ArticlePDF Available

Industry in Crisis: The Communication Challenge in the Banking Industry

Authors:

Abstract

As the number of high-profile failures and mergers of many large financial companies continues to grow, so does distrust in the industry. This study explores how communication professionals at financial companies are handling the global financial crisis. Although participants believed that communication must be accurate, timely, and transparent, they are greatly challenged by the quantity of communication needed. Many of the participants in this study had unique ways of handling certain aspects of communication needs. Ultimately, the collective of communication professionals at individual financial instructions can lead to the rebuilding of trust and confidence in financial organizations, and this study provides a glimpse into how they are accomplishing this massive feat.
Public Relations Journal Vol. 4, No. 1, Winter 2010
© 2010 Public Relations Society of America
Industry in Crisis: The Communication Challenge in the Banking Industry
Marcia W. DiStaso, Ph.D.
As the number of high-profile failures and mergers of many large financial
companies continues to grow, so does distrust in the industry. This study explores how
communication professionals at financial companies are handling the global financial
crisis. Although participants believed that communication must be accurate, timely, and
transparent, they are greatly challenged by the quantity of communication needed.
Many of the participants in this study had unique ways of handling certain aspects of
communication needs. Ultimately, the collective of communication professionals at
individual financial instructions can lead to the rebuilding of trust and confidence in
financial organizations, and this study provides a glimpse into how they are
accomplishing this massive feat.
INTRODUCTION
Recent news concerning bank failures, government bailouts, and global stock
market lows has been accompanied by talk of trouble at individual companies across
multiple industries. The constant barrage of negative news has left a pall over the entire
business community – especially the financial industry.
As the global financial crisis unfolds, the role of public relations is more important
than ever. “With the stock market on a rollercoaster ride, financial institutions must take
proactive measures to reassure their customers and shareholders and bolster
confidence in their performance,” said Jeff Resnick, President of Opinion Research
Corporation (ORC, 2008, p. 1). According to ORCs October 2008 survey, financial
institutions, such as banks, savings and loans, and credit unions, appear to be doing a
poor job of keeping their customers informed. This is because almost half of those
surveyed (46%) said the company in which they have most of their assets was not
communicating with them enough.
The global financial crisis not just a customer issue, but also a concern
companies must face with employees. Also in October 2008, Weber Shandwick found
that 70% of employed Americans believed the financial crisis will have a negative
impact on the company they work for over, with one-fifth (20%) saying that impact will
be “very” negative (Lawrence, 2008).
Ultimately, the global financial crisis has led to an increased need for internal and
Marcia W. DiStaso, Ph.D., is Assistant Professor of Public Relations in the College of
Communications at Pennsylvania State University, mwd10@psu.edu.
DiStaso Public Relations Journal- Vol. 4, No. 1, 2010
external communication especially in the financial industry. Indeed, stakeholder’s
concerns appear to be increasing, as the number of high-profile failures and mergers of
many large financial companies continues to grow.
This is a critical time for the financial industry, and how individual financial
institutions handle it can determine their very survival. Communicators in financial
institutions are facing more pressure than ever before especially with the 24-hour news
cycle and Internet. Therefore, the purpose of this article is to examine how
communication professionals at financial companies are handling the financial crisis.
This includes internal and external along with proactive and reactive communication. It
also provides insight about what communication professionals at financial companies
feel is important and necessary to work toward restoring trust and confidence.
LITERATURE REVIEW
Banking Industry Problems
Years ago, bank lenders personally scrutinized potential borrowers and made
individual judgments of their credit-worthiness. An example of this was J. P. Morgan’s
testimony before a congressional committee in 1912 when he said “A man I do not trust
could not get money from me on all the bonds of Christendom” (Morgan, 1912). In the
following years, the trend was for banks to be less concerned with character and
interpersonal interaction and a greater value was placed on collateral and mechanized
means of assessment (Earle, 2009).
In September 2008, it all came to a forefront with the failure and mergers of many
large financial companies including Lehman Brothers, Merrill Lynch, American
International Group (AIG), and Halifax Bank of Scotland (HBOS) (Earle, 2009). These,
along with economies that were unprepared to deal with the consequences of such
failures, led to the current global financial crisis.
To get a sense of how extreme this was, consider the heritage and recent
changes of some of the recent financial company casualties: Bear Stearns was founded
in 1923 and survived the Wall Street Crash of 1929 without a single layoff but was
bought out by JP Morgan in 2008; Lehman Brothers began as a cotton trading operation
in 1850 but was dramatically dissolved in 2008; Goldman Sachs was founded in 1869
and became a commercial bank in 2008; Morgan Stanley opened in 1935 merged with
Wachovia and became a commercial bank in 2008; and Merrill Lynch that began in
1914 with the credo “I have no fear of failure, provided I use my heart and head, hands
and feet – and work like hell” (Merrill Lynch, 2009, p.1) was bought by Bank of America
in 2008 (Earle, 2009). In addition, some large companies received governmental
“bailout” intervention and support as was the case with AIG, Citigroup, and UBS.
