WHAT WE DO trust, emotion and Strategy Public Affairs corporate reputation Internal Communications Issues and Crisis Management A chapter of Barbara Brooks Kimmel's "Trust Inc." written by Corporate Social Responsibility Linda Locke.
In 2008, a musician flying from Nova Scotia to Nebraska The decline in trust checked his prized instrument because it was difficult to carry on board. When he arrived in Omaha, he discovered has a cost that his guitar was damaged and he immediately contacted Damage to a company’s reputation for the airline. After nine months of discussion with the airline, trustworthiness comes with a price tag. he was told he was ineligible for compensation because he • Bank of America was surprised at the hadn’t filed the proper claim within 24 hours. public reaction to its announcement of a monthly fee to use their debit card, In a move that has become legendary, the musician, Dave and scrapped the plan despite its revenue potential. (1) Carroll, posted on YouTube a song and video he recorded • BP saw significant increase in its cost called “United Breaks Guitars.” This action got the attention of doing business as a result of of United Airlines – within 24 hours. reaction to its management of the Deepwater Horizon spill in the Gulf of When Carroll boarded the plane and checked his guitar with Mexico. (2) United, like hundreds of thousands of travelers that day, he • The Komen Foundation faced a significant decrease in contributions trusted that he and his luggage would arrive safely. He put when its process to decide to himself in the hands of pilots, flight control agents and withdraw funding from Planned baggage handlers, trusting that all would act competently. Parenthood became public. (3)
All three crises have two elements in A reputation is a promise common – a significant reputational crisis A company’s reputation is built on trust. It’s the promise an organization event followed by a negative impact to makes to its stakeholders about its products, processes and people. The revenue. promise is then secured by the handshake of a transaction. When people A reputational crisis is one in which trust trust an organization, they are more likely to exhibit supportive behavior: in the organization is undermined. buying the products and services it is selling, recommending it to friends, Reputation may be an organization’s and taking the actions it would like. When a company lives up to its most valuable asset, but its inherent reputation, customers develop warm, trusting feelings about it. intangibility may make it the most difficult Trust is an emotion we feel. When we trust another person we feel safe and asset to manage. This explains why secure. We are more likely to give them the benefit of the doubt in times of CEOs and boards of directors consider it stress, because ultimately we trust that there will be a positive outcome. a perplexing challenge that keeps them up at night. (4) After multiple attempts at resolving the airline’s responsibility related to his broken guitar, Carroll’s emotions had moved from trust to outrage. Key to that challenge is understanding the emotions that drive stakeholders’ A lack of trust in organizations is evident in the cynicism and skepticism that expectations. Leaders often mismanage permeates modern society. It can be tracked in annual surveys, such as the trust and reputation because they fail to Edelman Trust Barometer whose 2012 survey showed that low trust in think and communicate in emotional business results in increased calls for regulation because of perceptions terms. about companies’ irresponsible behavior. While the survey points out that business leaders are more trusted than government officials, nearly half of all respondents said the government does not regulate business enough.
