroom” media team (Bounty, Braun, Charmin, Gillette, Old Spice, Pampers, Puffs, and Tide); and geographical regions, with a “corporate” media team in different locations around the world (United States, United Kingdom, France, Germany, Spain, and Switzerland). Each contact point has its own set of contact information directing you to a person, location, office telephone number, mobile telephone number, and e-mail address.18 When public relations strategies take on a global perspective, new challenges emerge. For example, public relations managers must be sensitive to cultural disparities, as well as similarities, in crafting press releases and interactions with the media. The impact of the organization’s public relations program could vary country to country given the culture, social mores, political system, or history. A public relations manager must be able to communicate with local media and other stakeholder groups in their native language and avoid embarrassing or misleading communication due to poor translations. All basic public relations tasks are more complex in an international business environment.19 Some businesses decentralize their global public relations programs and establish officers in each of the locations where they have operations. This helps to ensure that the local public relations strategy is in tune with local customs and emerging issues. Brand Management Managers are very aware how important and how difficult it is to create a widely recognized brand; typically, the focus of the marketing team. Brand management uses techniques to increase the perceived value of a product line or brand over time. Well-established brands must be managed as part of maintaining the firm’s reputation. All brands have to re-establish themselves continually. Even luxury brands have begun to tout the number of their Facebook fans and Twitter followers. The Brand Directory publishes the value of the largest worldwide brands. In 2018, the U.S.–based Amazon brand was valued at more than $150 billion, followed by the Apple brand at $146 billion, and the Google brand at nearly $121 billion. Korea’s Samsung brand was valued at $92 billion, and Chinese banking institution, ICBC, was estimated to be worth $59 billion.20 A recognizable brand is one that can immediately signal to stakeholders how the company is different from its rivals. For example, the company 3M communicates innovation. 18 See P&G’s website at news.pg.com/media_contacts and additional information acquired through private communication. For a thorough discussion of these issues, see Craig S. Fleisher, “The Development of Competencies in International Public Affairs,” Journal of Public Affairs 3, no. 3 (March 2003), pp. 76–82, and “8 Reasons Why Companies Don’t Succeed at Global RP,” PR Daily, February 14, 2014, www.prdaily.com. 19 20 “Global 500 2018—The World’s Most Valuable Brands,” Brand Directory, branddirectory.com. Exhibit 19.A Unflattering Nicknames DHL = Documents Hopelessly Lost Fiat = Fix It Again, Tony Ford Motor Company = Fix Or Repair Daily British Petroleum = Burning the Planet; Big Problems; Broken Pipelines; and Bloated Profits Neiman Marcus = Needless Markup REI = Rental Equipment Inc.; Rent Every Item; Return Every Item Starbucks = Four Bucks Taco Bell = Taco Hell; Toxic Bell UBS (bank) = Used to Be Smart Whole Foods = Whole Paycheck Sources: “10 Best Company Nicknames,” Daily Finance, August 30, 2010, www.dailyfinance.com; and Grahame R. Dowling, “Winning the Corporate Reputation Game” (Cambridge, MA: MIT Press, 2016). But increasingly, a truly iconic brand fosters an emotional appeal that creates loyalty, even love, of the brand. Brand consultants’ say that it is this emotional attachment that gives brands their market power. For example, the Apple brand (and its creator Steve Jobs) instilled such a strong emotional appeal that fans were moved to place hundreds of cards and flowers at numerous Apple stores around the world upon hearing of Jobs’s death in 2012. Similarly, Harley-Davidson riders tattoo the brand name on their bodies. It is difficult to think of another brand that people would be willing to tattoo on themselves. A corporation’s reputation is captured in a recognized and trusted name. The company’s name and logo act as its signature, a sign that says they can be trusted to deliver exceptional value to customers. Often, brand management involves conveying what the product or service offers—the benefits, solutions to problems, or simply an experience. This can be challenging, because the experience may not be an obvious feature of the product. Charles Revson, the founder of the Revlon cosmetics company, commented that “in the factory we make cosmetics; in the drugstore we sell hope.” When a company fails to meet the public’s expectations, people can retaliate by ascribing a new meaning to a company’s name, with devastating results for its reputation. Some examples of some unflattering corporate nicknames are shown in Exhibit 19.A. Crisis Management A critical function for any manager is crisis management. Crisis management is the process by which an organization deals with a major event that threatens to harm the organization, its stakeholders, or the general public.21 Every organization is likely at some time to face a crisis that forces management and its employees to act quickly and without perfect information. A corporate crisis is a significant business disruption that stimulates extensive news media or social networking coverage. The resulting public scrutiny can affect the organization’s normal operations and also can have a political, legal, financial, and governmental impact on its business. A crisis is any event with the potential to negatively affect 21 Paul Shrivastava, Ian I. Mitroff, Danny Miller, and Anil Miglani, “Understanding Industrial Crises,” Journal of Management Studies, 25 (1988), pp. 285–304. 