When the bubble burst and banks started failing, trust and confidence were
rapidly replaced by distrust and panic. According to national public opinion poll
conducted right after the initial bailout was announced, in October 2008, 89 percent of
Americans said that “things have pretty seriously gotten off on the wrong track”
Industry in Crisis- Public Relations Journal- Vol. 4, No. 1, 2010
(Connelly, 2008). Ultimately, this landed us in a global financial crisis that has led to
recession in a number of countries and resulted in a downward spiral in the stock
exchanges.
Crisis Although crisis is defined in a variety of ways throughout the communication
literature, Fearn-Banks (2002) provides a comprehensive definition. She identified a
crisis as “a major occurrence with a potentially negative outcome affecting the
organization, company, or industry, as well as its publics, products, services, or good
name” (p. 2). She noted that a crisis can interrupt normal business and in extreme
instances jeopardize the existence of an organization. Mitroff and Pearson (1993)
defined an organizational crisis is an incident or event that poses a threat to the
organization’s reputation and viability. They included the personal, societal, and
technical factors of crisis, and stated that a crisis could break down the basic
assumptions that society holds: values, beliefs, and social structures. Similarly,
Coombs (2007) defined a crisis as “a significant threat to operations that can have
negative consequences if not handled properly” (p. 1).
The idea of being truthful is magnified in times of crisis. Often the damage from
a crisis occurs not because of the incident itself, but rather because of the way the
company handles it (Galford & Drapeau, 2003). In some ways, the current global
financial crisis can be seen as more of an environmental or technological disaster in
which trust and confidence are lost and then must somehow be regained.
Faulkner (2001) considered the extent to which the situation is attributable to the
organization itself, or can be described as originating from outside the organization as
the principal distinction between a crisis and a disaster. A crisis describes a situation
“where the root cause of an event is, to some extent, self-inflicted through such
problems as inept management structures and practices or a failure to adapt to
change,” while a disaster can be defined as “where an enterprise…is confronted with
sudden unpredictable catastrophic changes over which it has little control” (p. 136).
Although many factors led to the financial crisis, it appears that the banking
industry is faced with a crisis. This is because of the direct role that banks played. The
entire banking industry has been hit hard by this crisis. Although industries have been
hit by crises in the past, very little research exists on the topic beyond the tourism
industry (see Fall, 2004).
A crisis is unpredictable but should not be unexpected. Wise organizations know
that crises will happen; they just do not know when. According to the Institute for Crisis
Management, white collar crime, workplace violence, labor disputes, mismanagement,
and facility damage are the most prevalent crises faced by organizations (Institute for
Crisis Management, 2008).
Ultimately, it is the perceptions of stakeholders that help define an event as a
crisis. A stakeholder is a person or group who is affected by or can affect an
DiStaso Public Relations Journal- Vol. 4, No. 1, 2010
organization (Freeman, 1984). Examples of stakeholders for an organization include
employees, customers, competitors, community members, creditors, government
regulatory agencies, the media, suppliers, and investors. According to Coombs (2007),
if stakeholders believe an organization is in crisis, then it is.
Crises can also result from a violation of stakeholder expectations. For
example, people believe that products should not harm them, management should not
lie, and banks that borrow from other banks must repay them. When there is a violation
of expectations, the relationship between the organization and its stakeholders
becomes jeopardized resulting in a crisis. Because reputations are dependent on how
stakeholders perceive an organization, a crisis can harm their reputation (Coombs,
2007).
An organization’s reputation is “a collective assessment of a company’s ability to
provide valued outcomes to a representative group or stakeholders,” (Fombrun,
Gardberg, & Sever, 2000, p. 243). This valuable resource can be threatened by a
crisis, and reputation maintenance is the responsibility of communication professionals
during a crisis.
Global Crisis of Trust and Confidence
A large component of the current global financial crisis has to do with trust and
confidence (Aleman, 2009). Thanks in a large part to high-profile financial scandals
such as those at Enron, WorldCom and AIG, stakeholders have lost so much money
that they do not have confidence in corporations to behave appropriately or trust
corporations (especially financial companies) with their money, and until we are able to
fix what is wrong it will be very difficult to bring either back.
According to Early (2009), economists and policymakers also believe that trust
and confidence played key roles in the crisis and will be essential for economic
recovery. For example, Ben Bernanke, Chairman of the Fed, said “As in all past crises,
at the root of the problem is a loss of confidence by investors and the public in the
strength of key financial institutions and markets” (Bernanke, 2008).
Although many participants in the crisis, as well as the media, seem to use the
words trust and confidence interchangeably, they are very different. They are both
created and destroyed differently (Early, 2009). There are many definitions of trust, but
it is typically considered to be a willingness to be appropriately vulnerable (Watson,
2005). Confidence on the other hand is a “belief, based on experience or evidence
(e.g., past performance), that certain future events will occur as expected” (Early, 2009,
p. 786). Thus, trust is based on shared values and more intuitive and emotional than
confidence which relies more on past performance.
Hon and Grunig (1999) identified that trust is comprised of the belief that an
organization is fair and just and that it can and will do what it says it will. Confidence on
the other hand would require looking at past performance of a company to see what
they have done in the past to determine a belief for its future actions.
Industry in Crisis- Public Relations Journal- Vol. 4, No. 1, 2010
There is no doubt that trust and confidence are commodities that all
organizations need in order to function more effectively and efficiently. Without them,
organizations are bogged down by suspicion, cynicism, and disappointment.
