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CIM Membership No.: 12410638
12410638 563-Managing Corporate Reputation Charted Postgraduate Diploma in Marketing Synergy School of Marketing
CIM Membership No.: 12410638 DECLARATION ‘I confirm that in forwarding this assessment for marking, I understand and have applied the CIM policies relating to word count, plagiarism and collusion for all tasks. This assignment/project is the result of my own independent work/investigation except where otherwise stated. Other sources are acknowledged in the body of the text and/or a bibliography is appended. The work that I have submitted has not previously been accepted in substance for any other award and is not concurrently submitted in candidature for any other award.’ I further confirm that I have not shared my work with other candidates. Total Word Count: 6333
CIM Membership No.: 12410638
TABLE OF CONTENTS PART A TASK ONE - REPORT 1. Introduction
2. Assess the need for corporate reputation management
3. Critical evaluation of the key forces impacting on the
reputation of Waters Edge 4. A case arguing for establishment, or development of a
formal corporate reputation management process 5. Conclusion 6. Recommend processes, structures and systems necessary
to improve the organizations reputation 7. References
PART B TASK FOUR - HOW NOT TO BE THREATENED BY A CRISIS 1. Introduction 2. Critical view of crisis communication characteristics
3. Evaluation of crisis communication management and
its impact on reputation 4. Water’s Edge Club and its Crisis management plan
5. Evaluating the crisis plan to test potential effectiveness
6. Recommendations for quality improvement in corporate
communication activities to ensure successful crisis communication 7. References
CIM Membership No.: 12410638
Part A Task 1 REPORT To
: Chief Executive officer, Waters Edge, Sri Lanka
: Marketing Manager, Waters Edge, Sri Lanka
: 3rd February 2011
: Evaluation and improvements of corporate reputation management system of Water’s Edge
1. Introduction 1.1 General Overview In this report I’m looking at ways of improving the overall business of Water’s Edge club which is currently at a critical state. We are behind the front runners in the industry being unable to harness the full potential created after the end of the separatist war. We would look into the impact of reputation management as an instrument to impact business decisions. There would also be attention given to how corporate reputation could supplement growth of our organizations and how it could be developed and proactively managed for our advancement.
The objective of this report is to; Assess the need for Corporate Reputation Management (CRM) Evaluate key forces which would impact the reputation of the club Build arguments for establishment, or development of a formal a CRM process. Recommend processes, structures and systems necessary to build reputation of Waters Edge
CIM Membership No.: 12410638
1.2 History of the organization To understand the present situation, we would take a brief recap at our past. We once operated as an “exclusive members” club with a brand identity of sophistication, class and exclusivity. We underwent many crisis situations in the past, ranging from failing to preserve environmental regulations, illegal land dealing, internal management instability to loosing it’s luxury brand image in the eyes of the stakeholder. Since the club was taken over by the government, its primary stakeholder became the public. Hence club has to take all future decisions with this stakeholder in mind. 1.3 Corporate reputation management and Waters Edge We cognise of the fact that Water’s Edge since its beginning has not had any CRM system. It has neither undertaken any form of planned marketing or brand development activates. We have an elementary public relation role, which has a basic purpose of reaching customer with the information of the club’s activities. The value of other stakeholders in doing business has thus far been completely ignored. The need to build a favourable reputation is an urgent task as our apathy led to most of the problems. 1.4 Definitional view of CRM I would like to quote John Dalton who said that “Reputation is the sum values that stakeholders attribute to a company, based on their perception and interpretation of the image that the company communicates over time. Managing and improving it determines the sustainability of the organization in the long run.” According to Fombrun and Van Riel (1997) corporate reputation has two main components. Corporate image and Corporate Identity. They believed that identity is internal to the organization, the perception of employees and managers of the business. Image was thought to be a construct of the external stakeholders. To have a good CRM is to be the owner of the intangible asset which gives a competitive edge. In the present challenging environment having such a competitive advantage that enhances our stakeholder relationships is vital and could decide the long term survival of the organization.
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2. Assess the need for corporate reputation management 2.1 Financial performance and reputation management
Main objective of most Organizations is to maximize its value in the market to provide the optimum return to its shareholders. In competitive markets, it is the most basic challenge any business would face. To achieve it, we need to have a differential tool. This is where CRM comes to play. Many researchers such as Dunbar and Schwalbach (2002), Eberl and Schwaiger (2005), Fombrun and Shanley (1990), Luchs, Stuebs and Sun (2009), McGuire et al.(1990) and Roberts and Dowling (2002) have pointed out that firms with long term superior financial performance such as higher returns on assets, net income or quality of earnings, have one thing in common: Excellent CRM. With the recent economic crisis hits the world, companies such as Lehman Brothers, which supposedly had a excellent reputation prior to the crisis struggled. Which poses the question, if reputation is such a fickle asset, is it worth investing in it? The answer is this, “Whenever reputation management is marginalised companies not only put one of their most valuable intangible assets (and, consequently, their long-term performance) at risk” (Hall, 1992). Just having a good reputation doesn’t mean immunity against failure. It has to be managed actively to achieve long term value. 2.1 Employee relationship through reputation management
With the recent negative employment trends around the world, companies are finding it tough to engage employees in promoting its corporate image. “The behaviour of employees is seen as having a major influence on how external stakeholders perceive the corporate brand and make sense of its identity and image” (Anixter, 2003) Having a reputation of fair employment is a potential source of significant competitive advantage. “Employment issues are too important and too volatile in terms of risk to the company’s reputation and bottom line, to leave to chance, or to treat as an administrative issue” (Neef, 2003), Considering the above, creating a corporate image of fair employment through active CRM is something our organizations should consider. “In the recruiting market, potential employees will be much more attracted to firms with a good reputation” (Caminiti, 1992). Companies like Coca Cola, GE, Apple, and Microsoft have all created supreme value for themselves in the market as a preferred employer. These companies attract the best of the people at the job market and manage to train them and retain them for the long run. This converts into high productivity and better financial returns for the shareholders. It would be beneficial thus for an organization to develop a system by which its reputation as a preferred employer expands.
