New research has demonstrated that there is a design to reputation recovery if your brand finds itself in trouble.
Major brands including the BBC, Toyota, Siemens and News International have all experienced reputation damaging incidents recently. But new research indicates there is a design for reputation recovery to rescue consumer trust.
Trust is an important factor in the customer relationship, serving as a vital component of customer loyalty, and therefore of greater repeat purchasing, increased levels of spending and ultimately profitability.
Yet in recent years, a number of studies have indicated that consumers are becoming increasingly sceptical of big brands, with the Edelman Trust Barometer, for instance, reporting that trust in business has plummeted since the 2007 financial crisis.
Even amongst this general dip, however, there have been some notorious developments that threaten to have long-term implications for reputation and trustworthiness.
Siemens, for instance, was accused of systemic bribery in 2006, and the German engineering giant has since overhauled its structure, leadership, processes and culture. Toyota’s product recall crisis in 2009-10 has led to concerted efforts to recover its damaged reputation. The BBC undertook a comprehensive review of operations following its phone-in scandals in 2007-08 and it has carried out a number of reforms. Most recently, News International has had to hold itself accountable for the phone tapping scandals that rocked its reputation.
However, research indicates that while the process of trust repair and the recovery of reputation can be difficult, it is achievable. And a new report by the Institute of Business Ethics has discovered a pattern amongst those that have successfully rebuilt their reputations internally and externally.
“The damage to reputation trustworthiness when something goes wrong is mitigated by two things,” explains report co-author Dr Nicole Dando, head of projects at the Institute of Business Ethics. “One is the way the company responds to it, and the other thing is prior reputation of trustworthiness – having high ethical standards.
“You can clearly see how trust is impacted by the way brands respond. But if you have a strong reputation prior to the event, and a strong relationship, then the good will from stakeholders will mean they will be more forgiving. However, if you have a history of things going wrong then you’re going to get hit more. For instance, when Toyota had its problem, there had been pre-existing mistrust because there had been a series of recalls prior to the big disaster. And then when it responded very slowly and didn’t’ show remorse early enough, it meant that trust was diminished and its reputation was hit.”
The report also indicates that brands that do experience an event that threatens to cause significant reputational damage, must go through two processes to rebuild trust – these are referred to as distrust regulation and trustworthiness demonstration.
Distrust regulation means fundamentally removing people’s fears and concerns of a future negative event – i.e. that the violation is going to happen again. The distrust regulation steps that are put in place to ensure this are typically regulatory interventions to modify policies and practises, or potentially removing the offending people or product or service that has caused the problem. This will tackle negative expectations.
But this is not enough on its own – most people would regard this as a bare minimum. So the brand must also complement this with fresh positive steps to demonstrate trustworthiness again. Distrust regulation will demonstrate trustworthiness to an extent by being concerned about the relationship and by putting things in place to stop it happening again, that's an indicator of your ability but the brand must also demonstrate positive indicators of your trustworthiness - the trustworthiness demonstration. This should involve offering public and personal apologies, penance and steps over and above what might be considered to be a standard preventative measures.
Co-author of the report Graham Dietz, senior lecturer in human resource management and organisational behaviour at Durham University, explains: “If you only to one of them, if you only try to appeal with positive images and messages about your trustworthiness without actually tackling the problem then the former is going to be clearly undermined by the latter; and if you only say 'Ok, we've put that in place now, it won't happen again' then that tends not to be enough either. The optimum response is to apply both. so that's the theory that we've developed and that comes out of the academic trust literature about how trust it built and how it's repaired - you have to disconfirm the negative expectations and support positive expectations.”
Real world examples that demonstrate this in action, include Toyota.
Dietz continues: “Toyota tried to let the external regulators take their course and failed to appreciate the magnitude of the story as it was developing and delayed some of the indicators of their concern and their remorse by allowing the regulatory process with the highways agency in the states to take its course. Toyota failed to get out there early enough to indicate their concerns and how much they wanted to get to the bottom of it. the CEO and the president took a long time to make a public comment and so the fact that he didn't comments and seemed to resist wanting to come over to the US was interpreted rightly or wrongly as an act of a lack of trustworthiness.”
At the opposite end of the spectrum was National Express’ response to a 2007 crash which had resulted in its first ever fatality.
“The CEO got to the scene in the middle of the night and issued some genuinely remorseful and sympathetic and compassionate statements for the family and added that he was cooperating with the authorities. And one of the interesting things was that as a precaution they removed all of the similar coaches. He didn't have to do this.
“It potentially signals that perhaps the coaches are at fault, but he said we're only doing that as a precaution just to make sure to protect the customers. He was rightly lauded for not only the positive statements of remorse and concern and support for the families but also trying to take a competent and responsible approach to preventing it from happening again, just in case the coaches were at fault and then otherwise cooperating with the authorities to find out exactly what happened.”
But can brands ever fully recover trust from such serious events? And can they ever recover to the point where their reputations are actually even better than before? Dando believes it is possibly.
She points to the example of utility Severn Trent, which was found guilty of distorting performance data for the industry regulator Ofwat and fined £38m. Within two year, however, Severn Trent had been voted Utility of the Year by its peers, in part due to its innovative and impressive recovery efforts.
She explains: “Severn Trent put in a complete corporate cultural overhaul, and the way they went about doing that has left them in a stronger position than when they started. They have had a complete change at the top and a complete revision of the way they do things - their processes were revised with a view to scrutiny in terms of reputation risk and integrity risk and they began to persist with a code of conduct and whistle blowing policy so it made it a much stronger company as a result. Furthermore, their leadership development has emphasised ethical honesty.”
The main message, Dando concludes, is that protecting your relationship starts now – brands shouldn’t wait until disaster strikes before you start working on your trustworthiness.
She says: “Companies should consider in advance what their response to a crisis is going to be and what messages they would put out there, understanding the importance of values and reputation in the response process, and rehearsing so they get it right.
“The problem is when companies only do those things once a crisis has happened and of course it's much better to prevent an integrity crisis or a reputation hit by marking sure that your ethics program and training of staff on the importance of big ethical standards is in place to prevent these. But most importantly we all have to understand the role of prior trustworthiness in the public's response to something when it goes wrong.”