Given the high need along with the rules and regulations regarding financial
transparency, investor relations and public relations professionals must work together
closely to strive for restoring trust and confidence. This can be accomplished by
communicating timely, accurate, and responsible messages to stakeholders (Gower,
2006).
Opportunity
As with many crises, the global financial crisis is has provided communicators
with an opportunity. As Ulmer, Sellnow and Seeger (2007) argued, crisis
communication is focused on a discourse of renewal, thereby a crisis is an opportunity
for an organization to rejuvenate itself through strategic communication programs.
According to Fearn-Banks (2001), crisis communication is “verbal, visual, and/or
written interaction between the organization and its publics . . . prior to, during, and after
the negative occurrence” (p. 480). Crisis communication represents the actual
responses an organization uses to address a crisis. Communication with stakeholders
is critical during a crisis, and it includes both words and actions. The goal of crisis
communication is to minimize reputation damage (Coombs, 2007) and reestablish
legitimacy (DiStaso & Scandura, 2009). Since communication influences both how
people perceive a crisis and the image of the organization in crisis, how an organization
responds is critical (Coombs, 2007).
Coombs (2007) recommends that crisis communication be “quick, consistent,
and open” (p. 128). Quick refers to the speed of response. Stakeholders need
information; if they are not getting it from the organization they seek it elsewhere. A
quick response helps to ensure that stakeholders receive accurate information and that
the organization is able to share its side of the story. Obviously, with the increased
speed comes an increased risk of making mistakes including the possibility of providing
inaccurate information; therefore, communicators must find a balance between speed
and accuracy.
When an organization has a unified response in its delivery of messages they are
promoting consistency (Coombs, 2007). In the past, this meant that only one person
was be responsible for crisis communication, serving as the official spokesperson while
others were discouraged from being unofficial spokespeople (Fearn-Banks, 2002).
Today, it is often best to identify a media spokesperson to serve as the point of contact
for the media, but in reality, the idea of having a spokesperson is much more
complicated. One of the most noticeable effects that social media has had on the world
of public relations is the idea that anyone from passionate customers to employees can
speak for a company. This new crop of unofficial spokespeople has risen out of the
opportunity provided through social media and need.
DiStaso Public Relations Journal- Vol. 4, No. 1, 2010
The 2009 Edelman Trust Barometer found that about two-thirds of informed
publics (62%) trust companies less than they did a year ago. Plus, trust in business
was even lower than it was right after Enron and the dot-com bust, and “a person like
you” remained one of the most credible spokespeople in 2009.
Of course, it is impossible for consistency among all the possible spokespeople
in this environment, however, organizations should strive for consistency among
organizational spokespeople (including all employees). This requires consistent internal
communication. Employees should be kept informed and this will help them to better
articulate the situation.
Finally, according to Coombs (2007) openness means “(a) availability to the
media, (b) willingness to disclose information, and (c) honesty” (p. 132). Being open is
a component of transparency. Transparency is the degree to which an organization
shares information its stakeholders need to make informed decisions (Holtz, 2009).
Companies must consider their responsibility to stakeholders, and transparent
companies should make public all legally releasable information.
Transparency itself is not a simple solution. This is because it is an unending
process with a constant need to provide new information (Gower, 2006). Just giving
information does not constitute transparency. Transparency can only meet the needs of
stakeholders if the organization knows what they want and need to know (Rawlins,
2009). Transparency can even be used to obscure and obfuscate reality and simply
providing information does not necessarily lead to trust.
There appears to be growing evidence that openness and transparency
contributes to an increased sense of trust (Rawlins, 2007). Effective transparency holds
an organization accountable and is rewarded when companies provide enough
information for employees to make informed decisions (Rawlins, 2009).
Ultimately, without transparent/open, quick, and consistent information rumors
can run rampant. Defusing rumors requires stakeholders to believe that the
organization is providing accurate information. Essentially, the organization must be
more credible than the rumor (Coombs, 2007). Internal rumors require a certain degree
of preparedness (Kimmel, 2004). Communicators should have an understanding of
how the rumor grapevine works, who is influential in the communication network, the
types of situations that are likely to stimulate grapevine activity, and how to manage its
positive and negative potential for the good of the organization. Along with obvious
challenges, the grapevine can provide a fast means of distributing information internally.
Through this informal communication channel, employees have conversations in the
lunchroom, in carpools, through e-mail and the like. Information is spread rapidly and
since rumors are typically undocumented, they are susceptible to various
interpretations.
Rumors that circulate outside a company are likely to reach and affect far greater
numbers of people than grapevine rumors. External rumors have the possibility of
Industry in Crisis- Public Relations Journal- Vol. 4, No. 1, 2010
severely damaging a company’s reputation by undermining credibility, stimulating
customer boycotts, affecting employee satisfaction, and they can even impact the
financial markets (Kimmel, 2004).
Research Questions
The goal of this research was to explore what communicators in financial
organizations are doing to rebuild trust and confidence. To do so, the following
research questions were explored:
RQ1: Are communicators in financial organizations working in crisis mode?
RQ2: What are communicators in financial organizations doing to be proactive versus
reactive?
RQ3: How have message strategies changed for communicators in financial
organizations?
RQ4: What are communicators in financial organizations doing about rumors?
RQ5: How are communicators in financial organizations working with investor relations
practitioners?
