MASTER IN CORPORATE COMMUNICATION

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MASTER IN CORPORATE COMMUNICATION

AARHUS BSS

DEPARTMENT OF BUSINESS COMMUNICATION

A CASE STUDY OF MALAYSIA AIRLINES’ CRISIS COMMUNICATION

DURING THE DISAPPEARANCE OF FLIGHT MH370

WRITTEN BY

SØREN KRONBORG

THOMAS MAEGAARD-NIELSEN

SUPERVISOR

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The total amount of characters in this thesis amounts to 224,244 compliant

to 101.93 standard pages. Conferring with the requirements, this excludes

Spaces, Abstract, Table of Contents, and Appendices.

Appendixes are encloses separately.

June 1, 2015

______________________________

Søren Kronborg

______________________________

Thomas Maegaard-Nielsen

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Abstract

Purpose: With departure in reputation management and crisis communication, the aim of the thesis is to investigate how Malaysia Airlines executed its crisis communication during the disappearance of flight MH370. Furthermore, the thesis seeks to investigate to which degree Malaysia Airlines was able to protect its reputation during the crisis.

Design/methodology/approach: The thesis is a case study of Malaysia Airlines’ crisis

communication consisting of both a qualitative and quantitative research combined in a mixed methods research. The qualitative research is carried out on the basis of sampled company documents and analyzed using a qualitative content analysis. The qualitative investigation additionally forms the basis for conducting the quantitative research, which consists of data

gathered from an online e-mail questionnaire survey and analyzed using a frequency table analysis. The effect of Malaysia Airlines’ crisis communication is uncovered by combining the two

separately conducted investigations in an overall discussion.

Findings: The thesis found that Malaysia Airlines failed to provide an adequate and consistent information flow to its stakeholders during the crisis, which resulted in a double crisis that gave the airline an unprecedented communication challenge. Malaysia Airlines mistakenly decided to adopt its own crisis framing, and the airline therefore misjudged the crisis type which served as a launch point for the employment and combination of several inappropriate crisis response strategies. Consequently, it proved difficult for Malaysia Airlines to maintain positive stakeholder relations, and the airline’s reputation became severely damaged. Malaysia Airlines lost its means to sustain profitability, and it ultimately made the organization aware of the need to restructure its business operations.

Practical implications: The findings can give crisis managers useful insight into the

communicative challenges they may face during a crisis. If an organization mismanages the original crisis, it may be overlaid by a double crisis. In such an instance, it may prove difficult for crisis managers to carry out a successful crisis communication strategy due to a gap in existing literature. Originality/value: The thesis provides a deep insight into the crisis communication effort carried out by Malaysia Airlines in a corporate communication context from both an organizational and a stakeholder perspective.

Keywords: Corporate communication, reputation management, crisis management, crisis communication, crisis type and intensifying factors, crisis response strategies, guidelines with recommendations, stakeholder perceptions, and customers.

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1. Introduction

On March 8, 2014, Malaysian Airlines (MAS) was put to the test. The organization experienced one of the worst crises in modern aviation history, when flight MH370 on route from Kuala Lumpur to Beijing disappeared. Air traffic control centers lost all contact with the plane at 2:40am local Malaysian time, and an international search and rescue mission from Malaysia, Singapore and Vietnam was mobilized hours later (Appendix 1). The search for flight MH370 was initially carried out in the South China Sea and then widened to include Malaysian Peninsular, the Malacca Strait, and the Andaman Sea (Appendix 8). On March 15, the search was widened to include a northern and southern corridor (Appendix 11). However, the decision to widen the search did not shed light on the circumstances surrounding the disappearance of flight MH370. Consequently, MAS decided to inform the general public on March 24 that the plane presumably ended its route in the southern Indian Ocean and that no one could possibly have survived the plane crash. A British global mobile satellite communications company, Inmarsat, had performed further calculations on the satellite data which indicated that the last known positon of flight MH370 was in the middle of the southern Indian Ocean far from any possible landing sites (Appendix 13). Nevertheless, if MAS had predicted that the crisis would eventually be buried by drawing this conclusion, the airline was terribly mistaken. There is still no physical evidence to support the conclusion, and it has presented MAS with an

unprecedented communication challenge.

One might say that the MH370 crisis became an unprecedented challenge because it was what Fink (2002) refers to as sudden, unexpected, unanticipated, and short-fused, which arguably made it very difficult to manage (Fink 2002: 55). There seems to be a general consensus among crisis

communication writers that a crisis is a negative phenomenon that compose a direct threat to the organization and can have a serious impact on its reputation. Fink encapsulates that consensus in his definition of a crisis: “A crisis is an unstable time or state of affairs in which a decisive change is impending (…) with has the distinct possibility of a highly undesirable outcome (…)” (Ibid: 15). According to Cornelissen (2008), protecting an organization’s reputation by building and maintaining the relationship with important stakeholders is considered one of the most valued criteria of corporate communication (Cornelissen 2008: 3). Besides from its reputation, an organization’s relations with its stakeholders can also have a profound impact on its overall

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performance, as the “(…) ability to create value for the customer directly influences revenues” (Samanta 2014: 206).

One key element in managing an organization’s reputation is also the ability to manage crisis situations through effective communication strategies. In fact, organizations frequently find themselves in situations that can be defined as crises (Coombs & Holladay 2010a: 17). Crisis communication represents a set of factors designed to combat crises, lessen the actual damage inflicted and minimize the reputational threat. In other words, crisis communication seeks to prevent or lessen the negative outcomes of a crisis by protecting the organization, its stakeholders, and the industry from harm (Coombs 2012: 5). Crisis communication is one of the most critical elements of effective crisis management, and it can broadly be defined as “(…) the collection,

processing, and dissemination of information that is required to address a crisis situation” (Ibid). If the organization in crisis is incapable of running the communication processes which is supposed to contribute to the initial handling of the crisis, a double crisis may occur where the original crisis is overlaid by a communication crisis (Johansen & Frandsen 2007: 79). If this turns out to be the case, the crisis can be a serious threat to the organization’s legitimacy. Johansen & Frandsen (2007) argue that crises can violate the expectations that stakeholders have about how organizations should act. When expectations are breached, stakeholders perceive the organization less positively and the reputation is harmed. As a result, it is emphasized that crises should be considered very dangerous to an organization’s overall reputation and future existence (Coombs 2012: 3).