CIM Membership No.: 12410638 2.3 Branding through corporate reputation management Even though the word branding and reputation is often used interchangeably in the business world, it is not the same concept, and thinking it’s the same would often be very costly for organizations. “Brand is a “customer centric” concept that focuses on what a product, service or company has promised to its customers and what that commitment means to them. Reputation is a “company centric” concept that focuses on the credibility and respect that an organization has among a broad set of constituencies, including employees, investors, local communities as well as customers ” (Ettenson and Knowles 2008) Final aim of both CRM and brand management is to increase organizational returns. With excessive interest in active CRM, brand is often given the backseat. “Focusing on reputation at the expense of brand can lead to product offerings that languish in the market” (Ettenson and Knowles 2008). This is the last thing a commercial organization would want. The solution is that while active on CRM, businesses must place equal importance on brand management as well. Companies such as Apple and Microsoft have achieved this balance successfully. 2.4 Stakeholder trust and reputation management “Building trust with stakeholders is one method of CRM. Managers invest a lot of time and energy trying to build trust with various stakeholders” (Pirson and Malhorta, 2008). Building trust needs two main attributes; Transparency and competence. In order to actively manage reputation with stakeholders, organizations emphasise on the above. Yet this may not always prove to be successful. Companies sometimes follow a strategy of sensitive information disclosure to stakeholders. This is done to maintain the transparency which could enhance its reputation. This could prove harmful to some businesses under certain conditions. Providing information such as executive pay packages, quartile account reports in a cyclical business, could actually erode stakeholder image of the organization. In the past, Porsche refused to submit their quartile accounts on the above grounds. Having strong areas of competencies in business will supports the CRM process. Yet in choosing its areas of business competence companies often make the mistake of choosing interest of one stakeholder over the other. Choosing the management competence to increase reputation among shareholders over technical competence which is important to employees may prove to be useful in the short run, but would prove to be a problem later on. The best example for this is Delta Airlines. Thus in actively managing corporate reputation, these basic reputation management activities may prove to be errors that rather than building could lead to eroding reputation.
1.Critical evaluation of the key forces impacting on the reputation of Waters Edge 7
CIM Membership No.: 12410638 In any organization there are a number of forces which could impact its reputation. I selected following five factors (Two internal; One macro and Two industry) having such influence on Water’s edge that it can change the way a company’s business is done completely.(adapted Delaporte and Beverland 2011, p. 1861 ).
3.1.1 Workplace Environment Workplace environment could be construed as how the organization treats its employees. It’s important to reputation for two reasons. Firstly, because staff's perception of the company may affect external groups' perception of the organisation, Kennedy (1977). Secondly, because staff is an important resource for organizational development. Sri Lankan companies like Mass Holdings claims to offer a high importance to maintaining an excellent work environment. Here, organizational culture, formal policies, internal communication and resources are all combined to create a positive corporate identity. Unfortunately, Water’s edge does not employee any such methods to create positive employee environment. The outcome of this is a steady drop of reputation as a preferred employer. This has also resulted in external groups’ perception (image) of the company to fall. 3.1.2
Product and Service Quality
There are numerous empirical data which suggest that product and service quality is an important aspect of reputation building. Organizations reputed for their product quality are at a distinct advantage in the market. Companies like Mercedes-Benz often to better business due to their identification as a high quality and safety conscious automobile manufacture. Yet as a force impacting reputation, quality is capricious. The best example for this is Toyota, which enjoyed a reputation of good quality products until the recent high vehicle recalls. There are further issues in ensuring quality in services, than products. Mainly due to service quality perceptions being made very quickly. It’s important to ensure consistency in all aspects
CIM Membership No.: 12410638 of service delivery for customer satisfaction. Water’s Edge needs to identify quality as a striking factor on reputation and ensure that customer expectations of quality are met consistently. 3.2 Macro Forces 3. 2.1 Political The recognized impact of the political environment on organizational reputation is very high. This is the reason many companies fund political parties in election campaigns around the world. Key multinational organizations such as Time Warner, PricewaterhouseCoopers have been identified as organisations donating large amounts of money to political parties of their preference. “Pictures of business figures shaking hands with high-status officials or attending official functions virtually guarantee exposure on the national television news, which will prove more effective than any amount of paid-for advertising and promotion in convincing the audience of the organisation’s status, prestige and official recognition” (Fan, 2007). It’s easy for Water’s Edge to utilise the fact that it’s a government owned business having Defence secretary and the three Service commanders in the Board of Directors to build its reputation in the eyes of the key stakeholders. The political influence on the company needs to be channelled positively in order to create a better reputation. 3.3 Industry Forces 3.3.1
Impressive corporate reputation has been recognized as an important advantage in the market by many organizations. Due to this companies are attempting to surpass each other in their efforts to achieve the above said advantage. It’s hard to get the full benefit of one’s own organizations reputation when your competitor is either the owner of a better reputation or is undermining your own efforts in reputation building. The best way to overcome this situation is to build on your strengths in reputation management rather than engage in petty PR wars. These fights usually end badly for all involved as stakeholders don’t take well to companies who engage in this type of warfare. Water’s Edge needs to build its reputation on its strengths as a unique service provider, rather than go head to head with the competition. This way it can trump the competition with more success 3.3.2
Supplier relationships are becoming critical now more than ever before due to the consolidation of firms within industries, continuous product evolution and constant pressure on costs. Businesses which do not have healthy relationships with its suppliers often suffer in terms of both supplier and consumer relationships.
