MASTER IN CORPORATE COMMUNICATION

Transcription

1 MASTER IN CORPORATE COMMUNICATION AARHUS BSS DEPARTMENT OF BUSINESS COMMUNICATION A CASE STUDY OF MALAYSIA AIRLINES CRISIS COMMUNICATION DURING THE DISAPPEARANCE OF FLIGHT MH370 WRITTEN BY SØREN KRONBORG THOMAS MAEGAARD-NIELSEN SUPERVISOR BO LAURSEN

2 The total amount of characters in this thesis amounts to 224,244 compliant to standard pages. Conferring with the requirements, this excludes Spaces, Abstract, Table of Contents, and Appendices. Appendixes are encloses separately. June 1, 2015 Søren Kronborg Thomas Maegaard-Nielsen

3 Abstract Purpose: With departure in reputation management and crisis communication, the aim of the thesis is to investigate how Malaysia Airlines executed its crisis communication during the disappearance of flight MH370. Furthermore, the thesis seeks to investigate to which degree Malaysia Airlines was able to protect its reputation during the crisis. Design/methodology/approach: The thesis is a case study of Malaysia Airlines crisis communication consisting of both a qualitative and quantitative research combined in a mixed methods research. The qualitative research is carried out on the basis of sampled company documents and analyzed using a qualitative content analysis. The qualitative investigation additionally forms the basis for conducting the quantitative research, which consists of data gathered from an online questionnaire survey and analyzed using a frequency table analysis. The effect of Malaysia Airlines crisis communication is uncovered by combining the two separately conducted investigations in an overall discussion. Findings: The thesis found that Malaysia Airlines failed to provide an adequate and consistent information flow to its stakeholders during the crisis, which resulted in a double crisis that gave the airline an unprecedented communication challenge. Malaysia Airlines mistakenly decided to adopt its own crisis framing, and the airline therefore misjudged the crisis type which served as a launch point for the employment and combination of several inappropriate crisis response strategies. Consequently, it proved difficult for Malaysia Airlines to maintain positive stakeholder relations, and the airline s reputation became severely damaged. Malaysia Airlines lost its means to sustain profitability, and it ultimately made the organization aware of the need to restructure its business operations. Practical implications: The findings can give crisis managers useful insight into the communicative challenges they may face during a crisis. If an organization mismanages the original crisis, it may be overlaid by a double crisis. In such an instance, it may prove difficult for crisis managers to carry out a successful crisis communication strategy due to a gap in existing literature. Originality/value: The thesis provides a deep insight into the crisis communication effort carried out by Malaysia Airlines in a corporate communication context from both an organizational and a stakeholder perspective. Keywords: Corporate communication, reputation management, crisis management, crisis communication, crisis type and intensifying factors, crisis response strategies, guidelines with recommendations, stakeholder perceptions, and customers.

4 Table of Contents 1. INTRODUCTION (SHARED) PROBLEM STATEMENT SCIENTIFIC APPROACH, RESEARCH METHOD AND DATA COLLECTION THESIS SCOPE AND DELIMITATIONS STRUCTURE THEORETICAL FRAMEWORK (SØREN) INTRODUCING CORPORATE COMMUNICATION (THOMAS) CORPORATE REPUTATION (THOMAS) Corporate Reputation Defined (Thomas) One or Several Reputations (Søren) Why Corporate Reputation is Important (Thomas) Reputation Building (Søren) Managing Corporate Reputation (Søren) CRISIS MANAGEMENT (SØREN) Crisis Definition: a Socially Constructed Phenomena (Søren) Image Restoration Discourse and Crisis Communication (Thomas) The Theory of Image Restoration Discourse (Thomas) Suggestions for Effective Image Repair Discourse (Søren) Situational Crisis Communication Theory (Søren) Stage One: Crisis Type and Intensifying Factors (Søren) Stage Two: Crisis Response Strategies (Søren) Stage Three Guidelines with Recommendations for Crisis Response Selection (Thomas) Two Important Research Traditions (Søren) THEORY OF SCIENCE (THOMAS) ONTOLOGICAL AND EPISTEMOLOGICAL CONSIDERATIONS (SØREN) The Ontological Position of Constructionism (Søren) The Epistemological Position of Interpretivism (Thomas) METHODOLOGY (SØREN) The Case Study Design (Thomas) Research Strategy: Mixed Methods Research (Thomas) Why Both Methods? (Søren) Data Collection (Thomas) Documents as Sources of Data (Søren) Sampling Strategy (Thomas) Validity of the Qualitative Study (Søren) Qualitative Data Analysis (Søren) Online Survey (Søren) Questionnaire Design (Søren) Sampling Strategy (Thomas) Validity of the Quantitative Study (Thomas) Quantitative Data analysis (Søren) CASE PRESENTATION (THOMAS) ANALYSIS (SØREN) CRISIS TYPE AND INTENSIFYING FACTORS (THOMAS) The Crisis Occurs (Thomas) The Intensity of the Rumor Crisis Increases (Thomas) MH370 is Deemed Lost (Thomas) Stakeholders Question the Credibility of the Crisis Communication (Thomas) Interpreting the Findings (Søren) Ambiguity Creates Rumors (Søren)... 60