One of crisis communication’s corner stones was laid by Benoit (1997), when he used the concepts of apologia and accounts to develop his theory of image restoration discourse as an approach for understanding corporate crises. Apologia is communication with the purpose of defending reputation from public attack, and accounts is communication used to explain the organization’s behavior when it is called into question (Benoit 1997: 154). However, Benoit’s theory focuses primarily on the verbal defense strategies applied by organizations when their image or reputation is under attack. It does not take into account the contextual factors that may influence the

communication processes.

In continuation of Benoit’s image restoration discourse, Coombs (1999, 2007, 2012, and 2015) combines elements of the rhetorical approach to crisis communication with Weiner’s (2006) conceptualization of attribution theory in his Situational Crisis Communication Theory (SCCT). The theory includes the notion that stronger attributions of the organization as the source of the cause lead to greater attributions of crisis responsibility, which in turn leads to an increased threat to

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an organization’s reputation (Coombs & Holladay 2010b: 247). SCCT operates with three stages that seek to provide crisis managers with a set of guidelines to assist them in choosing the most effective responses for the protection of the organization’s reputational assets. The first stage seeks to establish the crisis’ level of reputational threat and determine if the crisis has any intensifying factors. The second stage proposes different crisis communication strategies to provide the maximal reputational defense, and the third stage provides a system of guidelines with recommendations for effective crisis communication (Coombs 1999: 143). The goal of the SCCT is to match crisis response strategies with specific situations. Roughly, the greater the reputational threat is, the more accommodative the crisis response strategy is expected to be (Coombs & Holladay 2010b: 249). 1.1. Problem Statement

Based on the information presented so far, we have been inspired to devise a problem statement consisting of two research questions. With departure in reputation management and crisis communication, we wish to investigate:

1. How did MAS execute its crisis communication during the disappearance of flight MH370? 2. To which degree was the airline able to protect its reputation during the crisis?

In order to address the first research question, we will apply Coombs’ (1999, 2007, 2012, and 2015) SCCT to investigate how MAS executed its crisis communication during the crisis. The second research question will be addressed in an investigation of MAS’ ability to protect its reputation by exploring how a specific customer group perceived the communication effort. It has been

emphasized that one of the most important stakeholder groups for any organization is the customers, as they can have a profound effect on its overall performance. The customers should therefore provide an interesting point of departure for a supplementary investigation of MAS’ reputation.

1.2. Scientific Approach, Research Method and Data Collection

The scientific approaches influencing this thesis are comprised of both ontological and

epistemological considerations, which will be expressed rather implicit than explicit. The thesis first and foremost takes its point of departure in the ontological position of ‘constructionism’ to study the reality and context created by MAS and its key stakeholders. Constructionism generally implies that social phenomena are constructed by social actors through interactions and conversations that

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do not exist independently from the people participating. The approach invites the researcher to consider the ways in which social reality is an ongoing accomplishment of social actors rather than something external to them (Bryman 2012: 33). By embracing the constructionist approach, it can be asserted that crises and their meanings are continually being constructed not only by MAS, but also by other social actors such as the stakeholders. As a result, the reality of the crisis should be regarded as a socially constructed phenomenon created by both MAS and its key stakeholders (Coombs 2012: 2). The ontological position of constructionism should enable an investigating of the communication effort carried out by MAS from both an organizational and a customer perspective.

Additionally, epistemology is the different forms of knowledge that can be employed to understand social realities more in-depth. In order to reach a more holistic understanding of the social reality created by MAS and its customers, the epistemological position of ‘interpretevism’ has been adopted. The interpretivist approach embraces a worldview that is affected by the social constructions of reality and based on the researcher’s subjective observations influenced by

personal values. We will employ ‘the hermeneutic-phenomenological tradition’, which is one of the most prominent intellectual heritages of interpretivism, to interpret the meaning created between MAS and its customers in a wider context. By gaining access to the common-sense thinking of MAS and its customers, we should be capable of interpreting their actions and their social world from their viewpoints (Bryman 2012: 30).

The investigation takes it point of departure in a case study of MAS’ crisis communication during the disappearance of flight MH370. The single case study should allow us to capture the complexity and particular nature of the case in question where our emphasis will be placed on an extensive examination of MAS’ crisis communication from two perspectives. There is a widespread tendency to associate case studies with qualitative research, but such identification is inappropriate as case studies are frequently sites for the employment of both qualitative and quantitative research methods (Ibid: 68). The same argument applies to the scientific link between ontology,

epistemology and methodology; it is important but not determinant for the chosen research strategy. For this thesis, we have decided to conduct research that cuts across the qualitative and quantitative divide within a single research project, namely what Bryman (2012) refers to as ‘mixed methods research’. Mixed methods research can be carried out in several ways, and different rationales exist for combining qualitative and quantitative research. Our incentive for combining qualitative and quantitative research in a mixed methods research is placed within the rationale of ‘completeness’,

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which dictates that a more complete answer to a set of research questions can be achieved by including two different research methods (Ibid: 637).

Qualitative research will account for the principal data-gathering tool of the mixed methods research. The qualitative data will be gathered by sampling documents from MAS’ and the

Malaysian Government’s official MH370 websites, and it covers both press releases, transcripts of press conferences and annual reports during a period from March 8 to August 29, 2014. It should be noted that all statements by both MAS and the Malaysian Government are accredited to MAS. The reason for this accreditation is the fact that at the time of the crisis, 70% of the airline was owned by the Malaysian Government through its strategic investment fund, Khazanah Nasional Berhad. A qualitative content analysis will consequently be employed to analyze the sampled documents and should enable an answer to the first research question. Qualitative content analysis is one of the most prevalent approaches to the qualitative analysis of texts, and it is comprised of searching for underlying themes and concepts in the sampled documents. The SCCT contains several theoretical concepts and categories, and we therefore find it sensible to use them as themes when examining the sampled documents. Bryman does not specify in detail the process through which the themes are extracted, but they will be illustrated in quotations and statements derived from the documents when we write down our findings. Another important element in qualitative content analysis is to interpret the findings, which means that we will reflect on the overall importance of our findings for the research questions and the research literature that have driven the collection of data (Ibid: 559). Although the predominant research strategy of the thesis is deemed qualitative, most qualitative research methods do not allow data to be evaluated in terms of measurement, and we therefore needed an additional approach that would allow us to measure how the customers perceived MAS’ crisis communication. When the findings derived from the qualitative content analysis have been interpreted, they will form the basis for conducting an online e-mail questionnaire survey. In other words, we have employed a quantitative investigation to help shed light on the findings drawn from the qualitative. According to Bryman, it is possible to use the in-depth knowledge of social contexts acquired through qualitative research to inform the design of e.g. questionnaire surveys (Ibid: 644). The questionnaire will primarily be comprised of attitude questions in the form of a Likert Scale design. The Likert Scale is one of the most frequently encountered formats for measuring attitudes, and the questions will be specifically geared towards addressing the thesis’ second research

