Learning from Reputational Crises

by Stephen A. Greyser

Stephen A. Greyser is Richard P. Chapman Professor Emeritus, Harvard Business School. He has written or co-authored 15 books and more than 300 case studies; most recently he co-authored Multiple Identities of the Corporation, Monarchies as Corporate Brands, and Revealing the Corporation.

Stephen A. Greyser

Editor's note: The following piece appeared in the April 2005 issue of Harvard University's Human Resource. It is reprinted here with permission.

Martha Stewart. The Catholic Church. Arthur Andersen. Perhaps even Harvard? Numerous organizations have suffered blows to their reputation and, in marketing terms, threats to their brand.

Some have quickly reemerged as strong: Tylenol (deaths from externally tainted capsules), Intel (flawed calculations from Pentium chips). Some have been weakened but survived: Firestone (tire-safety problems linked to many deaths). Some companies have failed to bounce back from their product/service or corporate brand crises: Enron and Andersen. For some the jury of consumers is still out: Martha Stewart.

In all these instances, the threat affected what I term the essence of their brand.

What can be learned from these experiences in brand crisis? How can an organization anticipate such troubles, confront them effectively, and try to recover from them? Over 30 years, my study of these situations points to some key lessons.

First, understand your identity as others see you--not what you say you are or want to be. Know your brand's meaning to key stakeholders and what could threaten its core.

I believe every organization, every entity, is a brand. It possesses and connotes meaning to a range of external and internal stakeholder groups. That meaning typically has functional characteristics and also emotional ones, e.g., a car considered both excellent transportation and "a brand that makes me feel good."

Not every key attribute of a brand, however, is its essence. Consider the International Olympic Committee (IOC) and the Tour de France. Bicyclists allegedly using performance-enhancing drugs harm the essence of the latter's brand, namely integrity of competition. For the IOC, the bid-city bribery scandals were serious but did not affect athletic competition, the essence of its brand to fans. But "tarnished rings" did potentially threaten the brand equity of IOC sponsors; they brought pressure for change.

Second, reputational trouble can come in many forms and from many publics. Examples include a social-responsibility gap (Kathy Gifford clothing line), corporate misbehavior (Enron), executive misbehavior (Martha Stewart), very poor business results (many), spokesperson going awry (Anita Bryant and Florida Orange Juice), death of iconic symbol (Dave Thomas of Wendy's), and loss of public support (Louis XVI and the French monarchy).

Nonprofits are not immune. United Way (executive misbehavior), Dana-Farber (accepting major money from a tobacco-related firm), and the US Catholic Church (priest sex abuse and cover-up) are a few widely reported instances of actions adversely affecting brand reputation with some constituencies.

Consider Martha Stewart Omnimedia. Strategically, Martha herself was the brand. The brand has many attributes, but its essence was largely around a perception of her as wholesome. That perception was eroded among key business partners and some consumers by Stewart's insider-trading scandal. Some advisors thought she could distance herself from the company by stepping down as CEO. But that's difficult when your name is on everything: the door, paycheck, magazine, TV show, and stock certificate. Her recent public relations-supported return from prison indicates that she still is the brand. Time and corporate performance will tell whether this is wise.

Thirdly, in the face of crisis, admitting the truth (even if embarrassing) and forthrightly addressing the problem (even if it involves changing corporate behavior) are the best roads to possible brand rehabilitation. Communications alone cannot do the job. Without a springboard of evidence-based support or change, communications cannot leap the tall buildings of reputational trouble.

For example, the Boston Archdiocese of the Catholic Church communicated denials of the existence, then the extent of priest sex abuse, but eventually it had to admit the problem. It is still suffering from much-eroded trust--the essence of the brand.

In another example, can Wal-Mart's current advertising campaign ("Wal-Mart is working for everyone") be effective when the company is widely reported to have closed a store where employees were trying to unionize and when it is being sued for discrimination against women employees?

What about Harvard? What is the essence of its brand? What could threaten the brand? The actual answer rests with key publics--alumni, faculty, and the nearby community. Logic suggests that the omnipresent veritas is at the core--espoused for generations as logo and motto. Veritas connotes both substance and style. What could harm it seriously?

Hypothetically, a major financial mismanagement revelation or a public and hotly debated governance issue might affect alumni confidence or donor giving. Lack of transparency in real-estate acquisition can affect community relations. In my view, however, they are not central to the heart of Brand Veritas.

More likely to wound the essence of the brand of any top-tier university would be massive falsification of faculty research data, especially in scientific or educational research that has an impact on public policy. Systematic scandals involving admissions, such as longstanding opaque arrangements with certain schools, would likely affect the perceived integrity of a core university process. Bribes accepted by senior officials for faculty appointments or for predetermined research findings are other hypothetical illustrations of injuries to a university's brand.

What are the principal lessons? In short:

Understand your brand and its essence based on the study of attitudes held by interested publics.
Recognize that threats to the brand are legion, and anticipate what could cause a brand crisis.
In the event of brand crisis, focus on forthrightness and truly substantive response.

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