5 Contributing to Rumor Creation (Søren) Assessing the Crisis (Søren) Intensifying Factors (Søren) CRISIS RESPONSE STRATEGIES (SØREN) The Initial Strategy (Søren) Shifting Strategies (Søren) Strategies following the Announcement of the Plane Crash (Søren) Interpreting the Findings (Thomas) Denial Posture Strategies (Thomas) Diminishment Posture Strategies (Thomas) Rebuilding Posture Strategies (Thomas) Bolstering Posture Strategies (Thomas) Overall use of Crisis Response Strategies (Thomas) STAKEHOLDER PERCEPTIONS OF MAS CRISIS COMMUNICATION (THOMAS) Survey Results (Thomas) Interpreting the findings (Søren) DISCUSSION (SØREN) CONCLUSION (SHARED) IMPLICATIONS FOR CRISIS COMMUNICATION PRACTICE (SHARED) BIBLIOGRAPHY ARTICLES BOOKS WEBSITES

6 1. Introduction On March 8, 2014, Malaysian Airlines (MAS) was put to the test. The organization experienced one of the worst crises in modern aviation history, when flight MH370 on route from Kuala Lumpur to Beijing disappeared. Air traffic control centers lost all contact with the plane at 2:40am local Malaysian time, and an international search and rescue mission from Malaysia, Singapore and Vietnam was mobilized hours later (Appendix 1). The search for flight MH370 was initially carried out in the South China Sea and then widened to include Malaysian Peninsular, the Malacca Strait, and the Andaman Sea (Appendix 8). On March 15, the search was widened to include a northern and southern corridor (Appendix 11). However, the decision to widen the search did not shed light on the circumstances surrounding the disappearance of flight MH370. Consequently, MAS decided to inform the general public on March 24 that the plane presumably ended its route in the southern Indian Ocean and that no one could possibly have survived the plane crash. A British global mobile satellite communications company, Inmarsat, had performed further calculations on the satellite data which indicated that the last known positon of flight MH370 was in the middle of the southern Indian Ocean far from any possible landing sites (Appendix 13). Nevertheless, if MAS had predicted that the crisis would eventually be buried by drawing this conclusion, the airline was terribly mistaken. There is still no physical evidence to support the conclusion, and it has presented MAS with an unprecedented communication challenge. One might say that the MH370 crisis became an unprecedented challenge because it was what Fink (2002) refers to as sudden, unexpected, unanticipated, and short-fused, which arguably made it very difficult to manage (Fink 2002: 55). There seems to be a general consensus among crisis communication writers that a crisis is a negative phenomenon that compose a direct threat to the organization and can have a serious impact on its reputation. Fink encapsulates that consensus in his definition of a crisis: A crisis is an unstable time or state of affairs in which a decisive change is impending ( ) with has the distinct possibility of a highly undesirable outcome ( ) (Ibid: 15). According to Cornelissen (2008), protecting an organization s reputation by building and maintaining the relationship with important stakeholders is considered one of the most valued criteria of corporate communication (Cornelissen 2008: 3). Besides from its reputation, an organization s relations with its stakeholders can also have a profound impact on its overall Page 1 of 102

7 performance, as the ( ) ability to create value for the customer directly influences revenues (Samanta 2014: 206). One key element in managing an organization s reputation is also the ability to manage crisis situations through effective communication strategies. In fact, organizations frequently find themselves in situations that can be defined as crises (Coombs & Holladay 2010a: 17). Crisis communication represents a set of factors designed to combat crises, lessen the actual damage inflicted and minimize the reputational threat. In other words, crisis communication seeks to prevent or lessen the negative outcomes of a crisis by protecting the organization, its stakeholders, and the industry from harm (Coombs 2012: 5). Crisis communication is one of the most critical elements of effective crisis management, and it can broadly be defined as ( ) the collection, processing, and dissemination of information that is required to address a crisis situation (Ibid). If the organization in crisis is incapable of running the communication processes which is supposed to contribute to the initial handling of the crisis, a double crisis may occur where the original crisis is overlaid by a communication crisis (Johansen & Frandsen 2007: 79). If this turns out to be the case, the crisis can be a serious threat to the organization s legitimacy. Johansen & Frandsen (2007) argue that crises can violate the expectations that stakeholders have about how organizations should act. When expectations are breached, stakeholders perceive the organization less positively and the reputation is harmed. As a result, it is emphasized that crises should be considered very dangerous to an organization s overall reputation and future existence (Coombs 2012: 3). One of crisis communication s corner stones was laid by Benoit (1997), when he used the concepts of apologia and accounts to develop his theory of image restoration discourse as an approach for understanding corporate crises. Apologia is communication with the purpose of defending reputation from public attack, and accounts is communication used to explain the organization s behavior when it is called into question (Benoit 1997: 154). However, Benoit s theory focuses primarily on the verbal defense strategies applied by organizations when their image or reputation is under attack. It does not take into account the contextual factors that may influence the communication processes. In continuation of Benoit s image restoration discourse, Coombs (1999, 2007, 2012, and 2015) combines elements of the rhetorical approach to crisis communication with Weiner s (2006) conceptualization of attribution theory in his Situational Crisis Communication Theory (SCCT). The theory includes the notion that stronger attributions of the organization as the source of the cause lead to greater attributions of crisis responsibility, which in turn leads to an increased threat to Page 2 of 102

