Does Social Responsibility Help Protect a Company’s Reputation?

When consumers encounter negative information about a company, its reputation for corporate social responsibility can help — but only sometimes.

Image courtesy of Flickr user p_a_h.

Negative information about businesses is omnipresent. Even much-admired businesses, such as Apple Inc., must deal with negative information, as Apple discovered when consumer complaints surfaced in 2010 about the antenna design of its iPhone 4. Negative information tends to spread faster than positive and, because of increased usage of social media and the Internet, businesses are likely to be confronted with more — not less — negative information about their companies in the future. While the spread of negative information may not always be under the control of a business, it can try to mitigate the potential damage from negative information in different ways.

An increasing number of companies invest money in corporate social responsibility initiatives, in part to build general good will for their organizations. However, we have not known how effective corporate social responsibility initiatives are in strengthening customer resistance to negative information, compared to other tactics that can enhance a company’s reputation — such as investing in product or service quality or customer care. Does doing good help protect a business’s reputation against negative information it may be confronted with in the future?

Not completely, some recent research of ours suggests. We conducted a study with Gaia Rubera, an assistant professor of marketing at Eli Broad College of Business at Michigan State University, and Matthias Seifert, an assistant professor of operations and technology at IE Business School in Madrid, to look at how customers reacted to negative information about a company. Detailed results from the study were published in the February 2011 issue of the Journal of Service Research.

RELATED RESEARCH

A.B. Eisingerich, G. Rubera, M. Seifert and G. Bhardwaj, “Doing Good and Doing Better Despite Negative Information? The Role of Corporate Social Responsibility in Consumer Resistance to Negative Information,” Journal of Service Research 14, no. 1 (February 2011): 60-75.

In the first part of our study, we surveyed 854 customers of a commercial bank about their opinions of the company and how they would react to negative information about it.

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12 Comments On: Does Social Responsibility Help Protect a Company’s Reputation?

  • Ginny Cassidy | March 27, 2011

    What’s missing in this analysis is that, when aligned with the Global Reporting Initiative (GRI) framework, Corporate Social Responsibility (CSR) directly addresses “tactics that can enhance a company’s reputation,” such as product and service quality and customer satisfaction.

    The best CSR practices and programs go well beyond “building general good will” and focus on specific issues that impact a business’s sustainability as well as its reputation. These run the gamut from quality and customer service to human rights, labor practices, and environmental risks and opportunities.

  • Ashish Deodhar | March 28, 2011

    This research really throws some very common sense result. If a company doesn’t care enough for its customers, they will not have a good opinion of the company no matter what it does in terms of CSR.

    A company I worked for recently is exceptional at customer service and stood out for its response to a major crisis brought about by a natural disaster. Whilst most other companies, including all the big airliners, took flack for their poor handling of the situation, we received nothing but good press throughout and after the crisis.

    The company doesn’t invest a single penny in CSR by the way.

  • Tom Kuhn | March 29, 2011

    This piece of advice would have saved my previous firm millions.

    Used to work for a very large oil company. And people actually thought of social responsibility investments as waste. As it turned out the firm got severely punished for it when things did go wrong because people did not perceive the firm as socially responsible in the first place.

  • Abel Kabiru | March 30, 2011

    Responsiveness and good corporate governance cannot be substituted by the best CSR initiatives. Majority of people will quickly overlook a company’s past CSR activities when a significantly negative story develops. They focus more on how the company could have avoided or mitigated against the crisis and follow keenly on how the same company is handling the whole issue – and with what speed.
    BP does a lot of CSR. However,BP’s initial fiddling with last year’s oil spill in the Gulf of Mexico eroded substantial goodwill, that no amount of CSR can compensate.
    Bottom line: do the right thing. when a crisis occurs, handle it expeditiously. But if its a big negative thing, all your past CSR activities will not count for nothing.

  • Ruben | March 30, 2011

    Nowadays information about firms (especially negative ones) are spread around the globe within hours. The authors explain this well with the Apple example.

    The authors show with a huge survey that CSR is important, however they conclude that CSR is not a complimentary ticket for a firm to sweep any misdoing under the carpet.

    I am sure that firms can save millions if they consider this research finding!

  • Kamall Munir | March 30, 2011

    I am not sure whether companies get what this piece is saying because so many of them fail to act accordingly.

    Social responsibility is either seen as worthless or as a silver bullet. CSR is neither. As always the truth is somewhere in between. Interesting read.

  • Yeyi | April 1, 2011

    Social network websites make consumers to be less likely to be influenced by company’s reputation for CSR.
    If one of mine friends, who is an expert customer, provides negative WOM on his facebook because of the company’s low reputation of service quality, I must be influenced even if I have a low level of expertise and the company does invest much on SCR.

  • Kevin Moss | April 4, 2011

    I am sorry, but I think this all wrong. Good corporate responsibility is not about spending money on doing some arbitrary good as a protection for when things go wrong – that will backfire. As Ginny Cassidy says, corporate responsibility must focus on the company’s core business. Anything else is pure marketing/advertising spend. A longer response on my blog at http://bit.ly/g6iNNJ

  • GT | April 8, 2011

    a study on Tata group w’ld be worthwhile. Also, a small request to the authors – please try and engage the audience, if people are taking out time to share their insights, you can atleast thank them ;)

  • Andreas Eisingerich | April 10, 2011

    Thank you for the lively debate and comments! As GT and Yeyi, noted the discussion about the role of social responsibility in a business is still going on and work on Tata and facebook is richly deserving. Too often firms either perceive CSR as not contributing at all or expectations regarding impact are overly optimistic, we agree with Kamall’s assessment. As we note in our JSR paper, CSR is not about advertising blitzes but it needs to be genuine, as Ginny and Kevin pointed out CSR will backfire in most cases unless it is seen as genuine efforts to make a positive difference. Ashish and Abel’s points are well taken. The role of CSR in improving stock performance and firm’s profits may not be straightforward but it does deserve our attention.

  • Reinder Koornstra | April 19, 2011

    The key words should be social responsability, authenticity and conformance quality. If quality fails, the rest does not matter.

  • Satya Pullakhandam | April 24, 2011

    Corporate Social Responsibilty is no substitute for Quality and Customer Service. Neither of them are tactics, first one as the name suggests it is every corporate responsibility to give back to society, and the second one is basic operating principle of every corporation for their reputation and very survival in this competetive market place. It is a big mistake if someone thinks that investing in CSR is a way to offset bad quality and customer service.

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