427 428 Part Six Business and Its Stakeholders the health, reputation, or credibility of the organization.22 Many corporate crises can be classified into one of these groups: ∙ ∙ ∙ ∙ ∙ ∙ ∙ “Acts of God”—earthquakes, tornados, violent storms, volcanic eruptions. Mechanical problems—breakdowns of or faulty equipment, metal fatigue. Human errors—through miscommunication, improper employee behavior. Management decision or indecision—often involving a cover-up or lack of urgency. Poor financial performance. Backlash against stance on controversial social or political issues. Terrorism or other acts of violence against the company. 23 A case at the end of this book, “The Boycott of Stoli Vodka,” describes how Stoli Group USA managed a crisis that erupted when gay activists organized a boycott because of the brand’s association with Russia, which had restricted LGBT rights. A corporate crisis can take many different forms and, by definition, are generally unexpected, such as the crisis that confronted Wendy’s, described in Exhibit 19.B. Some businesses or industries are more prone to corporate crises than others and therefore have greater need for a crisis management plan. According to the Institute for Crisis Management, medical and surgical manufacturers, pharmaceutical companies, and software manufacturers (because of the sophisticated technology found in their products and the potential for disruptive impact on consumers’ lives) are at the top of a recent list of crisis-prone industries. Most experts recommend that organizations develop a crisis plan ahead of time, to deal with such unexpected events as the one that happened to Wendy’s. Since the first 24 hours during a crisis are the most crucial, having a plan ready for implementation when the crisis occurs is imperative, citing the biblical wisdom: Noah built his ark before it began to rain. These plans must understand the situation confronting the business and try to get past the initial reaction of this is a catastrophic disaster. Melissa Agnes, a crisis management expert, explained how a crisis is often perceived only as a negative situation when the letters of the word “crisis” are believed to represent the following: People: ∙ ∙ ∙ ∙ ∙ ∙ Create their problems; React by blaming others; Infer that all will be okay (but don’t believe it) Secure themselves behind false claims; Independent . . . instead of working together as a collective; and Sue to protect the little honor they have left. Agnes said, “If this [a negative perception of a crisis] is how an organization—any organization—chooses to see and conduct their crisis management, “crisis” would indeed be a bad word.”24 She continues to observe that it would also be the beginning of the end for the organization that chooses to implement this mindset into their crisis management response plan. 22 For additional information on crisis management strategies, see Melissa Agnes, “Transforming the Word ‘CRISIS’ from Negative to Positive,” March 22, 2016, melisaaagnes.com; and “Are You Prepared for a Corporate Crisis?” McKinsey & Company, April 2017, www.mckinsey.com. 23 From the Institute for Crisis Management’s website, www.crisisexperts.com; and “Conquering the Three Most Common Types of Company Crisis,” Fast Company, August 12, 2016, www.fastcompany.com. 24 Melissa Agnes, Crisis Ready: Building an Invincible Brand in an Uncertain World, (Herndon, VA: Mascot Books, 2018). Exhibit 19.B Excuse Me, There Is a Finger in My Chili! Denny Lynch, senior vice president for communications at Wendy’s, one of the country’s largest fast-food restaurant chains, received a shocking and unexpected call. A customer, Anna Ayala, claimed she had bitten down on a severed finger while eating a cup of chili purchased at a Wendy’s restaurant in San Jose, California. Lynch knew that he had to act quickly, since this incident would certainly be the top story in the news within minutes. Wendy’s immediately assembled its crisis management team in its regional headquarters in Sacramento, California. Lynch prepared a statement for the press, instructed the company’s website to be frequently updated, and began coordinating with the San Jose police department, which was already involved in the case. According to Lynch, “It went nonstop the next two or three days. Even when the Pope passed away, it still got coverage.” In the wake of the crisis, Wendy’s focused on trying to discover what had really happened. Through an internal investigation, Lynch learned that a 10-year veteran and trusted employee had prepared the chili for Ayala; he assured Lynch there was nothing improper in the food preparation. While Lynch and his team worked furiously around the clock to discover the truth, Ayala, the woman who had made the accusation, was a guest on numerous morning and late night television shows. Yet, it was soon discovered that Ayala had a litigious history that included a settlement for medical expenses for her daughter, who had claimed she became sick at an El Pollo Loco restaurant in Las Vegas. The break Lynch and Wendy’s needed occurred exactly one month after the initial incident, when Anna Ayala was arrested in her Las Vegas home for attempted grand larceny, accused of trying to extort $2.5 million from Wendy’s. The finger in her chili was all a hoax. “The true victims are Wendy’s owners and operators,” said San Jose chief of police Rob Davis. Forensic evidence proved that the finger was not cooked at 170 degrees for three hours—the typical preparation of Wendy’s chili. It was later discovered that Ayala acquired the finger through her husband’s workplace, where a fellow worker had lost part of his finger in an industrial accident. Later that year, Ayala and her husband, Jaime Plascencia, pleaded guilty to attempted grand larceny and conspiring to file a false claim. Ayala was sentenced to 9 years in prison and her husband, who supplied the finger, was sentenced to 12 years and 4 months in prison. Sources: “At CSI: Wendy’s, Tracking a Gruesome Discovery,” The New York Times, April 22, 2005, www.nytimes.com; “Finger in Chili Is Called Hoax; Las Vegas Woman Is Charged,” The New York