8 an organization s reputation (Coombs & Holladay 2010b: 247). SCCT operates with three stages that seek to provide crisis managers with a set of guidelines to assist them in choosing the most effective responses for the protection of the organization s reputational assets. The first stage seeks to establish the crisis level of reputational threat and determine if the crisis has any intensifying factors. The second stage proposes different crisis communication strategies to provide the maximal reputational defense, and the third stage provides a system of guidelines with recommendations for effective crisis communication (Coombs 1999: 143). The goal of the SCCT is to match crisis response strategies with specific situations. Roughly, the greater the reputational threat is, the more accommodative the crisis response strategy is expected to be (Coombs & Holladay 2010b: 249) Problem Statement Based on the information presented so far, we have been inspired to devise a problem statement consisting of two research questions. With departure in reputation management and crisis communication, we wish to investigate: 1. How did MAS execute its crisis communication during the disappearance of flight MH370? 2. To which degree was the airline able to protect its reputation during the crisis? In order to address the first research question, we will apply Coombs (1999, 2007, 2012, and 2015) SCCT to investigate how MAS executed its crisis communication during the crisis. The second research question will be addressed in an investigation of MAS ability to protect its reputation by exploring how a specific customer group perceived the communication effort. It has been emphasized that one of the most important stakeholder groups for any organization is the customers, as they can have a profound effect on its overall performance. The customers should therefore provide an interesting point of departure for a supplementary investigation of MAS reputation Scientific Approach, Research Method and Data Collection The scientific approaches influencing this thesis are comprised of both ontological and epistemological considerations, which will be expressed rather implicit than explicit. The thesis first and foremost takes its point of departure in the ontological position of constructionism to study the reality and context created by MAS and its key stakeholders. Constructionism generally implies that social phenomena are constructed by social actors through interactions and conversations that Page 3 of 102

9 do not exist independently from the people participating. The approach invites the researcher to consider the ways in which social reality is an ongoing accomplishment of social actors rather than something external to them (Bryman 2012: 33). By embracing the constructionist approach, it can be asserted that crises and their meanings are continually being constructed not only by MAS, but also by other social actors such as the stakeholders. As a result, the reality of the crisis should be regarded as a socially constructed phenomenon created by both MAS and its key stakeholders (Coombs 2012: 2). The ontological position of constructionism should enable an investigating of the communication effort carried out by MAS from both an organizational and a customer perspective. Additionally, epistemology is the different forms of knowledge that can be employed to understand social realities more in-depth. In order to reach a more holistic understanding of the social reality created by MAS and its customers, the epistemological position of interpretevism has been adopted. The interpretivist approach embraces a worldview that is affected by the social constructions of reality and based on the researcher s subjective observations influenced by personal values. We will employ the hermeneutic-phenomenological tradition, which is one of the most prominent intellectual heritages of interpretivism, to interpret the meaning created between MAS and its customers in a wider context. By gaining access to the common-sense thinking of MAS and its customers, we should be capable of interpreting their actions and their social world from their viewpoints (Bryman 2012: 30). The investigation takes it point of departure in a case study of MAS crisis communication during the disappearance of flight MH370. The single case study should allow us to capture the complexity and particular nature of the case in question where our emphasis will be placed on an extensive examination of MAS crisis communication from two perspectives. There is a widespread tendency to associate case studies with qualitative research, but such identification is inappropriate as case studies are frequently sites for the employment of both qualitative and quantitative research methods (Ibid: 68). The same argument applies to the scientific link between ontology, epistemology and methodology; it is important but not determinant for the chosen research strategy. For this thesis, we have decided to conduct research that cuts across the qualitative and quantitative divide within a single research project, namely what Bryman (2012) refers to as mixed methods research. Mixed methods research can be carried out in several ways, and different rationales exist for combining qualitative and quantitative research. Our incentive for combining qualitative and quantitative research in a mixed methods research is placed within the rationale of completeness, Page 4 of 102

