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Airline's true crisis is loss of reputation, warn public relations experts

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Dec 10, 2007

(TVLW) - Marketing and public relations professionals disagree with Nationwide Airlines' view that it had protected its corporate reputation effectively during the crisis created by the grounding of its entire fleet by the Civil Aviation Authority (CAA).

One professional said Nationwide fell at the first hurdle of damage limitation, by not communicating with customers.

Nationwide and the CAA adopted an obvious media manipulation exercise at their joint media conference, where Phindiwe Gwebu, the regulator's communications manager, said questions about the past would not be allowed.

Nationwide's grounding took place three weeks after an engine fell off one of its planes during take-off from Cape Town airport.

Charmane Thorme, Nationwide's sales and marketing manager, said: "Our crisis management team handled the crisis as best as they could, given that we did not understand what the CAA required from us."

In response to a news agency report that a passenger had demanded a refund from the Nationwide desk at OR Tambo International airport, only to be allegedly threatened with police action, Thorme said she had been told thirdhand that the woman had been threatening and abusive.

One thing Nationwide had learnt from the crisis was to pay more attention to administration, Thorme said.

Vernon Bricknell, Nationwide's chief executive, said refunds to passengers would take time because no airline in the world sat on a cash pile.

He said: "We are doing our best to accept the applications for refunds and they are being processed as expeditiously as possible."

Bricknell said his airline had not yet quantified its financial losses

However, only a head-in-the-clouds optimist would fail to agree that Nationwide's reputation has suffered huge damage.

Big companies trade on their integrity and reputation. When these are impugned, business suffers tremendously.

Marketing and public relations practitioners talk of R for reputation.

The Ipsos MORI Reputation Centre in the UK defines R as the total emotional and intellectual disposition towards an organisation - different from brand recognition.

Reputation derives from assumptions, perceptions and beliefs about what an organisation is, how it is run and what it stands for.

A problem becomes a crisis when the media start paying critical attention to it and matters escalate rapidly out of control. Two well-remembered corporate scandals involved Italian dairy firm Parmalat and US energy firm Enron.

Parmalat collapsed towards the end of 2003 as a hidden debt of $14 billion (R95.3 billion at current rates) was exposed. Nearly a dozen executives have served prison time as a result.

Before Enron's bankruptcy in 2001 it employed 22 000 people. It imploded because of its leveraged balance sheet and questionable activities.

Ipsos MORI says: "Ultimately, reputation underpins an organisation's licence to operate. In broad terms, a strong reputation has two main benefits: a tool to build trust and create value among different shareholder groups; [and] a reservoir of goodwill to draw upon when challenges and difficulties arise."

Helen McIntee, academic director of the IMM Graduate School of Marketing, said consumers and marketing practitioners knew there was no such thing as "zero defect"; products and services would fail from time to time.

It was generally a firm's "service recovery" process that determined whether a customer remained faithful to it.

McIntee said: "I believe the correct course of action lies in the honest and open communication approach.

"Purchasing a product or service always entails some level of risk on behalf of the customer, and marketers go to great lengths to explain the product's benefits, pedigree, positioning to lessen that risk."

McIntee said such communication was most critical when things went wrong.

"Obviously, [in such a situation] it is even more important that the company communicates the reason for the failure, the extent of the problem and what the company is going to do about it, including possible compensation.

"Unfortunately, in Nationwide's case this does not appear to have happened."

She said it was only reasonable to expect customers to feel "angry, aggrieved and fearful, especially in the airline industry, where the customer feels such a high level of risk".

McIntee said safety was of paramount importance in the airline sector. Failure to communicate the problem clearly meant customers would make their own assumptions about the airline and its fleet.

"Nationwide could well experience a mass exodus of customers as they start to doubt the airworthiness of the aircraft," she said. "I suggest some open communication and damage control be implemented urgently by Nationwide."

Jennifer Cohen is managing director of FD Beachead Media & Investor Relations, the company that spearheaded Harmony Gold's unsuccessful but well-publicised takeover bid for Gold Fields.

Cohen said a good corporate reputation had to be grounded in solid business practices and adherence to good governance.

If a company's reputation came under fire, its conduct during the crisis had to be above reproach.

"Companies must be proactive, not reactive, with these communications," she said.

A company in crisis and its management team must take responsibility for its actions and be part of the solution, she said. If an apology was needed, it should be issued immediately; managers should never blame someone else for the problem; accountability resided with them.

"When these basic principles are followed, we can assist a company to communicate properly," said Cohen.

"We are not spin doctors and will not and cannot mask wrongdoing. We can only explain the problem and propose the solution."

Janine Hills, the chief executive of Vuma Corporate Reputation Management, quoted US billionaire Warren Buffet as saying: "If you lose money for the firm, I will be very understanding … If you lose reputation for the firm, I will be ruthless."

Hills said corporate reputation management had become a vital business tool, no longer considered a soft skill but a core responsibility of each and every employee.

Most successful companies realised the value of a strong corporate reputation, she said. "The reputation of a company is vitally important for a number of reasons, not least because employees of all levels are ambassadors for the organisation.

"Staff can easily influence the reputation of the company by communicating positive or negative messages to other people, both inside and outside the organisation.

"It is therefore important that the reputation of the company is nurtured at all times."

Hills said there were specific times in the development of any business when reputation management became even more critical and should be a focus of the internal communication strategy.

The first such time was crisis communication: to minimise damage to an organisation's reputation, a comprehensive plan needed to be developed long before any such crisis hit the organisation.

This plan needed to detail the responsibilities for internal communication, explaining how every employee would be reached in an effective way so that their perception of the company remained positive.

Hills said: "The second example is change management. Few organisations find themselves in an environment that is not in a constant state of flux, and managing the reputation is therefore vital."

Change was not just about how people acted, she said, but how they thought.

She quoted a Chinese sage who wrote centuries ago: "Tell me and I forget; show me and I remember; involve me and I understand."

Hills said: "Effective change management relies on employees understanding why the change is happening and how it affects them."

Hills' guidelines for crisis communication include:

n Creating a media statement;

n Having spokespersons available by phone 24 hours a day;

n Messaging that is clear and concise;

n Maintaining honesty and integrity at all times;

n Setting up an emergency website to communicate with the media, suppliers and emergency services; and

n Implementing immediate e-mail and phone communication to clients.

busrep.co.za

Airline's true crisis is loss of reputation, warn public relations experts



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