“We are unable to comment on this tragic accident until all the facts are known,” read a statement Toyota issued in response to the accident that killed off-duty California Highway Patrol officer Mark Saylor. The crash of Saylor’s dealer-loaned Lexus would touch off a series of investigations and product recalls that would undermine the storied Japanese automaker’s reputation for safety and quality.
“No comment” is a typical response for a company in Toyota’s position. But where executives see “no comment” as a safe and middle-of-the-road statement, the public hears a company trying to deny guilt and shirk responsibility. In fact, there may be little discernable difference in public reaction between “no comment” and a defensive approach to a crisis, according to new research by Adam Galinsky, professor of management and organizations, and Daniel Diermeier, professor of managerial economics and decision sciences, both at the Kellogg School of Management. Galinsky and Diermeier found that companies are perceived positively when they respond to crises in engaged and empathetic ways. Companies that offer “no comment” or react defensively not only may be harming their brand, they could be driving consumers away from their products in ways they never imagined.
“There can be a spillover from one side to another—a different part of the business. That means, for example, that a crisis that may be a sexual harassment case may have consequences for how a corporate logo is evaluated,” Diermeier says. In their experiments, Galinsky, Diermeier, and their colleagues also noticed that people rate their experiences with a product—bottled water in one case—lower and consume less of it when a company involved in a crisis does not respond in an engaging and empathetic way.
Crisis management is not a new skill—companies have had to deal with less than ideal situations ever since there were companies. But, according to Diermeier, “there’s very little systematic knowledge about it.” Much of what is taught in courses and recommended by consultants is born out of experience, and while experience can be a good teacher, it is not always the best theoretician. An experimental setting can allow researchers to ask new questions without instigating a corporate catastrophe.
Corporate Responses and the Spillover Effects
Galinsky and Diermeier, along with colleagues Eric Luis Uhlmann, a postdoctoral researcher at the Kellogg School, George E. Newman, a postdoctoral researcher at Yale University, and Victoria L. Brescoll, assistant professor at Yale, set up a series of five experiments based around two fictitious crises. The first three examined the range of company responses to a crisis—engaged, defensive, or no comment—while the last two evaluated what the authors call “spillover” effects—how a crisis shaped opinions of the company’s logo and affected the consumption and perceived taste of a product.
In each case, participants were given a news story about a fictitious corporate scandal. Four experiments involved sexually hostile work conditions at a large beverage company, while the fifth reported the presence of a harmful substance added to food products by a separate company. The first two experiments tested consumer response to the sexual harassment case; one recorded reactions using an evaluation form, while the other asked participants to write down the first three words that came into their mind after reading the news story. The third experiment also tested the sexual harassment case, but this time gauged executives’ intuitions. The fourth test also used the harassment case, but this time tested how much of the product participants drank and their impressions of taste after they heard the company’s response to the crisis. The last experiment focused on how consumer opinions of a logo were affected by the company’s response to the harmful additive crisis.
Participants in all studies reacted more positively when the company involved in the crisis gave an engaged response. When the company involved in the sexual harassment case firmly stated that inappropriate behavior was not tolerated and that allegations would be taken seriously, participants thought better of the company, drank more of their water, and said it tasted better than when the company gave a defensive or “no comment” response. In the harmful food additive case, the results were strikingly similar. When the company gave a defensive or “no comment” response to the crisis, participants found the product logo equally less attractive.
Executives did not anticipate the similarity between the defensive approach and “no comment,” thinking that consumer reaction to “no comment” would fall in between the engaged and defensive approaches. Executives believe a “no comment” statement will inspire the public to reserve judgment until all the facts are made public, Diermeier thinks. This seems a bit naïve, but “we all do that. As individuals, we have a sense of ‘most people trust us,’ ” Diermeier says. But “the moment you say something as a company, the level of trust you have is much lower than if you say it as an individual,” he adds. “Companies are really not trusted a lot.”
Though Diermeier expected many of these outcomes, his hunches “were confirmed to a degree that was astonishing to me,” he said.
Corporate “Wisdom” Says Limit Liability First
Many of Galinsky and Diermeier’s findings fly in the face of traditional corporate wisdom concerning crisis response. Many companies begin by trying to marginalize the problem. Toyota strove to keep itself out of the headlines with its “no comment” response to Saylor’s accident. Many legal departments will advise executives to stick with “no comment” to limit their company’s liability. But by giving such a statement, executives may lose far more in brand value than they could gain in minimizing legal risks, Diermeier says.
“There is a clear sense that a crisis strategy that’s engaged and reaching out works better than one that is self-justifying,” Diermeier says. “And most important is that saying nothing, being quiet in these cases has basically the same effect as if you are confrontational.”
“From a manager’s point of view, you have to balance customer risk and legal risk,” he says. “You have to make sure that you really connect with the affective or emotional dimension here. In your crisis response, connect with people not just at a factual but at an emotional level as well. People need to be reassured; they don’t just need to be convinced.”