10 which dictates that a more complete answer to a set of research questions can be achieved by including two different research methods (Ibid: 637). Qualitative research will account for the principal data-gathering tool of the mixed methods research. The qualitative data will be gathered by sampling documents from MAS and the Malaysian Government s official MH370 websites, and it covers both press releases, transcripts of press conferences and annual reports during a period from March 8 to August 29, It should be noted that all statements by both MAS and the Malaysian Government are accredited to MAS. The reason for this accreditation is the fact that at the time of the crisis, 70% of the airline was owned by the Malaysian Government through its strategic investment fund, Khazanah Nasional Berhad. A qualitative content analysis will consequently be employed to analyze the sampled documents and should enable an answer to the first research question. Qualitative content analysis is one of the most prevalent approaches to the qualitative analysis of texts, and it is comprised of searching for underlying themes and concepts in the sampled documents. The SCCT contains several theoretical concepts and categories, and we therefore find it sensible to use them as themes when examining the sampled documents. Bryman does not specify in detail the process through which the themes are extracted, but they will be illustrated in quotations and statements derived from the documents when we write down our findings. Another important element in qualitative content analysis is to interpret the findings, which means that we will reflect on the overall importance of our findings for the research questions and the research literature that have driven the collection of data (Ibid: 559). Although the predominant research strategy of the thesis is deemed qualitative, most qualitative research methods do not allow data to be evaluated in terms of measurement, and we therefore needed an additional approach that would allow us to measure how the customers perceived MAS crisis communication. When the findings derived from the qualitative content analysis have been interpreted, they will form the basis for conducting an online questionnaire survey. In other words, we have employed a quantitative investigation to help shed light on the findings drawn from the qualitative. According to Bryman, it is possible to use the in-depth knowledge of social contexts acquired through qualitative research to inform the design of e.g. questionnaire surveys (Ibid: 644). The questionnaire will primarily be comprised of attitude questions in the form of a Likert Scale design. The Likert Scale is one of the most frequently encountered formats for measuring attitudes, and the questions will be specifically geared towards addressing the thesis second research question (Ibid: ). Page 5 of 102

11 There are many available online software packages to design a questionnaire, and we decided to use SurveyXact since it is a free and acclaimed instrument offered by Aarhus BSS. Using SurveyXact should also eliminate the obligation of coding a relatively large number of questionnaires, and it reduces the likelihood of errors in the processing of data. Each respondent s replies are logged into a database, and the entire dataset can be retrieved and used in a frequency table analysis once the data collection phase is complete (Ibid: 671). The statistical analysis of the respondents perceptions of MAS crisis communication will be described by providing the reader with short and simple summaries about the sample and its measurements. Albeit qualitative research has had almost a monopoly of the ability to study meaning over the years, the widespread inclusion of questions about attitudes in social surveys suggests that quantitative researchers are interested in matters of meaning as well (Ibid: 617). When we ask the respondents about their perceptions of different elements of MAS crisis communication, it also implies that we need to uncover issues of meaning in the quantitative investigation. This aspect further supports the idea that qualitative and quantitative research is probably not as wide and distinct as is often supposed by many social researchers Thesis Scope and Delimitations In terms of scope, the thesis will conduct an investigation of MAS crisis communication during the disappearance of flight MH370. The crisis is contained to the period between March 8, when the plane disappears, and August 29, when the plan to delist MAS is announced. The qualitative investigation of press releases, transcripts of press conferences, and annual reports is conducted with the purpose of ensuring that the content of all the collected data speaks to how the airline utilized communication to manage the MH370 crisis. Articles including statements from unofficial sources like newspapers and other media have been excluded because they may angle the story to bring their version of it. We did however make a few exceptions in order to bring relevant information that was unavailable on the official websites, but when exceptions were made it was always the unedited information of the article that was utilized in the analysis. MAS use of social media communication during the crisis has been excluded for a variety of reasons, but first and foremost because it has not been the focus of the thesis. Additionally, it is user-generated communication, which makes it impossible to distinguish between users and exclude people that are partial to the airline, e.g. the relatives of the passengers and crew members of flight MH370. The statements made by the relatives in the press are also excluded because they are deemed partial and do not form a representative sample. Instead, we have conducted an online questionnaire Page 6 of 102

