Managing a Reputational Attack: How Whole Food Was Successful

reputation

“Honesta fama melior pecunia est.”  – “ A good reputation is more valuable than money.”

For a corporation operating in today’s Internet driven business environment, this quote is more important than ever. Over the past fifty years, the operational design and the manner in which corporations conduct business has evolved considerably. Today over 75% of a corporation’s value now consists almost entirely of intangible assets.

Successful corporate boards and C-Suite executives recognize that critical to their success and business development, their most valuable intangible assets are its corporate and brand reputation. One needs to look no further than Apple, which has placed the value of its corporate reputation in excess of $4.6 billion.

For all its value, a good corporate reputation can be an extremely fragile commodity. Ben Franklin once remarked “Glass, China and reputation are easily cracked and never well mended.” False and malicious accusations directed towards a corporation or its officers, has the potential to cause irreparable damage to an organization. The speed at which negative information is circulated and recirculated, has the potential to disrupt or destroy such a fragile commodity. How a corporation chooses to respond to a reputational attack has the potential to forever define the organization in the eyes of its varied constituencies.

A poorly managed reputational crisis will almost certainly have a significant impact on a corporation’s long term viability, including the manner in which analysts and corporate investors determine the current and foreseeable value of the organization. Also, a less than proactive response to a reputational crisis may provoke derivative litigation claiming that the company, its officers and directors breached their fiduciary duties by allowing the incident to escalate.

Given the value that is placed on a good corporate reputation combined with the importance of implementing and maintaining appropriate policies to strengthen and maintain a corporate reputation, I was surprised that any crisis management consultant would chose to publically criticize Whole Foods over the proactive response that it chose to employ when they were confronted with an unprovoked attack on their corporate reputation.

Earlier this year, the Rev. Jordan Brown claimed that a custom decorated cake he purchased at the Whole Foods flagship store in Austin Texas contained an offensive anti-gay slur.

Brown’s photo of the cake and subsequent tweets and tearful photo of himself went viral. Rev. Brown quickly retained an attorney and went on a media blitz. Just as quickly came the inevitable law suit against Whole Foods claiming severe emotional distress, mental anguish and humiliation.

It was under this backdrop, that Whole Foods found itself having to defend itself against Brown’s public allegations and lawsuit.

Whole Foods’ response to Brown’s attack on its reputation was a textbook example of how to successfully address and mitigate such an incident. The company’s response was proactive, strategic and in direct proportion to both the severity of the incident and the level of media attention.

When developing corporate risk assessments and crisis management plans, a company needs to keep in mind that in order to protect the future, you need to learn from the past. Such was the case with Whole Foods.

Last year was certainly not the best year for Whole Foods. In 2015, the company had experienced a long list of public relations missteps and negative media coverage. These events prompted co-CEO John Mackey to remark in December 2015, “When you are accused of something it’s very difficult to prove your innocence in the court of public opinion.” More importantly, Mackey recognized that there would be those times that winning in the court of public opinion would not be enough.

Mackey’s solution was to create a dedicated crisis response and mitigation team with the mandate to proactively confront any type of reputational attack facing the company. While it’s never a good idea to create false and malicious allegations against any company, the old adage “timing is everything” applies in Brown’s case. The change in Whole Foods reputational crisis response strategy while beneficial to the company was bad news for the Rev. Brown.

Upon receiving the complaint from Brown, the store manager responded with the appropriate level of concern, indignation and understanding to Brown’s claim and the perceived distress claimed by Brown. The manager assured Brown that the company viewed the alleged incident and his complaint as a very serious matter and if confirmed, a serious breach of company policy. The manager also informed Brown, that the company would vigorously pursue his complaint. In addition, the store manager even offered Brown a store gift card.

The store manager in conjunction with the company’s corporate offices commenced an immediate and thorough internal investigation. The company moved quickly to secure and review video from the store’s security cameras and interviewed the appropriate store employees. The internal investigation amassed considerable evidence refuting Brown’s allegation allowing the company to quickly inform its constituencies that Brown’s complaint was totally without merit. Throughout, Whole Foods conducted its investigation in a very transparent manner, even posting their evidence online.

During the time that Whole Foods was in the process of conducting its investigation into Brown’s claim, Brown and his attorney very publically announced that Brown was filing a lawsuit against Whole Foods. It was the initiation of Brown’s lawsuit in conjunction with his aggressive media show that prompted Whole Foods to file a counterclaim for defamation, as well as the seeking of sanctions against Brown’s lawyer.

It was Whole Foods’ decision to file a counterclaim that prompted the criticism by the crisis management consultant. In her company blog, the consultant posted two questions and a number of comments supporting her contention that the counterclaim filed by Whole Foods was inappropriate and amounted to overkill.

The two questions posed by the consultant were:

Were the countersuit for defamation-which was the part of Whole Foods’s crisis management that was offensive taking it too far?’ and,

When is the right time to implement an offensive crisis management strategy?” (Note: when the consultant used the word “offensive”, it’s believed they are referring to proactive)

It was the consultant’s opinion, that Whole Foods’ crisis response to Brown’s reputational attack was proper up to the point that Whole Foods chose to file its counterclaim against Brown. In support of her contention that the counterclaim was a poor strategic move on the part of Whole Foods the consultant wrote:

“In my opinion, Whole Foods’s response without the countersuit was sufficient……the choice of a countersuit was counterintuitive.” “Had they published their statement, video and picture and left it at that, the issue would have been managed and the story would soon be forgotten. Now however, where there is an update on the countersuit, the story will be brought back up and published about.”