Times, April 23, 2005, www.nytimes.com; and “Stiff Sentences for Wendy’s Chili-Finger Couple,” Bay City News, January 18, 2006, www.SFGate.com According to experts, an effective crisis management plan must include these steps: ∙ Get ready before the crisis hits by creating an internal communication system that can be activated the moment a crisis occurs. Scenario-based press releases, key employees and discussion points, and procedures to activate the organization’s website (to use the Internet to announce any news, product recalls, etc.) should be at the ready. Many organizations create a dark site, a website that is fully developed and uploaded with critical information, contacts for the media, and other useful details, ready to be activated at the moment it is needed. McDonald’s holds “hater” sessions where they ask themselves the following question, “If we said X, how would someone who doesn’t like us respond?” That way, when people criticize the company on social media, they’re not surprised.25 ∙ Communicate quickly, but accurately. Firms facing a crisis must communicate with the media and others promptly. Communications must always be honest and disclose fully what the company knows—even if it does not know the full story. Wendy’s, for example, effectively communicated with the public even when it did not yet know how the finger got in the chili. The media have excellent resources and will find the truth whether the organization speaks it or not. 25 Jana Seijts, “When the Twitterverse Turns on You,” Harvard Business Review, March 2014, pp. 117–21. 429 Exhibit 19.C A Dozen Critical Checkpoints for Ethics and Crisis Management 1. Create and document policies and procedures and circulate them widely. 2. Know the policies and procedures and follow them. 3. Be prepared with a continuity plan to provide for continuing operations during the crisis management phase. 4. Work as a team with assigned responsibilities and a clear leader and practice, practice, practice in mock drills. 5. Identify and understand the organization’s vulnerabilities; most importantly, correct shortcomings. 6. Let your conscience be your guide, follow good ethical practice, and remember the “front-page test.” (Or, better yet, consider: What would Grandma say?) 7. Beware of dangerous and distorted minds and protect coworkers and facilities. 8. Put all phases of the event under a microscope and track and record activities. 9. Handle all records, samples, information, materials, and evidence with care. 10. Know the media and how to handle it. NEVER lie, cover up, or obfuscate. 11. Keep your eyes on the law and contact legal counsel; don’t make decisions simply to avoid lawsuits. 12. Provide timely updates to coworkers and provide follow-up meetings and counseling. Source: FosterHyland & Associates, Inc. Used with permission. ∙ Use the Internet to convey the message to minimize the public’s fears and provide assistance. In addition to face-to-face press releases, Wendy’s frequently updated its company website to communicate to the public and others what the company was doing about the crisis situation. ∙ Do the right thing. Often the true test of an organization is how it reacts in a time of crisis. Public relations managers should not try to minimize the seriousness of a problem or make excuses. It is possible for the organization to accept responsibility without accepting liability. It also is important that the organization be sympathetic. For example, Wendy’s clearly expressed regret over its customers’ fears and advised the public that it was doing everything possible to investigate. ∙ Follow up and, where appropriate, make amends to those affected. Seek to restore the organization’s reputation. Wendy’s relentless pursuit of the truth resulted in vindication for the company and assisted law enforcement in the prosecution of those making the false claims. A crisis management guide describing a series of critical crisis management checkpoints is shown in Exhibit 19.C. Engaging Key Stakeholders with Specific Tactics In the past, building the corporate reputation was achieved mostly through contact with traditional media outlets, like newspapers, magazines, and television. While reputation management still involves these tactics, new technologies have emerged creating a much larger variety of available communication options. As the Internet has transformed how organizational stakeholders search for and find information, public relations managers have increasingly embraced social media as a platform for reaching the public. 430 Chapter 19 Managing the Public and the Corporate Reputation 431 Using all of these media outlets, companies strive to build a solid reputation by targeting the stakeholders who are important to their commercial success. Employees and customers are very important to the organization’s success, as are many other market and nonmarket stakeholders listed in Chapter 1. Different tactics for communicating and enhancing the firm’s reputation may be more appropriate for some stakeholders than others. For example, executive visibility and event sponsorship are most often targeted to employees. The other tactics, such as user-generated content, paid content, public service announcements, and image ads, discussed next in this chapter, can be used to target almost any type of stakeholder. The most important element in establishing the firm’s reputation is to win the trust of its key stakeholders. What media outlets are most trusted by the public? The 2018 Edelman Trust Barometer, as shown in Figure 19.3, reported that in a majority of the countries surveyed, trust in the media declined from 2017 and 2018. According to a survey conducted by Gallup and the Knight Foundation, 73 percent of Americans believed that the media spread inaccurate information on the Internet, a growing source for news information among those 50 years old and younger. Sixty-nine percent surveyed said that owners of new outlets were attempting to influence the ways stories