Reference no: EM131293139

One strike and you're down

‘Companies forget that staff have the power to wreck the brand.' This warning comes from Martin Langford, a corporate reputation specialist at PR firm Kissman Langford. But brand owners that probably don't need reminding of this include British Airways, Royal Mail and Jaguar, because of the high profile that staff industrial action, or threats of industrial action, has assumed at all three in recent months. Management at large organisations do not embark on widespread and risky company restructurings unless they believe their businesses are in straitened financial circumstances.

And the potential long-term damage to company branding that can be done if staff and managers clash publicly over plans will almost always take a back seat to other priorities, such as getting the business back into profit. Nevertheless, brands are a key part of the intangible assets that are playing an increasingly important role on company balance sheets. This means that it can be a serious issue for any business if its brands emerge as tainted in the long term by strikes and other industrial conflicts.

If this is the risk, how can corporations or other branded organisations reduce this danger? Many people believe that mud sticks and it was certainly noticeable that press coverage of the recent talks between unions and management at the now Fordowned Land Rover plant at Solihull referred to conflicts at the plant as far back as the 1970s and 1980s, when it was part of British Leyland.

Mike Seymour, international director of crisis and issues management for Edelman, describes this trend as the parenthesis factor. ‘The negative shadow of previous industrial relations conflicts hang over the current management, which has an undermining effect on the brand,' he says. Conversely, he points out, the rate of change among senior levels of management is conveniently - and unfairly - forgotten: ‘Consumers and the media forget that it is in some cases a different management team which is dealing with the issues today than when the previous problems arose.'

This is compounded by the intermittent nature of industrial conflicts and their accompanying media attention. However, others argue that it is rare for individual incidents to have a significant long-term effect on the fortunes of a company. For this to happen they must be compounded by a flawed strategy. Risk management company Lippincott Mercer looked at Fortune 1000 companies that had lost at least 25% of their market capitalisation in four weeks or less during the mid- to late-1990s. It found that 58% of those declines were from strategic errors, many of which had affected the brand value. Langford estimates that about one-third of his clients' problems are caused by the behaviour of their staff, with industrial action and disaffected workers being the most common examples.

John Williamson, board director of brand consultants Wolff Olins, says: ‘Poor industrial relations do not come about in isolation. They reflect on the business as a whole and the way in which it is being managed. British Airways management thinks the brand is something that is done by the marketing communications department, which makes for very poor brand strategy.' There is a particularly acute danger here for service companies. In service businesses, the impression of the brand given to the customer is often dictated by the behaviour of staff at the bottom of the organisation hierarchy.

And, in the maelstrom of media activity that goes with major industrial action, the senior management can develop the habit of briefing journalists before their own staff. This has a direct impact on the quality of the service. Seymour describes this chain of events as a form of self-fulfilling prophesy. ‘The people dealing with the public at large service organisations are those way down the management chain, who know least about what is going on,' he says. ‘Often these people are getting their information from, and having their opinions shaped by, what they see and hear in the media.

This leads to a drop-off in service, which is, of course, the last thing that is needed at such a critical time.' It follows that the protection of the brand's long-term reputation is also not just a marketing issue. ‘People are the primary marketing channel for any service organisation and they should be the first audience for any form of communication,' says Dan Bobby of brand consultancy Dave. ‘The best companies start with those staff who are dealing with the public and work back from there. ‘The worst thing that can happen is for people to see change management consultants wandering around the workplace without having been briefed as to what needs to be changed,' he says. ‘Taken out of context, change means insecurity and job losses.'

‘Brands represent the value of the organisation's relationship with its customer. It's the one thing a competitor cannot copy,' says Brenda Banks of insurers Aon, which works with clients on the issue of brand risk. Companies are not able to insure against declines in brand value, but often compound the problem by not managing the risk to their most valuable asset. ‘Reputation risk only comes home to roost when things go wrong.' Source: Richard Gillis (2004) Financial Times, 5 October. Reprinted with permission.

Question
1. How can marketing research inform those people engaged in internal marketing within an organisation on how best to perform their jobs?