12 survey of potential customers with the purpose of providing a different and perhaps more realistic perspective of how the stakeholders perceived MAS crisis communication. The quantitative investigation is made with the purpose of ensuring that the respondents are a fair sample of MAS potential customers. One might say that the majority of MAS potential customers are located in other areas of the world, but since it is the absolute size of a sample that is important and not the relative, the investigation will arguably be just as valid when sampling from a Danish population. For the purpose of this thesis, we have identified golf players of Mollerup Golf Club in Aarhus as the population and specific stakeholder group from which a probability sample will be drawn. Golf players generally represent a wide section of the Danish population that travels to Asian countries, and they are therefore considered a fair sample of MAS potential Danish customer base. In regards to the theoretical framework of the thesis, a delimitation was made to utilize crisis theory that has a strong focus on the communication produced by the organization in crisis and not by other actors involved. It was chosen for its ability to both enable a study of how organizations in crisis defend their reputation through an application of various types of crisis response strategies, as well as its ability to illuminate how the organization s attribution of crisis responsibility impacts its response strategy choice. Although it was considered, we ultimately chose to exclude the inclusion of theory that applies a multi vocal approach to crisis communication such as the Rhetorical Arena (Johansen & Frandsen 2007). It was considered because of its ability to capture the complexity of the many communication processes that take place inside the rhetorical arena, thereby characterizing crisis communication in its entirety. It was excluded because the thesis scope does not include the communication from multiple stakeholder groups. The focus is instead placed on the one-way crisis communication of MAS and on an analysis of how the airline s communicative effort was perceived by its customers. Additionally, we recognize that corporate communication is a holistic discipline and encompasses internal as well as external dimensions, but it should be noted that the thesis sole focus is on external communication in regards to the MH370 crisis. Finally, it is recognized that the MH370 crisis is situated in a specific social reality and that no two crises are identical. However, a single case study allows for theory-based generalizations, which makes the scientific context relevant for providing insights into how organizations should communicate during a double crisis and why the findings of this thesis should be regarded as contributions to the field of crisis communication. Page 7 of 102

13 1.4. Structure The thesis extends over eight chapters, beginning with the preliminary considerations of the introduction. Chapter two consists of the theoretical framework, and it focuses primarily on the corporate communication sub-disciplines of reputation management and crisis communication, which together formed the basis for the development of the problem statement and its accompanying research questions. The theoretical framework will provide an extensive account of the two disciplines that should be regarded as the theoretical foundation for assessing the case. Chapter three contains the thesis underlying research orientation including ontological and epistemological considerations as well as the methodologies for data collection and data analysis. Chapter four will provide the reader with a case presentation to ensure a contextual understanding of the subsequent chapters. In chapter five, the theoretical and methodological considerations will be applied in an investigation of MAS crisis communication effort during the disappearance of flight MH370. Chapter six will consist of a discussion of the findings derived from both the qualitative and quantitative analysis while taking a critical perspective towards MAS crisis communication. Whereas chapter seven will present an account of the problem statement and provide the concluding remarks of the thesis, chapter eight will attempt to offer alternative perspectives for future research within the field of crisis communication. 2. Theoretical Framework In this chapter, we have conducted a theoretical framework that is intended to help us understand the social world and the phenomenon we are investigating. The framework has been particular important in our research process because it has provided a backcloth and rationale for the research that is being conducted on MAS crisis communication during the disappearance of flight MH370. Basically, what we have done is to construct a multiple layered theoretical chapter with different theoretical approaches. The idea is that one theory will support another in its limitations, which will enable the existence of a connection thread throughout the thesis. The theoretical framework is comprised of reputation management and crisis management theories, both sub-disciplines of corporate communication. The two disciplines have been employed to enable an answer of the problem statement and its accompanying research questions. Page 8 of 102

14 2.1. Introducing Corporate Communication The history of corporate communication begins with the discipline being considered a subset of journalism. Since the need for that type of communication was created by journalists, many CEO s believed that they should hire journalists to deal with media relations (Argenti 1996: 74). Corporate communication became more than just public relations when internal and external stakeholders began demanding more information from organizations (Cornelissen 2008: 4). Argenti (1996) argues that although communication schools began training practitioners of public relations, business schools are now the most appropriate home of the discipline: ( ) like other functional areas of the organization, e.g. marketing, finance, production etc., corporate communication exists as a real and important part of most organizations (Argenti 1996: 74). Argenti also provides a list of different activities within corporate communication, and although he acknowledges that it is not all-encompassing, it does represent the most important sub-functions. His list of modern corporate communication practices contain: image and identity; corporate advertising; media relations; financial communication; employee relations; community relations and corporate philanthropy; government relations, and; crisis communications (Ibid: 77). Even though the corporate communication function incorporates a number of specialized disciplines, its communication with both internal and external stakeholders always starts from the perspective of the bodily organization as a whole (Cornelissen 2008: 5). Corporate communication transcends the specialties of individual communication practices, e.g. media relations, investor relations, internal and external communications, etc., and crosses these specialist boundaries to harness the strategic interests of the organizations at large (Ibid). Protecting an organization s reputation by building and maintaining the relationship with important stakeholders is considered one of the core tasks of corporate communication, and it is also one of the most important strategic objectives in most modern organizations. There seems to be a widespread consensus among managers that the future of an organization actually depends on how it is perceived by key stakeholders. Therefore managing and executing strategic programs is the key to building and nurturing these relationships (Ibid: 3). The general idea is that the sustainability and success of an organization depends on how it is perceived by its stakeholders, and communication is a critical part of building, maintaining and protecting such relationships (Ibid: 5). Although corporate communication originated in media relations and subsequently spread to other functions, today it is a discipline that begins with the bodily perspective of the organization. Because it has its roots in the overall nature of the corporation, it does not have the in depth Page 9 of 102