CIM Membership No.: 12410638 If companies provide suppliers with technical assistance, help in establishing new business alliances etc..Suppliers in turn will provide the company with high quality products at low prices. This effects the organizations reputation as a quality service provider. It also develops its reputation as a supplier accommodating business. If Water’s edge does not deliver excellent products and services to the customer which require solid backing of suppliers, the company’s reputation will suffer. To prevent this, the company needs to build better relationships with its suppliers.
1. A case arguing for establishment, or development of a formal corporate reputation management process. After we have discussed the current situation and the forces behind bringing thus forth that situation, we must now look at how establishing a CRM which would specifically benefit Water’s Edge. Prior to proceeding with the proposal to building a fully fledged system that would be both expensive and time consuming, we look at how it could work for the club. 4.1 To create financial stability
All commercial organizations desire to create value for their shareholders. As discussed earlier in point 2.1 the view among researchers is that better reputation create financial stability and prolonged profitability. Future investors tend to be drawn to companies with superior reputation due to this reason. They invest their money with the view that the company will be able to convert its good reputation into higher cash flows. Overall, business with good reputation can create sustainability and stability to a business. When the task of rebuilding Xerox was given over to Anne Mulcahy in 2001, people didn’t expect the company to last. With stock prices down and company’s reputation at an all time low, Mulcahy had a tough task in front of her. She believed that the only way to recover the business was through building reputation of Xerox as a financially stable business. To achieve this she cut costs, communicated endlessly, and listened carefully, created positive organizational culture and build teams. Through these efforts she brought the company back on its feet. Taking a cue from the above example, Water’s Edge also could follow a similar path. As a business which in accountable to the public, it needs to prevent the variations it is facing in profits and create consistency and growth. According to Sarstedt (2009) good reputation is taken by investors as a risk reducing signal, thus investments would naturally grow. As we are in dire need of investments to grow, best way to get the investors interested is through an excellent
CIM Membership No.: 12410638 corporate reputation. Having a good reputation also allows the club to cater to the premier customers at a premium prices. This will also ensure financial stability for the club. 4.2 To achieve social credibility
Companies doing business in the modern world need to adapt themselves in to the society. This is mainly because its stakeholders who are also a part of the society desire it. They prefer to do business with companies which have reputations of socially conformed corporate citizens. Companies which failed to create this conformity in the society have long perished due to their own arrogance. The best way to reach a state of superior reputation is through giving careful attention to establishment of a CRM system which focuses on social conformity. Social conformity is how the organization follows the expected behaviour of the society. Its importance is identified by Michelotti & Michelotti (2009) “performing actions that conform to social norms are critical for gaining superior corporate reputation rating within the community in which a firm operates”. Research done on America's largest companies has shown that a strong reputation for moral and ethical conduct tend to perform better in financial terms. They have better returns on investment and equity We have confronted with many issues in the past due to the avoidance in obeying social rules. It has engaged in unethical business practices and refused to fulfill its expected social responsibility of environment protection. This has caused the clubs reputation to suffer and its stakeholders to abandon their support towards the club. Yet the club has the opportunity to build a new CRM system which places emphasis on activities which allows it to be a responsible corporate citizen. Building systems and processes which engage in establishing the club’s reputation as a fully accepted member of the society is the only way that the club can regain its social acceptability.
4.3 Achieve competitive advantage
When doing business in a competitive environment, businesses always seek new ways to distinguish themselves apart from the rest. This is called competitive differentiation. A business that has some asset which positively set apart it from the rest can achieve higher business returns. Earlier this differentiation came through marketing and branding activities. Yet it has been found out through research that to achieve a real competitive advantage companies need to go beyond the usual method of differentiation. Researchers such as Fomrun et al (1997) have identified that to achieve overall distinctive advantage companies must adopt the concept of corporate reputation building. Corporate reputation is a more evolved concept than branding since it is not customer centric but emphasises on the organizations reputation as a whole. “The basic message here is that
CIM Membership No.: 12410638 everything about an organization communicates. Everything. Failure to recognize this can result in serious headaches for organizations”( Bronn, 2002). By developing a fully functioning reputation management system business ensure that the message that is communicated throughout the organization gives the business a competitive advantage. Intercontinental hotels are the prime example for an organization achieving higher business value through superior corporate reputation management. By developing a strong reputation among its stakeholders the company has achieved a distinctive competitive advantage among its rivals. By establishing a CRM system at Waters Edge, the company can expect to gain this competitive advantage. Since the leisure industry competition is extremely high at present, this kind of benefit can be a real boon. The main advantages which the club can hope to achieve through achieving superior reputation is that it can outperform the competition purely based on this reputation. This is because reputation management isn’t given much importance in the Sri Lankan leisure industry. The club can even charge premium prices for products and services as customers are often willing to pay extra for superior reputation.
