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Monday, December 9, 2013

Strategic CSR - Twitter

While it has been apparent for some time now that the free flow of information was shifting the balance of power away from corporations and into the hands of their most active stakeholders (Chapter 4, The Free Flow of Information, p161), the article in the url below demonstrates how far firms have to go in order to regain the initiative:
“News of a business crisis spreads internationally within an hour in more than a quarter of cases, and in more than two-thirds of cases it has reached an average of 11 countries within 24 hours, yet it takes businesses on average fully 21 hours to start getting their own version of the story out.”
The report on which this article was based was written after interviewing “100 senior PR professionals”—a reasonable source for information about the PR/reputation/crisis management industry. And, for those firms out there who do not yet understand this (see: Strategic CSR – British Airways):
“Social media are important channels for airing dirty laundry, albeit more so locally than internationally. In half the cases, social media had ‘a significant impact’ on how the news spread locally, but in somewhat under a third of the cases internationally, the report said.”
What is worse is that, if a firm starts behind the curve on a breaking story, the damage can be significant:
“Not only do social media help spread the word initially, they also help keep the spotlight on the story. … Freshfields found that ‘inability to control reputational crises in the early stages can prove costly for a business, affecting its value, revenue and long-term reputation.’ In about six out of 10 cases, the impact disrupted operations. In just over half the cases, revenue suffered. Over a quarter of cases–27%–resulted in a stock price drop. ‘Only one in 10 companies (11%) suffered no impact or were adequately prepared to deal with the issue,’ the survey found.”
What is most interesting about the report, however, is that it has begun to tease apart different moderating effects for the role that social media plays in enhancing the reputational damage associated with crises:
“Freshfields identified four kinds [of crises]: operational, such as a product recall or environmental problem; behavioural, involving dubious conduct by the company or its employees; corporate, such as a liquidity problem or litigation; or informational, i.e. IT or data security problems. Operational crises had the most serious revenue impact, while behavioral crises were the fastest to move through social media. In fact, social media moved news of bad behavior at twice the speed of operational crises, with 40% of behavioral bad news spreading within an hour through social media, the report said, twice the rate of operational crises.”
While the report identifies various reasons for firms’ slow responses (e.g., the need to get sign-off by lawyers and senior executives), the underlying message is that firms are not preparing ahead of time to minimize the potential damage when the crisis occurs. The overall goal? To avoid “trial by Twitter.
Take care
David Chandler & Bill Werther
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Business Caught Flat-footed in Trial by Twitter
By Gregory J. Millman
November 4, 2013
The Wall Street Journal