Reputation Management for BP - Assignment Example

Reputation Management for BP Reputation Management for BP There have been recent developments that formalize the notion that the reputation of a company is an asset that can give future rents. The behavior of reputation building is of strategic importance to the performance of any business especially in settings of incomplete communication. A scenario of incomplete communication is one in which some of the players do not have the relevant information concerning a trending event. For this case, there is a consideration that one of the actors in the setting has critical information that matters to the other. This work reviews the game theoretic approaches that formalize the ideas of reputation building. The paper is a discussion of the reputation management practices at British Petroleum considering that the business lost a considerable amount of its reputation at one time. This paper examines and interprets the relationship between crisis management methods for cases such as BP’s Deepwater Horizon oil spill and reputation levels. Introduction The Deepwater horizon crisis caused considerable financial damages to the company. In the Stock Exchange Market of London, for example, the company’s shares dropped on 25 June 2010 by almost 7%, which was its lowest level in 14 years. BP also lost 50% of its capitalization of the market in July 2010 (Mejri & Daniel 2013, p. 69). There was also a reduction in the reputation of the company particularly in the US. Such is the core of this work because there was a need that the firm deals with the public because of its profitability. Before a completion of the sealing of the well, as there has been a progression of the spill without a resolution, the company received the lowest grade in reputation ranking. The PRWeek/OnePoll’s survey that happened nearly one month after the crisis indicate the BP had not done enough in enough to make the leakage stop. There were reports by the 12th Annual Harris Interactive US, which gave BP a reputation quotient of 49.82 that ranked it as second last in the order. Such is an indication that most Americans still felt that the firm was one of those with the worst corporate reputations. BP also faced remarkable calls for people to boycott its products by a group on Facebook called Boycott BP, which has approximately 640,000 fans. There was also a fake Twitter account called @BP_America, which had only 18, 826 followers. Lastly, there were thousands of lawsuits from multiple other actors such as hotels, fishers, NGOs like Animal Welfare Institute, restaurants, and other organizations (Mejri & Daniel 2013, p. 70). The institution expanded many efforts and mobilized substantial means that targeted to address the situation. However, there were differing opinions on the success of the strategies that the company laid down. There are theories of crisis management that the company should have used in dealing with the situation. In reference to the three-phase model of disaster management, which is the most commonly used approach, this paper examines how BP dealt with repairing its spoilt reputation to the American public. Such an analysis will help in evaluating crisis management of the company in relation to this disaster as well as provision of some more ideas for use in the future. There is a consideration that the methods of crisis management are critical to reputation management. The outline of this paper is as follows: the first section is a review of the literature on crisis management with a consideration of the models of crisis management and its relationship with reputation. The second part is a description of the adopted methodology while the third section is a discussion of the approaches to reputation management of BP. Section 1 An Analysis of the Stakeholders of BP in the Spillage Crisis According to Weiss (2008 p. 34), the stakeholders of any given institution are not only the direct owners but also any groups or persons that burdens or benefits the same organization in any manner. In this case, the oil spillage in the Gulf of Mexico affected a number of stakeholders. First, the crisis affected the workers who worked on the oilrig. Only 115 of the 126 people present on the platform at the time of the explosion were evacuated (Cleveland 2010, p. 13). The tragedy also affected other stakeholders such as the environmentalists, the fisheries in the Gulf region, and communities that rely on tourism. The government is also another stakeholder in the company considerably because it sets the legal working framework for the enterprise. The environmentalists held concerns for the impact of the oil spillage on the environment. The crisis affected the marine ecosystem, which included all the marine life forms, as well as habitats. Apart from the crisis’ direct impact on the workers, the other biggest effect was the environment, which attracted criticism from a host of other actors. As indicated in the diagram below, the case affected the media, the oil industry itself and other businesses connected to BP. As such, there was much tension because of the crisis, of which the media played a pivotal role in its escalation. Some of the pressures of the media on the company were demands for explanations to the public of what the management of the firm thought of doing to help the situation. As such, there were frequent press releases by the spokespersons at the institution that mostly sought to convince the stakeholders that the company was in