were reported, and 65 percent said that there was too much bias in the reporting of news stories that was supposed to be objective. Overall, 45 percent of the Americans surveyed saw greater bias in the news, compared to only 25 percent in 1989.26 Executive Visibility In today’s business environment, the firm’s overall reputation is clearly on the agenda for the board of directors because of its effect on the firm’s products and profits (for more information on the board of directors and its role in the governance of the company see Chapter 13). The growing importance of board-level attention toward a firm’s reputation, combined with assuring damage control that a bad or failing reputation can cause, makes executive visibility a necessity. Specifically, executives need media training that focuses FIGURE 19.3 China India Canada Italy Hong Kong Mexico Brazil Germany United States South Korea Russia France Japan United Kingdom Sweden Australia Declining Percentage of People Trust the Media, 2017–2018 Source: 2018 Edelman Trust Barometer Global Report, cms. edelman.com. 0 26 +6 –5 +4 –3 +1 +1 –5 0 Positive Change –5 Negative Change 0 +4 0 0 0 –1 –1 10 20 30 40 50 60 70 Level of trust and percent of change of people trusting the media, 2017 to 2018 “American Views: Trust, Media and Democracy,” NiemanLab, January 16, 2018, www.niemanlab.org. 80 432 Part Six Business and Its Stakeholders on helping them to interact with the public and media. This is especially true for those executives who are likely to have contact with the media, such as members of the board of directors, the CEO, CIO, CFO, general counsel, and directors of human resources, investor relations, and marketing. They are the ones who will tell the corporate story, and they must be well versed in all aspects of the story and aware of how their comments might affect the reputation of the company. Executives should make themselves visible and available to both their internal and external stakeholders in good times and in bad. Media training is necessary because communicating with the media is not as simple as talking with friends or coworkers. Mark Zuckerberg, CEO of Facebook, encountered significant backlash from lawmakers, regulators and social media users over Facebook’s mishandling of their customers’ data, as presented in the discussion case in Chapter 7. Cambridge Analytica, a British political consulting firm, reportedly acquired a large amount of Facebook users’ private information through inappropriate means and allegedly collaborated with Russian agents to use this data to support the 2016 Trump Presidential campaign. Zuckerberg immediately went into crisis management mode and testified before a hearing of the House Energy and Commerce Committee, conducted numerous press conferences with the global media, and held a staff meeting to address questions from the company’s 25,000 employees. Zuckerberg assured his employees and other stakeholders that regaining trust was paramount for the company. “I think it’s a clear signal that this is a major trust issue for people, and I understand that,” Zuckerberg said during an interview with the New York Times.27 Zuckerberg’s response to the Facebook crisis echoes many of the recommendations offered to CEOs facing similar crises. Media communication experts generally give their clients the following advice. ∙ Be honest. Always tell the truth and explain why you cannot discuss a particular subject. ∙ Be current. The media wants to speak with you because of your up-to-date knowledge. If you do not have current information, promise to find out and get back to the media. ∙ Be accessible. A spokesperson is expected to be on-call and promptly respond to demands made by the media, so long as the demands are reasonable. ∙ Be helpful. If you do not know the answer to a question, say so and offer to find out. Try to make the media’s job easier; they will print or broadcast anyway, so if you are helping them there is a better chance of your message being heard. ∙ Be understanding. Understand the needs of the media, their pending deadline or the importance of their acquiring background information. ∙ Be cool, courteous, and professional. You are representing your organization in the eyes of the media and the public. Remember, nothing is really ever “off the record.” Employees trained to interact with the media should know the basic message points that the organization wants communicated. These key points need to be reinforced with facts and statistics, whenever possible, and elaborated upon in an interview or press conference. Many times the audience is not aware or knowledgeable of the organization’s operations or product or whatever is the focus of the press conference. Therefore, it is important to be clear and avoid jargon or technical language. Finally, the spokesperson should close the interview by reiterating the organization’s key message. 27 “Zuckerberg Takes Steps to Calm Facebook Employees,” The New York Times, March 23, 2018, www.nytimes.com. Chapter 19 Managing the Public and the Corporate Reputation 433 Some of the best techniques to assist a spokesperson to stay on point when challenged by a reporter with a tough question follow: ∙ Hooking. Grab the reporter’s attention by making a statement that influences the next question. For example, “We are undertaking a program to correct the situation.” Typically the reporter will follow up by asking about the organization’s new program. ∙ Bridging. Answer the challenging question but quickly move on to the key message. For example, “Yes, but . . .” or “What I can tell you is . . .” or “While that is true, what is important to know is . . . .” ∙ Flagging. Emphasize key points and guide the reporter to them. For example, “Your listeners may not know that . . .” or “This is important news because . . . .” Managers may also consider using not only the traditional press conference but also other media outlets—namely, user-generated content and well-heeled content distributors— all of which