On the day the crisis becomes public, the C-suite naturally focus on their company’s stock price, but it’s worth remembering the words of Warren Buffet, who once wrote to his managers that, “We can afford to lose money—even a lot of money. But we can’t afford to lose reputation—even a shred of reputation.” Everything an organization does and says during a crisis matters, but what matters most is long-term credibility, integrity and reputation.
Very few people know the decision-making process Boeing went through in late 2018 after the first 737 Max crashed in Indonesia. We do know that the U.S. Federal Aviation Administration allowed the planes to continue to fly, despite misgivings over its stall prevention software. We also know that Boeing made a grave error in continuing to fly the Max 737s until the crash had been fully investigated and that the second crash, in Indonesia in March 2019, should have been avoided. At House committee hearings in December 2019, a former Boeing employee alleged that Boeing had “prioritized production speed over quality and safety.” Boeing’s reputation will probably recover, unless another serious incident happens, because of the long history and high standing of the organization. But recovery will be slower than if it had put reputation ahead of everything else in the days after the first crash in October 2018. Boeing initially hoped that the Max 737 “recertification” would be completed in 2019 but has now suspended production.
|This article is featured in O'Dwyer's Jan. '20 Crisis Communications Magazine.|
Reputation accounts for 35 percent of the market value of the world’s leading publicly listed companies according to Reputation Dividend and company Boards should bear this in mind at all times. Organizations with the best reputations outperform rivals in tangible ways from recruiting higher quality staff, charging more for their services, succeeding with smaller marketing budgets to exerting greater influence over governments. They’re also the most likely to be given the benefit of doubt in crisis situations.
In the most acute crises—BP and Deepwater Horizon (2010-12); Samsung and exploding phones (2016); Volkswagen and emissions (2014-18) and Boeing (2018-19)—the acute threat to the business and the stock price did not come directly from shareholders and the financial community, but from governments, pressure groups, media, and public concern and outrage. The best crisis managers are therefore those who understand reputation and civil society, rather than those who specialize in understanding stock price movements and the financial community.
To successfully handle a crisis, corporate communications and public relations professionals need to add value to their organization or client in two areas: A real understanding of reputation and genuine reputation management advice.
My favorite definition of reputation comes from John Doorley, formerly of Merck and now Visiting Professor at Elon University in North Carolina, who co-authored the excellent Reputation Management with Helio Fred Garcia. His formula is wonderfully straightforward, it states that reputation is the sum of the images of others—Eminem’s version is pretty good too: “I am whatever you say I am”—and it comes from performance plus behavior plus communication. He says that reputation can only be sustained if an organization is authentic and true to its purpose or to a set of values. This says it all, but it emphasizes how all-encompassing reputation is.
So, anyone who defines their role as narrowly as a public relations or corporate communications professional can only, by definition, be tangentially involved in reputation management—because they’re not at the center of how their organization behaves or performs, only in how it engages and communicates. Stephen Covey memorably said that, “you can’t talk your way out of a problem that you behaved yourself into”—and in times of crisis, organizations almost always need to change their behavior.
In the Boeing case, the crucial commercial decision of whether to keep flying or ground all 737 Maxs until the (first) crash has been fully investigated—was also the crucial reputation management decision. Amidst the range of advice from bankers, lawyers, the CFO and commercial heads, reputation must have been discussed. Perhaps things would have been different if Boeing had a reputation management professional who transcended the role of corporate communications and public relations and had been empowered in those discussions?
Boeing’s stock price fell from $386 to $304 by December 2018 as a result of the Max 737 crash in Indonesia. However, it recovered to a five-year high of $441 in February 2019 as a result of the strong response to the first disaster. Since the second crash, it has fallen 26 percent to $327 in December 2019 and appears to have further to fall. The response to the first crash was beneficial to the share price, but the second crash leaves the share price in a perilous state. In the House transportation hearing on 10 December 2019, the FAA’s Administrator, Stephen Dickson, said the agency should have grounded the Max after the first deadly crash, in October 2018. That’s probably true. I’d argue that Boeing would’ve made that decision itself if it had put long-term reputation ahead of short-term stock price. And that’s a lesson for all of us.
Tony Langham is Co-Founder and CEO of Lansons in London and Chairman of Lansons Intermarket in New York.