5.Conclusion It is found in research and in everyday business that corporate reputation is more important than ever before. In a published research by a popular consultancy company, it was stated that the percentage of a company’s value gained from intangible assets increased from 17% in 1981 to 71% in 1998. In further research by Brooklings Institute, it was found in 1962 that 62% company’s value was made up of hard capital. This decreased to 38% in 1992 and in the final data it was shown that in the year 2000 hard capital only made up 20% of company’s value. This shows the importance and value of soft capital which is a sound corporate reputation. Water’s Edge could consider these findings in moving to establish a sound reputation management programme for the organization. 6.
Recommend processes, structures and systems necessary to improve the organizations reputation.
After establishing the importance of CRM to Waters Edge, it is clear that the club needs to develop the necessary processes, structures and systems which would support in building its reputation. The following is a brief look at what improvements or developments the club must do to achieve a valuable reputation management system. 6.1 Structure development An organizations structure involves internal relationships, division of labour and methods of coordinating activities within the organization. A proper structure is very important to any organization as it helps maintain organizational control. It also ensures proper corporate and
CIM Membership No.: 12410638 individual actions and behaviour which in turn translates positive corporate identity. If a business wants to implement a new way of doing things such as implement a reputation management system, it needs to make sure that a proper structure is in place. Changes suggested for the structure I.Create stability Water’s Edge does not have a properly placed organizational structure. With many ad-hoc changes made to the organizational structure in the past, the internal stability of the club is vanished. The first thing the club needs is to have a properly designed structure in which each individual’s responsibility towards ensuring positive reputation is clearly identified. II.Adopt top down approach In any business organization the most senior influential leader of the organization creates the corporate culture. Taking CEO of Apple, Mr Steve Jobbs as example, we can see how his personal vision has created a reputation of unique innovation to the Apple. At Water’s Edge we need the full support of the top management board in implementing organizational commitment to reputation building. A strong leadership not only creates positive corporate culture among the internal stakeholders, it also signals a positive image to the consumer who world create a strong reputation. III.Create new positions Since Water’s edge does not have a proper Public Relations personal, this is the first position which needs to be created. Even though mere engage in PR is not reputation management, it is an important part of it. The club further needs a separate team of management level personal who would be in charge of all reputation building activities. IV.Allocate proper authority Creating the above positions is not sufficient if these new positions do not carry the necessary authority and resources that is required to do their job properly. This is why it’s important that top management is completely behind the effort to build reputation. All employees at Water’s edge need to support the effort of the new team to create positive reputation.
4.1 Processes development An organization has many different processes. Starting from strategic planning, communication, to value chain, everything is a process. Processes are in place to help the organization identify, regulate and manage its activities. Having proper processes in place help the organizations manage its corporate reputation better.
CIM Membership No.: 12410638 One of the most obvious faults of Water’s edge is the lack of process to manage and regulate activities. Due to this, the club has suffered both internally and externally. When there is no proper management of organizational activity it’s hard for a company to send a clear message across to its stakeholders. This is because the club itself isn’t sure what it’s supposed to be doing. Changes suggested for processes I.Strategic planning process This is the most important process for building corporate reputation in a company. It’s through this process that a company knows what it’s the big picture is in terms of what it wants to do, where it wants to go and how it plans to excel. A company needs to make an active decision in its strategic planning to allocate resources to pursue reputation building. Water’s Edge needs to develop a strategic plan which has an objective of creating superior corporate reputation. The strategic plan needs to be followed in all tactical decisions to ensure all-round reputation building. The necessary resources required to establish reputation management needs to be allocated through the strategic plan. II.Communication process A company which does not have a proper communication process is forever at a disadvantage in reputation building. As reputation exists in the realm of perception,. building positive perceptions should come through properly managed communication processes. Water’s Edge is in dire need of a proper communication process. A way through which it can create positive awareness both internally and externally among stakeholders. It is the lack of the aforementioned that has caused the company to suffer the most. III.Value chain A value chain contains number of sub activities in it. All these activities may not be important for Water’s Edge. The most important one is inbound logistics, as Water’s Edge is mainly a food and beverage service. In inbound logistics the company needs to understand that its partnerships with suppliers are one important reputation creating activity. The suppliers need to be chosen to follow the same level of quality as the company projects in its service delivery. Then only can the company not only create positive reputation among suppliers but also among customers as high quality service provider. 4.1 System development
Systems are defined as an organized compilation of parts that are highly integrated to achieve an overall goal. If the organization is considered as the main system, then it would have number of sub systems. Each subsystem has inputs, processes and outputs which work in continuity to achieve the overall objectives of the organization.
CIM Membership No.: 12410638 Changes suggested for systems I. Information technology system
Water’s Edge has numerous systems, differing in importance in its contribution towards reputation building. The most important out of these is the information technology system. Water’s Edge is in urgent need of building a proper integrated IT system as most of its stakeholder’s value communication done through this. Having an IT system supports the organization in corporate reputation creation and management. Using the internet or other telecommunication media to create reputation is done through the organizational IT system. IT systems can even support in managing crisis situations as having proper communication systems in place always reduces risk to reputation.
