The effect of crisis type and crisis disclosure on corporate reputation

Employees have become increasingly impactful and valuable for businesses. However, next to positive added value they can also form risks for the companies that they work for. In recent years, with the rapid rise of social media, it has become increasingly easy for employees to voice their opinions about the corporation online with an audience of millions, whether the opinion or experience that they share is positive or negative (Kaul & Chaudhri, 2017). Research has found that consumers see employees of a company as a credible source with regards to company information, emphasizing the increased risk for companies. This is further supported by the fact that several real life examples have shown that information unrelated to the company or industry that the employee is working in can also impact the way that consumers think about the company. In other words, employees are seen as direct representatives of the company and its values, by the consumer. Research has shown that the online behaviour of employees can have an impact on the customers perception of the corporate reputation. A direct consequence of this is that it can still hurt the company when employees tweet, post or blog about things other than the company, by going against society’s or the company’s moral codes. Due to these risks, this research aimed to investigate how crisis type and crisis disclosure influence the corporate reputation when the crisis is generated by an employee. No research has focused on the involvement of employees with regards to crisis communication before, giving this research the opportunity to explore this realm and add to the currently available literature base. Hypothesis 1 stated that an intentional crisis would wield more power over consumers and would therefore result in a more negative perception of the corporate reputation. Hypothesis 2A and 2B focused on when the crisis was disclosed by the company versus disclosed by a third party media outlet, in which case literature suggested that company disclosure would give a more favorable perception of the corporate reputation. To investigate the relation between corporate reputation and crisis disclosure and crisis type a survey experiment was conducted. The experiment used several stimuli representing the different crisis types and crisis disclosure scenarios, to be able to investigate the posed research question and to test the offered hypotheses. To further test the hypotheses, the data was analyzed using independent-sample t-tests, following that a regression analysis was conducted to analyze the additional variables included in the survey to check for other possible moderators, such as crisis responsibility, customer trust, customer satisfaction and demographics. After a thorough analysis of the data this study found that an intentional crisis is more harmful to the corporate reputation than an accidental crisis, in both disclosure type scenarios, company disclosure and third party media outlet disclosure. Additionally, company disclosure wielded the most positive results in either crisis type situation, the accidental crisis and the intentional crisis. Moreover, results showed that both crisis type and crisis disclosure had a significant effect on the perceived corporate reputation. As suggested by the first hypothesis which was accepted on account of the gathered results. Intentional crises have a more negative impact on the perceived corporate reputation than an accidental crisis. This result could be due to the theory proposed by Coombs and Holladay (2002) that more responsibility is accounted to the company, according to consumers, when consumers perceive the crisis to be the company’s responsibility. In support of this statement the results showed a significant effect of crisis responsibility on the post-crisis reputation. In line with these findings, the results have shown that consumers experience a decline in perceived corporate reputation even when an individual employee is responsible for the crisis. In relation to crisis disclosure, this research found that the perceived corporate reputation turned out more positive when the company decided to self-disclose the crisis, as opposed to a third party disclosing the same crisis, regardless of what type of crisis was disclosed. Concluding that consumers have a more favorable attitude towards companies that self-disclose their wrongdoings during a crisis. Additionally, customer trust and customer satisfaction showed to be high predicting variables for the corporate reputation. When being exposed to one of the crisis situations, consumers that reported having more trust in the company and being more satisfied with the company perceived a higher corporate reputation. Therefore, showing that consumers who experience more loyalty towards a brand are more likely to be forgiving towards the company and its reputation following a crisis. From these findings we can conclude that, for organizations, it is advisable to continue to support projects that ensure a better corporate reputation as well as programs that support the creation and enhancement of customer trust and customer satisfaction. This study has shown that these concepts are significant variables leading to a better corporate reputation, which could lead to benefits such as, increased financial performance and more loyalty amongst employees.