Introduction to the impact of scandals on a company’s reputation and trust

A fundamental element which determines the success of any particular organization is trust. However, trust has become at a premium for most of the companies across the globe. According to surveys which have been conducted, there has been a consistent skepticism among various stakeholders such as customers and investors. Also, it is important for different companies to comprehend how to build, support and even recover trust since it is vital for a company to be considered competent. Also, the companies which value commitments and other ethical related issues should ensure that they have built a good reputation for their activities.

 The development of a good reputation of a particular company to enable it to become trustworthy often takes time, and it also needs investment and effort. However, if there is a scandal involving a particular company, it becomes difficult to rebuild such a good reputation even though it can be attained (Horn et al.2015 p.200). Often there is an extent to which the reputation of a company could be damaged, and this is typically depicted in the Volkswagen case study. In the case study, it can be seen that the company had provided false information to the public. Such false information was in regards to the number of cars which had been fitted with a defeat device in the US market (Shim and Yang, 2016 p.75).

The defeat device was used in allow different vehicles to pass through the emission tests. After some time, it was again announced by the company that there were about 11 million cars which had been fitted with the defeat device all over the globe. The information on the number of cars which were fitted with the defeat device was however false, and this compelled the head of US operations, Michael to accept that such information was false. Michael claimed that it was just an attempt by certain software engineers to defraud the regulators on the number of cars which were fitted with defeat devices.

There are various techniques which can be used in determining the extent of damage on the reputation of the company. In the case study, and such element enables any other particular organization to ascertain the level to which they could be exposed to reputational risks. One key factor would be to know the external expectations and beliefs of change of the company (Honey, 2017 p.100). Also, it would be prudent to understand the extent to which the damaged reputation would exceed the true character of the company. Lastly, the extent of damage could be determined by looking into the quality if the internal coordination of the company which has often been to affect the reputational risk gap.

Based on the case study, it can be concluded that the extent of damage on the reputation of the company can be categorized into various levels and this is based on the extent of damage on the company. The essential extent of damage on the company’s reputation includes, one is the deadly damage where there is a huge impact on the organization and that its survival would become an issue (Bednar, Love, and Kraatz, 2015 p.1750). Most of the customers will typically lose their trust in the Volkswagen Company since it had lied to the public on the number of cars which had been fitted with the defeat device. The survival of the company will typically become minimal, and this is because most of the clients will begin to purchase cars from other rival companies.

Case Study 1 – Volkswagen Emissions Scam

The other to which the company’s reputation was damaged is based on the way it responded to the situation at hand such that they were dishonest and never accepted that they had already lied on the number of cars which had been fitted with the defeat device. It later emerged that the statement which had initially been issued by the company that it was the work of the soft engineers was wrong (Coombs, 2015 p.145).

Further, a document was published which claimed that in reality the software engineers were defeated to build an engine which could attain high performance and thus keep emissions at the regulatory standards. By lying and not accepting that the engineers had been defeated to build the devices, the company’s reputation was damaged severely since it could not meet up with the regulatory standards as was expected of them (Trevino and Nelson, 2016 p.5). There will, therefore, be no customer would, therefore, be willing to purchase a car which had not met the regulatory standards resulting in a loss to many customers across the world.

The reputation of the company has also been damaged based on the expectations from the public on factors such as integrity, ethics, and morality which have all have critical roles in the development of a good reputation. The company was expected to be ethical, moral and promote integrity in the products they produced. However, that was not the case (Ferrell and Fraedrich, 2015 p.40).

Volkswagen instead lied on the number of cars which had been fitted with defeat device which would reduce the number of emissions in accordance with the regulatory standards. The fact that the company failed to maintain integrity, ethics, and morality was enough reason to typically damage its reputation (Fennis and Stroebe, 2014 p.115). It can be argued that when there is a huge difference between the reality and expectations of any particular company by the public, there is a possibility of greater adverse implication on the reputation of the particular company.

 What Can the Organisation do to Rebuild their Reputation?

There is a variety of step which can be taken by the company to enable it to rebuild its reputation which has already been damaged by the different actions they took. The steps are as indicated below in the paper; 

Analysis of the Depth of the Damage Caused

The first step which the organizations should take would entail an evaluation of the extent of damage, and this could be carried using a variety of techniques which include;

Tracking of the Press of an Organization: It entails looking into the various types of the press an organization is typically receiving which help in ascertaining the overall approach to use. The press provides information on business activities of an organization and also the perceptions of the particular company (Swain and Jordan, 2015 p.10). It will, therefore, be prudent for the different companies to work harder to help restore their reputations which had already been damaged by their business activities.

Tracking of the Brand Names: The marketing department of the companies can typically track the brand mentions, and this is to be done online. There are a variety of tools which can be sued to track the mentions, and they include, buzzsumo, Google alerts and mention. After tracking the mentions, it will be typically easy for the companies to get to know how negative or positive their business could be displayed in the media (Swain and Jordan, 2015 p.10). It will also be important for the companies to look into the percentages of the positive, negative and neutral coverage as they will be tracking the mentions online. 

Case Study 2 – Medical Malpractice at Gosport War Memorial Hospital

Conduct a Research on Comments of Customers

In this step, a study is conducted to determine the thoughts of different customers all over the globe, and this is done to typically know how the press is treating the particular customers. It is also important to know the number of loyal customers who have decided to stick with the organization and the other ones who have left to purchase cars from the other related firms. By looking into the number of clients who have gone and those who have remained, it will be easy to track the overall effect on the level of revenue of the company (Albert, Wright and Dean, 2016 p.315). Often there are various places to check for the comments, and this includes; 

Customer Support inbox

The customer support inbox is a critical place to look for different comments of the customers on the particular product. For example, many messages which could be from certain disgruntled customers could be an indication of a red flag (Albert et al.2016 p.315). The support team will, therefore, be expected to check the comments and later respond promptly to the customers.