CONTACT: Linda Locke, Senior Vice President | (314) 469-3500 | [email protected] standingpartnership.com | @standingteam | @reputationista
If they were speaking to a boardroom of Commitment, honesty Trust as an emotional fellow executives, or a panel of attorneys, construct that response might suffice. But if their and empathy broader audience is a nation of skeptical Risk communication science suggests When faced with consumer outrage – families and consumer advocates, a cold that to build trust, the facts of the situation when trust and reputation are at risk – the list of facts may only worsen the are a small part of what organizations first instinct of many organizations is to company’s reputational crisis. The need to communicate. Trust and respond with facts. But mistrust is not company may get a reputation for credibility depend upon a company often assuaged by facts. unethical behavior. demonstrating that it has the knowledge and expertise to address a problem; that Trust is an emotional construct and a Instead, facts should just be the starting it acts with honesty and openness; and building block for civil society and point. that it expresses concern and care. commerce. Trust is the core of every transaction and interaction. Why? We depend on others. We need them to Facts: Only the first provide what we long for – love, safety A company that expresses and security. Likewise, we depend upon step toward trust empathy, care and concern for businesses that provide essential The facts are the starting place to build its stakeholders demonstrates products and services. We rely on them trust. An organization must meet all of the that it understands their and are disappointed when they fail to requirements to comply with the law. If meet our expectations. the legal requirements are not met, then perspectives and is more likely stakeholders have good reason to to maintain their goodwill in a Today, consumer expectations often consider a company weak in the crisis. extend beyond price and quality to how dimension of ethics. the companies make us feel. Are we In a crisis situation, here is the satisfied with our interactions with clerks, To earn trust, a company must go beyond recommended breakdown of customer service representatives? Do the requirements, beyond the simple communications content: they make us feel important or ignored? facts of the situation, and demonstrate that it understands the concerns of its • half of a company’s external We expect companies to act ethically, stakeholders. Compliance with the law communications should express care fairly and reliably. When we hear an can be interpreted as doing the minimum; and concern executive speak or we read about today, stakeholders have expectations • one quarter should express the corporate activities, we make judgments regarding ethics, fairness, the workplace, company’s commitment to addressing about them. We decide whether they and the environment that go beyond the the situation meet our expectations. These attributes of a specific product. The • and only one quarter should focus on expectations shape our beliefs and our manner in which companies engage, the facts actions. respond and communicate can impact how they are perceived. Consumers today express their feelings The more that companies meet our through traditional market research and expectations, the stronger our emotional In times of crisis or stress, when the customer care surveys, but also through bond. When our expectations are not environment can be characterized as social media. met, we begin to withdraw our trust, “high concern/low trust,” people hear either slowly or rapidly, depending on the messages differently. Given the A company that welcomes unfettered severity of the issue. asymmetry of information between large stakeholder feedback will employ a organizations and their stakeholders, listening platform to understand what is Unfortunately, businesses often approach companies should communicate being said about it and its competitors – their activities from a purely logical assertively that they care about their and to ascertain whether its perspective perspective. Rationality rules the stakeholders and are dedicated to on a situation aligns with the perceptions boardroom while emotionality rules the resolving the situation. But if those of its stakeholders. living room. communications are not backed up with action, the move will backfire. The more sophisticated social listening Let’s say a company is accused of acting tools capture the level of emotion in the unethically. The business may meet public dialogue about an issue or every requirement for compliance with organization – such as the emotion laws and regulations. In a crisis, the expressed in comments on Twitter, blogs, instinct of executives often is to respond Facebook and web forums. with the facts that demonstrate the logic of their choices and actions – in this case, with a full list of compliance actions.
Using tools from social psychology, a listening readily accepted and appear greater than Human involvement. This is an emotional platform should predict the emotion that will risks perceived to be familiar. concern that derives from the feeling that be felt by people reading about an issue or the situation is being caused by human company. By understanding trust and other Involuntary. The involuntary nature of the failure or action. Risks perceived to be emotions that drive perceptions and lead to crisis stemmed from consumers feeling that generated by human action elicit greater behavior change, an organization can they were unable to have any influence over negative emotion than risks perceived to demonstrate empathy, caring and concern the situation; that it was not a result of be caused by nature. If someone caused that resonates with its stakeholders. personal choice. the problem, that person is expected to fix it. In this case, organizations that wished to demonstrate empathy, caring