How to Handle Corporate Scandal and Minimize Reputation Damage

Elina Nazarova
Elina Nazarova, Chief Marketing Officer at Powercode
Published on May 13, 2021 in Enterprise App Developers Resources

Business reputation is like a glass vessel. You build it hard, put your heart and soul into it, and then one day, something happens, and it's broken. The goal of this article is to prepare entrepreneurs to handle the possible corporate scandal situations as fast and smooth as possible.

Learning from Others’ Mistakes

Learning about the corporate scandal cases of other companies can help with your own crisis management in case it happens. It is important to know about both successful and unsuccessful measures. For example, Volkswagen still continues to repair the damages caused by using carbon dioxide emission-cheating software. The Dieselgate scandal happened in 2015, and the company still deals with lawsuits in 2021. Thus, you may study it as one of the unsuccessful corporate cases.

Crisis Management Team

Brand reputation is easy to damage, which is why all critical brand-related decisions must be made by the professionals and people motivated to keep the company's reputation sterling. Your company must be equipped with everything needed for crisis management before it occurs. By doing this, you'll be able to provide a timely and effective response. What is most important, in many cases, such teams prevent companies from situations bad for corporate reputation. The first signs of dissatisfaction among customers or employees won't grow into a massive brand scandal with severe consequences if you react quickly.

Listening and Responding to Customers and/or Employees

Unsatisfied customers or employees usually want to be heard and get a satisfactory result. Unless their primary intention is to get money from the company this way or another, individuals who started the corporate scandal are the people who got negative experience with the company's goods, services, or attitude towards them. Thus, they want an apology, some compensation for moral damage, and a guarantee that a situation like this will never happen again to them or other customers/employees.

CEO Engagement in Scandal Management

Unlike minor misunderstandings with customers or employees, massive scandals need the immediate presence of the company's top management and their response. When CEO, founder, or top management representatives take such situations under their personal control, it is always good for the company, brand name, and public view. If the company is somehow guilty – there always must be an apology and a damage-repairing action.
However, if the company is unfairly accused – there should be a controlled internal investigation on the case.

Social Media Visibility

Today, every case of reputation scandal is highlighted in public information sources like news and social networks. Even if the company is wrongfully accused, at the beginning of the scandal, most people initially take the side of a customer or an employee, especially if the company is big and thriving on the market. Lack of information causes speculation; thus, you need to willingly be present in social media in good light if possible. The public response from the company's top management can show the human side of the business and that companies care about their customers, partners, and employees.

Balanced Information

Lack of information and excessive information are equally bad when related to a corporate or reputational scandal. In the majority of cases, the public and the victim don't need all the details. What they want to know is that:

  • – the victim is heard by the company's management,
  • – the investigation took place, and the culprit is detected,
  • – the culprit is punished (and fired from the company),
  • – the victim received a sincere apology from the culprit and the company,
  • – the company makes everything possible to prevent such a situation from happening again.

In some cases, the report on investigation and measures may be demanded by the victim or the public. However, this usually happens when a large corporation is involved in a high-profile case.

Turning Lemons into Lemonade (if Possible)

If the company has developed an effective reputation management strategy, it can transform such a negative experience into benefits. With an optimistic view, one can say that corporate scandals can:

  • – reveal the company's human side,
  • – show that a company cares about its customers and employees,
  • – gain experience that can improve the company's strategy and position,
  • – develop several crisis-prevention and management strategies,
  • – increase the quality of goods, services, approach, communication, etc.,
  • – enhance brand loyalty (if a company manages to create a positive emotional connection with the victim and public.)

Final Words

Being somehow involved in a scandal is bad for any brand. For this reason, big brands like Coca-Cola, Nike, Chanel, and many others terminate their contracts with celebrities immediately when they get involved in reputational scandals. The business world has many challenges for entrepreneurs in all industries, and some of them may be utterly unfair. However, learning from others' mistakes and making the business function in good faith towards customers, partners, and employees will help overcome every challenge and eliminate many brand name-ruining situations.

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About the author
Elina NazarovaChief Marketing Officer at Powercode

Elina is accountable for digital strategy development and implementation. She is certified in business and startups development and has more than 5 years of experience in content writing and management. Her core belief is that well-designed digital t...

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