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Managing the Message

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The Robert H. Smith School of Business is an internationally recognized leader in management education and research. One of 12 colleges and schools at the University of Maryland, College Park, the Smith School offers undergraduate, full-time and part-time MBA, executive MBA, online MBA, specialty master's, PhD and executive education programs, as well as outreach services to the corporate community. The school offers its degree, custom and certification programs in learning locations in North America and Asia.

May 01, 2012

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Research by Rhonda Reger and Debra Shapiro

Even after wrongdoing, firms can influence media coverage by carefully choosing the types of information they release to the press.

British energy giant BP spent $93 million dollars on advertising in the quarter following its massive Gulf Coast oil spill to try to protect its corporate image, respond to consumer demand for transparency and show that it was actively managing the crisis. Managing negative media coverage after a firm has been responsible for wrongdoing is a tricky issue for any firm. Worse, negative media coverage of one firm’s wrongdoing can spill over to its competitors in the same industry—even if they are completely innocent. How can firms influence media coverage to change consumer perceptions in times of wrongdoing, or protect themselves from a negative view of their industry?

The way a firm responds after wrongdoing has a significant effect on how it is perceived, according to research from Rhonda Reger, associate professor of management and organization; Debra L. Shapiro, Clarice Smith Professor of Management; Anastasiya Zavyalova, a Smith School doctoral candidate; and Michael D. Pfarrer, Smith PhD ‘07, University of Georgia.

The authors examined media coverage of U.S. public toy firms in each quarter over a ten-year period, and more than 5,500 press releases generated by the firms during that time. Almost half of the firms they surveyed conducted a toy recall, for a total of 56 million toys associated with thousands of reported injuries or incidents, during the study period. Those recalls were indications of a firm’s “wrongdoing,” defined as firm behaviors that placed stakeholders at risk or violated consumer expectations for standards of conduct.

As one might expect, the authors found that the worse a firm’s wrongdoing, the more negative the media coverage it received. But whenever any toy firm conducted a recall, other toy firms often suffered from a negative media backlash against the entire industry, making every firm guilty by association. In the case of toy recalls, media reports often did not name the companies involved, using general phrases like “children’s product recalls.”

After a toy recall, firms in the industry released information to the press that was either technical or ceremonial in nature. Technical information deals with the specific actions a firm takes to address wrongdoing, while ceremonial information deals with actions the firm takes to create or highlight positive differentiators.

Technical press releases were effective for improving the tenor of media coverage about the firm that was conducting the recall of defective toys.

“If you’re the perpetrator, it’s better to put out a substantive press release. The media likes to see that you are addressing the problem,” says Reger. “Say that you fired the production manager, or increased standards for quality in manufacturing.” Technical press releases detailed changes in production management, improvements in manufacturing, compensation for defective products, and cooperation with regulatory agencies investigating the recalls.

Firms that aren’t guilty of wrongdoing should be careful to avoid a technical-type press release, the authors warn, as it can draw unwanted media scrutiny. Detailing the ways in which its toys were not defective actually worked against a firm.

Rather, when a firm’s brand had been tarnished by a competitor’s recall, it was more effective to release information designed to take attention away from the wrongdoing—to point out the ways in which the firm is different from others in the industry. These ceremonial press releases included information about firm initiatives such as starting a foundation, engaging in a charity function, or hiring a celebrity to promote products. Those kinds of actions were effective because they divert attention from the negative coverage surrounding the industry in general.

However, recalling products during a period when other firms were also conducting recalls resulted in media coverage that was somewhat less negative for individual firms. That indicates that there may be “safety in numbers.” It is less damaging to be engaged in recalls when other firms are doing the same.

“The "guilt-by-association" dynamic found in our study suggests that the image of many firms in an industry benefit whether they--or their competitors--receive positive media coverage,” says Shapiro. “As such, firms help each other, not just themselves, when media portrays them positively. On the other hand, mudslinging hurts everyone, not only the thrower."

This is an early area of study within strategic management, says Reger, but it is becoming more important. “There is something of a crisis of confidence right now concerning our institutions, corporations and government,” says Reger. “Bad publicity has been elevated to a C-suite issue because it can affect earnings, stock prices, even the organization’s future.”

“Managing the Message: The Effects of Firm Actions and Industry Spillovers on Media Coverage Following Wrongdoing” is forthcoming from the Academy of Management Journal.

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