Charlie Pownall 查理·保诺 - Freshfields Bruckhaus Deringer archive

A new survey on crisis communications by law firm Freshfields Bruckhaus Deringer reveals 28% of crises spread internationally within an hour, and 69% within 24 hours. The accompanying report (pdf) goes on to state that there ‘is no longer such a thing as a national crisis’.

This makes some sense in the context of a report on multinationals, yet despite the reach of CNN and other 24-hour news operations, and the pervasiveness of social media, there are plenty of scenarios when crises do not go global.

These include:

Footprint: if the company has no foreign operations, stakeholders or relevance and where its reputation is essentially local or national
Language: where the language in which the company operates is little spoken outside its domestic borders eg. Japan
Affinity: where potential for word of mouth is limited to due to local/small-scale or weak online affinity communities.

Source: Freshfields Bruckhaus Deringer, November 2013

A case in point is Hoi Tin Tong, a herbal medicine retail chain based in Hong Kong that was recently hauled into the spotlight by a study finding that its turtle jelly – the firm’s signature product – has very little or no turtle shell, on the heels of a video purporting to show mouldy jelly being prepared for sale.

Covered in detail by the local press, including the South China Morning Post, and the subject of considerable speculation in Hong Kong’s highly active online communities, the story has proved immensely damaging to the firm, whose founder is now talking of shuttering stores.

Despite the firm operating stores in mainland China and Macau, the story has failed to catch light in these and other markets.

Why?

Perhaps because the company is principally a local Hong Kong player and online/offline coverage has been principally in Cantonese, a language not understood even by most mainland Chinese.

There is much talk in social media and marketing circles about ‘digital’ or ‘social media’ crises.

There are no such things.

A crisis is a crisis, a one-off incident or series of events that seriously impacts the reputation and/or performance of an organisation – think BP’s Gulf of Mexico oil spill, the BBC’s Newsnight meltdown or Yum Brands’ recent KFC woes in China.

While the internet and social media can escalate and amplify both ‘digital’ and ‘traditional’ issues, the great majority of significant reputation problems directly attributable to social media are small.

Types of crisis

According to a recent study by law firm Freshfields Bruckhaus Deringer, operational crises such as significant product recalls or environmental lapses have the greatest long-term impact on a firm’s share price (and reputation), while behavioural crises such as rogue employees or corruption have the severest short-term impact.

This feels accurate, and it is useful to see it quantified.

Here’s how Freshfields categorises crises:

Behavioural: allegations of illegal or questionable conduct by the company or specific employees, including claims of bribery and corruption; senior employee misconduct or human rights violations.
Operational: where the company’s ability to function is seriously impaired, such as significant product recalls or environmental incidents.
Corporate: a crisis affecting corporate or financial well-being, including liquidity issues or material litigation.
Informational: where a company’s IT infrastructure or electronic data systems are seriously impacted, including system failures; hacking and loss of customer data.

Most crises are informational

Most incidents emanating from or being played out in social media fit into one or more of the categories above. Research (see below) indicates that the majority of social media risks are informational in nature.

McKinsey-Risks-Use-of-Social-Tech-Mar2013

Worryingly for reputation and risk managers, the most damaging in terms of reputation are behavioural and involve their own employees. Experience and observation suggest the main drivers of so-called ‘digital’ reputation issues are:

Customer service – complaints about poor product quality and/or customer service eg. Vodafone’s Vodafail in Australia
Customer feedback – failure to listen to customer needs, requirements and concerns eg. Netflix’s sudden price hike
Marketing – inappropriate, misleading or offensive marketing and advertising eg.
Nivea’s Re-Civilise campaign
Social media campaigns – often caused by a lack of alignment between marketing and PR eg. #QantasLuxury or #McDStories
Employees – disgruntled or poorly trained employees eg. Domino’s Pizza mucus video.

Of these, only inappropriate use of social media by employees, failed standalone social media campaigns and poor online customer service can surely be construed as ‘digital’ and result largely from inadequate professionalism and a lack of coordination between marketing, sales, PR and customer service.

Smart organisations have learnt to educate their people about their online behaviour and to integrate their social media campaigns and online customer service.

Regrettably, bona fide crises will continue. But the death of the ‘social media’ crisis is surely nigh.

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First published by Social Media Today