are useful tools to tell the company’s story to maintain, or sometimes defend, its reputation. User-Generated Content User-generated content refers to sources of information provided by users through social media sites like Facebook, YouTube, Twitter, and Instagram. This information can be supportive or critical of business since the content is created by consumers, employees, investors— indeed, by anyone with access to a computer. Larry Weber, founder of Weber Shandwick Worldwide, a global communications company, suggests the communications world is dramatically moving in a digital direction. Managers who understand the growing importance of user-generated content will communicate much more effectively than those who do not. Weber, and coauthor Lisa Leslie Henderson, argue in their book, The Digital Marketer, that managers need to embrace a world where, “the ‘digital genie’ isn’t going back into her bottle and neither is the consumer.”28 User-generated sites can be used effectively for brand, issue, and crisis management. An increasingly popular technique is to create a hashtag on Twitter, which is simply text placed in the beginning, middle, or end of a tweet by inserting a pound sign in front of a keyword. Hashtags are used to start an online dialogue with employees, consumers, media, and brand lovers, creating buzz around a product or an issue. One effective example is Keurig Green Mountain’s #keurig hashtag campaign, which is full of happy thoughts about this coffee maker and its coffee. A recent post on Twitter said it well: Say hello to my new bestfriend. #KeurigK45 #KeurigCoffee #KeurigKCups #HelloKeurig #Keurig #ImpulseBuy #Kcups —Annette Williams @LadyGemini71 Oct 15 However, these campaigns can sometimes result in the hashtag becoming what has been called a bashtag as McDonald’s recently found out. When McDonald’s promoted the hashtag #McDStories, hoping that customers would tweet about positive experiences with the company, they discovered that after just a few hours, the conversation was turning unexpectedly negative. In response, the company changed the hashtag to #MeettheFarmers, which had been successful earlier that day in soliciting positive posts, and they also stopped 28 Larry Weber and Lisa Leslie Henderson, The Digital Marketer: Ten New Skills You Must Learn to Stay Relevant and Customer-Centric (New York: Wiley, 2014). 434 Part Six Business and Its Stakeholders promoting the troublesome one. Within 15 minutes, the disparaging tweets were down to zero. So, managers need to be mindful that critics can take over and direct a firm’s hashtag campaign.29 Paid Content When firms pay to have online or print publishers create and distribute their content—also referred to as content distribution—they are using the tactic of paid content. This represents a major shift in the way firms manage their reputation because corporations now deliver directly to multiple stakeholders via the web, whereas traditional marketing and public relations relied on journalists to disseminate it. Companies are increasingly paying to put information on a newswire or other distribution network. This tactic can reach almost any stakeholder with the same message. Creating high-quality content is very important for a firm’s brand and image management, but its distribution is equally vital. There are many companies that provide distribution services for paid content. Perhaps best known are promoted feeds on Facebook, LinkedIn, and Twitter, but other less well-known options, like CSRWire, Outbrain, Taboola, and Disqus, are also available. For example, CSRwire, perhaps one of the largest of these distributors with over 70,000 readers per month and nearly 60,000 News Alert subscribers, has a membership that includes corporations, NGOs, advertising agencies, and universities. These organizations pay CSRwire to communicate their corporate citizenship, sustainability, philanthropy, and socially responsible initiatives to not only this membership base but to its vast individual subscriber base. CSRwire’s CEO Joe Sibilia stated, “All content is paid for now.”30 Experts warn, however, understanding the nuances of the distribution process can be the difference between getting ignored or standing out. Event Sponsorship Another important tactic to reach consumers, the general public, employees, and the media is to sponsor an event with the company’s name and logo, as mentioned earlier when Kraft added the Kid Eat Right logo to their cheese packages. The total value of global sponsorships by companies or individuals continues to rise, as shown in Figure 19.4. However, sponsorship is not as simple as placing the company name on a colorful banner. According to Jeff Haden at Inc.com, “when you sponsor an event your focus should 29 “How to Use Hashtags on Twitter: A Simple Guide for Marketers,” HubSpot Blogs, April 24, 2012, blog.hubspot.com. CSRWire information from a speech by CSRWire’s CEO Joe Sibilia at the 10th Annual Bentley Global Business Ethics Symposium on Integrated Reporting. May 19, 2014. 30 Chapter 19 Managing the Public and the Corporate Reputation 435 FIGURE 19.4 Source: The Statistics Portal, www.statista.com. 70 Spending in billions of U.S. dollars Global Sponsorship Spending, 2007–2018 65.8 60.1 60 62.7 55.3 51.5 50 53.1 46.3 43.1 40 57.5 48.6 44.0 37.9 30 20 10 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Year always be on the quality rather than the quantity of brand impressions.” Therefore, Haden recommends that much emphasis be placed on choosing the right event. Haden also recommends that businesses ask the following questions: 1. 2. 3. 4. 