Dr Benedetta Crisafulli is Senior Lecturer in Birkbeck’s Department of Management with expertise in crisis communication. She shares insights from her research on how to plan for and handle a crisis.

No organisation is immune from crises. While in an ideal world crises would be avoided altogether, in practise that’s not always possible. Invariably this means that it’s essential to have a plan for situations when things go wrong.

In the literature, we tend to distinguish between three main types of crisis:

Corporate Social Irresponsibility – when an organisation is affected by a scandal due to disregard for the environment, employees and/or community at large.
Service Failures – when an organisation fails to deliver on its brand promise.
Product Harm – when products are suspected to be dangerous to customers and have to be withdrawn from the market.

The way companies handle a crisis determines their reputation, sales and ability to recruit top talent. Much of my research in collaboration with top scholars including Paolo Antonetti, Jaywant Singh and Stan Maklan examines the response of various stakeholders when crises occur, and what happens when organisations and their brand representatives do something in an attempt to overcome such events.

What are the most important PR actions for an organisation facing a crisis?

If you find yourself failing to deliver upon your brand promise in a way that causes customer dissatisfaction and anger, a very important step to revert the situation is to fix the problem. A very recent case in point in the UK concerns Heathrow baggage crisis last summer. In such circumstances, an offer of compensation is somehow futile unless the problem is fixed and any compensation is provided in a timely manner, by an empathetic and polite brand representative. The empathy, concern and politeness of the company, or its representatives, does matter regardless of the channel of communication – it matters even in technology-mediated interactions, as our research shows.

Crucially, we should remember that customers are not always complaining with the aim to gain some form of compensation. Customers often seek reconciliation to be able to re-use the company services, and are not always ready to take revenge. In our research on anger, we could identify not only a vindictive form of anger, but also a supportive form of anger following service failures. Supportive anger can be beneficial to companies as signalling consumers’ willingness to find a resolution to the problem and show continued patronage. If anger is not always negative, as we find, then companies should be ready to listen to customers’ complaints.

Do some organisations weather crises better than others?

It is important to note that not all crises are the same: if there is no attribution of responsibility to the company, customers tend to be more tolerant. For example, if a flight is cancelled due to extreme weather conditions, customers are unlikely to blame the company. That’s quite intuitive.

When it comes to crises exposing companies’ social irresponsible practices, however, market leading companies tend to be somehow less affected. Such companies still suffer, but less so when compared with smaller companies. With Prof Paolo Antonetti at NEOMA Business School, and Aybars Tuncdogan from King’s College London, we addressed this specific question in our published research in the Journal of Business Ethics. In particular, we were interested in job seekers’ reactions to corporate social irresponsibility events concerning dominant companies, which are leaders in an industry. Our research shows that dominant companies are comparatively less negatively impacted than non-dominant companies, especially so when job seekers feel very certain about their attitudes towards the organization.

While market dominance does not give companies a license to do what they want, investments in building a dominant brand can have a return in being able to navigate crises more easily.

What mistakes have organisations made in the face of crises?

The case of BP managing a crisis is exemplary. In 2010, the Gulf Coast was hit by a huge oil rig explosion – the biggest oil spill in US history. BP failed to report the facts with transparency and good intentions, stating that the oil rig was leaking 1,000 barrels of oil a day. That number was in fact closer to 5,000. Being perceived as dishonest in responding to the crisis would have most likely further damaged BP’s reputation.

Another example of a questionable crisis response is the case of United Airlines, when a guitar owned by the band Sons of Maxwell was broken during baggage handling. After being frustrated by repeated failed attempts to get compensation or reach a resolution, singer Dave Carroll took to YouTube to publicly shame United Airlines through a series of songs, which went viral.

Is there any way to turn a crisis into a positive story?

In service failure literature, there is some evidence to support what is called the Service Recovery Paradox, wherein customer satisfaction after a failure and subsequent recovery is even higher than satisfaction prior to the failure. In practice, the evidence assumes that crisis response of companies is exceptional (not simply good enough), yet that’s costly. It also assumes that the failure is low in severity and unlikely to happen again in the future.