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There are many available online software packages to design a questionnaire, and we decided to use SurveyXact since it is a free and acclaimed instrument offered by Aarhus BSS. Using SurveyXact should also eliminate the obligation of coding a relatively large number of questionnaires, and it reduces the likelihood of errors in the processing of data. Each respondent’s replies are logged into a database, and the entire dataset can be retrieved and used in a frequency table analysis once the data collection phase is complete (Ibid: 671). The statistical analysis of the respondents’ perceptions of MAS’ crisis communication will be described by providing the reader with short and simple summaries about the sample and its measurements.

Albeit qualitative research has had almost a monopoly of the ability to study meaning over the years, the widespread inclusion of questions about attitudes in social surveys suggests that

quantitative researchers are interested in matters of meaning as well (Ibid: 617). When we ask the respondents about their perceptions of different elements of MAS’ crisis communication, it also implies that we need to uncover issues of meaning in the quantitative investigation. This aspect further supports the idea that qualitative and quantitative research is probably not as wide and distinct as is often supposed by many social researchers.

1.3. Thesis Scope and Delimitations

In terms of scope, the thesis will conduct an investigation of MAS’ crisis communication during the disappearance of flight MH370. The crisis is contained to the period between March 8, when the plane disappears, and August 29, when the plan to delist MAS is announced.

The qualitative investigation of press releases, transcripts of press conferences, and annual reports is conducted with the purpose of ensuring that the content of all the collected data speaks to how the airline utilized communication to manage the MH370 crisis. Articles including statements from unofficial sources like newspapers and other media have been excluded because they may angle the story to bring their version of it. We did however make a few exceptions in order to bring relevant information that was unavailable on the official websites, but when exceptions were made it was always the unedited information of the article that was utilized in the analysis. MAS’ use of social media communication during the crisis has been excluded for a variety of reasons, but first and foremost because it has not been the focus of the thesis. Additionally, it is user-generated

communication, which makes it impossible to distinguish between users and exclude people that are partial to the airline, e.g. the relatives of the passengers and crew members of flight MH370. The statements made by the relatives in the press are also excluded because they are deemed partial and do not form a representative sample. Instead, we have conducted an online e-mail questionnaire

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survey of potential customers with the purpose of providing a different and perhaps more realistic perspective of how the stakeholders perceived MAS’ crisis communication.

The quantitative investigation is made with the purpose of ensuring that the respondents are a fair sample of MAS’ potential customers. One might say that the majority of MAS’ potential customers are located in other areas of the world, but since it is the absolute size of a sample that is important and not the relative, the investigation will arguably be just as valid when sampling from a Danish population. For the purpose of this thesis, we have identified golf players of Mollerup Golf Club in Aarhus as the population and specific stakeholder group from which a probability sample will be drawn. Golf players generally represent a wide section of the Danish population that travels to Asian countries, and they are therefore considered a fair sample of MAS’ potential Danish customer base.

In regards to the theoretical framework of the thesis, a delimitation was made to utilize crisis theory that has a strong focus on the communication produced by the organization in crisis and not by other actors involved. It was chosen for its ability to both enable a study of how organizations in crisis defend their reputation through an application of various types of crisis response strategies, as well as its ability to illuminate how the organization’s attribution of crisis responsibility impacts its response strategy choice. Although it was considered, we ultimately chose to exclude the inclusion of theory that applies a multi vocal approach to crisis communication such as the Rhetorical Arena (Johansen & Frandsen 2007). It was considered because of its ability to capture the complexity of the many communication processes that take place inside the rhetorical arena, thereby

characterizing crisis communication in its entirety. It was excluded because the thesis’ scope does not include the communication from multiple stakeholder groups. The focus is instead placed on the one-way crisis communication of MAS and on an analysis of how the airline’s communicative effort was perceived by its customers. Additionally, we recognize that corporate communication is a holistic discipline and encompasses internal as well as external dimensions, but it should be noted that the thesis’ sole focus is on external communication in regards to the MH370 crisis.

Finally, it is recognized that the MH370 crisis is situated in a specific social reality and that no two crises are identical. However, a single case study allows for theory-based generalizations, which makes the scientific context relevant for providing insights into how organizations should communicate during a double crisis and why the findings of this thesis should be regarded as contributions to the field of crisis communication.

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Page 8 of 102 1.4. Structure

The thesis extends over eight chapters, beginning with the preliminary considerations of the introduction. Chapter two consists of the theoretical framework, and it focuses primarily on the corporate communication sub-disciplines of reputation management and crisis communication, which together formed the basis for the development of the problem statement and its

accompanying research questions. The theoretical framework will provide an extensive account of the two disciplines that should be regarded as the theoretical foundation for assessing the case. Chapter three contains the thesis’ underlying research orientation including ontological and epistemological considerations as well as the methodologies for data collection and data analysis. Chapter four will provide the reader with a case presentation to ensure a contextual understanding of the subsequent chapters. In chapter five, the theoretical and methodological considerations will be applied in an investigation of MAS’ crisis communication effort during the disappearance of flight MH370. Chapter six will consist of a discussion of the findings derived from both the qualitative and quantitative analysis while taking a critical perspective towards MAS’ crisis communication. Whereas chapter seven will present an account of the problem statement and provide the concluding remarks of the thesis, chapter eight will attempt to offer alternative perspectives for future research within the field of crisis communication.

