How not to manage a crisis in the 21st century: United Airlines.

Note: this article was first published in spanish and can be found here.

The size of a companiy does not seem to be directly proportional to its ability not to get into trouble or to get out of trouble.

The last example we have seen recently with the painful incident on a United Airlines plane that has gone around the world and has been even videotaped by several passengers.

As a summary of the incident we can say that the airline needed to allocate seats for four staff members on a flight that was full, volunteers were sought to leave their seats but no one wanted to leave, the company had to choose four random passengers and one of them, Dr. David Dao, refused to do so and was finally dragged down the aisle of the plane by the airport police, in deplorable images and while some of the passage was screaming.

The result of the incident for Dao was his nose and some teeth broken, and for United a demand by Dao, the criticisms harvested worldwide for the bad treatment of the passenger, others accusing them of racism for being the passenger of Chinese origin, and a gigantic crisis of reputation that caused the company to lose in a few hours of the incident no less than a billion dollars in stock market.

The awkward reaction to the incident of United CEO, Óscar Muñoz, was one of the main reasons for all those consequences. In his first Twitter message about the incident, he simply apologized for having to rearrange some passengers and said they would investigate the incident and contact the affected passenger in particular.

It was not until the following day when the video was already viral and was causing a good storm on the company when he pronounced publicly again and apologized for the expulsion by force of a passenger, calling the episode “truly horrible”.

Subsequently, Muñoz’s speech has put aside expressions such as “the passenger was disruptive and belligerent” in internal messages of the company to end up saying that he had “remorse and shame” and promise that something similar would never happen again.

Meanwhile, Delta Airlines, direct competition from United took advantage of the situation and declared that it will offer its passengers up to $ 10,000 to free their seats in cases of overbooking.

Crisis manual in United Airlines?

I do not doubt that the CEO of United can be very good when it comes to managing an airline, but I do have a clear idea that he has no idea on how to deal with a crisis situation like that.

I also do not know if he was advised (or to what extent he was advised) by the department of communication, marketing, crisis or whatever that it exists in that company, but the end result of everything could hardly have been worse.

If he acted individually on something that seemed to him of little importance, perhaps he should have submitted his resignation after further events and consequences.

And if he was advised, we doubt how the crisis manual of this company must be after seeing how the incident has ended for a topic that should not have much relevance at the present time as is the overbooking of an airplane, and whether this airline will be prepared to correctly manage a real catastrophe (that hopefully never really happens) such as the one would occur after a serious accident of one of its aircraft.

Reputation: a lot to gain but much more to lose.

This case in question has not been, of course, the first and will not be the last one in which an awkward and unprepared reaction ends up in a crisis for a company or, in the event that the incident could not be prevented, has helped to end even worse.

In 2008 United also had problems with a guitar that underwent damages. Its owner, musician Dave Carroll, claimed damages and the company declined to pay by saying that the claim period had passed.

The musician continued for months claiming without success and ended up recording the song “United breaks guitars”, whose video has more than 17 million visits. Later he recorded more songs and videos and even wrote a book about his adventures with the airline.

Even the competition from United, Southwest Airlines, took advantage of United’s ridicule through another song called “Southwest never broke my guitar” that Gory Bateson sang.

It seems incredible that big companies, with budgets and power according to their size, demonstrate such inability to manage events that should not happen and if they do happen should be easy to tackle and solve recognizing the guilt, paying what is correct, asking sincere pardon and assuring that it will not happen again.

In the last century, things like those mentioned ended up being isolated facts that had hardly repercussion or publicity however they were solved.

But in the 21st century, internet and social networks make viral situations and incidents in less than 24 hours all over the planet. Continuing to manage problems as if no one were looking at means being very short-sighted.

Just as it is to continue believing that better care should be taken to those customers who disburse more money for the products or services, leaving aside and ignoring the claims of those who are a priori less powerful or influential.

By 2017 you should not underestimate the potential power of influence of any client and, I would add, even less if he or she has a mobile in his or her hand.

Reputation management is much more than putting out fires.

The document “How and where do Reputation Risks impact your Company?” of the Reputation Institute and published in September of last year, highlights some data that confirm us even more that is necessary to make a correct management of the corporate reputation.

For the Reputation Institute, reputational risk is the second risk for investors, behind market risk and ahead of regulatory risk. It is not at all surprising, therefore, that United lost so much stock value in such a short time.

Nine out of ten employees believe that reputational risk is more difficult to manage than other categories of risk because is complicated to evaluate and quantify and because there is no standard for risk.

If employees understand the importance of reputation, companies will be well positioned to identify and manage early warning signals, but only 51% of companies are effective in inculcating a reputation-based risk management culture for workers. A company that is incapable of doing so will, therefore, be more inclined to have more and more profound problems in this area.

A management culture that has to be based on four aspects to be effective and not simply “go out and put out fires”:

  • Quantification of impact. Studying the probability that the risk materializes and how it impacts on the perceptions and support of the stakeholders.
  • Preparation. The factor that defines how the company is prepared to identify, mitigate and respond to a crisis.
  • Mitigation. Having action plans to reduce the impact and likelihood of risks.
  • Monitoring. Conducting a monitoring of progress process and providing information to the organization over time.

And within the management of reputation is also unavoidable the existence of a crisis manual, which is known by all those concerned, and with reviews and periodic simulations that contemplate all kinds of possible negative risks for the company.

A crisis manual that should have been correctly applied to United Airlines. There are no excuses in the solution of something a priori very simple to fix.

While the embers of this controversial incident are extinguished and the company begins trying to recover from it, we are waiting for the next crisis of reputation.

Which company will be next?