Word Count for Part A- 4190
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References Fombrun, C . J. and van Riel , C . B . M . ( 1997 ) ‘ The Reputational Landscape ’ , Corporate Reputation Review ,1 (1/2) , pp.6 – 11 Ettenson, R. and Knowles, J.(2008) ‘Don’t confuse reputation with brand’, MITSloan Management Review, Vol. 49, No. 2, pp 19-21 Pirson, M. and Malhotra, D. (2008), ‘‘Unconventional insights for managing stakeholder trust’’, MIT Sloan Management Review, Vol. 49 No. 4, pp. 43-50 Meffert, H. and Bierwirth, A. (2002), “Corporate branding – Fu¨hrung der Unternehmensmarke im Spannungsfeld unterschiedlicher Zielgruppen (corporate branding – leading the brand in conflicting stakeholder relationships)”, in Meffert, H., Burmann, C. and Koers, M. (Eds), Markenmanagement (Brand Management), Gabler, Wiesbaden, pp. 181-200. Anixter, J. 2003, “Transparency or not? Brand Inside: Brand OutsideTM – the most obvious
yet overloaded next source for the brand’s authentic evolution”, in Ind, N. (Ed.), Beyond Branding, Kogan Page, London. Beverland, MB & Dickinson, SJ 2011, “Building corporate reputation with stakeholders:
exploring the role of message ambiguity for social marketers”, European Journal of Marketing, vol. 44 no. 11/12 Brønn, PS 2002,'Corporate communication and the corporate brand', in Brønn, PS & Wiig, R (eds),Corporate Communication: A Strategic Approach to Building Reputation, Gyldendal, Oslo Caminiti, S 1992, “The payoff from a good reputation”, Fortune, vol. 125 no. 3, pp. 49-53. Dunbar, R & Schwalbach, J 2002, “Corporate reputation and performance in Germany”, Corporate Reputation Review, vol. 3 no. 2, pp. 115-23. Eberl, M & Schwaiger, M 2005, “Corporate reputation:disentangling the effects on financial performance”, European Journal of Marketing, vol. 39 no 7/8, pp. 838-54. Ettenson, R & Knowles, J 2008, ‘Don’t confuse reputation with brand’, MITSloan Management Review, vol. 49, no. 2, pp 19-21. Fan, Y 2006, “Guanxi ”, government and corporate reputation in China”, Marketing Intelligence & Planning, vol. 24 no. 4, pp. 365-79.
CIM Membership No.: 12410638 Fombrun, CJ & Shanley, M 1990, “What’s in a name? Reputation building and corporate strategy”, Academy of Management Journal, vol. 33 no. 2, pp. 233-58. Fombrun, C J & van Riel , CBM 1997, ‘ The Reputational Landscape ’ , Corporate Reputation Review ,vol. 1 no. 1/2 , pp.6 – 11. Hall, R 1992, “The strategic analysis of intangible resources”, Strategic Management Journal, vol. 13 no. 2, pp. 135-44. Kennedy, SH 1977, ``Nurturing corporate images: total communication or ego trip?'', European Journal of Marketing, vol. 11 no. 3, pp. 120-64.
Luchs, C, Stuebs, M & Sun, L 2009, “Corporate reputation and earnings quality”, Journal of Applied Business Research, vol. 25 no. 4, pp. 47-54. McGuire, JB, Schneeweis, T & Branch, B 1990,“Perceptions of firm quality: a cause or result of firm performance?”, Journal of Management, vol. 16 no. 1, pp. 167-80. Meffert, H. & Bierwirth, A 2002, “Corporate branding – Fu¨hrung der Unternehmensmarke im Spannungsfeld unterschiedlicher Zielgruppen (corporate branding – leading the brand in conflicting stakeholder relationships)”, in Meffert, H, Burmann, C. and Koers, M. (eds), Markenmanagement (Brand Management), Gabler, Wiesbaden, pp. 181-200.
Michelotti,PP & Michelotti,M 2010 "The role of the stakeholder perspective in measuring corporate reputation", Marketing Intelligence & Planning, vol. 28 no 3, pp.249 – 274. Neef, D 2003, Managing Corporate Reputation and Risk, Butterworth-Heinemann, Massachusetts. Pirson,M & Malhotra, 2008, “Unconventional insights for managing stakeholder trust”, Sloan Management Review, viewed on 2 February 2011, http:/www.hbs.edu/research/pdf/08-057.pdf Sarstedt, M 2009, “Reputation management in times of crisis”, Journal of Brand Management, vol. 16 no. 6, pp. 499-503.
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Part B Task 4
Publication Justification Business Today is a highly circulated magazine within the business community having a distribution of over 6000 copies. Mainly targeted at the professionals from different fields it carries a more global outlook on the local industries.
How not to be threatened by a crisis Introduction Business Crisis is not a new topic and is taken by business very seriously throughout. Organizations view crisis as “a point of great difficulty or danger to an organisation possibly threatening its existence and continuity that requires decisive change.” (Cornelissen, 2004). A good example is what Toyota has to face in poor safety standards. Crisis isn’t an unexpected phenomenon for most organizations. There is no doubt that businesses understand the inevitability of crisis. In understanding this eventuality, businesses can plan to avoid being threatened by a crisis.