2. Theoretical Framework

In this chapter, we have conducted a theoretical framework that is intended to help us understand the social world and the phenomenon we are investigating. The framework has been particular important in our research process because it has provided a backcloth and rationale for the research that is being conducted on MAS’ crisis communication during the disappearance of flight MH370. Basically, what we have done is to construct a multiple layered theoretical chapter with different theoretical approaches. The idea is that one theory will support another in its limitations, which will enable the existence of a connection thread throughout the thesis. The theoretical framework is comprised of reputation management and crisis management theories, both sub-disciplines of corporate communication. The two disciplines have been employed to enable an answer of the problem statement and its accompanying research questions.

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Page 9 of 102 2.1. Introducing Corporate Communication

The history of corporate communication begins with the discipline being considered a subset of journalism. Since the need for that type of communication was created by journalists, many CEO’s believed that they should hire journalists to deal with media relations (Argenti 1996: 74). Corporate communication became more than just public relations when internal and external stakeholders began demanding more information from organizations (Cornelissen 2008: 4). Argenti (1996) argues that although communication schools began training practitioners of public relations, business schools are now the most appropriate home of the discipline: “(…) like other functional

areas of the organization, e.g. marketing, finance, production etc., corporate communication exists as a real and important part of most organizations” (Argenti 1996: 74).

Argenti also provides a list of different activities within corporate communication, and although he acknowledges that it is not all-encompassing, it does represent the most important sub-functions. His list of modern corporate communication practices contain: image and identity; corporate advertising; media relations; financial communication; employee relations; community relations and corporate philanthropy; government relations, and; crisis communications (Ibid: 77). Even though the corporate communication function incorporates a number of specialized

disciplines, its communication with both internal and external stakeholders always starts from the perspective of the bodily organization as a whole (Cornelissen 2008: 5). Corporate communication transcends the specialties of individual communication practices, e.g. media relations, investor relations, internal and external communications, etc., and crosses these specialist boundaries to harness the strategic interests of the organizations at large (Ibid).

Protecting an organization’s reputation by building and maintaining the relationship with important stakeholders is considered one of the core tasks of corporate communication, and it is also one of the most important strategic objectives in most modern organizations. There seems to be a

widespread consensus among managers that the future of an organization actually depends on how it is perceived by key stakeholders. Therefore managing and executing strategic programs is the key to building and nurturing these relationships (Ibid: 3). The general idea is that the sustainability and success of an organization depends on how it is perceived by its stakeholders, and communication is a critical part of building, maintaining and protecting such relationships (Ibid: 5).

Although corporate communication originated in media relations and subsequently spread to other functions, today it is a discipline that begins with the bodily perspective of the organization. Because it has its roots in the overall nature of the corporation, it does not have the in depth

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knowledge of the sub-functions of the organization’s communication. As a consequence, it risks losing the details that can make all the difference when the organization’s communication professionals are managing its various stakeholders to strengthen its corporate reputation.

Stakeholder management is one of the more important elements of corporate communication, as an organization’s relationships with its stakeholders can have profound effect on its overall

performance. Freeman (1984) defines a stakeholder as: “(…) any group or individual who can

affect or is affected by the achievement of the organization’s objectives” (Freeman 1984: 46). According to Fiedler (2011), one of the most important stakeholders for any organization is its customers: “(…) customers (…) are indeed the most important stakeholder group” (Helm et al. 2011: 134). The notion that customers are the most important external stakeholder is supported by Samanta (2014). She states that customers are “(…) the raison d'être of any company” (Samanta 2014: 206), which means that they are the organization’s very reason for existing. Moreover, she states that “(…) customer value is the primary objective since the ability to create value for the

customer directly influences revenues” (Ibid). 2.2. Corporate Reputation

Fombrun (1996) is one of the most recognized and referenced writers within corporate reputation. According to him, “(…) a reputation embodies the history of other peoples’ experiences with a

service provider. Good reputations increase credibility, making us more confident that we’ll really get what we’re promised” (Fombrun 1996: 3). Fombrun references the reader’s own life when explaining why a good reputation is important, saying that when we choose our dentist, electrician, lawyer, doctor, travel agent, etc.; we do so because they come recommended by someone we trust. The main reason for why a good corporate reputation is valuable is that it makes the individual confident that he or she will really get what is promised by the organization (Ibid).

2.2.1. Corporate Reputation Defined

Looking for a clear-cut definition of what constitutes corporate reputation can be close to

impossible. Every book or article seems to have a different variation on how the concept should be defined, and this section therefore begins with the root of the construct: reputation.

We found that the word ‘reputation’ was defined quite similarly in various dictionaries as a ‘belief or opinion held by others about someone or something’. Additionally, we found that it is the:

“Overall quality or character (…)” (Webster), something that “(…) is generally held about

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(Longman). For this thesis we have summarized the three dictionary definitions and taken reputation to mean “the overall opinion or belief generally held by people towards someone or something because of what has happened in the past”.

Bromley (2002) provides one definition of corporate reputation by stating it is “(…) reflecting a

firms relative standing, internally with employees and externally with other stakeholders, in its competitive and institutional environment” (Bromley 2002: 36). Griffin (2008) provides another view on corporate reputation by arguing that “(…) any attempt to deconstruct and

compartmentalize corporate reputation risks missing the point: your reputation is difficult to pin down as it is based on perceptions” (Griffin 2008: 12). A third definition of corporate reputation is proposed by Doorley & Garcia (2011), who suggest that three critical components must be included in the definition: “(…) corporate reputation is the sum of images and it is made up of performance,

behavior and communication” (Doorley & Garcia 2011: 4).

According to Helm (2011), the reason that no clear-cut definition exist is the number of different disciplines that take an interest in reputation without a common language or an agreement on the terms and axioms of their analyses (Helm et al. 2011: 5). Helm therefore summarize the various definitions by condensing the findings on the construct interpretations and describes corporate reputation as ”(…) a stakeholder’s overall evaluation of a firm in respect to its past, present, and

future handling of stakeholder relationships that reflects a firm’s ability and willingness to meet stakeholders’ expectations continuously and describes the firm’s overall appeal to all of its constituents when compared with other firms” (Ibid: 7).