5. What’s in it for me? What is unique about this opportunity over others? How is my company directly engaging the audience at this event? What kind of return could I see from sponsorship? (not necessarily monetary) Do I like this event and does the audience fit my target audience?31 While sponsoring an event can be a real benefit for employees, having them volunteer at these events must be done by considering whether it adds value to the firm as would be the case for any comparable monetary donation. (This tactic is similar to strategic philanthropy—where corporate giving is linked directly or indirectly to business goals and objectives—and discussed in Chapter 18.) Many companies understand that their employees not only want to work and pay their bills—they also want to do good for their communities and others. Today’s workforce wants to find a sense of purpose at work, and one way to do that is by increasing options to give back to the local community. Novo Nordisk, a Danish pharmaceutical company, was recognized by Fortune Magazine as one of the best companies with an employee volunteering program. Novo Nordisk employees were provided with paid time off to volunteer 80 hours (10 days) per year. Community engagement was integrated into the company, with various programs and resources to help employees give back. For example, most of the company’s offsite meetings had a community service component built into them, and there is a Novo Nordisk Social Awareness Team in charge of organizing community service projects. The company also created an intranet portal to track and help employees find volunteering opportunities.32 31 32 Jeff Haden, “Sponsoring an Event? Tips to Maximize Your Return,” Inc., September 25, 2012, www.inc.com. “These 8 Employers Will Pay You to Volunteer,” Fortune Magazine, March 21, 2016, fortune.com. 436 Part Six Business and Its Stakeholders Public Service Announcements Since 1942, the Ad Council has been the leading producer of public service announcements (PSAs), addressing critical social issues for generations of Americans and global citizens. The Ad Council has created some of the most memorable slogans, such as its inaugural campaign of “Loose Lips Sink Ships,” promoting secrecy of military operations during World War II to the more recent “Friends Don’t Let Friends Drive Drunk” and “A Mind Is a Terrible Thing To Waste.” More recently, PSA campaigns have ranged from preventing teen bullying and suicide to promoting lung cancer screening and getting volunteers for meals on wheels programs. The longest running PSA in American history, introduced in 1944 and continuing today, features Smokey the Bear and his famous warning: “Only You Can Prevent Forest Fires.” The forest fire prevention campaign has reduced the number of acres lost annually from 22 million to less than 10 million.33 Modeled after the actions taken by the Ad Council, businesses have discovered that public service announcements are an effective means for promoting various social issues or topics that affect the business work environment, as demonstrated by the campaign by the Ad Council’s #ThatsHarassment campaign. The Ad Council created the #ThatsHarassment project, a series of six short films that depict cases of sexual harassment in the workplace. The project was intended to spark further awareness of sexual harassment, encourage women to report and speak out, and send a message to all that sexual harassment will not be tolerated in any environment. The Ad Council distributed three of these PSAs to help raise awareness of sexual harassment. The films depicted different scenarios where male co-workers in positions of power took things too far and acted inappropriately toward female co-workers. The PSAs directed viewers to the Rape, Abuse & Incest National Network (RAINN), which is the nation’s largest anti-sexual violence organization. RAINN provides support and information to both bystanders and victims of sexual harassment and operates a 24-hour hotline, along with a live chat option.34 Image Advertisements Image advertisements are used by business organizations to enhance their public image, create goodwill, or announce a major change such as a merger, acquisition, or new product line. These ads are different than issue advertisements, as discussed in Chapter 8, that focus on a public policy issue or piece of legislation. Image ads promote the image, or general perception, of a product or service, rather than promoting its functional attributes. They target the public’s emotions and seek to influence the consumers’ imaginations. Brazilian modeling agency Star Model created an anorexia ad campaign to help change the image of the modeling industry. Designers used software graphic techniques to turn real women into life-size versions of fashion illustrations, as shown in Figure 19.5. Showing what women would look like if they had the same measurements as the illustrations. Star Model’s “Say No To Anorexia” campaign stated: “You are not a sketch.” The fashion industry seemed to hear this challenge and, in 2017, two of the world’s largest luxury fashion conglomerates, LVMH Moet 33 See the Ad Council’s website, www.adcouncil.org. 34 See www.adcouncil.org/Our-Campaigns/Safety/Confronting-Sexual-Harassment. Chapter 19 Managing the Public and the Corporate Reputation 437 FIGURE 19.5 Brazil’s Star Model’s “Say No To Anorexia” Campaign Hennessy Louis Vuitton and Kering Company, announced the creation of a code of conduct to protect models from mistreatment. Under the new code, models are required to furnish a medical certificate attesting to their good health and ability to work, or modeling agencies cannot hire them. However, this new effort cannot reverse the tragedy that occurred in the past. Sadly, Isabelle Caro, the model who became the international face of anorexia when she allowed her ravaged body to be photographed nude for an Italian advertising campaign to raise awareness about the disease, as shown in Figure 19.5, died at the age of 28.35 The American Association of University Women (AAUW) and Pantene, a well-known maker of hair products, joined forces on a new program called Shine Strong, designed to challenge women student leaders on college campuses throughout the country to initiate change and tackle biases and stereotypes that permeate our culture. The company offered campus action project grants to 11 American universities, including Clemson, Murray State, Pacific Lutheran, Wisconsin–Milwaukee, and West Virginia Wesleyan. “Pantene believes women are stronger when they work together, and we are thrilled to have collaborated with the AAUW and been able to provide these grant recipients with the opportunity to work as a team to fight the stereotypes and biases on their college campuses across the country, said Jodi Allen, P&G vice president.36 This chapter illustrates that managers, and particularly public relations managers, are in charge of safeguarding the story of the firm. By using information strategies and tactics that can apply broadly to managing the corporate reputation they may avoid some of that harm that can befall any company. 