15 knowledge of the sub-functions of the organization s communication. As a consequence, it risks losing the details that can make all the difference when the organization s communication professionals are managing its various stakeholders to strengthen its corporate reputation. Stakeholder management is one of the more important elements of corporate communication, as an organization s relationships with its stakeholders can have profound effect on its overall performance. Freeman (1984) defines a stakeholder as: ( ) any group or individual who can affect or is affected by the achievement of the organization s objectives (Freeman 1984: 46). According to Fiedler (2011), one of the most important stakeholders for any organization is its customers: ( ) customers ( ) are indeed the most important stakeholder group (Helm et al. 2011: 134). The notion that customers are the most important external stakeholder is supported by Samanta (2014). She states that customers are ( ) the raison d'être of any company (Samanta 2014: 206), which means that they are the organization s very reason for existing. Moreover, she states that ( ) customer value is the primary objective since the ability to create value for the customer directly influences revenues (Ibid) Corporate Reputation Fombrun (1996) is one of the most recognized and referenced writers within corporate reputation. According to him, ( ) a reputation embodies the history of other peoples experiences with a service provider. Good reputations increase credibility, making us more confident that we ll really get what we re promised (Fombrun 1996: 3). Fombrun references the reader s own life when explaining why a good reputation is important, saying that when we choose our dentist, electrician, lawyer, doctor, travel agent, etc.; we do so because they come recommended by someone we trust. The main reason for why a good corporate reputation is valuable is that it makes the individual confident that he or she will really get what is promised by the organization (Ibid) Corporate Reputation Defined Looking for a clear-cut definition of what constitutes corporate reputation can be close to impossible. Every book or article seems to have a different variation on how the concept should be defined, and this section therefore begins with the root of the construct: reputation. We found that the word reputation was defined quite similarly in various dictionaries as a belief or opinion held by others about someone or something. Additionally, we found that it is the: Overall quality or character ( ) (Webster), something that ( ) is generally held about someone or something (Oxford), and something that reflects ( ) what has happened in the past Page 10 of 102

16 (Longman). For this thesis we have summarized the three dictionary definitions and taken reputation to mean the overall opinion or belief generally held by people towards someone or something because of what has happened in the past. Bromley (2002) provides one definition of corporate reputation by stating it is ( ) reflecting a firms relative standing, internally with employees and externally with other stakeholders, in its competitive and institutional environment (Bromley 2002: 36). Griffin (2008) provides another view on corporate reputation by arguing that ( ) any attempt to deconstruct and compartmentalize corporate reputation risks missing the point: your reputation is difficult to pin down as it is based on perceptions (Griffin 2008: 12). A third definition of corporate reputation is proposed by Doorley & Garcia (2011), who suggest that three critical components must be included in the definition: ( ) corporate reputation is the sum of images and it is made up of performance, behavior and communication (Doorley & Garcia 2011: 4). According to Helm (2011), the reason that no clear-cut definition exist is the number of different disciplines that take an interest in reputation without a common language or an agreement on the terms and axioms of their analyses (Helm et al. 2011: 5). Helm therefore summarize the various definitions by condensing the findings on the construct interpretations and describes corporate reputation as ( ) a stakeholder s overall evaluation of a firm in respect to its past, present, and future handling of stakeholder relationships that reflects a firm s ability and willingness to meet stakeholders expectations continuously and describes the firm s overall appeal to all of its constituents when compared with other firms (Ibid: 7) One or Several Reputations All of the above definitions operate with the notion that an organization only has one corporate reputation, but several writers question this notion. In fact, Bromley (2002) claims that an organization can have ( ) as many reputations as there are social groups (Bromley 2002: 36). Additionally, Liehr-Gobbers & Storck (2011) claim that a reputation can vary from stakeholder group to stakeholder group and additionally from country to country (Helm et al. 2011: 29). These views are somewhat supported by Davies et al. (2003), who argue that ( ) different stakeholders can have different images of the same organization (Davies et al. 2003: 61). In their definition, they use the term image, which is one of two elements that they argue a reputation is composed of: image the view of the organization held by external stakeholders, and; identity the view of the organization held by internal stakeholders. Page 11 of 102