2.2.2. One or Several Reputations

All of the above definitions operate with the notion that an organization only has one corporate reputation, but several writers question this notion. In fact, Bromley (2002) claims that an

organization can have ”(…) as many reputations as there are social groups“ (Bromley 2002: 36). Additionally, Liehr-Gobbers & Storck (2011) claim that a reputation can vary from stakeholder group to stakeholder group and additionally from country to country (Helm et al. 2011: 29). These views are somewhat supported by Davies et al. (2003), who argue that “(…) different

stakeholders can have different images of the same organization” (Davies et al. 2003: 61). In their definition, they use the term ‘image’, which is one of two elements that they argue a reputation is composed of: image – the view of the organization held by external stakeholders, and; identity – the view of the organization held by internal stakeholders.

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A further explanation of the relationship between image, identity and reputation is provided by de Camara (2011), who emphasizes that: “(…) corporate identity represents the internal culture,

values and behavior of an organization, as well as its visual appearance” (Helm et al. 2011: 48). In her summarization of what an image is, she argues that “(…) corporate image resides in the heads

of the stakeholders, whereas identity resides in the heads of the organization” (Ibid: 49). She also explains why some might state that more than one corporate reputation exist, saying: “(…) the term

should be ‘corporate images’ for there are as many as there are individuals having relationships with, or knowledge of, the firm (Ibid).

The approach taken by most studies of corporate reputation and by this thesis towards

understanding the relationship between corporate identity, image and reputation is the holistic view. This view perceives reputation building as a cross-functional and organizational activity that

concerns all stakeholder groups (Ibid: 51). To a large extend, de Camara and Davies et al. also agree on what corporate reputation ultimately is. Davies et al. argue that it is “(…) a collective term

referring to all stakeholder’s views of corporate reputation” (Davies et al. 2003: 61), whereas de Camara argues that it is “(…) an external reflection of internal organizational behavior” (Helm et al. 2011: 54).

2.2.3. Why Corporate Reputation is Important

A survey from 2003 indicates that reputation among business leaders is regarded as a more

important criterion for the success of a business than e.g. price development and profitability (Helm et al.: 2011: 27). Additionally, reputation management does not have an assigned budget in several organizations, as it is considered so central to business success that it cannot be a budgeted area. Instead, reputation management is regarded as a top level role, and more than 80% of managers agree that reputation is ultimately the responsibility of the CEO (Davies et al. 2003: 51-52).

The question one might ask is why reputation is so important for organizations and ultimately more important than profitability and price development. This question is partly answered by Liehr-Gobbers & Storck (2011) in two parts. Firstly, developing and protecting reputation have the objective of securing the cooperation of internal and external stakeholders and securing maximum cooperation, which can lead to achieving the strategic goals of the organization. Secondly, a good reputation leads to better chances of overcoming crises, as reputation serves as a sort of ‘buffer’ or ‘safety net’ (Helm et al. 2011: 19).

The buffer that Liehr-Gobbers & Storck speak of is also referred to as reputational capital, which is something that every organization has in greater or lesser amount. Reputational capital can be

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considered a form of intangible wealth closely related to ‘goodwill’ or ‘brand equity’, and by having a large stock of reputational capital an organization can gain a competitive advantage against its rivals. This advantage is achieved through gaining the trust and respect of the customer, which means that the organization is granted the benefit of doubt in ambiguous situations and that we willingly pay handsomely for their products because we trust them to deliver on our

expectations. In other words, reputational capital enables an organization to charge premium prices for its products, to achieve lower marketing costs, and to benefit from greater freedom in decision-making (Fombrun 1996: 9-11).

In order to fully understand how reputational capital can serve as a buffer in crisis situations, Helm provides an example where the reputation equals a sand dune and the crisis equals the blowing wind. The size of the dune is determined by how good the reputation is: the greater the reputation, the bigger the dune. Now, when the blowing wind of a crisis occurs, the size of the sand dune plays an important role. A strong wind takes away the uppermost layer of sand at first and leaves the lower layers and the core of the dune (the historical values of the firm) untouched. Depending on the severity of the storm, this means that the core and maybe even the lower layers can stay unaffected by the big wind gust. However, if the sand dune is very small, the lower layers and the core of the dune may also be severely affected by the blowing wind of a crisis (Helm et al. 2011: 13).

2.2.4. Reputation Building

Fombrun (1996) argues that reputation building is a form of an ‘enlightened self-interest’, and that building an organization’s reputation means entering into competition with its rivals: “Reputation is both a product and a by-product of competition. It is produced directly as a firm builds competitive advantage in pursuing uniqueness, as it differentiates itself from rivals” (Fombrun 1996: 32). Pursuing uniqueness is the way to differentiate the organization from its rivals by finding the unique value that it alone can deliver to a chosen marketplace. The development of management practices that reinforce the found uniqueness of the organization will enable it to foster consistent images of it as credible, reliable, responsive, and trustworthy (Ibid: 23). And when these images are

benchmarked against rivals, communicated persuasively to stakeholders, perceived by those to cohere and maintained over time – they enhance the company’s reputation and build competitive advantage (Ibid: 23-24).

However, according to Drucker (2006) uniqueness is worth nothing without effective executives practicing mundane management. He states that the way to be a truly effective executive is to

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perform a small number of fairly simple practices well, and to ask oneself: “What can I and no one

else do which, if done really well, would make a real difference to this company” (Drucker 2006: 59). One might say that Drucker combines the concept of ‘uniqueness’ with the role of the effective executive. He expects the executive to ask what he and only he can do that makes a real difference to the organization and then to develop the simple mundane habit of doing it day in and day out:

“When you come down to it, building reputation is downright mundane” (Fombrun 1996: 30). 2.2.5. Managing Corporate Reputation

In reputation management, the organization’s stakeholders are usually managed through separate departments that are exclusively devoted to that one stakeholder group. “Most companies deal with

their publics in a fragmented manner. For the most part, they delegate them to distinct functional silos – finance, marketing, human resources – with minimal opportunity for contact or

coordination. Doing so reflects a poor understanding of the determinants of corporate reputation”

(Fombrun 1996: 193-194). This way of conducting business can work fine at a micro level, but if an organization seeks to manage its reputation at a more strategic macro level, then simply managing the various silos of the organization will not be sufficient. According to Fombrun (1996), “It also

imperceptibly damages an organization’s competitiveness and profitability while increasing its riskiness and vulnerability to crisis” (Ibid).