Critical view of crisis communication characteristics The most important method of managing crisis is through communication. It is identified as the best way to mitigate the effects which crisis brings on to the Business. Crisis Communication (BCC) has unique characteristics which have both negative and positive impacts on business. Preparedness
CIM Membership No.: 12410638 Being prepared for the eventual crisis is an important part of BCC, (Coombs, 2006). Having an annually updated BCC plan and a well rounded BCC team will not go to waste when crisis hits businesses unexpectedly. The down side for early preparation is that managers fail to think beyond their plan and often use it as a blue print for BCC.
Team Work In crisis it’s seen that all relevant parties work together to overcome it. This sort of team work will ensure prompt response to crisis situations. Yet if members of the team are not on one page regarding the message or there are internal conflicts within the teams, things can end up in further crisis. The recent crisis in Egypt is a prime example of how internal conflicts within teams caused crisis escalation. Precision Precision usually involves testing of the communication plan and teams to test for weaknesses. This ensures strategic precision in realizing the company’s overall goals for BCC. Some businesses do not understand the importance of allocating budgets for this testing and often end up knee deep in crisis when they realize that their BCC isn’t up to dealing with the situation. Speed If the media can communicate the news the instant it happens, crisis communications dictate that a company must be prepared to respond almost as fast. The inability to communicate your message skilfully during a crisis can prove fatal. And it would be a totally needless demise, a wrongful death.
—Steven Fink, Crisis Management BCC is never effective if it isn’t done quickly. There are number studies which emphasises on the importance of speed in crisis communication. Yet even in the modern world of instant communications, the company in crisis is sometimes the last one to speak out. Accuracy
CIM Membership No.: 12410638 “In order to be effective in BCC, people require accurate information on what happened” (Coombs, 2007a). Yet companies make the mistake of providing inaccurate information either due to time pressure or to conceal the real situation.
Evaluation of crisis communication management and its impact on reputation In situations where reputation is threatened, one aspect of crisis management gains great importance: communication. Internal communication in a crisis enables an organization to stem rumours while external communication can result in favourable public perception Thiessen and Ingenhoff (2010)
Failure of most of BCC methods is due to the way it’s managed. If businesses follow a proper route of management for crisis communication, half of the harmful effects of crisis can easily be subdued. By developing and managing a plan of communication, communication teams, partnerships with media and proper feedback structure, organizations can face crisis easily. The crisis situations faced by Johnsons and Johnson & Tynelol products and how they come through it, managing its crisis communication is a fine example of how crisis communication management can support organizations passing through tough times.
Stages in which BCC management should occur. Adapting the BCC model of (Woodyard, 1998).
Develop a crisis plan Crisis plan should be formulated prior to the crisis and proper attention should be given to response procedures and budget allocations. Performance metrics should be introduced to measure the follow through of the plan.
CIM Membership No.: 12410638 Establish a crisis response team The main team members should be identified prior to the crisis. The team should be aware of their responsibilities and should consist of people who are both articulate and level headed. Identify key spokespersons Even though BCC is a team effort, it should have a selected set of key spokespersons. The spokesperson should be a person of authority and every spokesperson should stick to one voice. Spokesperson need not be a PR personal, yet the support of the PR and Legal personal is a must. Manage the first 25 hours vigilantly It is the first hours of crisis that can actually decided on which route the crisis would take. The management needs to be decisive and authoritative to convince the public. The crisis message should ensure public safety before organizational reputation. Talk to the media When addressing the media be sure to tell the organizations side of the story. Empathy and conviction here will go a long way to prove your concern. The information delivery should be managed at timely manner. Most importantly the organization should never lose control of the press meet. BCC and reputation According to the American Heritage Dictionary (1970: 600) reputation is the general estimation in which one is held by the public. A company’s public is its stakeholders. The way in which business manage BCC will directly affect their reputation (Coombs and Holliday, 1996) If the stakeholders believe that the business is responsible for the crisis, it will have an adverse effect on reputation. On the other hand if a business is able to convince that they are pushed into a crisis wrongfully a crisis can even improve reputation through stakeholder sympathy. This was the case with Cadbury India, where the proper management of crisis communication actually increased company reputation through public sympathy. This is why it’s so important to manage issues as they occur and to maintain good relationships with stakeholders, including media.
CIM Membership No.: 12410638
Water’s Edge Club and its Crisis management plan It would not be exaggeration to state that Water’s Edge has not had any form of crisis management since the time of its inception. This maybe the reason why the business is struggling for survival today. Even thought the club has a PR function, there is no strategic plan for the PR personal on how to deal with crisis. Because of this Quick-fix alternatives have become appealing to managers. These Hasty moves have created more trouble for the club.Due to this each time a crisis occurred in the business, its reputation has suffered further blows. The stakeholders of Water’s Edge are often misinformed by competitive forces. This has caused a steep reduction in business as far as the financial returns are concerned. Since the club is at a vulnerable stage it can be predicted that it will face further crisis. If the club does not anticipate and manage crisis more effectively things may worsen with time. Taking this factor to consideration, the following is a recommended crisis management plan for Water’s Edge adapting Coombs (2007a) Crisis management composition.
