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5 Lessons to Learn From Famous Corporate Reputation Crises

Whether you are in the midst of a crisis now or want to understand how to avoid one, here are five takeaways from businesses that reacted to crises well—and some that didn’t.

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From social media strategies to data-driven digital marketing and SEO, companies have myriad ways of boosting their brand’s image online. The digital sphere allows us to spread the net wide in our efforts to not only promote our products and services but also to impress customers with our dedication to them, giving them ample reasons to continue letting us into their digital world.

However, one consequence of doing business in an ultra-connected world is that the positive brand image you build can be like a house of cards that could topple in an instant. If something your company does—or even something that happens to your company through no fault of its own—is viewed negatively by the public, the issue can go viral, quickly transforming your trusted brand into a notorious one. Negative content on social media poses one of the biggest threats; in one study, roughly 31 percent of companies reported that unfavorable content had already had a damaging effect on their reputation. In today’s world, a reputation crisis is almost inevitable. As Warren Buffett has said, “It takes 20 years to build a reputation and five minutes to ruin it.”

If your company finds itself in a reputation crisis, you absolutely must take it seriously. Your business’s positive image is its lifeline and vital to its future, so when it is jeopardized, you need to architect a composed, strategic response. If you approach reputation risk management with the gravity it deserves and learn how to respond correctly to a crisis, you can help your company rise from the ashes and mitigate large financial losses in the long run. Whether you are in the midst of a crisis now or want to understand how to avoid one, here are five takeaways from businesses that reacted to such a situation well—and from some that didn’t.

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Lesson 1: Respond Quickly, Genuinely and Compassionately

When your company’s reputation is threatened, it can be human nature to go on the defensive and lash back—but refraining from being reactive is paramount for you and your colleagues. Every word you speak or type from the moment the negative information first hits the internet will have consequences. You are now open to scrutiny from anyone in the world. 

Give yourself some time to think through and formulate the optimal response, which you should then disseminate quickly and widely across multiple channels. Reputational crises can quickly get out of hand if you delay necessary action because social media users have time to fan the flames. At the same time, you don’t want to risk reacting prematurely or inadequately. Above all, your response should be well thought out, compassionate and empathetic, and if an apology is necessary, ensuring that it is (and sounds) completely genuine is extremely important.

As a near-perfect example of how not to react in a reputation crisis, consider the backlash against United Airlines that occurred when its staff members violently ejected Dr. David Dao from an overbooked Sunday night flight in early 2017. Internet users later learned that Dao had been removed from the plane so the airline could give his seat to a United employee trying to reach another airport. Dao, a pulmonologist, had refused to relinquish his seat, citing the need to see patients the next day. Other passengers videoed Dao’s forced removal from the aircraft, during which he was knocked out and grievously hurt, to the extent that he required surgery. The video blew up on social media soon afterward, yet United Airlines CEO Oscar Munoz’s initial response was remarkably tone-deaf:

“This is an upsetting event to all of us here at United. I apologize for having to re-accommodate these customers. Our team is moving with a sense of urgency to work with the authorities and conduct our own detailed review of what happened. We are also reaching out to this passenger to talk directly to him and further address and resolve this situation.” 

Munoz’s response fell painfully short of an apology, and three days later, with the price of United stock plummeting and internal emails having been leaked in which he praised crew members for their handling of the situation, Munoz was forced to backtrack, telling ABC News“This will never happen again. We are not going to put a law enforcement official onto a plane to take them off…to remove a booked, paid, seated passenger. We can’t do that.”

Dao’s eventual settlement with United is rumored to have been close to $140 million. Some critics have commented on how the company did a much better job of responding to a later incident in which a passenger’s pet died during a flight as a result of the crew’s negligence.

In contrast, Pepsi proved much more compassionate than United when it was blasted online for a 2017 ad that appeared to make light of Black Lives Matter protests. In it, 21-year-old (white) supermodel Kendall Jenner appeared to easily resolve tensions between protesters and police. The ad was so insensitive that it even attracted condemnation from Dr. Martin Luther King’s daughter on Twitter. Within 24 hours, Pepsi had pulled the commercial and disseminated a genuine apology: 

“Pepsi was trying to project a global message of unity, peace and understanding. Clearly, we missed the mark, and we apologize. We did not intend to make light of any serious issue. We are removing the content and halting any further rollout. We also apologize for putting Kendall Jenner in this position.”