We have examined several writings on reputation management in order to determine what the subjacent fields of an organization’s reputation are. The examination resulted in the authors taking the subjects of writings by various reputation management practitioners as an indication of what constitute an organization’s reputation. Those subjects were: corporate identity and image, stakeholder management, investor relations, issues management, crisis communication, customer relations, employee relations, government relations, media relations and corporate social

responsibility. All of these fields can arguably be considered part of good corporate communication as well as good reputation management, which speaks to the complex nature of an organization’s reputation. Griffin (2008) furthermore argues that compartmentalizing corporate reputation risks missing the point: a reputation is difficult to pin down as it is based on perceptions (Griffin 2008: 12).

Davies et al. (2003) state that defending reputation begins with “(…) thinking the unthinkable and

then planning for that eventuality” (Davies et al. 2003: 99). Additionally, Fink (2002) suggests that

“(…) the problems in managing crisis occur when they become sudden, unexpected, unanticipated, short-fused crises” (Fink 2002: 55). He also states that success in defending reputation essentially

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consists of planning ahead for what and whom will be needed as that will save valuable time in the heat of the crisis, which saves the organization from having to (a) decide what is needed and (b) then finding it. Furthermore, he states that an effective plan presents certain key decisions on the mechanical portions of the crisis – those aspects that rarely vary – and leaves one free to manage the content portion of the crisis with your hands unfettered” (Ibid: 55).

When an organization has experienced the need to defend its reputation following a crisis it will then need to rebuild its reputation. Before an organization begins rebuilding, it can choose to conduct a reputational audit. An audit is done through three principal steps:

1) Diagnosing the current stage, which is a diagnostic view of the organization's current identity, image and reputation.

2) Designing the future state, which is a strategic analysis of the trends, plans, and competitive positioning that defines the organization’s desired future state.

3) Managing the transition, which is a review of the plans for managing the transition towards the future state (Fombrun 1996: 206-209).

The first step has three parts and consists of an identity analysis (1), which is a review of all

organizational communication with its stakeholders. An image analysis (2) assesses the perceptions of how well the projections are communicated, which is done by conducting a comprehensive survey of the organization’s principal stakeholders. The final part is a coherence analysis (3) that explores the coherence of the different images obtained in the surveys.

In the second step, the organization’s top managers develop a consensus on where they would like the organization to be positioned. This development is done through an understanding of the organization’s strategic intentions and competitive circumstances, through discussions of the strategic position within the industry, and through a discussion of its rivals relative reputational standings and self-presentations. The third step is managing the transition. This step requires a close involvement of a representative cross section of employees to ensure the success of the intervention, and secrecy is therefore not essential and broad internal discussions are encouraged (Ibid: 207-209). Generally, one issue with managing corporate reputation is the number of different definitions that exist. The lack of consensus in the definition of a corporate reputation means the researcher can take a variety of approaches, making it a somewhat blurred field of study. Another subject of disagreement is whether an organization has one overall reputation or several reputations. Some

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argue that an organization has several reputations, while others call for the existence of one overall reputation.

Finally, there is the question of how to manage reputation, which is a question without one correct answer. Additionally, one must also incorporate the management of the subjacent fields of

reputation in the overall plan, which then begs the question of which department should oversee the reputational management. Should it be the communications department, which most articles claim, or do they have too much focus on the communicative aspect. Perhaps it will be managed better by another department where the focus is also placed upon the performance and behavior of the organization. All these unanswered questions indicate that the field of reputation management is currently a work in progress with far more questions than answers.

2.3. Crisis Management

According to Coombs (2012), crisis management is not merely developing a plan and executing it during a crisis. Instead, it is appropriately viewed as an ongoing process. Every day, organizational members should be scanning for potential crises, taking actions to prevent them, or considering any number of aspects of the crisis management process to increase the level of preparedness (Coombs 2012: 6). Coombs further suggests that crises are ubiquitous, and various developments in today’s environment have made all types of organizations more susceptible to them. Unprepared

organizations have more to lose today than ever before, and especially mismanagement costs seem to escalate (Ibid: 13). Crisis management therefore represents a set of factors, including crisis communication, which is designed to combat crises and to lessen the actual damage inflicted. In other words, it seeks to prevent or lessen the negative outcomes of a crisis and thereby protect the organization, stakeholders, and industry from harm. Crisis communication is probably one of the most critical elements of effective crisis management, and it can broadly be defined as “(…) the

collection, processing, and dissemination of information that is required to address a crisis situation” (Ibid: 5).

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Page 17 of 102 2.3.1. Crisis Definition: a Socially Constructed Phenomena

Coombs & Holladay (2010a) emphasize that organizations frequently find themselves in situations that can be defined as crises (Coombs & Holladay 2010a: 17). The crisis communication field is characterized by rich definitions as to what constitutes a crisis and how it should be managed. However, there is a general consensus among writers that a crisis is a negative phenomenon which should be regarded as a direct threat to the activities and the livelihood of the organization.

This reasoning is especially evident in Fink’s (2002) crisis definition: “A crisis is an unstable time or state of affairs in which a decisive change is impending (…) with the distinct possibility of a highly undesirable outcome (…)” (Fink 2002: 15). Fink further suggests that a crisis should be perceived as any situation that runs the risk of: escalating in intensity; falling under close media or government scrutiny; interfering with the normal operation of business; jeopardizing the positive public image presently enjoyed by an organization or its officers, and; damaging an organization’s bottom line in any way. If any or all of these developments occur, the turning point most likely will take a turn for the worse (Ibid: 15-16). Doorley & Garcia (2011) have built their definition around the premise of Fink’s definition by arguing that “A crisis is a non-routine event that risks undesired visibility that in turn threatens significant reputational damage” (Doorley & Garcia 2011: 310). In continuation hereof, Coombs (2012) describes a crisis as being fairly unpredictable, but not unexpected. He suggests that wise organizations know that crises will befall them sooner rather than later: “A crisis is the perception of an unpredictable event that threatens important expectancies of

stakeholders and has the power to seriously impact an organization’s performance and generate negative outcomes” (Coombs 2012: 2). Coombs’ definition is a synthesis of various perspectives on crises, since it tries to capture the common traits that other writers have used when describing them. It can also be derived from the following statement that a crisis is perceptual and that the existence of a crisis depends on the perception of key stakeholders: “If stakeholders believe an organization

is in crisis, a crisis does exist, and stakeholders will react to the organization as if it is in crisis”

(Ibid). In other words, Coombs operates with a definition that perceives a crisis as being a socially constructed phenomenon. He emphasizes that a crisis is constructed by the stakeholders’

perceptions of whether a crisis exists or not. Stakeholders tend have their own perceptions and interpretations of a crisis, but at the same time they are also capable of shaping and influencing the perceptions of other people. Although a crisis may not be directly caused by a human act, crises are often socially created through human intervention.