Recommended Crisis Management strategy for Waters Edge
Evaluating the crisis plan to test potential effectiveness Pre Crisis Phase The main aim of the crisis plan is to reduce the damage which crisis brings to a business. Establishing a pre-crisis plan and allocating the required budgets will ensure that when a crisis does occur the business would be ready both strategically and financially to handle it. The plan and the budget should be reviewed and updated at least once a year for it to be effective. A crisis team which consists of members from strategically vulnerable functions would ensure that the business has overall protection in crisis. Building strategic relationships with the media is essential for effective crisis management as they are usually the main source of information in 22
CIM Membership No.: 12410638 crisis situations. Developing websites and building on the existing intranet connections could ensure preparedness to deal with crisis in terms of stakeholder information as internal communication in a crisis enables an organization to stem rumours (Fearn-Banks, 2007), while external communication can result in favourable public perception (Penrose, 2000). Finally creating different draft messages for stakeholders can be a way of guaranteeing that all stakeholders are addressed in a proper way. Crisis response phase This phase is hard to control and principally depends on the stakeholder’s belief in the company and the skill of the spokesperson in convincing the public. To ensure effective crisis management plan follow through, the spokesperson could be trained and supported by both PR and legal personal. For the communication to be truly effective the company must remember to keep the employees in the loop of information as they are also a way of reaching the stakeholders. Using only traditional communication methods may not prove effective. The company would benefited by using the website developed in the pre crisis stage as this would ensure quick message delivery from one official source. Using mass notification system is another way of ensuring effective crisis management as this allows stakeholders to respond back to the company. Finally and most importantly the message delivered should be honest and consistent. Empathy is a good way of showing support but the business should make sure they are not accepting unnecessary liability.
Post crisis phase This stage is often disregarded by businesses as they feel that the crisis has passed. The lack of effective post crisis planning is one of the main problems Water’s Edge has faced with customers complaining repeatedly that the promises made during crisis has not been followed through. To prevent this club could emphasis in its crisis management plan of their policy regarding promises to the stakeholder. A post analysis of the situation could be useful in preventing similar crisis taking place. It could also be effective if the important stakeholders are kept in the loop to ensure loyalty. The crisis plan can to be reviewed post crisis and alterations regarding budgeting, performance matrices and team members need could be make the crisis plan more effective.
CIM Membership No.: 12410638
Recommendations for quality improvement in corporate communication activities to ensure successful crisis communication. Considering its present situation and the importance of BCC as was discussed above, Water’s Edge club would benefit from improving its corporate communication activities to manage crisis more efficiently. Online Media With world internet usage topping one billion people, online communication can no longer be ignored as a mean for crisis communication. The number of discussions which went on online during the recent Toyota automobile crisis shows the damage online media can do to a business in crisis. Water’s Edge itself is a prime example on what online news reporting can really do to a business (appendix 1 & 2). If Water’s Edge had any form of online presence other than their basic website they could have reduced the damage which online reporting brought on to the company. The club needs to develop a comprehensive BCC website which can be kept as a dark site until a crisis situation occurs. It also needs to build better relationships with the online media personal to display the club in positive light during crisis. Using Facebook and twitter to keep customers constantly updated would be a good way to ensure that stakeholders get the official version of the crisis situation from the company itself.
Opinion leaders and formers With heavy paid communication activities done for various reasons by thousands of business the reliability of the message delivered is always in question. It was suggested by Fisk (1959) that personal sources may be more effective than mass media in situations where uncertainty exists. The best personal sources a company can utilize in a crisis situation are opinion leaders and formers. This is because opinion leaders and formers usually carry a great amount of influence on the decisions of other consumers as they are thought to be trustworthy and impartial. To gain this advantage Water’s Edge can to use their government influence because in terms of opinion leaders, political leaders offer high value. Internal communication media A pre designed internal communication systems such as the intranet would be extremely useful for as a corporate communication activity in times of crisis. Dowling (2003) brings out this in his
CIM Membership No.: 12410638 research, when he states the significance of American Airlines’ use of its intranet system as a successful way to correspond with its employees following the 9/11 tragedy. An internet communication can also reach suppliers and obtain their loyalty and feedback during times of crisis. Water’s Edge needs to improve on its intranet communication system to include suppliers and a better feedback process as currently it’s only a one sided communication. To conclude Water’s Edge as a growing business has faced many setbacks due to the non existence of a proper BCC. By improving on their corporate communication activities regarding crisis the club may have a chance at dealing with crisis situations more effectively.
Word Count for Part B- 2143
References Coombs, WT 2006, Code red in the boardroom: Crisis management as organizational DNA.
