Harvard Business Online
Does Your Company's Reputation Matter?
I have spent the last few days watching in amazement as Eurostar has spectacularly mishandled the crisis that ensued when five passenger trains broke down in the cross-Channel tunnel last week. I was lucky to avoid getting caught in the chaos myself—I'd been scheduled to travel to Paris by Eurostar on Friday, but my meeting had been cancelled the night before. Had I travelled, I might have had to endure the nightmare described by those caught up in the chaos, caused by icy weather shutting down the trains' electrical systems.
While Eurostar scrambled to contain events, angry passengers warned the public not to be taken in by Eurostar's spin doctors and released their own stories, calling news stations on their cellphones and recording the events. One man on his way back from Disneyland with his family told the BBC how passengers were left without water and food, then air conditioning, and finally lighting after they had been stranded in the tunnel. With no assistance from the train manager, they forced open an emergency exit and organised their own evacuation from the train. As it happens, their 15-hour journey home turned out to be less arduous than for subsequent passengers, who were left for days at freezing stations and told to find their own ways home while Eurostar suspended all services to test the lines.
Eurostar has been rightly criticised for its handling of the crisis. Chief executive Richard Brown has apologised repeatedly but was clearly shaken by events. On Monday, he said the company would "work hard to rebuild" passenger confidence and has ordered an inquiry. But as passengers continue to rage about the way they have been treated, the story is evaporating fast. Yesterday, Eurostar received wide positive TV and press coverage for getting the service back on track, while the voices of angry customers have been drowned out by feel-good accounts of passengers being reunited with loved ones.
By any standards, Eurostar has failed the 125,000 passengers caught up in the chaos. But I wonder whether there will be any long-term impact on the company's reputation. While some of those affected may refuse ever to travel with Eurostar again, I am sure that most of them will be back in a few months, spending their compensation money and taking advantage of the free trips offered as an apology. I will also be using the service in the new year, even though the last time I took it, I was held up without information for three hours following an incident on the train in front.
The fact is that Eurostar will survive this crisis and prosper because it offers a generally a convenient and reasonably priced service. So if the company knows that passengers will be back, what incentive does it have to improve its crisis management and offer better customer service? While this incident will affect it in the short term, there will probably be no adverse impact over time. Even though it is tightening up its procedures, employing reputation management consultants and spinning out press releases, my guess is that nothing will change substantially.
The same is true for airlines, which have developed a shocking reputation for customer service in recent years. How many people remember BA's Terminal 5 crisis last year when they book with the airline? EasyJet, too, receives consistently bad customer reviews, yet the airline remains successful and has even filmed a reality TV series which exposed its appalling treatment of customers. And Ryanair, that other notorious no-frills airline, is doing well even though it consistently pushes the boundaries of acceptable behaviour and is regularly reprimanded.
I have been asking myself whether, in the end, companies need to worry about reputation management. Take another spectacular example of reputation loss having little impact on business: investment bankers. After precipitating the world's biggest economic crisis, many of the large investment banks have continued to prosper, although the share prices of the bailed-out banks have admittedly fallen. Although there have been some scapegoats, individual star bankers, such as Goldman Sach's Lloyd Blankfein who recently claimed that bankers did 'God's work', rode out the storm very well. Complaints from customers, politicians and economists, fell on tin ears, according to Britain's City minister.
It seems that there are many companies which are either too big (oil, gas and utilities), too important (banks, financial services) or too convenient (airlines, transport, telecommunications) to have to bother about their reputation or customer service. They will carry on regardless. If we are to widen the net, we could include public services—hospitals, social services and schools—where executives have failed to prevent, deal with or resign following shocking incidents of mismanagement.
Compromised reputations are no longer a barrier to political success or leadership, as Tony Blair and the Copenhagen delegation recently demonstrated.
And institutions—Britain's House of Commons, the Catholic Church, the BBC, and sporting bodies are becoming quite adept at apologising and then moving on swiftly from scandals.
I am not sure what the answer is yet to the question posed in the headline. Perhaps things will change if capitalism develops into a more socially equable system, or a new form of leadership evolves for the 21st century, as my colleague Umair Haque has powerfully argued. In the meantime, what do you think? Is reputation still something to be valued and maintained? Does it really count for anything? And how do we ensure that our voices—customers, citizens, taxpayers—are heard amid the deafening noise of spin? As always, I am interested to hear your thoughts, views and experiences.