Preserving Brand Equity in a Corporate Turnaround
With rare exception, companies assign very little planning or resources to proactively managing the effects of a restructuring on its brand equity. While financial and legal considerations will always be the primary focus, a tangible sophistication gap has long existed between workout arrangement skills, compared with what’s required to preserve a company’s goodwill among internal and external audiences during a corporate restructuring.
Brand communication is considered a fuzzy management science by many legal and financial professionals and can be discounted by the C-suite as well. However, in our digital age, rumor and misinformation can incur permanent damage to a company’s reputation with lightning speed. A communications strategy largely consisting of press releases or cryptic statements from management falls far short of what is required to protect an enterprise’s most valuable asset — its brand.
Why Brand Equity Matters
A brand is the promise a company makes to its customers. Brands help customers understand what a company knows, what it stands for, what it will deliver and why they should trust it. Brands involve far more than a firm’s name, logo or website. Simply put, marketing is what a company does to promote its brand. Brand equity is what people believe the company is.
Marketing academics and practitioners promote plenty of convoluted definitions of brand equity. For the sake of this discussion, brand equity is best defined as the sum total of market perceptions, customer loyalty and employee engagement. If those three factors drive a company’s revenue, then building and protecting brand equity must be a strategic priority, particularly when the enterprise undergoes any change or event that may negatively influence those factors.
Brand equity has always mattered to companies. What has changed over the past decade, primarily as a result of the internet, is a company’s loss of control over information related to its brand and the democratization of influence. A company’s senior management and traditional media sources no longer have exclusive or primary control over brand equity. Anyone with Facebook, a Twitter account or a blog — including employees, customers, competitors, short sellers or dedicated troublemakers — can erode (or bolster) brand perceptions. Restructurings provide perfect opportunities for those opinions to be heard and considered.
Preparing A Game Plan
During a restructuring, it is critical that preserving a company’s brand receives the same level of attention by senior management as financial and legal considerations.
Anything short of that commitment can signal to employees, customers, business partners and other key stakeholders that their interests and concerns will take a back seat to the personal agendas of the corporate owners. Post restructuring, the rebuilding of trust and confidence with audiences that shape a company’s brand equity is far more difficult (and expensive) to achieve, because negative and incorrect facts and opinions have online visibility that can last for many years. As the classic FRAM oil filter commercial suggested: “You can pay me now…or you can pay me (much more) later.”
With an upfront commitment in place, most of the heavy lifting in creating a game plan to protect a company’s brand equity in a restructuring is front-loaded: strategic planning, delegation of responsibilities and a sense of urgency are the critical success factors.
Here are some primary considerations in preparing and implementing a game plan:
Treat Restructuring as Crisis Communication
In terms of its potential to inflict long-term damage to brand equity, a restructuring can be as significant as a product safety recall or financial fraud. Most audiences won’t understand the purpose or logistics of the transaction. Many will assume restructuring is simply a tactic to enrich senior management. The overall impression will be that the company is in trouble or going out of business. Don’t underestimate the significance of the turnaround or the sense of urgency that’s required to communicate properly with key audiences on a real-time basis.
Refine the Core Messaging
How well and how consistently the company explains what’s happening and what’s likely to occur will have the greatest impact on how audiences respond. It is critical to provide an accurate, clear and concise description of the reasons for the transition and provide insight into the company’s plans and expectations. It is critical to express empathy for those affected, especially for those who have lost their jobs. Internal pressure from legal advisors to say very little about the restructuring or to communicate in legalese often requires pushback from management.
Tailor Core Messaging for Each Audience
There is no “one size fits all” strategy when communicating a restructuring event to diverse internal and external audiences. Because employees, customers and business partners all have very different motivations and concerns, the company’s core messaging must be tailored to address the “what’s in this for me?” factors relevant to each target audience. The substance of the messaging remains the same. The tone and details will change relating to areas of greatest concern for each audience.
Select & Manage Communication Channels
Tailored communications are of little value if they are not delivered to the intended audiences through an appropriate channel. Employees, for example, will respond more positively to email, and face-to-face (or televised) meetings/town halls, than they will to statements posted on the company’s website or intranet. Communication with business partners may best be managed through personal phone calls from their company contact. Ideally, establish dedicated channels (an internal microsite, for example), and do not mix restructuring-related information with normal course business communication. In all cases, the most damaging scenarios occur when an important audience receives restructuring information from a third party or indirect source — the news media or on social media — before hearing it directly from the company.
Apply Listening Tools & Respond Immediately
Several online tools, with capabilities far beyond GoogleAlerts, can provide real-time insights into where a company is being mentioned and what’s being said. This window into market sentiment is a necessity during a restructuring, but it will be of tangible value only if a company has the capability to respond immediately and appropriately to rumors and misinformation. Keep in mind that each social media channel has its own protocol and culture and requires specific skills to communicate effectively. If a company lacks channel-specific expertise in social media, engaging outside help is essential.
Centralize All Communications
With lots of moving parts — multiple audiences, tailored communications, different online and direct channels — the potential for inconsistent messaging and inaccurate information is very high. To manage those risks, establish a very simple and strict protocol with respect to how and when transaction-related communication is managed. The game plan should include individuals covering multiple disciplines. A single individual should be responsible for implementation and keeping the team informed of progress and problems at all times.
Start & End With Employee Communication
Employees have a personal stake in the company’s future and a direct influence on customer satisfaction and loyalty. At all times, depending on how they are treated, employees can serve as strong brand ambassadors or insidious brand terrorists. Because a restructuring strategy’s success will rely, in some measure, on their cooperation and support, a communication plan should be heavily weighted in tactics designed to keep them informed and to give them a voice in the process.
Anticipate Unpleasant Surprises
Plans designed to protect brand equity during a restructuring rarely follow the script. Part of the initial planning process should include a whiteboard session to address all the possible “what if” scenarios, ranging from union problems to negative media coverage to legal or regulatory problems. It’s unrealistic and unproductive to create detailed communications strategies for all of these potential issues, but considering them in advance enables identification of their early signs and a quicker response should they occur.
Despite the negative connotations, restructuring can serve as an opportunity for a company to demonstrate its true character and to build respect and loyalty from existing and new audiences. If, as Hemingway suggested, “Courage is grace under pressure,” then a company’s behavior during a restructuring — in terms of what it says, how well it manages the process and how it backs up promises — can significantly strengthen its brand equity.
To accomplish this goal, advance planning is more critical than good intentions. A company of any size, without a deep bench of internal talent, and lacking specialized communications experience, can preserve the brand equity it has worked so hard to establish. That effort starts and ends with a commitment to transparency and an acknowledgement that brand equity is a very fragile asset.
Note: This article was published in the November / December 2017 edition of ABF Journal, found here.