CIM Membership No.: 12410638 Praeger, Connecticut Coombs, WT 2007a, Ongoing crisis communication: Planning, managing, and responding, 2nd edn, Sage publications Ltd, Los Angeles. Coombs, WT 2007b, “Protecting organization reputations during a crisis: the development and application of situational crisis communication theory”, Corporate Reputation Review, vol. 10 no. 3, pp. 163-76. Coombs, WT & Holladay, SJ 1996, Communication and attributions in a crisis: An experimental study of crisis communication. Journal of Public Relations Research, vol. 8 no. 4, pp. 279–295. Cornelissen, J 2004, Corporate Communications: Theory and Practice, Sage Publications Ltd, London Downing, JR 2003, American Airlines’ use of mediated employee channels after the 9/11 attacks. Public Relations Review. Fearn-Banks, K 2007, Crisis Communications: A Casebook Approach, 3rd edn, Lawrence Erlbaum Associates, New Jersey. Fink, S 1986, Crisis Management: Planning for the Inevitable, American Management Association, New York Fisk, G 1959, ``Media influence reconsidered'', Public Opinion Quarterly, vol. 23 no. 1, pp. 8391. Penrose, J 2000, “The role of perception in crisis planning”, Public Relations Review, vol. 26 no. 2, pp. 155-71. Thiessen, A & Ingenhoff, D 2011, “Safeguarding reputation through strategic, integrated and situational crisis communication management. Development of the integrative model of crisis communication”, Corporate Communications: An International Journal, vol. 16, no. 1, pp. 8-26 Woodyard, TM 1998, Crisis communication: A commanders guide to effective crisis communication, Research Report for Graduation Requirement, Air University. Miniwatts marketing group, World internet usage statistics, viewed 20th January 2011, http://www.internetworldstats.com/stats.htm Appendix 1 Online publication http://www.lankanewspapers.com in its continued reporting on the Water’s Edge crisis
CIM Membership No.: 12410638 Sri Lanka`s Water’s Edge land handed back to State Tuesday, 11 November 2008 - 4:39 AM SL Time
The Urban Development Authority yesterday submitted to the Supreme Court, the Deed of Revocation of ownership whereby, the ownership of 224 acres of land at Waters Edge, Battaramulla, was handed back to the State from the private entrepreneur Asia Pacific Golf Course Pvt Limited. Counsel for the UDA Nihal Jayewardene, told the Court that the UDA abided by the recent Supreme Court judgement which declared that the alienation of this property to a private entrepreneur was malafide. The Court ordered the retired president Mrs. Kumaratunga to pay Rs. 3 million as compensation to the state, for misdirecting the Cabinet to believe that this land was alienated for a public utility purpose counsel Jayewardene also told the court that the UDA and the Sri Lanka Land Reclamation and Development Corporation are having discussions to decide how best the land could be used to benefit the people. A draft of this master plan is to be submitted to the court within two weeks. The UDA is awaiting the valuation report from the Chief Government valuer in respect of the constructions done on this land. This report is also to be submitted to the court shortly. The court yesterday issued notice on the permanent commission to investigate bribery and corruption. The court ordered that the commission should submit their findings in respect of the mala-fide deal and submit the progress of their investigation at the next hearing, in two weeks time. Senior State Counsel N. G. Pulle, said that the Commission has started on the Investigation. Uditha Egalahewa appeared for seven hotelier employees of the Water’s Edge Club. He said that his clients are likely to lose their jobs. They are top hotelier, but unable to secure elsewhere as the hotel industry is at present having a lean time. The court directed Mr. Egalahewa, to check the employee’s employment data and to check with the Commissioner of Labour, what best relief could be granted for them. The counsel for the UDA said that the Chairman of the UDA, had expressed willingness to retain any competent employees. Faiz Mustapha PC, appeared for some former land owner of Battaramulla, who had not received compensation, when the land was originally acquired by the state. The court advised the UDA to look into this matter. The bench comprised the Chief Justice Sarath N. Silva, Justice Shirani Tilakawardene and Justice Saleem Marsoof.
Why the Water’s Edge deal is illegal in Sri Lanka
CIM Membership No.: 12410638 Friday, 10 October 2008 - 11:38 AM SL Time
This Court granted the Petitioners leave to proceed on November 12 2007 on an alleged infringement of Article 12(1) of the Constitution of the Democratic Socialist Republic of Sri Lanka. The Petitioners presented their case on the basis of an infringement pertaining to the acquisition of land on the premise that such land would be utilized to serve a public purpose whereas, by this impugned executive or administrative action the land was knowingly, deliberately and manipulatively sold to a private entrepreneur to serve as an exclusive and private golf resort in Sri Lanka, one carrying a membership fee of Rs. 250,000/-. Learned Counsel submitted that this was done through a process that was conniving and contrary to the equal protection of the law guaranteed by Article 12(1) of the Constitution which assures to the People the Rule of Law. Counsel also submitted that the facts in this case reflected a flagrant betrayal of the purported policy of the 1994 government under :the 1st Respondent to establish transparent governance and eliminate corruption, and that the facts disclose that this transaction reeked of corruption . Counsel submitted that the most disturbing factor of all was that those alleged to have initiated, facilitated and/or conspired to achieve this outcome were those from the highest echelons of the executive and included senior officials, members of the public sector and statutory bodies of the government, the former President (the 1st Respondent), multiple government agencies, the 4th Respondent Company, and as Counsel submitted in particular, the 5th Respondent Mr: Ronnie Peiris chose not to take part in the proceedings despite notices being served on him, and who through tax declarations, was revealed to have obtained a sum of approximately Rs. 60 Million in profit from this transaction despite having no disclosed association with it. Counsel additionally submitted that there had been a series of deliberate acts of gross abuse of executive power by the 1st Respondent. Counsel submitted that given the executive or administrative power wielded by those involved, the nature of the allegations made, and the seriousness of the implications of such allegations upon the national interest and national economy and, importantly, the citizenry of this country, the ramifications of this case, though exceedingly complex, should be carefully and incisively scrutinized by this Court He further submitted that this Court was the last bastion of hope to the people in whom sovereignty is reposed who are the most affected by the patent abuse of executive or administrative power especially by the 1st, 3rd, and 7th Respondents in this case. The facts indeed are complex, as one would expect from the voluminous pleadings presented to Court. Despite its scale and magnitude, a detailed study of the facts of the case has been done and it is appropriate to begin at the inception with an analysis which chronologically unravels the basic, relevant and important sequence of events of the impugned transaction.