Anyone who’s read the news in the past month will be familiar with the incident involving a United Airlines passenger being dragged off an airplane. This incident caused all kinds of bad press for United Airlines, with negative perceptions of its corporate reputation increasing to 500% according to new research from The Harris Poll.
The end of the road for United? Hardly. They’ve been through this before! Remember the guitar-breaking incident back in 2009 which prompted the guitarist himself to produce this YouTube video which has generated 17 million++ views?
United survived that PR storm, and they’ll weather this one too.
Reputational damage also happens in the alternatives sector. It’s inevitable. Performance will suffer drawdowns and there’s never an opportune time for it. A bad quarter, another bad quarter, mass redemptions, a case study in the Harvard Business Review about how quickly your AUM shrunk… can’t get much worse than that, can it?
WHAT ARE THE LESSONS WE CAN TAKE FROM UNITED AIRLINES?
A single accolade won’t save you from a mess. Just a month earlier in March 2017, United Airlines CEO Oscar Munoz was named U.S. Communicator of the Year by the magazine PRWeek. A few weeks later he was taking flak from all corners about dodging the issue, or being dismissive of an incident that was deemed very serious by most consumers.
Know when to show conviction, and when to show humility, signals that you have the intent to make things right. Investors want a manager to show conviction and consistency, but there’s a time for everything. Think Pershing Square and its recent apology for the Valeant debacle. Sometimes, fighting back isn’t always the best way forward; there are times when one has to raise their hands and admit that they were wrong. Beyond that, humbly tell your investors how you will get through this bump.
Case in point: A day after the United Airlines incident, CEO Oscar Munoz bungled a ‘non-apology’.
“I apologize for having to re-accommodate these customers”
The next day, he did a little better. And then finally began to show some compassion and empathy on Good Morning America the following day.
It took United Airlines 3 weeks to issue this statement to all of its members on April 28 (myself included):
(CLICK HERE to enlarge image)
Certainly more heartfelt, sincere, and hopeful than the first series of apologies. The settlement, and different approach by United, had finally taken its name off the front pages, which it had been dominating for almost the entire month of April.But, 3 weeks in the PR world can be an eternity. Not all managers can wait 3 weeks before addressing their investors. Don’t think that your only communication channel is your monthly performance report.
Do it quickly. In the modern world, there are less secrets than in the past; people find information more easily than before. Quickly be in front of the people that matter and talk to them consistently.
If you know that you’ve suffered a big drawdown in a bull market, don’t let your investors find out about it and question you later. However you approach it, do it promptly so that you can – to an extent – control the reputational damage done, and possibly, put a positive spin on it.
Negative PR and reputational damage are bound to happen in any industry. It’s how one deals with them that determines how quickly they get back up, or – if they are able to get back up at all.
By Alan Chu