The speed and sincerity of Pepsi’s response went a long way in repairing the company’s reputation, and the brand moved forward with more appropriate ads.

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Lesson 2: Use the Crisis as an Opportunity to Learn and Grow

If you take the right approach to a crisis, the situation could serve as a wake-up call that leads you to improve your product or evolve your mission and messaging in a beneficial way. See it as an opportunity to show your customers how much you care about them and not just about your profits.

Many consider Johnson & Johnson’s response to its 1982 Tylenol poisoning crisis the gold standard for how companies should navigate a serious reputational challenge. When a lone killer began maliciously lacing Tylenol capsules with cyanide, Johnson & Johnson’s market value fell by $1 billion. However, the company acted swiftly, enacting a massive recall of every Tylenol product, everywhere. Next, Johnson & Johnson immediately began work developing the tamper-proof packaging used for virtually all medications today. Not only did the company handle the situation intelligently, but it also invested money and energy into solving the problem, increasing the safety of its own products as well as those of other medication manufacturers in the future. It also saved lives.

Another notable comeback was when Samsung turned a $5.3 billion mistake into an opportunity after its Galaxy Note 7s began bursting into flames all around the world in 2016. Although the necessary product recall almost bankrupted the company, Samsung followed Johnson & Johnson’s model: It created a test lab to investigate the Note 7’s battery issues and established industry-standard fail-safes to ensure such a problem would never arise again. The company then went on to have record success with its Galaxy Note 8.

Lesson 3: Don’t Deflect

A company’s leaders must step up to face the heat of a reputation crisis themselves because nothing sours public opinion faster than a leader who does not take responsibility for their business’ mistakes. Customers keenly feel the insincerity of a CEO who tries to shift the blame, and although finding a scapegoat to avoid short-term financial losses might be tempting, taking responsibility will likely lead to a long-term increase in corporate value. 

Boeing CEO Dennis Muilenburg made the wrong choice when he resisted efforts to ground the company’s 737 Max jets after two mysterious crashes only five months apart in late 2018 and early 2019. With aviation authorities in multiple countries all coming to different conclusions about whether the planes should be temporarily taken out of service, travelers were left uncertain about whether the aircrafts were safe. The world watched with puzzlement as Muilenburg focused more on negative press than on the potential human cost in the event of future crashes. If Boeing’s leadership had immediately acknowledged that the planes could have serious technical problems and should therefore be grounded while the issue was being investigated, the company would have sent the message that it valued customer safety more than profit. Only time will tell what the long-term impact of this crisis will be on Boeing.

Some leaders are willing to make things right no matter the cost. When Starbucks received terrible press after a staff member had two Black men arrested for simply meeting in one of the chain’s cafés, chairman Howard Schultz closed 8,000 locations for one day so that all employees could participate in racial-bias training. “It will cost millions of dollars,” he said, “but I’ve always viewed this and things like this as not an expense, but an investment in our people and our company. And we’re better than this.” This responsible, compassionate act did Starbucks credit in the long run.

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Lesson 4: Be Human

This seems like a simple directive, yet with all the disastrous repercussions a reputation crisis can have on a business, we can easily forget that some “drop everything” moments require us to be humans first and foremost. Richard Branson did this beautifully when one pilot was killed and another injured in a 2014 crash of a Virgin Galactic test flight. He tweeted, “Thoughts with all @virgingalactic & Scaled, thanks for all your messages of support. I’m flying to Mojave immediately to be with the team.”

With this simple but clearly heartfelt statement, he acknowledged that what people needed most from him was to merely be supportive and present.

Lesson 5: Accept That You Might Need Expert Help

Knowing how to best respond to a reputational crisis comes with experience, and seeing a clear way forward can be difficult when you are on the receiving end of passionate public backlash. Fortunately, experts are available who can help you assess such issues and react appropriately to prevent or minimize any subsequent damage to your business or brand. The right approach can protect your company. 

In addition to deftly handling any current crises, a reputation management expert can help you be proactive about safeguarding your brand and company and arm you with critical skills. Nurturing your relationship with the public is key to preserving your business’s future—and this includes being properly prepared for times when society demands an explanation from you.

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