In support of their second question, the consultant wrote:

“Often times, it’s better to respond appropriately, prove yourself, let your community come to your defense and then continue to move forward.”

“You should seek, first and foremost, to find positive opportunities, rather than implementing an aggressive or negative strategy-especially one that will be long lasting when the situation could have otherwise been put to bed and forgotten about.”

While the consultant did raise some valid points in her blog post, for the most part, the author was extremely shortsighted and continued to demonstrate an inability to grasp the fundamental goal of responding to a reputational attack.

When a reputational crisis occurs, no one actually stops to think just how lucky they are for the opportunities the attack may ultimately bring. False and sensational reputational attacks tend to proliferate quickly and widely. When a corporation’s reputation is attacked, the first step of the crisis response team should never be “to first and foremost find positive opportunities.”

Furthermore, the consultant failed to recognize the seriousness of the event. Her suggestion that doing nothing or letting “your community come to your defense” is both simplistic and naïve. A company responding to an unprovoked reputational attack has a duty to employ aggressive proactive measures designed to mitigate the attack. A company with a reactive approach will be unprepared to prevent otherwise controllable situations from escalating.

Also, in the Internet age, nothing is ever forgotten and the news stories and various posting on the Whole Foods/Rev. Brown incident are like diamonds, are forever. The consultant actually contradicts her own statement that had Whole Foods chose to do the bare minimum, the incident would be quickly forgotten. The very qualities that make the Internet a beneficial medium, its ability to distribute information rapidly, also makes it a source of concern for corporations. By choosing to write about the Whole Foods/Rev. Brown incident, she has insured that the story will be revisited every time someone Google her name or reads her blog post on the incident.

It is a mistake on the consultant’s part to lose sight of the fact that Brown’s actions were not a random act, they were a calculated and premeditated attack on Whole Foods. Because of Brown’s scheme, Whole Foods was the victim of false accusations that went to the very core of its corporate reputation and integrity.

[bctt tweet=”No organization can afford to remain impassive or simply reactive when encountering a reputational crisis. ” via=”no”]

More importantly, no organization can afford to respond to a false and malicious attack on its corporate integrity strictly from a defensive, disorganized corporate position and expect to be successful. Not only will organizations suffer embarrassing and costly mistakes, executives will end their careers with these organizations.

When evaluating Whole Foods response to this incident, it is important to consider just how lucky the company actually was when it came to investigating and disproving Brown’s allegations. The successful outcome of the company’s internal investigation was predicated on more than having an excellent corporate compliance and crisis response program, it was dependent on a number of factors that were outside their control.

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First, the company was fortunate that the stores surveillance cameras were positioned in the correct locations allowing the company to capture images of the price label on top of the cake box at the time of the purchase.
Secondly, the company was fortunate that Brown chose to reposition the price label from the top of the box to the side of the box after he tampered with the cakes inscription. It is unclear exactly why Brown chose to move the label and reposition it on the side of the box, since it appeared that the box could have been opened surreptitiously without moving the label.

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Had either of these two things not occurred, Whole Foods would have found itself at the mercy of Brown’s allegations.

The consultant chose to not take into consideration that it was the Rev. Brown who was the instigator, it was Brown who chose to initiate litigation first. It was that action in combination with Brown’s full court media press that heavily influenced Whole Foods decision to file a counterclaim.

The option of filing a counterclaim or the initiation of litigation can be a strategic decision for a company facing a serious reputational attack. In this context, a proactive litigation response to an attempted extortion scheme is particularly appropriate where:

(1) The claim is believed to be without merit;

(2) Seizing the public relations high ground if appropriate, advantageous and warranted;

(3) The organization’s business interests and constituent relations would be significantly damaged by delay.

In addition, by becoming the plaintiff, a company can be provided with a number of procedural advantages, such as permitting the company to define the issues and to an extent control the narrative. Most important of all, the initiation of litigation when responding to a reputational attack and possible extortion demand, will hopefully possess a potential deterrent value against similar attacks in the future.

For a corporation facing a reputational attack, silence is never golden.

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Michael D. Celockhttp://www.omegastrategic.com/
Michael's public-private sector experience spans both the advisory and operational spectrums of corporate governance and compliance, international affairs, intelligence, national security and law enforcement. Mr. Celock also has substantial experience regarding compliance with the FCPA and multi-jurisdictional government and corporate investigations. Mr. Celock regularly counsels corporate clients on strategic, operational and political risk, cross-border due diligence, corporate internal investigations, crisis mitigation, the FCPA and international crime and corruption issues as well as devising innovative solutions to complex problems arising from non-traditional corporate situations. Mr. Celock’s work is often of a cross-border and international dimension across a variety of industries and is designed to promptly and effectively identify, assess and manage rapidly changing risks facing the client. Mr. Celock’s intervention provides clients with the ability to respond strategically and in a timely manner to existing or emerging situations that threaten the business and reputation of the organization. Mr. Celock was appointed by President Clinton to the position of Special Advisor to the President for National Security Affairs. Mr. Celock has also served as a consultant to CIA’s Office of Transnational Issues. Responsibilities included providing unique functional expertise to assess existing and emerging threats to the national security interests of the United States and to identify, disrupt and prevent illicit financial transactions that threatened U.S. National Security.
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