Managing costly PR mistakes

The recent United Airlines wrongdoing of dragging out a seated passenger to accommodate airline employees should serve as a warning that a PR crisis can be very costly. Per industry reports, on the day of the passenger-removal controversy, the shares of the $21-billion company fell as much as 6.3 percent in premarket trading, dropping by $1.4 billion (or P70 billion). The financial loss does not include the severe damage to United’s reputation and the erosion of public confidence in it. The backlash refuses to die down at this writing.

United is not alone. Other companies have been through costly PR blunders. The sinking of the Deepwater Horizon platform of British Petroleum (BP) on April 20, 2010, resulted in probably the worst oil spill ever to hit the United States, and the most costly, too. It killed 11 persons and stained more than 1,300 miles of the Gulf of Mexico’s coastline with 3 million barrels of oil. BP said the pretax cost of the 2010 explosion totaled $61.6 billion.

Simply put, a crisis is a bad thing that happens to a good company, which stimulates extensive news media coverage. United’s was not a premeditated homicidal act but a procedural mistake committed on the spur of the moment, while the sinking of the Deepwater Horizon platform was pure accident. Both events would have been quickly forgiven by the stakeholders if statements by spokespersons came quickly, transparently, and with an emphatic apology. The response after the crisis occurs is most crucial and should offer support to those affected by the misstep. Public relations plays a vital role in the crisis response by helping develop messages to be sent to various publics. The initial response should be quickly made—in the first hour after the crisis hits, because people want accurate information about what happened and how that event might affect them.

An individual or company wrongdoing does not become a crisis until it is played up by the media and a large segment of the public becomes aware of it. But before we become complacent, we should remember that in the digital age, every person with an iPhone is a reporter, interconnected with millions of other reporters worldwide. It is impossible to hide from citizen journalists, and there’s a 99-percent chance that social and mainstream media will hype your story into a full-blown crisis.

The response of United’s CEO Oscar Muñoz was a lukewarm mea culpa, which was later countered by his internal email that defended the employees and called the yanked-out passenger disruptive and belligerent. BP’s CEO Tony Howard did not immediately apologize for the accident; instead, he arrogantly said, “I want my life back.”

The first step in crisis prevention is to build an infrastructure of goodwill to protect the firm during bad times. Every company must consciously manage its reputation by projecting a deep sense of corporate social responsibility. It takes years to build a good reputation, but it takes only a few minutes to lose that reputation. Some 75 percent of a firm’s stock value is derived from its reputation. The reason some companies are prone to crisis is that they do not devote any time worrying about their reputation until they are faced with a crisis.

No one is immune from making mistakes. No matter how careful, we are bound to make a mistake somewhere, sometime. When that happens, we should consciously adopt the “3As” formula for dealing with mistakes: acknowledge, apologize, address.

A client emailed me recently and said we had failed to inform them about negative publicity concerning their services that was published last Easter Sunday. We were on vacation and we did fail to monitor media reports. Sensing that the client was hurt, I quickly emailed: “Hello, sir, I acknowledge our delay in advising you of the negative publicity; I deeply apologize for our shortcoming and I take full responsibility; we are taking steps to make sure this will not happen again.” He promptly replied: “Thank you. Next time, even just a copy of the news link sent to me with an FYI will suffice. Cheers.”

Charlie Agatep (charlie.agatep@grupoagatep.com) is chair and CEO of Grupo Agatep.