35 “Why Brazil’s ‘Shocking Say No To Anorexia’ Campaign May Be Self-Defeating,” Metro, May 13, 2013, metro.co.uk; and “LVMH and Kering Ban Ultrathin Models,” The Wall Street Journal, September 6, 2017, www.wsj.com. 36 “Pantene Earns Social Capital Sponsoring Grants to College,” Cosmeticsdesign.com, February 10, 2015, www .cosmeticsdesign.com. 438 Part Six Business and Its Stakeholders Summary ∙ The general public affects the firm through its opinions of the firm’s activities or performance, which in turn help shape the firm’s public image or reputation. The public may utilize its own stakeholder networks and engage with government agencies, special interest groups, or the media to demand a certain level of firm performance. ∙ A good corporate reputation conveys the desirable qualities associated with an organization in order to positively influence the organization’s relationships with its stakeholders, on whom it depends to survive and thrive. ∙ Firms often create public relations (or media relations) departments, appoint public relations officers, and develop public affairs strategies to manage their relationship with the public. As new technologies have emerged, the variety of available channels of communication for the public affairs officer and departments has grown dramatically, including social media platforms and apps. ∙ Effective brand management helps increase the perceived value of a product line or brand over time and helps companies be more successful because they can charge premium prices, enhance their access to capital markets and funding, obtain better credit, trust, and social ratings. ∙ An effective crisis management plan is one that is ready to be implemented before the crisis occurs. Such a plan enables the organization to quickly and accurately communicate with the media and to use a wide range of online platforms to reach the public directly, while always remaining focused on the organization’s ethical responsibilities to its stakeholders. ∙ Business organizations can influence or change their reputation through a variety of tactics such as executive visibility, media training, user-generated or paid content, event sponsorship, public service announcements, and image advertisements. Key Terms brand management, 426 corporate crisis, 427 corporate identity, 421 corporate image, 422 corporate reputation, 421 crisis management, 427 crisis plan, 428 dark site, 429 general public, 420 image advertisements, 436 media, 421 paid content, 434 public relations department, 424 Internet Resources aipmm.com The Association of International Product Marketing & Management National Center for Crisis Management Professional Crisis Management Association Public Relations Society of America The Ad Council Social Media Association American Media Institute The Reputation Institute U.S. Federal Communications Commission U.S. Federal Trade Commission (FTC) www.nc-cm.org www.pcma.com www.prsa.org www.adcouncil.org socialmediaassoc.com americanmediainstitute.com www.reputationinstitute.com www.fcc.gov www.ftc.gov public service announcements, 436 social media influencers, 424 user-generated content, 433 Chapter 19 Managing the Public and the Corporate Reputation 439 Discussion Case: United Airlines—Navigating a Social Media Storm In 2017, a United Airlines gate agent barred two girls from boarding a flight because the teenagers were wearing leggings. Passengers boarding the fight saw the commotion and began tweeting about the incident. Social media exploded, with users calling the incident “horrendous,” “outrageous,” and “nonsense.” Many questioned why United considered this clothing inappropriate, since many women passengers wear leggings, yoga and athletic apparel for comfort while traveling. United responded to the criticisms by quoting their policy: “United shall have the right to refuse passengers who are not properly clothed via our Contract of Carriage.” The company statement continued, “This is left to the discretion of the agents.” Moreover, the two girls were traveling using a United employee pass and, according to the airline spokesperson, “were not in compliance with our dress code policy for company benefit travel.” It was a common industry practice to expect persons using the employee benefit privilege to dress more nicely than paying passengers. United promised to review their dress code policy but indicated that they would likely remain in agreement with the industry practice regarding a dress code for passengers using company benefit travel. A month later, United customers posted videos across multiple media outlets showing airport police dragging a passenger, Dr. David Dao, off a United Airlines flight. Dao appeared to have a bloodied face. The airline defended its actions, stating that it was customary practice to remove paying passengers on full flights so that off-duty crew members, needed at the flight’s destination, could have a seat. United reported that passengers were asked if they would voluntarily give up their seat for compensation, and three passengers agreed. But four seats were needed, so the airline moved to its next action in their protocol—asking passengers to leave the plane. Dao reportedly was asked, and when he refused, the airline instructed airport security to remove