control of the situation. As mentioned in the introduction, BP also faced remarkable calls for people to boycott its products by a group on Facebook called Boycott BP, which has approximately 640,000 fans. There was also a fake Twitter account called @BP_America, which had only 18, 826 followers. Lastly, there were thousands of lawsuits from multiple other actors such as hotels, fishers, NGOs like Animal Welfare Institute, restaurants, and other organizations. An Analyis of The Key Issues, Rsiks and Opportunities from the Stakeholders’ Analsysis A number of issues arise from the scrutiny of the stakeholders of the firm. The first one is a consideration for the economic the reputation of the company. It is a common ideology that the public sits back and watches what an institution does in times of a crisis and exerts pressure on an almost immediate action. Conversely, the media played a critical part in the case by playing a link between the two parties. Much of the pressure of the public was that the company should have found immediate solutions for the case and compensated the affected parties at the same time. Therefore, BP risked losing much of its reputation to the stakeholders and the community as a whole. There were implications from various studies that indicated that the public lost trust in the company. For instance, the PRWeek/OnePoll’s survey that happened nearly one month after the crisis shows the BP had not done enough in enough to make the leakage stop. There were reports by the 12th Annual Harris Interactive US, which gave BP a reputation quotient of 49.82 that ranked it as second last in the order. Such is an indication that most Americans still felt that the firm was one of those with the worst corporate reputations. The loss of confidence of the American public in the company risked the frim’s economic wellbeing. The company lost its performance on the primary markets because of the spoilt reputation. Considerably, the company’s shares dropped on 25 June 2010 by almost 7%, which was its lowest level in 14 years. BP also lost 50% of its capitalization of the market in July of the same year. As much as there were risks, there was still an opportunity for the business in its relations with the public. The chance was the fact that the management at BP could devise an efficient system that could convince the community of its dedication to deal with crises. As such, the opportunity will serve to regain the status the business had before the occurrence of the crisis. However, the chance will only materialise if the firm formulates a proper corporate communications model, one which will assess the situations and deal with the crisis. Section 2 Corporate Planning and How it Will Help BP in Terms of PR There are all indicators that BP needs to repair its reputation and regain its marketing strengths. As such, this work proposes the use of SOSTAC planning model because of its ability to improve reputations as well as developing the marketing strategies. The approach entails six elements that will see the firm through the crises. The first component is a situational analysis of the business to determine its current position (Shin 2014, p. 100). Such a move will entail a SWOT analysis of the company, which acts as one of the best ways of determining the well being of any business. In such a case, BP will realize all the strengths, for this case, the assets and the managerial economies. The situational analysis relates to the issues discussed in the previous section of this work, and they form a background against the management at the company should work to improve its reputation. The second element of the planning model should be a review of the company’s objectives, which is often a determination of where it should be. Considerably, the management of the business hope to regain the degraded status in terms of both the economic performance and reputation. This element of the plan works to keep the planners in line with the ambitions as well as dealing with all criticism. The third component of the strategy entails the strategies of the company and its administrators towards attaining the objectives. Considerably, the administrators, should use the crisis management as the best strategy.Crisis Management helps institutions in managing crises and minimizing their adverse impacts (Regester, Larkin & Regester 2008, p. 23). Many scholars consider crisis management as a fundamental function of any organization because failing to manage a problem may cause substantial harm to the concerned stakeholders, cause losses for an organization, or eventually terminate its very existence. For this reason, there is a requisition for understanding the meaning of crisis management through the mirror of several scholarly works. The process is, therefore, one, which eliminates some of the uncertainty and risks from the negative happening and thereby permits the organization a greater regulation of its destiny. Such strategies target to mitigate or avoid undesirable developments and to cause the desired problem resolutions. However, there are many challenges to the models put forward by the same scholars because of the pressure that the concerned parties face at the time of crisis management. This part discusses what BP should do in the future as a part of the management process. The Three-Phase Model of Crisis Management This theory is the most contemporarily accepted and widely recommended and used framework for the analysis and management of crises. The model