RQ6: What are some of the changes in the industry that communicators in financial
organizations are expecting?
METHOD
This study explored how communicators in financial organizations are handling
the global financial crisis. A qualitative focus group was used for this study because of
its strength in answering the research questions by providing narrative richness (Lindlof
& Taylor, 2002). The focus group, conducted on November 6, 2008, allowed the
systematic interviewing of several individuals simultaneously.
Thirteen communicators from a variety of financial companies including banks,
insurance companies, and credit card companies participated in the focus group. Six
participants were males and there were seven females.
Recruitment was done through an e-mail sent to all PRSA financial
communication division members. Participants were required to enroll in advance and
although 16 originally enrolled, only 13 participated. No incentives were used, and the
invitation asked members to participate in “a discussion on how to most effectively
communicate during these volatile market conditions.” Institutional Review Board
approval was received and all participants provided informed consent.
DiStaso Public Relations Journal- Vol. 4, No. 1, 2010
A discussion guide was created in advance and contained key and probing
questions about external communications (seven key questions) internal
communications (five key questions) and investor relations (five key questions). The
guide was loosely followed allowing the conversation to progress somewhat naturally,
therefore not all of the questions were asked.
The moderator was a practicing communicator for a financial organization, thus
providing credibility with the participants. The focus group was conducted through a
conference call with each participant calling in from their own location. Conducting the
research through a conference call allowed access to a group of professionals who are
extremely busy during this financial crisis, an otherwise near impossible task. A note
taker recorded key points and the session was audio recorded and later transcribed and
analyzed for common themes as well as unique comments that emerged from the
discussions.
RESULTS
RQ1: Are communicators in financial organizations working in crisis mode?
At the time of the focus group, some of the participants worked for institutions
that had decided to take TARP money while others were still trying to decide. Either
way, they were all feeling pressure to “fix the world” while “everyone” was breathing
down their necks. They also found it challenging to “balance transparency along with
not increasing a sense of urgency or emergency.”
When asked if they are working in crisis mode most participants answered yes.
One participant said that she is running her crisis plan concurrently with her formal
communications plan. Allowing her to continue to maintain a “business as normal
perception” along with beefing up and activating more crisis communications pieces as
the situation elevates.
Other participants said that their existing communication plans were “not strong
enough.” This is because as one participant said, “Not a day goes by when we don’t
get an e-mail from an executive saying we need to do more, we need to see the CEO
more, or we need to have another communication.” At this point, she said they have
almost tripled the frequency of communications to employees from the CEO. She went
on to say that “in a sense it helps to have so many people breathing down your neck
because it helps you see the need to embellish the existing plan.”
Another challenge for the participants was the rapid pace that things were
changing across the industry hurt the believability of all CEOs. An example one
participant provided was the when the Wachovia CEO said he thought they were okay,
that they had a strategy, and could go it alone, but the next day they announced they
were selling. As another participant said, things like this that blew up in the financial
media have hurt skepticism with internal and external stakeholders.
Industry in Crisis- Public Relations Journal- Vol. 4, No. 1, 2010
Overall, participants were seeing a shift in the use of traditional communication
tools. As one participant commented, “previous tools are being put on steroids” or a use
at a “higher level right now.” For example, they talked about how they use Web sites
more talk to customers directly. One participant said her bank sent a letter from the
CEO out to customers directly and then posted it online. They then used some of the
messages from this letter in other communications, making the communications “very
targeted and consistent.” Plus, participants said advertorials (advertisements designed
to stimulate editorial content) are now being used more frequently.
Some of the participants found that coordinating their communication needs with
CEOs and CFOs has been challenging. For example, one participant found that with all
that her CEO has going on he has been less responsive to smaller needs such as those
of specific reporters. Another talked about how his CEO is upbeat and optimistic but is
“cautious with the media because he questions it as a good platform” to tell their story.
Overall, participants felt that business must go on as was normal. They felt that it
is important to continue to do things as they did before. For example, one participant
discussed how her bank has always make their CEO available to reporters after their
earnings calls and although they have had quarters that have not been “their best,” they
still followed protocol so as not to send a message to reporters that they have
something to worry about or that they were trying to hide something.
On a side note, a few participants commented on how they have been so busy
that they have been “working around the clock” and that as a result they have missed
much of what has been going on in their personal lives as they have been submerged in
work.
Finally, as one participant said, “the larger issue facing financial services is the
distrust that is generated among consumers and kinda carries throughout the
industry….and as an industry, it is really important for all financial services to come
together and help regain consumer trust”
RQ2: What are communicators in financial organizations doing to be proactive versus
reactive?
Although being reactive is a current fact of life, most of the participants were
finding ways to still be proactive. As one said, “With our bank in the news almost daily,
we have been much more reactive than we would like to be.”
Dealing with financial reporters has been challenging for some of the participants
because many of them have “one track minds” with their focus on the meltdown. A few
participants felt that this was a time to push out topics that were independent to their
bank, industry or stock price (i.e., products, services, events, community work, white
papers, customer testimonials). One participant commented on how she angles pitches
about topics that are non-financial by tying into the economic meltdown to gain more
reporter interest, whereas before the angle of similar stories had nothing to do with the
DiStaso Public Relations Journal- Vol. 4, No. 1, 2010
economy. Ultimately, she saw good results from this with her company getting some
positive news coverage. Another participant said that she was focusing more on
building relationships with other local beat reporters who are not so focused on the
industry or banks in particular. In her words, she is “making new friends when her old
friends aren’t so friendly anymore.”
