Crisis: Chicken or Egg?

(Below is a re-post from ProActive Communications’ President Mark Serrano from his blog, PowerTrip)

Two new studies raise the specter of plummeting trust in institutions and the impact this has on corporate reputations and business success. The interesting question that the analysis behind these studies raises is: what is at the heart of a negative reputation and how much of a role does crisis management and communications play in public perceptions?

For many sectors, such as finance and banking, the dramatic vote of no confidence in their companies by the public is in and of itself a crisis, so the crisis dynamic and whether it is a cause or result, is worth considering in the current negative economic climate and in the choice of leaders.

Harris Interactive, in its Annual Reputation Quotient (RQ) study, which assesses perceptions of corporate reputations across industries, determined that 60% of 17,000 survey respondents believe that the reputation of corporate America has declined in the past year (a decline of 36% over the 2011 study). The assessment determined that the factors behind the “negative reputation landscape” include the following:

Perceptual Factors

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  • Erosion of trust in corporate leadership, both in the personal traits of leaders and in their ability to successfully manage the whole corporation.
  • A greater impact of sincerity, transparency, and accuracy in communication on reputation and the gap in how well companies are seen performing on these.

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Behavioral Factor

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  • 50% of the general public now research companies – not just products – before doing business with them, and they’re finding a lack of information around corporate values and behaviors, limiting the emotional appeal between the public and these companies.

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Interestingly, Harris Interactive notes that the auto industry has doubled in public perceptions of trust in the past two years, and that the technology sector is on top of the RQ scale (Apple tops the poll with an RQ rating of 84). Who is at the bottom of their trust scale in the eyes of respondents? Government, of course, with an RQ of 10, and the financial and banking sectors are not much better off.

In a similar study, Edelman Public Relations also just released its annual Trust Barometer in which they survey 25,000 general population respondents (with an oversample of 5,600 “informed publics”) in 25 countries and “examine trust in four key institutions – government, business, media, and NGOs – as well as communications channels and sources.” Many of their key findings parallel Harris Interactives’.

Edelman Findings

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  • Government is the least trusted institution since people do not “trust that their government will do what is right.” The Japanese Government’s handling of the Fukushima disaster in the wake of the earthquake and tsunami last spring serves as a key area of focus in the study.
  • Trust in business is still on a steady decline, with the financial and banking sectors at the bottom, and the tech sector at the top.
  • Trust in both government and business leaders also plummeted, with a lack of transparency serving as the main cause in the slide (as reflected in the excerpt below).

In a separate look at how much the general population trusts government and business leaders to tell them the truth, government leaders resoundingly emerge as the less likely party to be transparent, with 46 and 27 percent, respectively, saying “I do not trust them at all.”

Business leaders were not immune to the increasing skepticism. The drop in the credibility of CEOs…fell more than – or as dramatically as – it did when the recession hit in 2008-2009. Overall, CEO credibility dropped 12 points to 38 percent, its biggest drop in (Edelman Trust) Barometer history.

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While the general economic condition is certainly an important backdrop for perceptions, not all sectors are faring badly in the public eye, with technology most notably in the lead. With the Fukushima disaster singled-out as a notable example in the Edelman report regarding trust in government, transparency in communication in the wake of a crisis is clearly critically important in the eyes of the public and the trust they will offer institutions and leaders.

Look back to 9/11 (when Mayor Rudolph Giuliani was hailed as a hero for his crisis management and communications approach) and Hurricane Katrina (in which state and local officials assailed the federal government’s response, instead of seeking solutions and calming the public) and you will see the full spectrum of disasters and the public’s response to the styles of leadership displayed under such conditions, good and bad.

Since the economic crisis began in 2008, the finance and banking sectors have been in the political cross-hairs in the US. This, as well as their complicity in the mortgage-banking disaster, has dramatically impacted perceptions about companies in these businesses.

These examples, demonstrate that no matter what the circumstances, (and no matter what lawyers may say about your legal liability exposure) the general public should not be taken for fools. People should be provided candid and timely information about companies, their products and services, crises that affect any part of the population, and natural disasters.

Crisis and challenging times draw out the best and worst in leaders, but these studies show that the public will ultimately have the last say about your success, so leaders would be wise to include them in the solutions along the way.

Continue the conversation on Facebook and Twitter with @ProActiveComm and @MarkVSerrano.

Photo Credit: SodaHead

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