holds that there are three separate phases of crisis management. However, there is a need that adopters perceive the design as an integrated and a holistic setup, whose distinctive parts aggregate rather than existing as separate constituents. The initial phase, the pre-crisis phase, focuses on preparation and prevention. The second stage is the crisis response phase, which begins at the occurrence of the crisis and the associated managerial responses. The last step is the post-crisis phase, which concerns the strengths and the weaknesses of the processes taken to solve the problem and the preventive methods for the future. Figure 1: A Model of Crisis Communication within a Firm The convention that will make the above model work has four main requirements. The first requires that the concerned parties communicate truthfully because such forms the basics of proper problem solution. There is also the need that the relevant personnel demonstrate their dire concern for the problem as a way of showing empathy. The second requisition for the management is to tell the problem accurately and as fast as they can. It, therefore, means that they should rush to collect the most accurate data concerning the problem. Such a step should happen within the first 24 hours and should ensure that there are no lingering facts. The third aspect requires that management communicate the problem entirely, which will prompt as much questioning as possible so that there can be as many proposals for solutions as possible. The last requires that the top most managers communicate the crisis themselves and not delegate to their juniors (Devlin 2006, p. 87). Talking in person is an indicator of the concerns of the managers in a move, which works at uniting the rest of the stakeholders. The Pre-Crisis Phase This stage deals with preparation and prevention of the crisis, which makes it an anticipatory stage for the prospective problems. At this point, the manager at BP should have an answer to what the company should do reduce crisis occurrence as well as minimizing the potential damages in the event that calamity strikes. The company should undertake to reduce the obvious disaster risks through activities such as scoreboards, control systems, risk audits, measures and standards among others. Every organization needs such a program because of the realization no firm is immune to crises. Consequently, BP should prepare adequately by devising a management plan that the company should update annually. There should also a training program for the crisis management personnel as well as a pre-drafting some of the emergency messages. The messages should contain statements from the senior managers within the institution, dark websites, and news releases (Alsop 2006, p. 23). Such channels form avenues for separate communication channels for the anticipated situations. The best approach according to many scholars is personnel training because it creates long-term plans for the company. The Response Phase The stage involves that moves by the management of an institution to solve a problem as soon as it occurs. The phase forms the most critical of the three because of the challenges that situations cause. At such a stage, the BP management should ensure that they work at crisis mitigation and supporting the affected persons (Arora 2013, p. 60). It is noteworthy that actions at this stage attract public interest because of the feeling that the business should take full charge of the situation. British Petroleum should consider that the priority for this case should be protection of the stakeholders from any potential harm. The management of the corporation should work quickly because if they delayed, they would face a lot of public pressure. The Post-Crisis Phase The phase starts when the company resumes normal business and looks for methods that it will use to prevent the future happening. BP for this case should use this period as the main stage for the future if starting with the delivery of the all the information that the firm promised the stakeholders. The second step is to keep updating the stakeholders on all the progress the company makes. The last part entails an analysis of the lessons learned from the crisis as well as a campaign to regain the spoilt PR. Rebuilding the spoilt PR of the company will take about five initiatives (Morschett & Zentes 2010, p. 89). The first is an acceptance of the business of all the responsibilities regarding the effects of the crisis. For this case, the firm should not blame any other parties for the losses realized, but account for all the inconveniences. The second initiative is helping all those affected directly and indirectly by the events. The third is to communicate the long-term corrective measures to the public as a way of winning their trust. The company should also undertake to address systemic issues and ensure that there are little or no chances for failures. The next step is rebuilding bridges with the corporate stakeholders through regular communications (Botes and Samkin n.d, p. 10). The fourth is an inclusion of the tactics that the management should deploy in the process of seeking to repair its lost reputation (Weiss 2008, p. 67). For this case, the best approach is the use of proper communication. The revolution of information is an opportunity for a firm to recover its lost reputation or boost its languishing image. BP may use several mediums of communication such as the internet that BP in countering the criticism that it still faces