Internally the participants were spending more time talking face-to-face with
employees. This included more officer and employee meetings where executives such
as senior economists, market presidents, CEOs, CFOs, and business heads talking
about the stability of their bank, what they were seeing in the economy, and what it
means to 401 Ks. They found that these face-to-face meetings were especially
necessary to answer why questions such as: why they are reducing their dividend, why
they are participating in the Treasury’s Capital Purchase Program (TARP), and why
they are participating in the FDIC Temporary Liquidity Guarantee Program. They also
distributed more periodic communication including regular communications from the
CEO.
Although face-to-face communication had picked up, cascading communication
was still being used by all the participants. Along with this, the participants each talked
about how they provide employees avenues for questions both from themselves and
their customers. One participant described how her bank put together a cross
communications team with representatives from each business unit and shared services
so they can share “best practices” on what they are doing to reach their distribution
channels, customers, and associates. This team now provides daily updates at 11 a.m.
and 4 p.m. during the crisis. Many of the participants had an electronic idea exchange
for associates to post ideas and a few used this channel as a two-way communication
tool.
RQ3: How have message strategies changed for communicators in financial
organizations?
As one participant said, companies can no longer say things like “We are a very
old bank, as solid as can be,” since some big, old companies have recently gone down.
Now, saying you are old is not good enough. Companies now have to say more. For
example, participants said that they are now more frequently using things as third-party
endorsers, quality studies, and ratings from ratings agencies to back up their longevity
and financial strength. These, along with reiterating FDIC limits, are ultimately used to
“provide comfort” and answer questions like “Is our money safe.” Another participant
said that they have been doing this “very aggressively now.” A third participant talked
about how her bank has been very upfront in talking to employees and customers about
how their company is “financially stable” that the “financial services industry is in
transition” and what they think about the “long view.”
RQ4: What are communicators in financial organizations doing about rumors?
Industry in Crisis- Public Relations Journal- Vol. 4, No. 1, 2010
The general consensus among the participants was that following communication
plans to send out good, consistent communications and having informed leadership
teams were ways to try to stay out front of rumors. Beyond this, the participants talked
about different ways that they are specifically handling rumors. For example, one
participant said his bank is handling it through leadership by having all executives meet
and make sure they understand and are all on the same page and then they cascade
the messages back.
Another participant talked about how her bank is not “sugar coating things” with
employees. They are not giving “down and dirty” information either, but by telling them
the good and the bad news, she feels this frankness helps them feel “like they are
getting the straight story.” As a third participant said this is just as important with
investors: “if you don’t get bad news out now, you will pay for it coming down the
pipe...with your credibility”
A fourth participant talked about how his financial institution has found a unique
way to keep a finger on the pulse of their employees by offering free breakfast, lunch
and dinner in their cafeteria. With everyone mixing and mingling in one place (including
the CEO) they are able to pick up on some of the hot topics. This helps them “maintain
a culture of interactivity and two-way communication.”
Taking this a step further, a fifth participant said that there is a “blurring of the
lines” and anyone can be a spokesperson for the company, so her bank distributes key
talking points to “everybody” from executives to tellers and even janitors.
Finally, a sixth participant said, “It doesn’t have to be your CEO or your officers of
the company to reassure employees, but if you are upfront and you’re transparent, that
frontline employee from the mailroom to the cafeteria can carry that message for you –
which has more credibility.”
RQ5: How are communicators in financial organizations working with investor relations
practitioners?
As one participant said, investor relations is “a hard department to work with right
now because they are feeling stress in a different way than we’re feeling but at pretty
much the same intensity, so it’s almost like we’re peas in a pod – they know what we’re
going through and we know what they’re going through.”
Although most participants agreed that this symbiotic relationship is important,
not all the participants were able to accomplish it yet. One participant that was
successful said it took a new IR director to change the things at her bank. She said that
both the head of PR and the head of IR “must understand one another and not work
independent in their own worlds” but by working together, internal and external
messages can be consistent.
DiStaso Public Relations Journal- Vol. 4, No. 1, 2010
One participant improved his relationship with IR through frequent contacts with
each other to learn what they each are hearing and make sure they are delivering
similar messages. This also led to the creation of an employee one-pager for after
earnings to reiterate the key messages, provide tidbits from analyst and media reports,
and offer peer comparisons.
RQ6: What are some of the changes in the industry that communicators in financial
organizations are expecting?
As one participant said, “this is the first time that companies have had to discuss
how the overall macroeconomic environments are affecting their company” and they
need to make sure they are staying proactive in doing so.
In an effort to meet the saying “the best defense is a good offence,” one
participant talked about how companies should pay a greater attention to and meeting
with their existing shareholders. Existing shareholders should understand what is going
on so “they don’t bail on you because there are very few new investors.”
At the time of the focus group, the participants were having shareholder meetings
where very few people came. As one participant said, they were made up of “people
with too much time on their hands.” But, there was the general consensus that they
should expect to see things change with “executive compensation on the front burner”
and they felt the need to be prepared for questions about how compensation packages
were developed.