and concern When consumer commentary focuses on Case study: Fear with their stakeholders would communicate “human-caused risk,” consumers are undermines trust the steps that could be taken by each assigning blame. They are calling relevant party (government, banks, organizations to account. A company that For example, during the 2007-2008 financial consumers) in language that most people fails to understand these expectations meltdown in the U.S., a major financial found easy to understand. They would risks looking tone deaf, which undermines services firm conducted an analysis of the explain in plain language how the situation its emotional bond with stakeholders, gives emotions about the crisis in the public occurred, using examples from familiar rise to distrust and damages its reputation. dialogue. By applying a social-psychological situations. And, they would describe the role framework to the language people were using of the responsible parties and what they Dread and catastrophe. These are to describe and discuss the situation, the firm were doing to address the situation. extreme emotions. When dread and found that the three strongest likely emotions catastrophe are driving the emotional tenor were: irreversibility, unfamiliarity and a sense of the public discussion, people are likely among consumers that their involvement was Case study: Blame to be experiencing fear, terror and anxiety. involuntary. undermines trust They perceive the potential for fatalities, injuries or illness. Irreversibility. A risk perceived to be More recently, a proposition was on the irreversible elicits greater negative emotions ballot in California to require labeling of In such a situation, a company must than one that is thought to be reversible. In genetically modified food. A recent analysis respond with both empathy and action to this case, consumers expressed deep fears of the dialogue around the campaigns for preserve trust, protect its reputation and that the changes they were seeing were and against Proposition 37 identified three contain the issue. If people fear permanent. This fear of permanent economic primary emotions: human involvement, catastrophe, but a company responds with difficulty was reflected in changes in dread and catastrophe. only the bare facts of, say, its compliance consumer sentiment about spending. program, that company would rapidly lose the trust of many of its stakeholders. Such Unfamiliarity. This concept involves the a misstep could give rise to calls for emotional concern over the unknown risks additional regulation. from an issue. Risks perceived to be unfamiliar are less
Trust payoff … or penalty A strong reputation that inspires trust provides a measurable payoff.
A company that is highly regarded by its stakeholders is more likely to enjoy strong brand loyalty and long-term, high-value customers. It can expect to see lower employee turnover and easier recruitment of high-caliber employees. Such a company is more likely to benefit from higher investor confidence, a more positive regulatory environment and even lower costs of capital, as its reputation paves the way for greater trust from financial partners. That’s the payoff of trust and a good reputation.
Mistrust, resulting in a weak or negative reputation, exacts a measurable cost – a reputation penalty – in the form of increased customer churn and elevated customer acquisition costs. Such a company will face higher employee training costs and related service inefficiencies. It will pay the price of regulatory constraints, increased cost of capital, lower investor confidence and an increased vulnerability to competitors.
Leaders are responsible for protecting both revenue and reputation. To fulfill this dual responsibility, they must orient their organizations toward understanding the expectations of their stakeholders as a core element of strategy.
Every leader knows perceptions are reality; the wise leader uses the drivers of trust to survive and thrive in the current economy.
For more about trust and corporate reputation, purchase “Trust Inc.” from Barbara Brooks Kimmel.
About Linda Locke About Standing Partnership Linda Locke is a senior vice president Standing Partnership specializes in at Standing Partnership. managing corporate reputation by creating influencer strategies that deepen Before joining Standing Partnership, understanding, build trust and mitigate Linda was the principal of Reputare risk in complex, ever-changing Consulting, a consultancy that focused environments. This comprehensive on reputation, risk, crisis management approach drives strategy and helps and strategic communications. clients build, protect and restore reputations. Locke’s corporate experience focused on reputation and communications The Standing Partnership team has responsibilities in financial services expertise in strategy, corporate social organizations such as Boatmen’s responsibility (CSR), public affairs, Bancshares Inc. (now Bank of internal communications and issues and America) and MasterCard Worldwide. crisis management – critical areas that As senior vice president for reputation impact and influence successful and issues management at programs. MasterCard Worldwide, Linda led a groundbreaking initiative to define, The firm primarily serves clients in health create, launch and direct the care, agriculture, sustainability, education company’s global reputation practice. and other complex industries. [email protected] www.standingpartnership.com
References (1) Bank of America drops debit card fees, by Sandra Block, USAToday, Nov. 11, 2011 (2) Reputation, Stock Price and You by Dr. Nir Kossovsky, Apress, 2012 (3) Komen Foundation Struggles to Regain Wide Support, by David Wallis, New York Times, Nov. 8, 2012 (4) Third Annual Board of Directors Survey 2012 - Concerns About Risks Confronting Boards - EisnerAmper, May 7, 2012; survey of 193 U.S. company directors regarding chief concerns beyond financial risks.