Pepsi successfully bolstered their reputation following a consumer backlash when a needle was allegedly found in a drink in Washington. Pepsi produced a number of videos demonstrating the way the drinks canning process is carefully managed, thereby reminding consumers of the brand’s excellent production standards and goodwill.

What kind of preparation can organisations do to support the handling of future crises?

There is no one size fits all approach for crisis communications, but there are some guiding principles:

Companies should try their best to behave ethically and responsibly to avoid crises to start with.
Make sure there is a plan in place for crises that commonly occur in your industry. For example, customer service industries can measure consumer sentiment via historical data or social media listening to identify the kinds of crises they should plan for.
Have a crisis communication plan detailing what steps you will take if a crisis occurs. The plan should include fixing the problem and communicating empathetically with customers in a way that conveys genuine, not manipulative, motives.
If a customer asks for compensation, it is usually because they deserve it, so don’t be parsimonious!
Work on building, maintaining and reinforcing market dominance as that can somehow attenuate the negative effects of crises, and still make you attractive to job seekers.

Further Information

New research by Birkbeck’s Dr Benedetta Crisafulli and co-authors Dr Paolo Antonetti and Professor Stan Maklan adds insight to the relationship between company failure, CSR and customer response.

Picture the scene: you’re at a restaurant and your order is taking longer than expected to arrive. The waiter has been steadfastly ignoring your gaze since you sat down and when you finally do manage to flag him down, he is rude and unapologetic.

How would you respond?

Anger, frustration and a desire to tell your friends never to dine in that restaurant are all common responses. At the same time, you might feel a desire for reconciliation – to receive an apology and be offered a discount on your bill.

Would your reaction be different if you knew the restaurant was committed to Corporate Social Responsibility (CSR)? Would the fact that the restaurant is a morally responsible business excuse them from your harshest criticism?

This is the question that researchers from Birkbeck’s Department of Management, NEOMA Business School and Cranfield University sought to answer in their latest study on the relationship between company failures, CSR and consumer response.

CSR and consumer behaviour: what we know so far

Prior research suggests that CSR acts as a reservoir of goodwill that companies can draw on following a crisis. If we believe that a company is caring and well-intentioned, we are more willing to give it the benefit of the doubt in the event of a brand failure such as poor product performance.

However, existing evidence from research is less clear on whether CSR does indeed mitigate the negative impact of failed service delivery.

How does CSR impact consumer reactions to failed service delivery?

The results from an online experiment showed that the nature of the failed service is key in determining consumer response:

when competence-based, CSR is an effective service recovery strategy
when integrity-based, CSR is unable to inoculate the negative effect of poor service performance

In the case of a competence failure, a company’s CSR generated impressions of warmth , which softened the negative impact of the failure.

In the case of an integrity failure, the service failure contradicted the impression of warmth conveyed by CSR; as a result, CSR fails to save the company from consumers’ retaliation.

Does a consumer’s relationship with a company matter?

Of course, not all consumers are alike. The researchers found that the nature of the relationship between consumer and company has an impact on consumer response to CSR.

Consumers with high communal orientation, that is those who are concerned for others’ interests and benefits and value a company that is caring are less likely to feel betrayed by the company and CSR would reinforce the positive relationship. A less positive effect would be felt for consumers with an exchange orientation, who are concerned about individual gains from the relationship.

What does this mean for managers?

For managers looking to mitigate the impact of service failures, it is essential to monitor the types of service failures in their organisation to assess the likely impact of CSR initiatives.

When it comes to communicating CSR activities, firms are advised to focus on communicating the altruistic objectives of their CSR initiatives.

In the event of a competence failure, CSR can buffer negative effects, Explanations and apologies should focus on reassuring customers that the company did not intentionally cause the failure.

It would also be helpful for companies to capture consumers’ level of communal orientation as part of their market research and to target CSR messaging to the segments aspiring to a communal relationship.

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