him. Munoz immediately issued an apology, saying that it was unfortunate that sometimes “we have to re-accommodate customers.” One woman reacted to this statement by posting on Twitter, “Nice to know that re-accommodate on United now means ‘drag you violently out of your seat.’” Some Chinese social media users accused United of racism, believing that Dao was targeted since he appeared Asian. The incident also drew the attention of Congressional leaders. Four members of the Senate commerce committee said in a letter to United Airlines, “The last thing a paying airline passenger should expect is a physical altercation with law enforcement personnel after boarding, especially one that could likely have been avoided.” This incident occurred at a time when passengers were increasingly unhappy with higher airfares, as well airlines’ practice of adding on extra fees for baggage, seat reservations, and other services that once were included with the basic plane ticket. A few hours after Munoz’s initial apology, the company seemed to go on the offensive when it circulated a letter in which Munoz appeared to blame Dao, saying he defied the officers. Finally, a few days later, the airline changed its position once again, when Munoz stated that “United would take full responsibility for the situation.” He also pledged that the company would conduct a full review of its policies in re-accommodating paid passengers to give off-duty crew members their seats and its interaction with law enforcement agencies within a few weeks. “We are going to fix what’s broken so this never happens again,” he said. The company subsequently issued a report stating that the incident involving Dao “was a failure of epic proportions that’s grown to this breach of public trust. We get that. We let our policies and procedures get in the way of doing the right thing.” A few weeks later United announced that it had reached “an amicable” settlement with Dao, although the specific terms were not disclosed. The company also reported that many 440 Part Six Business and Its Stakeholders of its policies related to this case were revised in the hope these actions will prevent a repeat of the public relations disaster that has engulfed the company after Dao was forcibly removed from a plane. Morning Consult, a brand-tracking company, reported that shortly after Dao was dragged off the airline, United’s favorability rating dropped 47 points (on a scale from negative 100 to positive 100). This rating slowly rebounded in the days after the incident, but still lagged behind rivals American, Delta, and Southwest. As the airline attempted to win back the public’s trust and rebound from a major drop in the company’s favorability rating, another tragic story hit social media: the news of a dog dying after being placed in an overhead cargo bin without water during a three-hour flight. One passenger said, “I heard the dog barking a little and we didn’t know it was barking a cry for help.” According to another passenger, the flight attendant who placed the bag in the bin did not know there was a dog inside the bag. Morning Consult reported that United’s favorability rating dropped 28 points when this incident became public. United Airlines tried to reassure the public of its care and compassion. “This was a tragic accident that should have never occurred, as pets should never be placed in the overhead bin,” United said in a statement. “We assume full responsibility for this tragedy and express our deepest condolences to the family and are committed to supporting them. We are thoroughly investigating what occurred to prevent this from ever happening again.” Sources: “Two Girls Barred from United Flight for Wearing Leggings,” The Washington Post, March 26, 2017, www.washingtonpost.com; “United Grapples with PR Crisis Over Videos of Man Being Dragged Off Plane,” The New York Times, April 11, 2017, www.nytimes.com; “United CEO Apologizes to Passenger Pulled from Plane,” The Wall Street Journal, April 11, 2017, www.wsj.com; “United Says Litany of Failures Led to Flight Fiasco,” The Wall Street Journal, April 27, 2017, www.wsj.com; “United Settles with Passenger Dragged Off Flight,” CNBC, April 27, 2017, www.cnbc.com; “Dog Dies on United Flight after Being Placed in Overhead Bin, Airline Confirms,” ABCNews, March 13, 2018, abcnews.go.com; and, “United Airlines’ Favorability Rating Was Rebounding Until Dog Died in Overhead Bin,” Chicago Tribune, March 26, 2018, www.chicagotribune.com. Discussion Questions 1. What was the impact of the incidents described in the case on United Airlines’ reputation? 2. Did these incidents impact the firm’s corporate identity or corporate image, or both, as described in the chapter? 3. Did these incidents constitute a crisis, as defined in the chapter? 4. Did United Airlines engage in effective crisis management, and why or why not? If you were the public relations manager at United Airlines, what steps would you have recommended the company take when these incidents occurred? 5. What should the company do now to regain its customers’ trust?
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REPUTATION AND PUBLIC RELATIONS

The incidents involving United Airlines damaged its reputation. In the first incident, the airline
staff denied passengers entry because of their dressing. While this is normal, the airline denying
entry to passengers with acceptable clothing ruined its reputation as controlling. Leaving the
decision to the gate agent was also irresponsible because it is a matter of the agents’ choice,
leading to possible discrimination of passengers. United Airline's removal of services from the
basic ticket harmed its reputation. In the second incident, how the airline employees treated a
paying passenger proved negative and tarnished the airline's reputation further. It showed the
airline as condoning violence on passengers and discriminatory because of race. The third
incident involved a pet dy...


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