Comment Part of Articles

The other place to check for the comments by different customers would be on the comment part found in the big news release (Comyns and Franklin-Johnson, 2018 p.175). The company should check if there is any direct message sent to the company by different customers regarding the particular issue and later respond to it promptly.

Speaking to both the Stakeholders and Investors of the Company

The company should also speak to the key stakeholders of the company, and this also includes the investors. In the event, the head of operations has to apologize to them regarding what transpired (Shanahan and Seele, 2015 p.45). Also, the company has to provide details on how the situation can be sorted out to rebuild the reputation of the company. Additionally, Volkswagen Company should provide every particular detail which it feels is vital to the stakeholders and investors since this will help such individuals to reconsider their trust issues on the company to help restore its reputation. 

Taking Control of the Communication Channels Which are Branded

According to Cao, Cassell, Myers, and Omer (2017 p.100), the extent of the damage caused to the company has to be established first in this step. The step entails looking into the key communication channels which the organization owns. Some of the channels which could be looked into by the firm include the social media pages, various internet properties, and the websites. Further, the company will use such communication channels to apologize publicly on the particular misleading information which it had availed to the public.

Such an apology could be made by issue of a formal apology letter on their website, and this has to be published in all the social media platforms which Volkswagen uses in the marketing of its product. The apology should be factual and brief on what had transpired (Agyemang, Williams and Kim, 2015 p.615). Additionally, Volkswagen will be expected to own up to the mistake they had made by giving false information on the number of cars which had been fitted with the defeat devices. The company can take full control of the branded communication channels; it would be prudent for the company to publish the formal apology on all of its channels to reach a wider group of customers who purchase cars from the firm.

Case Study 3 – Starbucks’ Tax Avoidance Practices

Besides taking control of the branded communication channels, the company has to regularly update the audience on the situation at the organization. It could involve broadcasting of all the actions which have been taken by the company, and this is because the public is essential for any particular business to succeed indefinitely (Brammer and Pavelin, 2016 p.445). The support team or rather the marketing department should be alert to enable them to provide feedback to all comments raised by different clients. Also, as the team responds to the comments, they have to give an assurance to the people that the company is doing everything possible to resolve the issue at hand. 

Creation of a Recovery Roadmap

After making all the promises to rectify the mistake which had been made by the company, it should have both the marketing and public relations team develop a recovery roadmap. Such a roadmap can be established on the basis of comments and feedbacks made by different stakeholders such as the general public, investors and the customers. The key elements which have to be taken into account in the step above would include, the violation of data scenario which would entail an evaluation of the extent of damage caused to a variety of stakeholders within the firm (Burke, 2016 p.30). The other aspect involves dealing with the particular negative content which had been made to the public by the company by replacing it with positive content. The company can also seek the services of the reputation specialists to help it in changing the visibility of negative content. 

Conclusion

In conclusion, the process of rebuilding the reputation of a business enterprise has been difficult. However, it is possible to restore the good reputation of any particular company even though it often needs more efforts and time to attain.

References

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Albert, L.S., Wright, G.H. and Dean, T.J., 2016. The Neenan Company: rebuilding from a crisis. The CASE Journal, 12(2), pp.310-318.

Bednar, M.K., Love, E.G. and Kraatz, M., 2015. Paying the price? The impact of controversial governance practices on managerial reputation. Academy of Management Journal, 58(6), pp.1740-1760.

Brammer, S.J. and Pavelin, S., 2016. Corporate reputation and corporate social responsibility. A handbook of corporate governance and social responsibility, pp.437-447.

Burke, R.J., 2016. Corporate reputations: Development, maintenance, change and repair. In Corporate Reputation (pp. 19-59). Routledge.

Cao, Y., Cassell, C.A., Myers, L.A. and Omer, T.C., 2017. Does Company Reputation Matter for Voluntary Disclosure Quality? Evidence from Management Earnings Forecasts.

Comyns, B. and Franklin-Johnson, E., 2018. Corporate reputation and collective crises: A theoretical development using the case of Rana Plaza. Journal of Business Ethics, 150(1), pp.159-183.

Coombs, W.T., 2015. The value of communication during a crisis: Insights from strategic communication research. Business Horizons, 58(2), pp.141-148.

Fennis, B.M. and Stroebe, W., 2014. Softening the blow: Company self-disclosure of negative information lessens damaging effects on consumer judgment and decision making. Journal of business ethics, 120(1), pp.109-120.

Ferrell, O.C. and Fraedrich, J., 2015. Business ethics: Ethical decision making & cases. Nelson Education.

Honey, G., 2017. A short guide to reputation risk. Routledge.

Horn, I.S., Taros, T., Dirkes, S., Hüer, L., Rose, M., Tietmeyer, R. and Constantinides, E., 2015. Business reputation and social media: A primer on threats and responses. Journal of direct, data and digital marketing practice, 16(3), pp.193-208.

Shanahan, F. and Seele, P., 2015. Shorting Ethos: exploring the relationship between Aristotle’s Ethos and Reputation Management. Corporate Reputation Review, 18(1), pp.37-49.

Shim, K. and Yang, S.U., 2016. The effect of bad reputation: The occurrence of crisis, corporate social responsibility, and perceptions of hypocrisy and attitudes toward a company. Public Relations Review, 42(1), pp.68-78.

Swain, K.A. and Jordan, L.A., 2015. BP’s Reputation Repair Strategies during the Gulf Oil Spill. Journal of Risk Analysis and Crisis Response, 5(1), pp.2-15.

Trevino, L.K. and Nelson, K.A., 2016. Managing business ethics: Straight talk about how to do it right. John Wiley & Sons.