17 A further explanation of the relationship between image, identity and reputation is provided by de Camara (2011), who emphasizes that: ( ) corporate identity represents the internal culture, values and behavior of an organization, as well as its visual appearance (Helm et al. 2011: 48). In her summarization of what an image is, she argues that ( ) corporate image resides in the heads of the stakeholders, whereas identity resides in the heads of the organization (Ibid: 49). She also explains why some might state that more than one corporate reputation exist, saying: ( ) the term should be corporate images for there are as many as there are individuals having relationships with, or knowledge of, the firm (Ibid). The approach taken by most studies of corporate reputation and by this thesis towards understanding the relationship between corporate identity, image and reputation is the holistic view. This view perceives reputation building as a cross-functional and organizational activity that concerns all stakeholder groups (Ibid: 51). To a large extend, de Camara and Davies et al. also agree on what corporate reputation ultimately is. Davies et al. argue that it is ( ) a collective term referring to all stakeholder s views of corporate reputation (Davies et al. 2003: 61), whereas de Camara argues that it is ( ) an external reflection of internal organizational behavior (Helm et al. 2011: 54) Why Corporate Reputation is Important A survey from 2003 indicates that reputation among business leaders is regarded as a more important criterion for the success of a business than e.g. price development and profitability (Helm et al.: 2011: 27). Additionally, reputation management does not have an assigned budget in several organizations, as it is considered so central to business success that it cannot be a budgeted area. Instead, reputation management is regarded as a top level role, and more than 80% of managers agree that reputation is ultimately the responsibility of the CEO (Davies et al. 2003: 51-52). The question one might ask is why reputation is so important for organizations and ultimately more important than profitability and price development. This question is partly answered by Liehr- Gobbers & Storck (2011) in two parts. Firstly, developing and protecting reputation have the objective of securing the cooperation of internal and external stakeholders and securing maximum cooperation, which can lead to achieving the strategic goals of the organization. Secondly, a good reputation leads to better chances of overcoming crises, as reputation serves as a sort of buffer or safety net (Helm et al. 2011: 19). The buffer that Liehr-Gobbers & Storck speak of is also referred to as reputational capital, which is something that every organization has in greater or lesser amount. Reputational capital can be Page 12 of 102

18 considered a form of intangible wealth closely related to goodwill or brand equity, and by having a large stock of reputational capital an organization can gain a competitive advantage against its rivals. This advantage is achieved through gaining the trust and respect of the customer, which means that the organization is granted the benefit of doubt in ambiguous situations and that we willingly pay handsomely for their products because we trust them to deliver on our expectations. In other words, reputational capital enables an organization to charge premium prices for its products, to achieve lower marketing costs, and to benefit from greater freedom in decisionmaking (Fombrun 1996: 9-11). In order to fully understand how reputational capital can serve as a buffer in crisis situations, Helm provides an example where the reputation equals a sand dune and the crisis equals the blowing wind. The size of the dune is determined by how good the reputation is: the greater the reputation, the bigger the dune. Now, when the blowing wind of a crisis occurs, the size of the sand dune plays an important role. A strong wind takes away the uppermost layer of sand at first and leaves the lower layers and the core of the dune (the historical values of the firm) untouched. Depending on the severity of the storm, this means that the core and maybe even the lower layers can stay unaffected by the big wind gust. However, if the sand dune is very small, the lower layers and the core of the dune may also be severely affected by the blowing wind of a crisis (Helm et al. 2011: 13) Reputation Building Fombrun (1996) argues that reputation building is a form of an enlightened self-interest, and that building an organization s reputation means entering into competition with its rivals: Reputation is both a product and a by-product of competition. It is produced directly as a firm builds competitive advantage in pursuing uniqueness, as it differentiates itself from rivals (Fombrun 1996: 32). Pursuing uniqueness is the way to differentiate the organization from its rivals by finding the unique value that it alone can deliver to a chosen marketplace. The development of management practices that reinforce the found uniqueness of the organization will enable it to foster consistent images of it as credible, reliable, responsive, and trustworthy (Ibid: 23). And when these images are benchmarked against rivals, communicated persuasively to stakeholders, perceived by those to cohere and maintained over time they enhance the company s reputation and build competitive advantage (Ibid: 23-24). However, according to Drucker (2006) uniqueness is worth nothing without effective executives practicing mundane management. He states that the way to be a truly effective executive is to Page 13 of 102