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In addition to Coombs’ crisis definition, Johansen & Frandsen (2007) have developed a broader approach that may occur if the organization’s crisis communication is insufficient: “A double crisis is a crisis where the original crisis is overlaid by a ‘communication crisis’ in a way that the

organization is not capable of running the communication processes which is supposed to

contribute to the handling of the original crisis” (Johansen & Frandsen 2007: 79). The definition contains the explanation that the original crisis may be overlaid by a communicative crisis, if the organization is incapable of running its communication processes which is supposed to contribute to the management of the original crisis. The definition has certain similarities with other crisis

definitions, but it is limited in its applicability as it does not propose a best practice for managing two dependable crises. However, the definition stands apart by recognizing that a communicative crisis should be treated with similar importance as the original (Ibid).

The double crisis definition is relevant in the context of this thesis because such a crisis may occur if the organization is incapable of handling the issues at the very beginning. If this turns out to be the case, the crisis can be a serious threat to the organization’s legitimacy. Crises can violate expectations that stakeholders hold about how organizations should act. For instance, planes are supposed to land safely on the ground and not disappear out of the blue. Crises therefore have the potential to disturb some stakeholders’ expectations, which can result in people becoming angry and upset and thereby threaten the long term relationship between the organization and its stakeholders. When expectations are breached, stakeholders perceive the organization less positively and the reputation is harmed.

Based on the different crisis definitions that are included in this section, crises should be considered very dangerous to an organization’s overall reputation and future existence (Coombs 2012: 3). Following Johansen & Frandsen’s double crisis definition, Shibutani (1966) presents an intriguing hypothesis that may arise if the organization is incapable of providing adequate information in a crisis situation. He defines a crisis as “(…) any situation in which the previously established social

machinery breaks down, a point at which some kind of readjustment is required” (Shibutani 1966: 172). He postulates that during a crisis, an “Inability to act may also arise from the perplexity of

those who are caught in a dilemma” (Ibid). According to Shibutani, these inabilities often arise from ambiguity during a crisis which can also lead to the creation of rumors. Rumors “(…) emerge

in ambiguous situations” (Ibid: 56-57), and they generally “(…)develop when there is an

unsatisfied need for information” (Ibid: 173). The variables of importance and ambiguity dictate the amount of rumors circulating in a crisis situation. In other words, the amount of rumors will vary

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with the importance of the subject to the concerned individuals and the ambiguity of the available evidence. During a crisis, the established sources must supply adequate information, for if they do not and the problem remains unsolved, it will give basis for even more frustration: “If enough news

is not available to meet the problematic situation, a definition must be improvised. Rumor is the collective transaction in which such improvisation occurs” (Ibid). On the basis of his observations, Shibutani has formulated the following hypothesis: “If the demand for news in a public exceeds the

supply made available through institutional channels, rumor construction is likely to occur” (Ibid). 2.3.2. Image Restoration Discourse and Crisis Communication

Benoit’s (1997) Theory of Image Restoration Discourse is probably the most cited theory within crisis communication. The theory builds on two theoretical traditions: rhetoric and sociology. Within rhetoric, Benoit is inspired by Ware & Linkugel’s Apologia Theory (1973) and Burke’s Theory of Purification (1941 and 1961) (Johansen & Frandsen 2007: 204). Within sociology, Benoit’s source of inspiration has primarily been Scott & Lymann’s Theory of Accounts (1968) (Ibid: 205).

In general, crisis response strategies represent the actual responses that an organization can use to address a crisis. Crisis response strategies involve both words (verbal aspects) and actions

(nonverbal aspects) which are directed toward the crisis. Crisis response strategies were first examined as apologia or the use of communication to defend one’s reputation from public attack. Since crises threaten reputations, it was believed that organizations would use apologia to defend their reputations. However, several critics found that apologia offered a rather limited number of crisis response strategies, and the number of strategies was therefore expanded by examining the concept of accounts. Accounts are statements people use to explain their behavior when that behavior is called into question. According to Benoit, a crisis response can be a form of account, and similar to apologia, accounts involve protecting one’s reputation from a threat (Ibid).

Following the theories of apologia and accounts, Benoit developed the theory of image restoration discourse as an approach for understanding corporate crisis situations. The theory is very useful for practitioners to help design messages during crises and also by critics or educators to critically evaluate messages produced by organizations or individuals during crises (Benoit 1997: 177). Benoit further emphasizes that there are differences in the repair efforts of individuals and

organizations. First of all, organizations might use different strategies than individuals, or employ them in different configurations. Organizations often tend to bring greater resources to image repair

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efforts than individuals, although he suggests that the basic options are the same for both individuals and corporate image repair efforts (Ibid).

2.3.2.1. The Theory of Image Restoration Discourse

The basic key to understanding image repair discourse is to “consider the nature of attacks or

complaints that prompt such responses or instigate a corporate crisis” (Benoit 1997: 178). The nature of attacks and complaints has two components: that the accused is held responsible for an action, and; that act is considered offensive. In this regard, the important thing is not whether the organization in fact is responsible for the offensive act, but whether the organization is thought of as being responsible for it by the relevant audience. What must be remembered is that as long as the audience thinks the organization is responsible for the offensive act, the image is at risk. Similarly, the key question is not if the act was in fact offensive, but whether the act is believed by the relevant audience to be offensive. However, if the organization is not really to blame for the offensive act, or if the act in question was not actually offensive, it can be an important component of the organization’s response (Ibid).

The theory focuses on message options rather than describing the crisis types or the distinct stages in a crisis. This aspect makes the theory more exhaustive than the earlier theories of apologia and accounts on which it is build. Benoit’s theory offers five broad categories of image repair strategies:

 Denial and evasion of responsibility address the first component of persuasive attack, and the categories have two and four sub-responses respectively.

 Reducing offensiveness and corrective action address the second component of persuasive attack. While reducing offensiveness has six sub-categories, corrective action simply consist of the organization promising to correct the problems.

