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Hanover - Uncertain Times Require Uncommon Sense

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8 Sep 2018

As humans we learn, sometimes painfully, who our friends are in times of crisis.

But does your organisation?

IKEA certainly didn’t when in 1994 it was caught unawares by a Swedish documentary showing children weaving at looms on the shop floor of one of its Pakistan-based rug suppliers. The expose made country manager Marianne Barner acutely aware of the lack of relationship between IKEA and community stakeholders with deep knowledge and vested interest in the child labour problem. The UN Convention on the Rights of the Child had only been published in 1989.

Barner and her team embarked on a mission to meet suppliers, but also unions, politicians, activists, NGOs, and UN organisations – anyone and any community that could help them learn more. Back in Sweden she brokered an advocacy agreement with charity Save the Children, opening up a channel of communication that could also help IKEA publicise its ongoing efforts and commitments – a campaigning friendship that still lasts to this day.

Crisis preparedness efforts are usually weighted towards plans, processes and practice, leaving stakeholder relationships all too often undervalued. Taking the time to build relationships with communities drawn from broader swathes of stakeholders, beyond immediate suppliers, is a core part of crisis prevention.

Heed Uber. Its core values, among which included “hustling” and making “bold bets”, helped propel the ride-hailing app to unicorn status through aggressive expansion. Yet its push into new markets left the company with little time for making the kind of international friends who would back it in a bind. So when it was hit with a series of “body blows” to its reputation, including being banned in multiple countries, stakeholders such as Transport for London were swift to cite a “lack of corporate responsibility” as a critical factor in the app’s demise.

To date, Uber’s operations have been banned or suspended in 11 countries; and at the end of 2017 its valuation had dropped from $70bn to $48bn, according to the Wall Street Journal.

As that eponymous first lady of the American stage Ethel Barrymore said, “making friends before you need them” is non-negotiable when it comes to neutralising attacks on your reputation.

In their 2016 joint research paper, Professors Witold Henisz (Wharton) and Sinziana Dorobantu (New York University) examine how a single “spark” of negative stakeholder criticism can escalate into a situational crisis that can devalue a business with weak stakeholder relationships.

“The key is not: ‘Do you have a report? Do you meet a standard? Do you get five stars?’”, said Henisz in a recent interview. “It’s whether there are people willing to stand in front of the microphone for you when you’re criticised. That’s what matters.”

For IKEA and Save the Children, their shared stance on child labour is unequivocal: written in corporate stone in the furniture giant’s code of conduct. Nurturing strong, positive relationships creates a network of credible allies on which an organisation can rely to defend its reputation.

But building trusted relationships takes time – weeks if not months. Don’t wait until you’re fighting fires to start handing out business cards.

Find out more about our Crisis and Risk Management Services.