This document discusses corporate crises and crisis responses. It presents research on how consumers perceive organizations after a crisis depending on the response type. A study tested consumer impressions and purchase intentions in response to a foodborne illness crisis linked to a produce supplier. The crisis was classified as preventable. The study found that apologizing was not significantly more effective than other responses like denial or no comment in repairing perceptions of trust, impression, and responsibility. The research has implications for how organizations should respond to crises.

1. WHY SAY SORRY? Influencing consumers’ perception post organizational crisis CRISIS MANAGEMENT AND CORPORATE REPUTATION Angelo De Blasio and Roberta Veale

2. CORPORATE REPUTATION Corporate Reputation can be defined as the overall assessment of an organization’s business and social performance as compared to the observed performance of other organizations.

6. CONITUUM OF DEFENSIVE AND ACCOMODATIVE RESPONSES CRISIS RESPONSE ACCOMODATIVE DEFENSIVE ATTACK DENIAL EXCUSE JUSTIFICATION INGRATITION APOLOGY CORRECTION Adapted from Coombs (1998)

7. APOLOGY/ CORRECTION

9. CONCEPTUAL FRAMEWORK Adapted from Lee (2005) CRISIS SERIOUSNESS Crisis Response Type Trust in the Organisation Impression of the Organisation Purchase Intention Judgments of Organisational Responsibility

12. CRISIS SITUATION Walker Family Pty Ltd is a large supplier of fresh produce. For many years they have supplied fresh fruit and vegetables to a number of supermarket and restaurant chains. In September 2006, an outbreak of illness caused by Escherichia coli (E. coli) bacteria was found in fresh lettuce supplied by Walker Family Pty Ltd. The strain of E. coli found in the lettuce causes bloody diarrhea and dehydration. By 6 October, 2006, 67 people were infected after eating lettuce supplied by the company, including 3 people who also suffered a form of severe kidney failure (Hemolytic Uremic Syndrome). Federal health officials stated that over 50% of those who reported being sick from eating the lettuce were hospitalised. The outbreak was eventually traced to one of the company’s farms located in a regional area, where many of the organisation’s products are sourced. Investigators with the Professional Society for Infectious Diseases confirmed that the dangerous strain of bacteria found in the lettuce originated from irrigation water contaminated with sheep feces and from grazing cattle. On September 27th, there was a recall of all goods distributed by Walker Family Pty Ltd and consumers were warned to be especially vigilant when preparing fresh fruit and vegetables. As a result of this, consumer analysts predict that Walker Family Pty Ltd will suffer dramatically as a business due to the fact that many consumers feel the organisation has engaged in unsafe practices.

13. Denial (Previously untested in this context) “ Until adequate testing has been conducted Walker Family Pty Ltd refuses to acknowledge that the recent outbreak of E. coli is linked to any of our products.” Excuse “ Upon distribution, our products are exposed to a number of possible sources of contamination not associated with our organization.” No Comment (Previously untested in this context) “ Despite the government issuing a recall of all goods supplied by Walker Family Pty Ltd., the organization is yet to make an announcement on the outbreak of E. coli linked to its products.” Apology “ Walker Family Pty Ltd is extremely sorry that the recent outbreak of E. coli was linked to our fresh produce. Our thoughts are with the victims.” Correction “ Walker Family Pty Ltd. yesterday announced that the source of the recent E. coli outbreak had been identified and corrected. New testing procedures have now been implemented and will ensure that a similar outbreak of E. coli does not occur in the future.” RESPONSES TESTED

14. RESULTS Crisis Response Type Trust in the Organization Impression of the Organization Purchase Intentions Judgments of Organizational Responsibility 0.06 0.45 0.32 0.06 NS No significant difference between means scores for No Comment, Denial and Apology Comparison of mean scores for Impression of the Organization Response Type Mean Score Std. Denial 9.60 5.28 No Comment 15.40 6.96 Excuse 14.00 5.95 Apology 15.37 5.79 Correction 18.02 5.59

17. QUESTIONS?