According to Aon’s 2017 Global Risk Assessment Survey, reputational damage features in the top five risks for almost every industry.  Product recalls unethical behaviour, supply chain failures, business interruption and cybercrime are all precursors to reputational damage.  It warrants heightened vigilance from businesses, especially since reputational damage can subsequently lead to legal challenges, increased competition and even share price fluctuation.

It is clear that businesses should take this risk extremely seriously, and incorporate it into business risk analysis. If reputational damage has already occurred, the question is not about prevention, but about repair and the response to the issue/crisis will influence how the company is perceived, its reputation and long-term survival.

McDonald’s Response to Supersize Me
In 2004, filmmaker Morgan Spurlock released his now famous documentary about McDonald’s, Supersize Me.  It followed Spurlock as he attempted to spend a month eating nothing but McDonald’s food, with emphasis drawn to the ‘supersize’ option offered to customers at the time. The film became very popular and McDonald’s suffered reputational damage as a result, particularly due to the health problems endured by Spurlock as a result of his experiment.

The fast-food chain responded in a variety of ways, its strategy often depending on the country in which it was deployed.  In several countries, McDonald’s paid for advertising time in the trailers shown before Supersize Me at cinemas.  As a Campaign article noted in 2004:

“The calm, rationed approach contrasts strongly with McDonald’s response to the movie in the US.  While the UK advert describes the film as “slick” and “well-made”, McDonald’s in the US called it “a gross-out movie” and responded with an aggressive PR campaign.”

Although McDonald’s tried to respond to the film, ultimately it helped to push the fast food industry in a healthier direction. The ‘supersize’ option was phased out, even as spokespeople insisted the film and connected health concerns played no part in the decision.  It made little difference. The damage to the reputation of McDonald’s and the wider fast-food industry invited a wave of competitors to join the fray.  Even as recently as 2015, the chain was arguably still suffering as a result.

Uber Loses CEO
The ride-sharing app has come under increased scrutiny in recent months, with several aspects of its business suffering reputational damage.  From sexual harassment scandals and the revelations of a toxic workplace culture to public concerns about unethical business practices and exploitation, we have seen Uber’s brand tainted.  And, like McDonald’s, the reputational damage has opened the door to competitors to take market share. In this particular instance, rival business Lyft has raised half a billion dollars to capitalise on Uber’s pain.

Uber responded by opening an anonymous tip line for employees, as well as holding ‘listening sessions’ with its workforce.  However, such is the scale of the issues facing the company that CEO Travis Kalanick had no choice but to resign.  Unlike the previous combative nature of Uber to negative press, the new CEO Dara Khosrowshahi had these words for employees:

“While the impulse may be to say that this is unfair, one of the lessons I’ve learned over time is that change comes from self-reflection.  So it’s worth examining how we got here. The truth is there is a high cost to a bad reputation.”

It remains to be seen whether an ‘attitude reset’ will actually be able to turn around serious reputational damage, considering the number of issues currently facing the company.

The Knock on Effects
As we’ve seen from these two cases, the knock-on effect of reputational damage can be painful in the short-term.  However, it is the long-term effects that can make recovery and repair much more difficult.  Reputational damage makes the job of positive PR an uphill battle, and once public trust is lost, it can be elusive to regain.

We can’t always predict where the next crisis will come from. However, with a strong ethical direction that maintains the balance between shareholders, staff and customers, it makes it easier to survive reputational damage intact.  If the wider public has faith in your business, they will be more inclined to forgive a mistake – so long as the resolutions to the crisis situation is sincere and robust.