from the public. It, therefore, means that that the public will get the concerns of the company regarding the crisis and measure from the communications it makes the levels of the firm’s seriousness. Contact gives BP a chance of dealing with the prospects of another crisis by telling the concerned parties of its levels of preparedness for future hazards. There are some portions of the public with more influence on the reputation of BP than others do. Such include the stakeholders and the government as well as other institutions that concern the well-being of the society. For this case, BP should devise a communications platform that will first seek to convince such players who will in turn influence the entire public and change the reputation. The second last aspect of the plan entails the action plan for the daily activities included in the appendix of this work. Lastly, the company should control the future happenings that may risk its reputation as outlined in the post-crisis phase. Conclusion This work has analyzed the perspectives of a crisis according to several scholars and interpreted the effects BP oil spillage in the Gulf of Mexico. The reason for the interpretation was to measure the levels of spoilt reputations of the company to its stakeholders and the public. The second reason was to devise a communications model that the firm would use to solve the issue and at the same time prevent the future happenings. The primary consideration is that the company lost both financially and in its reputation to the public. The best way to ensuring that the business regains its productivity lies in the approaches that it will use to repair its lost PR. For such a reason, this work has interpreted the three-phase model for crisis management. Bibliography Alsop, R 2006, The 18 Immutable Laws of Corporate Reputation: Creating, Protecting & Repairing Your Most Valuable Asset, London, Kogan Page. Arora, A 2013, International Business Realisms Globalizing Locally Responsive And Internationally Connected Business Disciplines, New York, Palgrave Macmillan. Botes, V., & Samkin, G (n.d), Restoring Legitimacy in Order to Remain Sustainable: The Case of BP. Retrieved March 16, 2015 http://www.uetas.edu.au/__data/assets/pdf_file/0008/188405/Botes_Samkin.pdf Cleveland, C., Hogan, C. M., & Saundry, P. 2010. Deepwater Horizon oil spill. The Encyclopedia of Earth. Retrieved March 19, 2015 from http://www.eoearth.org/view/article/161185/ Coombs, W. T 2014, Ongoing Crisis Communication: Planning, Managing, and Responding, Sage Publications. Devlin, E. S 2006, Crisis Management Planning and Execution, CRC Press. Griffin, A 2008, New Strategies for Reputation Management Gaining Control of Issues, Crises and Corporate Social Responsibility, London, Kogan Page. Griffin, R 2013, Fundamentals of Management, New York, Cengage Learning. Lerbinger, O 2011, The Crisis Manager: Facing Disasters, Conflicts, and Failures, Routledge. Mejri, M., & Daniel, D. E 2013, Crisis Management: Lessons Learnt from the BP Deepwater Horizon Spill Oil, Business Management and Strategy, 4, 2, pp-67. Morschett, D., Schramm-Klein, H., & Zentes, J 2010, Strategic International Management Text and Cases. Wiesbaden, Gabler. Regester, M., Larkin, J., & Regester, M 2008, Risk Issues and Crisis Management in Public Relations: A Casebook of Best Practice. London, Kogan Page. Retrieved March 16, 2015 http://www.utas.edu.au/__data/assets/pdf_file/0008/188405/Botes_Samkin.pdf Shin, K. Y. 2014. Corporate Social Responsibility Reporting in China. Springer Berlin Heidelberg. Weiss, J. 2008. Business ethics: a stakeholder and issues management approach. Cengage Learning. Appendix Table 1: Crisis Preparation 1. The firm should have a crisis management plan that it should update annually 2. Train and designate a crisis management team 3. Carry out annual exercises that will measure the abilities of the designated team 4. Pre-draft messages for crisis management that may include web content for dark websites and have the messages reviewed by the legal department within the firm. Table 2: Crisis Media Timetable 1. The management should avoid phrases that avoid the direct answers to questions because the public feels that BP is responsible for what happened 2. Present the information in clarity and avoid the use of technical terms and other jargons as a way of avoiding to create the impression of hiding something 3. A spokesperson should appear calm and pleasant on the cameras and avoid nervousness because some people may perceive it as deceptive. 4. The management should brief all the spokespersons of the latest information concerning the crisis Table 3: Best Practices for Crisis Communication Channel Preparation 1. BP should always prepare to use a unique web site for crisis communication 2. The company should have the preparedness of using the internet as a way of addressing the stakeholders 3. The business should use mass notification programs to reach stakeholders and its employees Table 4: Best Practices for Crisis Response 1. The concerned parties should act promptly, mostly within the first hour of the crisis 2. There should be a careful analysis of the facts 3. The firm should ensure consistency by updating the spokespersons of the information from analyses of the situation 4. Public safety should be a priority 5. Utilize all the available channels of communication 6. Give expressions of concern and sympathy for those affected 7. Involve employees in the first response as a way of indicating unity Read More