19 perform a small number of fairly simple practices well, and to ask oneself: What can I and no one else do which, if done really well, would make a real difference to this company (Drucker 2006: 59). One might say that Drucker combines the concept of uniqueness with the role of the effective executive. He expects the executive to ask what he and only he can do that makes a real difference to the organization and then to develop the simple mundane habit of doing it day in and day out: When you come down to it, building reputation is downright mundane (Fombrun 1996: 30) Managing Corporate Reputation In reputation management, the organization s stakeholders are usually managed through separate departments that are exclusively devoted to that one stakeholder group. Most companies deal with their publics in a fragmented manner. For the most part, they delegate them to distinct functional silos finance, marketing, human resources with minimal opportunity for contact or coordination. Doing so reflects a poor understanding of the determinants of corporate reputation (Fombrun 1996: ). This way of conducting business can work fine at a micro level, but if an organization seeks to manage its reputation at a more strategic macro level, then simply managing the various silos of the organization will not be sufficient. According to Fombrun (1996), It also imperceptibly damages an organization s competitiveness and profitability while increasing its riskiness and vulnerability to crisis (Ibid). We have examined several writings on reputation management in order to determine what the subjacent fields of an organization s reputation are. The examination resulted in the authors taking the subjects of writings by various reputation management practitioners as an indication of what constitute an organization s reputation. Those subjects were: corporate identity and image, stakeholder management, investor relations, issues management, crisis communication, customer relations, employee relations, government relations, media relations and corporate social responsibility. All of these fields can arguably be considered part of good corporate communication as well as good reputation management, which speaks to the complex nature of an organization s reputation. Griffin (2008) furthermore argues that compartmentalizing corporate reputation risks missing the point: a reputation is difficult to pin down as it is based on perceptions (Griffin 2008: 12). Davies et al. (2003) state that defending reputation begins with ( ) thinking the unthinkable and then planning for that eventuality (Davies et al. 2003: 99). Additionally, Fink (2002) suggests that ( ) the problems in managing crisis occur when they become sudden, unexpected, unanticipated, short-fused crises (Fink 2002: 55). He also states that success in defending reputation essentially Page 14 of 102

20 consists of planning ahead for what and whom will be needed as that will save valuable time in the heat of the crisis, which saves the organization from having to (a) decide what is needed and (b) then finding it. Furthermore, he states that an effective plan presents certain key decisions on the mechanical portions of the crisis those aspects that rarely vary and leaves one free to manage the content portion of the crisis with your hands unfettered (Ibid: 55). When an organization has experienced the need to defend its reputation following a crisis it will then need to rebuild its reputation. Before an organization begins rebuilding, it can choose to conduct a reputational audit. An audit is done through three principal steps: 1) Diagnosing the current stage, which is a diagnostic view of the organization's current identity, image and reputation. 2) Designing the future state, which is a strategic analysis of the trends, plans, and competitive positioning that defines the organization s desired future state. 3) Managing the transition, which is a review of the plans for managing the transition towards the future state (Fombrun 1996: ). The first step has three parts and consists of an identity analysis (1), which is a review of all organizational communication with its stakeholders. An image analysis (2) assesses the perceptions of how well the projections are communicated, which is done by conducting a comprehensive survey of the organization s principal stakeholders. The final part is a coherence analysis (3) that explores the coherence of the different images obtained in the surveys. In the second step, the organization s top managers develop a consensus on where they would like the organization to be positioned. This development is done through an understanding of the organization s strategic intentions and competitive circumstances, through discussions of the strategic position within the industry, and through a discussion of its rivals relative reputational standings and self-presentations. The third step is managing the transition. This step requires a close involvement of a representative cross section of employees to ensure the success of the intervention, and secrecy is therefore not essential and broad internal discussions are encouraged (Ibid: ). Generally, one issue with managing corporate reputation is the number of different definitions that exist. The lack of consensus in the definition of a corporate reputation means the researcher can take a variety of approaches, making it a somewhat blurred field of study. Another subject of disagreement is whether an organization has one overall reputation or several reputations. Some Page 15 of 102

21 argue that an organization has several reputations, while others call for the existence of one overall reputation. Finally, there is the question of how to manage reputation, which is a question without one correct answer. Additionally, one must also incorporate the management of the subjacent fields of reputation in the overall plan, which then begs the question of which department should oversee the reputational management. Should it be the communications department, which most articles claim, or do they have too much focus on the communicative aspect. Perhaps it will be managed better by another department where the focus is also placed upon the performance and behavior of the organization. All these unanswered questions indicate that the field of reputation management is currently a work in progress with far more questions than answers Crisis Management According to Coombs (2012), crisis management is not merely developing a plan and executing it during a crisis. Instead, it is appropriately viewed as an ongoing process. Every day, organizational members should be scanning for potential crises, taking actions to prevent them, or considering any number of aspects of the crisis management process to increase the level of preparedness (Coombs 2012: 6). Coombs further suggests that crises are ubiquitous, and various developments in today s environment have made all types of organizations more susceptible to them. Unprepared organizations have more to lose today than ever before, and especially mismanagement costs seem to escalate (Ibid: 13). Crisis management therefore represents a set of factors, including crisis communication, which is designed to combat crises and to lessen the actual damage inflicted. In other words, it seeks to prevent or lessen the negative outcomes of a crisis and thereby protect the organization, stakeholders, and industry from harm. Crisis communication is probably one of the most critical elements of effective crisis management, and it can broadly be defined as ( ) the collection, processing, and dissemination of information that is required to address a crisis situation (Ibid: 5). Page 16 of 102