Biggest Reputation Crises in Australia 2010

Corporate and organizational crises continued to fill the headlines and shred reputations during 2010. The Qantas A380 near-disaster off Singapore tops the list of 10 worst Australian reputational crises during the year, but there were many strong contenders for top spot.

Organisational reputation is hard to build and hard to measure, and some of the organizations on the 2010 list – such as Qantas – demonstrate that even a well-managed public relations response cannot always prevent reputational damage. By contrast the Commonwealth Bank’s inclusion on the list – twice – demonstrates that even in an industry where public reputation is consistently low, deliberate corporate policy can trigger adverse political response and the risk of regulatory intervention.
The Issue Outcomes assessment matrix considers not just adverse public relations impact, but also weighs the broader business and societal impact and recognises that reputation depends on many factors.

The criteria evaluated are
• sustained adverse media attention
• news coverage outside Australia
• impact on share price
• union involvement
• social media profile
• real or pending litigation
• executive resignations
• consumer/sales impact
• government/regulatory intervention

Using this formula the top ten reputation crises in Australia in 2010 were:
1. Qantas – A380 engine failure which nearly resulted in disaster and came after other worrying mechanical failures and alleged maintenance issues
2. Commonwealth Bank – broke ranks on mortgage interest rates and helped trigger government intervention
3. Federal Labour Government – misconceived and mismanaged roof insulation scheme led to multiple deaths, scores of house fires and multimillion dollar remediation costs
4. David Jones – CEO resigned amid allegations of sexual harassment and suggestions of systemic issues
5. National Australia Bank – prolonged computer failure blocked thousands of transactions and cascaded across the financial sector
6. Melbourne Storm – football salary cap cheating damaged the club, the players, the owners and sponsorship
7. Virgin Airways – check-in computer meltdown stranded thousands of passengers
8. Victorian Bushfire Inquiry – in the wake of the 2009 fire disaster, 2010 hearings and findings left organizational and personal reputations irreparably damaged
9. Securency – top officials of the Reserve Bank dragged in to the banknote producer’s foreign bribery scandal
10. Storm Financial –ASIC announces it will sue Commonwealth Bank, Bank of Queensland and Macquarie Group over the Storm Financial investment collapse.
Every such list must be subjective – even when it follows a formula. Your comments and suggestions are welcome here or at my website http://www.issuemanagement.com.au

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About managingoutcomes

Issue and crisis management expert
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7 Responses to Biggest Reputation Crises in Australia 2010

  1. J.D. says:

    Tony,

    Thanks for this list and for your great thoughts as always. Love this blog.

    As someone who has followed the Qantas situation from afar (http://www.jamesjdonnelly.com/tag/qantas/) , I’m curious…how much reputational damage have they suffered?

    I agree that they handled the PR well. But in looking at your criteria above:
    * Has the adverse media attention been on the incident itself…or on Qantas’ handling of the incident? From my perspective, Qantas pilots and the company could not have done a better job. This appears to be more of a Rolls-Royce reputation crisis than Qantas’.
    * Share price — QAN’s price drop has been just a minor blip, when you look at the 5-year average.
    * Consumer/sales impact — Qantas did halt flights to make sure it’s other engines/aircraft was safe. But wasn’t that the right thing to do?

    Therefore, I agree Qantas may have been the biggest reputation management story in Australia….but are they really facing a reputation crisis? Have they lost reputation?

    I’d love your local perspective.

    Regards,
    J.D.

    • Thanks James for your usual perceptive input. The Qantas situation is a fascinating and complex one. Apart from an initial stumble, the company handled the A380 situation very well from a PR viewpoint. However the context is very important. Qantas had previously suffered a recent run of high profile mechanical failures and this event was widely depicted in the news media as “the latest in a series,” which played into the hands of union officials running a campaign against overseas maintenance of Australian aircraft. Qantas certainly has a powerful brand and an enviable market position, but adverse events are chipping away at that reputation. The heavy mobilisation of Qantas resources, and in particular the high profile personal involvement of the CEO, reinforced that the airline itself saw this as a major potential crisis.

  2. Joe LaFleur says:

    Thanks for the article. Keeps confirming the cycle. How to get corporations to pay attention is always the problem. Getting some help before hand to insulate the company as much as possible is the way to go – plans and processes – – but the human ego gets in the way as either “it can’t happen here” or “I can handle it if it does happen”.

    • Sadly, Joe, experience right around the world reinforces your point. It is disheartening how even well managed and experienced companies still cling to the idea that it wont happen to them.
      Tony J

  3. Lee Miles says:

    I am curious as to why Rolls Royce is not footing some of the pointing in the A380 situation – would this not have moved Q from the number one spot?

    • It is a good question. Rolls Royce has undoubtedly suffered some of the reputational damage from this debacle. And their share price took a hit. But my list was intended to be confined to Australian organizations. However reputational risk from ongoing litigation is one of the criteria on my matrix, and the question of potential litigation for Qantas – perhaps against Rolls Royce – helped it to hold top spot.

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