They also expect changes in the annual reports. One participant said his
company is working to make the annual report a reflection of who they “are in this point
in time” and according to him, “what we are not is a company that is flamboyant and
spends money freely’ so he does not expect to have “a real top end glossy annual
report” this year. He also said that they are not going to include some of the “fluff” that
they normally include to “hone in on the chairman’s letter and even expanding it
because shareholders want to hear from the top and because there is a lot to talk about
his year with both the industry and our company.” Another participant also said that
they are going to spend less money on the bells and whistles and pay more attention to
the chairman letter. She said her bank is making the changes because “knowing that
perception is reality we want to make sure that we give the perception that in this frugal
economy we’re being frugal.”
DISCUSSION AND CONCLUSIONS
This qualitative study revealed several insights into how communication
professionals at financial companies are handling the global financial crisis. At no time
is communication more important than during a crisis (Coombs, 2007), and although not
all financial institutions are in crisis, the industry is, so companies must act accordingly.
Industry in Crisis- Public Relations Journal- Vol. 4, No. 1, 2010
With new news breaking frequently and changing day-to-day or even hour-to-
hour, the communication professionals in this study found it difficult to be proactive. Part
of the problem has simply been an issue of timing. This is because they must
supplement the time they spend “hunkered down” handling the crisis with still getting
other news out. Also, it is especially important that communicators find a balance
between being responsive and allowing the time necessary to properly construct
appropriate fact-based messages. Being truthful is magnified in times of crisis. With
reputations on the line, financial organizations can face negative consequences if they
do not handle the crisis properly. This includes companies that continue with a
business as normal approach in such a volatile industry in the midst of a crisis.
The public already has very low trust and confidence in corporate institutions and
in the absence of information, people will fear the worst, so it is in the best interest of
companies to use this opportunity to steady their reputations and calm stakeholders.
It appears that the communication professionals in this study were striving to
follow the recommendation for crisis communications to be quick, consistent and open.
With the 24-hour news cycle and online frenzies, organizations face more pressure to
manage crisis effectively than ever before. Although the participants admitted that this
has kept them extremely busy, they have increased the quantity of their communication
substantially. None of participants commented on the changes in the quality of their
communications, but they did mention that they were working hard at delivering clear
and transparent communications. They have even enlisted the help of additional
organizational leaders to aid in the clarity and accuracy of the messages.
Consistency also appears to remain a challenge, but the communication
professionals in this study were working on targeting their messages, training their staff,
providing talking points, and using communications in various formats (such as sending
a letter to customers and posting it online or using the same talking points in all
communications). This allows them to have many spokespeople by utilizing everyone in
the company from the cafeteria to employees and executives. This is especially useful
to embrace given the increasing prominence of social media in society.
The communication professionals in this study were focusing on communication
with the media (as a means to communicate with current and potential customers and
other stakeholders) and their employees. This pertains to dealing with rumors too. The
participants focused on internal rumors by trying to keep employees informed and giving
them outlets to ask questions. They talked about providing good and bad information o
both employees and investors. The challenge they face is balancing transparency with
sparking a sense of emergency. This increases the need to monitor concern closely
while avoiding being overly focused on the rumor of the day.
Two-way interactive communication at all levels can help to reassure
stakeholders. As the participants noted, this does not have to be the CEO or the officers
of the company, but if you are up front and transparent, any employee from the
mailroom to frontline staff can carry the message for you, resulting in higher credibility.
DiStaso Public Relations Journal- Vol. 4, No. 1, 2010
Plus, by working closely with investor relations, communication professionals can draft
appropriate internal and external messages.
Ultimately, participants agreed that communication must be accurate, timely,
transparent, and should explain what happened, what is being done to fix it, and why
such actions will help. By making following this, communication professionals can work
toward rebuilding trust.
LIMITATIONS AND FUTURE RESEARCH
This study used a limited number of participants. Although it was appropriate
and necessary for this exploratory study, it does limit the findings. Future research
should consider utilizing more quantitative methodology to identify generalizable trends
or minimally expand the number of participants for additional qualitative studies.
Research on communication related to financial organizations is limited and
direly needed especially since communication plays such an essential role in repairing
trust in organizations (something financial organizations especially need). One area
future research can make a difference is in determining if there is a difference between
the communication of financial information from financial institutions versus non-
financial institutions. Do date, this has gone unexplored, but it is possible that
stakeholder expectations are different.
Ultimately, no matter where what type of organization, the global financial crisis
will have an impact on communication strategies. This includes restoring trust and
confidence along with reassuring and educating stakeholders about what the economic
turmoil means for them personally.
Industry in Crisis- Public Relations Journal- Vol. 4, No. 1, 2010
REFERENCES
Aleman, E. J. (2009). Needed: Confidence, not short-term incentives. ABA Banking
Journal, 101(4), 40.
Bernanke, B. S. (2008, October 15). Stabilizing the financial markets and the economy.
Speech Presentation at the Economic Club of New York. Retrieved June 15 from
http://www.federalreserve.gov/newsevents/speech/bernanke20081015a.htm
Connelly, M. (2008, October 18). NYT in dark days, they let the sun shine in. Retrieved
July 7, 2009 from http://www.nytimes.com
Coombs, W. T. (2007). Ongoing crisis communication: Planning, managing, and
responding. (2nd ed.). Thousand Oaks, CA: Sage.
