Don’t be misled by United’s crisis survival

By Dr Tony Jaques

It could be very easy to draw the wrong lessons from the United Airlines “customer re-accommodation” crisis. United will survive the forced removal of a law-abiding passenger being dragged off their plane and, within a very short time, the “scream heard around the world” will probably be forgotten . . . if not forgiven.

That’s the sad reality. Public memory is short and boycotts rarely last. In the wake of this mismanaged debacle, the share value of United plunged by over a billion dollars. But it soon recovered and there is no indication that passenger loadings registered any substantial movement.

Like America’s big banks and big car-makers which were “too big to fail” in the 2008 financial crisis, United will most likely sail through its most recent disaster with maybe some cosmetic changes to the way it operates and little or no lasting damage. As TV host Jimmy Kimmell commented: “Next time we book a flight, if one airline is one dollar less than the others, that’s the one we pick. They know this. That’s why we’re stuck with them.”

You don’t have to be loved to survive a crisis – think no further than big oil, big tobacco and big banking. Or consider the combative former Chairman and CEO of ExxonMobil Lee Raymond, who rebuilt the company after the notorious Exxon Valdez oil spill disaster in 1989. He is supposed to have told colleagues: “People hate us, but they are going to keep buying our product.”

However, genuine customer loyalty to a big brand can be an important factor. In the wake of Toyota’s “sudden acceleration” recall crisis of 2010, many pundits, especially in America, predicted that the company would not survive or, at the very least, would have to change its name. Not true of course. Toyota rapidly recovered and within two years record sales restored its title as the world’s biggest car-maker.

And, despite the emission cheating crisis which struck Volkswagen in 2015, early this year the German company overtook Toyota to once again hold top spot. Today, not only are both Toyota and Volkswagen in the Fortune global top ten companies by revenue, they are both in the Forbes top 100 most reputable companies (Toyota at 34 and Volkswagen at 100).

United Airlines clearly has a long way to go in terms of reputation and customer loyalty. However the important lesson here is not that big brands can survive a crisis. The real lesson is that no-one should think this is precedent for the rest of us.

Outside the world of massive global brands, a serious crisis is a very real threat to survival. The American academic John Penrose reported that, while large companies with ample prestige, goodwill and financial resources may survive even the worst disasters, 80% of smaller, lesser-known organisations without a well-conceived and tested crisis plan go out of business within two years of suffering a major disaster. And one study of Australian crises across a ten year period showed that more than 25% of the companies affected went out of business.

It can be fascinating to watch the big brands mismanage crises and still survive, but the reality for most companies is that crisis failure may well prove fatal. It’s a pretty good reason to get working on that “well-conceived and tested crisis plan.”

 

This article is taken from Managing Outcomes Vol 8, No. 8. published by Tony Jaques, Director of Issue Outcomes Pty Ltd, for people who work in issue and crisis management. You can subscribe to Managing Outcomes at www.issueoutcomes.com.au