 Mortification is the final broad category and consists of the organization trying to restore its image by asking forgiveness for the offensive act committed (Ibid: 181-182).

Benoit (1997) recommends that organizations develop a contingency plan before a crisis occurs, since judicious planning may reduce response time and possibly prevent missteps in the initial response to a crisis. Although crises can take a variety of forms, some potential crises can be anticipated and prepared for (e.g. an airline company should anticipate the possibility of a crash). Once the contingency plans have been developed, they should be reviewed periodically and

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implemented thoughtfully: elements of the actual problem may differ from the anticipated problem, so plans should be modified as needed (Ibid: 182).

When a crisis occurs, it is important to understand both the nature of the crisis and the perceived severity of the alleged offense. Hence, the response should be tailored to the offense. As mentioned previously, it is also vital to clearly identify the salient audience(s). An organization facing a crisis may hope to favorably influence more than one audience. If so, Benoit suggests that it is best to prioritize the audiences, making sure that the most important audience is appeased first, and then devoting time and effort to the other audiences as possible. This may be done with different messages delivered to different groups (while separate messages may stress different points, according to the intended audience, it is risky to develop contradictory messages), or by directing different passages or aspects of a message to different audiences (Ibid: 183).

2.3.2.2. Suggestions for Effective Image Repair Discourse

It is claimed by Benoit (1997) that “(…) image restoration rhetoric is a form of persuasive

discourse”, and that effectiveness can be derived from our understanding of persuasion such as:

avoid making false claims; provide adequate support for claims, and; avoid arguments that may backfire (Benoit 1997: 183). An organization that is at fault should probably admit this

immediately. However, image restoration concerns may, admittedly, conflict with a desire to avoid lawsuits, and the organization must decide whether it is more important to restore its image or avoid litigation (Ibid: 183-184). Apart from the fact that this is morally the correct thing to do, attempting to deny true accusations can backfire. An organization that falsely denies responsibility for

offensive actions risks substantially damaging its credibility if the truth emerges. Benoit also suggests that one should recognize that the powers of persuasion are rather limited, and his theory of image restoration discourse should therefore be used with caution (Ibid).

According to Johansen & Frandsen (2007), Benoit has admitted that his theory on image restoration is to some extend inadequate. He is perfectly aware that the theory can and should be revised, since the five broad categories of image restoration strategies are operating on a higher level of

abstraction that do not necessarily entail theoretical or conceptual advantages. In fact, Benoit refers to other writers that operate with far more detailed lists of strategies. The theory of image

restoration discourse focuses primarily on the verbal defense strategies applied by organizations when their image or reputation is under attack. It does not take into account the contextual factors that may influence the communication process, which is why we now turn to an examination of Coombs’ (1999, 2007, 2012, and 2015) SCCT.

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Page 22 of 102 2.3.3. Situational Crisis Communication Theory

Situational Crisis Communication Theory (SCCT) combines elements of the rhetorical approaches to crisis communication with Weiner’s (2006) conceptualization of attribution theory. Attribution theory holds that people search for causes when negative and unexpected events occur, making them perfect for triggering attributions of cause and responsibility. Typically, the attributions of cause and responsibility also shape the effect generated by the event and future interactions with the person or organization involved in the event. For crisis management, stronger attributions of the organization as the source of the cause lead to greater attributions of crisis responsibility. In turn, stronger crisis responsibility leads to increased anger towards the organization in crisis, reduced purchase intention, increased intentions to engage in negative word-of-mouth, and increased threat to the organization’s reputation (Coombs & Holladay 2010b: 247).

The SCCT operates with three stages: stage one seeks to establish the level of reputational threat posed by the crisis combined with a set of intensifying factors that influence this process; stage two is concerned with a selection of the different crisis communication strategies that should provide the maximal reputational defense for that threat level, and; stage three is about matching the

communication strategy with the crisis type (Coombs 1999: 143). To summarize, the three stages seek to provide crisis managers with a set of guidelines to assist them in choosing the most effective responses for protecting the organization’s reputational assets.

2.3.3.1. Stage One: Crisis Type and Intensifying Factors

As mentioned, stage one seeks to evaluate the level of the reputational threat posed by the crisis and has two steps. The first step is to decide the crisis type and the actual reputational threat. Coombs (2007) distinguishes between three degrees of reputational threats: mild, moderate andsevere reputational threat. He further divides the crisis types into three subcategories by level of

responsibility. It is important for an organization to determine the degree of reputational threat as crisis responsibility can be a threat to an organization’s image and reputation - stronger attribution of crisis responsibility causes greater reputational damage (Coombs 2007: 142).

1) Victim crises: The reputational threat is mild, and the attribution of responsibility is very little. These crises could be:

 Natural disasters: Acts of nature such as tornados or earthquakes.

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 Workplace violence: Attack by former or current employee on current employees on site.

 Product tampering/Malevolence: External agent causes damage to the organization.

2) Accident crises: The reputational threat is moderate, and the attribution of responsibility is low. These crises could be:

 Challenges: Stakeholders claim that the organization is operating in an inappropriate manner.

 Technical-error accidents: Equipment or technology failure that causes an industrial accident.

 Technical-error product harm: Equipment or technology that causes a product to be defective or potentially harmful.

3) Preventable crises: The reputational threat is severe, and the attribution of responsibility is strong. The stakeholders often believe that the organization is responsible for the crisis. These crises could be:

 Human-error accidents: Industrial accident caused by human error.

 Human-error product harm: Product is detective or potentially harmful because of human error.

 Organizational misdeed: Management actions that put stakeholders at risk and/or violate the law (Ibid: 141-142)

It has now been demonstrated how each crisis type creates attributions of crisis responsibility among stakeholders. The subcategories presented suggest that the victim cluster induces a mild reputational threat with a low level of attribution of crisis responsibility. In other words,

stakeholders perceive the organization to be a victim itself. The accidental cluster induces a moderate reputational threat with a low level of attribution of crisis responsibility, whereas the preventable crisis cluster induces a severe reputational threat with a strong attribution of crisis responsibility.

In the latter crisis cluster, the stakeholders may believe that the organization was intentionally engaged in the behavior that caused the crisis (Coombs 2012: 157). Although most crises easily fall into one of the abovementioned crisis clusters, it is fair to assume that an organization and its stakeholders may disagree on the crisis type. If this turns out to be the case, Coombs (2012)