DiStaso, M. W., & Scandura, T. A. (2009). Organizational legitimacy: Lessons learned
from financial scandals. In D. W. Stacks & M. B. Salwen (Eds.), An integrated
approach to communication theory and research (2nd ed.). Mahwah, NJ:
Lawrence Erlbaum Associates, Inc.
Earle, T. C. (2009). Trust, confidence, and the 2008 global financial crisis. Risk
Analysis, 29(6), 785-792.
Edelman Trust Barometer (2009). Retrieved June 20, from
http://www.edelman.com/trust/2009/
Fall, L. T. (2004). The increasing role of public relations as a crisis management
function: An empirical examination of communication restrategising efforts
among destination organisation managers in the wake of 11th September, 2001.
Journal of Vacation Marketing, 10(3), 238-252.
Faulkner, B. (2001). Towards a framework for tourism disaster management. Tourism
Management, 22(2), 135-147.
Fearn-Banks, K. (2002). Crisis Communications: A Casebook Approach (2rd ed.).
Mahwah, NJ: Lawrence Erlbaum Associates.
Fombrun, C. J., Gardberg, N. A., & Sever, J. M. (2000). The Reputation QuotientSM. A
multi-stakeholder measure of corporate reputation. Journal of Brand
Management, 7(4), 241-255.
Freeman, R. E. (1984). Strategic Management: A Stakeholder Approach. Boston:
Pitman Publishing.
Galford, R., & Drapeau, A. S. (2003). The enemies of trust. Harvard Business Review,
81(2), 88-95.
DiStaso Public Relations Journal- Vol. 4, No. 1, 2010
Golin, A. (2004). Trust or consequences: Build trust today or lose your market
tomorrow. New York: AMACOM.
Gower, K. K. (2006). Truth and transparency. In K. Fitzpatrick & C. Bronstein (Eds.),
Ethics in public relations (pp. 89-105). Thousand Oaks, CA: Sage.
Holtz, S. (2009). Tactical transparency: The value of getting personal in business.
Webinar presentation on May 20, 2009.
Hon, L. & Grunig, J. (1999). Guidelines for measuring relationships in public relations.
Retrieved June 15, 2009, from the Institute for Public Relations website:
http://www.instituteforpr.org/
Institute for Crisis Management (2009, May). Annual ICM Crisis Report, 18(1).
Retrieved June 15, 2009 from http://www.crisisexperts.com/01creport.htm.
Kimmel, A. J. (2004). Rumors and rumor control: A manager’s guide to understanding
and combating rumors. Mahwah, NJ: Lawrence Erlbaum.
Lawrence, C. (2008, October 9). US financial & economic problems: Overview of
omnibus question findings. Retrieved June, 14 2009 from
http://www.instituteforpr.org/
Lindolf, T. R., & Taylor, B. C. (2002). Qualitative communication research methods
(2nd ed.). Thousand Oaks, CA: Sage.
Merrill Lynch (2009). Our history. Retrieved on July 2, 2009 from http://www.ml.com/
Mitroff, I. I., & Pearson, C. M. (1993). Crisis management: A diagnostic guide for
improving your organization’s crisis-preparedness. San Francisco, CA:Jossey-
Bass Publishers.
Mr. Morgan’s Sermon (1912, December 22). New York Times. Retrieved June 19 from
http://www.nytimes.com
Opinion Research Organization (2008, October 7). Despite Wall Street chaos, most
investors consider assets safe. Retrieved July 10, 2009 from
http://www.opinionresearch.com/
Shockley-Zalabak, P., Ellis, K., & Cesaria, R. (2000, August). IABC Research
Foundation unveils new study on trust. Communication World, 7-9.
Rawlins, B. (2007). “Measuring the relationship between organizational transparency
and trust.” Proceedings of the Tenth International Public Relations Research
Conference. Miami, March 8-10.
Industry in Crisis- Public Relations Journal- Vol. 4, No. 1, 2010
Rawlins, B. (2009). Give the emperor a mirror: Toward developing a stakeholder
measurement of organizational transparency. Journal of Public Relations
Research, 21(1), 71-99.
Ulmer, R. R., Sellnow, T. L., & Seeger, M. W. (2007). Effective crisis communication:
Moving from crisis to opportunity. Thousand Oaks, CA: Sage.
Watson, M. L. (2005). Can there be just one trust? A cross-disciplinary identification of
trust definitions and measurement. Retrieved June 10, 2009, from the Institute
for Public Relations Website: http://www.instituteforpr.org/
... Sedangkan Mitrof dan Pearson (1993) mende inisikan krisis organisasi sebagai sebuah kejadian atau peristiwa yang dapat mengancam reputasi dan kelangsungan hidup organisasi, hal tersebut mencakup personal sosial, faktor teknik krisis, dan asumsi -asumsi dasar yang diturunkan dari krisis yang dianut sebuah masyarakat, seperti nilai, keyakinan, dan struktur sosial. Hal yang sama juga disampaikan oleh Coombs yang menyatakan krisis sebagai sebuah ancaman signi ikan terhadap operasi bisnis perusahaan dan memberikan konsekuensi negatif jika tidak ditangani dengan benar sebagaimana disampaikan Marcia Distaso (Distaso, 2015) Ketika terjadi krisis, peran public relations suatu organisasi/perusahan harus segera menyampaikan apa yang terjadi dan menyediakan atau merespon informasi apa yang dibutuhkan publik. Ini tidak gampang butuh manajemen dan strategi komunikasi. ...
