The rush to assess the impact of the now infamous United Airlines incident is understandable. In an editorial yesterday the FT argues, with reference to the Volkswagen emissions scandal, that the impact of a crisis on profits and corporate reputation is fleeting. Noting that United’s share price is only down 5% – a mere “blip” in the volatile airline sector – they argue that “even serious damage to corporate reputations is not, in many cases, very economically important in itself.”
The reality is that the impact of many scandals may not be fully understood for some time. Paul Polman, CEO of Unilever, has regularly cautioned about the dangers of taking a short-term view of the market and his long-term perspective is one that communicators need to heed – even when advising on an hour by hour basis during a crisis.
In the eye of a storm, communicators can take comfort that sectoral reputation – itself a complex issue involving many players – can help to insulate individual companies. The work of Alva, our reputation tracking partner, shows that companies within a sector are bound together in how they are perceived. A scandal that affects one leading brand inevitably has an impact on others. Conversely, this does mean when one firm steps out of line, its reputation is at least partly protected by those of its competitors – in the short-term at least. The danger for them, and other airlines, is that a future mistake by any player will be magnified and this incident may be seen as the starting point for a slide in the reputation of the whole sector.
Having stumbled, rebuilding United Airlines’ reputation will take time and numerous small steps that need to be expertly executed. Rather than share price, there will be far more relevant metrics – such as customer brand perceptions, net promoter score or a reputation tracker like Alva’s – that United Airlines communications team will be tracking on a regular basis. They need to be clear on where they are heading and use numerous tools, rather than just one economic measure, to guide them on their long-term journey.
This will be a fascinating one to watch.