... Sedangkan Mitrof dan Pearson (1993) mende inisikan krisis organisasi sebagai sebuah kejadian atau peristiwa yang dapat mengancam reputasi dan kelangsungan hidup organisasi, hal tersebut mencakup personal sosial, faktor teknik krisis, dan asumsi -asumsi dasar yang diturunkan dari krisis yang dianut sebuah masyarakat, seperti nilai, keyakinan, dan struktur sosial. Hal yang sama juga disampaikan oleh Coombs yang menyatakan krisis sebagai sebuah ancaman signi ikan terhadap operasi bisnis perusahaan dan memberikan konsekuensi negatif jika tidak ditangani dengan benar sebagaimana disampaikan Marcia Distaso (Distaso, 2015) Ketika terjadi krisis, peran public relations suatu organisasi/perusahan harus segera menyampaikan apa yang terjadi dan menyediakan atau merespon informasi apa yang dibutuhkan publik. Ini tidak gampang butuh manajemen dan strategi komunikasi. ...
Chapter
Pelaku Usaha Mikro, Kecil dan Menengah (UMKM) perlu meningkatkan kompetensi digital agar dapat berdaya saing di tengah melesatnya pertumbuhan ekonomi digital. Salah satu cara untuk meningkatkan kompetensi digital tersebut adalah dengan mendapatkan pelatihan di bidang teknologi informasi komunikasi yang sesuai kebutuhan berdasarkan hasil analisis terhadap level dimensi kompetensi digital mereka. Penelitian ini bertujuan untuk merekomendasikan pelatihan yang dapat diberikan untuk meningkatkan kompetensi pelaku UMKM di Kabupaten Bandung Barat dari gap kompetensi yang ada adalah pelatihan yang dapat memperkuat dimensi kompetensi pembuatan konten dan pengetahuan; operasional teknis; kolaborasi; etika dan tanggung jawab; evaluasi dan pemecahan masalah; manajemen informasi serta terakhir adalah dimensi komunikasi dan berbagi.
Article
While public relations and marketing research has analyzed how companies are using individual social media channels, minimal research has explored an organization's social media presence across several channels or identified differences among industries. Using theoretical guidelines for best practices, this study does both by analyzing the complete list of Fortune's “America's Most Admired Companies” (N = 417) on Facebook, Twitter, and YouTube. Results found there were differences across industries regarding their adoption and integration of best practices into their social media accounts. A list of 20 gold standard companies is provided.
Article
This study reports on two surveys with business journalists to identify the impact the Occupy Wall Street movement had on the reputation of banks. The first survey was conducted before the movement and the second was after. Perceptions after the Occupy Wall Street movement, that the media caused the loss of trust in banks decreased but beliefs that the media were the main barrier in repairing the reputation of the US banking industry increased. While business journalists felt less strongly after the movement, greed remained their main belief of what caused the loss of trust and that transparent communication is needed to repair the reputation of the US banking industry. The Occupy Wall Street movement appears to have also influenced their thoughts on how many banks were involved in the financial crisis, how long it will take to repair it, and the impact of financial reforms.
Article
Full-text available
Measures of corporate reputation currently in widespread use suffer from fundamental methodological and conceptual weaknesses. This paper begins with a brief overview of the reputation construct and its expected dimensionality. It then examines some of the major indices in use and documents their principle weakesses. A new instrument is proposed - the 'reputation quotient' - to measure corporate reputations and establish its empirical validity and reliability through focus groups and pilot studies. It concludes that the reputation quotient is a robust measure of corporate reputations that considerable improves the state of the art in reptuation measurement.
Chapter
The purpose of this chapter is to outline the development of the idea of "stakeholder management" as it has come to be applied in strategic management. We begin by developing a brief history of the concept. We then suggest that traditionally the stakeholder approach to strategic management has several related characteristics that serve as distinguishing features. We review recent work on stakeholder theory and suggest how stakeholder management has affected the practice of management. We end by suggesting further research questions.
Article
Strategic Management: A Stakeholder Approach was first published in 1984 as a part of the Pitman series in Business and Public Policy. Its publication proved to be a landmark moment in the development of stakeholder theory. Widely acknowledged as a world leader in business ethics and strategic management, R. Edward Freeman’s foundational work continues to inspire scholars and students concerned with a more practical view of how business and capitalism actually work. Business can be understood as a system of how we create value for stakeholders. This worldview connects business and capitalism with ethics once and for all. On the 25th anniversary of publication, Cambridge University Press are delighted to be able to offer a new print-on-demand edition of his work to a new generation of readers.
Article
Tourism destinations in every corner of the globe face the virtual certainty of experiencing a disaster of one form or another at some point in their history. Despite this, few destinations have properly developed disaster management plans in place to help them cope with such eventualities. Among the reasons for this is the limited amount of systematic research that has been carried out in the field. This paper addresses this problem by drawing on insights from the broader disaster management literature to produce a generic model for analysing and developing tourism disaster management strategies. A set of prerequisites and principles of effective tourism disaster management planning is also provided.