CAN CRISIS SPREAD from one company to the next? Yes, especially between companies with similar characteristics, say Daniel Laufer, associate professor in the School of Marketing and International Business at Victoria University’s Victoria Business School in Wellington, New Zealand; and Yijing Wang, assistant professor of organization and corporate communication at Erasmus University’s Erasmus School of History, Culture, and Communication in Rotterdam, the Netherlands.
In a recent paper, Laufer and Wang cite the moment in April 2017 when a United Airlines flight crew had airport security forcibly remove a man from an overbooked flight. Once smartphone video of the incident made the news, “people were quick to point to the issue of overbooking as an industrywide problem,” the co-authors write. Soon, all airlines found themselves defending—and in some cases re-evaluating—their own overbooking practices.
More recently, last October’s tragic shooting in Las Vegas, in which a gunman shot concertgoers from an overlooking hotel and casino, sparked concerns about security at all Las Vegas casinos.
The co-authors point to two conditions that make crisis contagion more likely: accessibility, or the level to which the public perceives companies to be in the same category; and diagnosticity, or the extent to which the crisis can be generalized to all companies in a category.
How can companies gauge the risk of contagion? Laufer and Wang suggest they look at four factors: country of origin (COO), industry, organizational type, and positioning strategy. The more factors companies have in common with a stricken organization, the more likely it is they will be similarly affected. Companies also can gauge their risk by monitoring news and social media to determine whether the public views the crisis as isolated or industrywide.
If an organization finds that the risk of contagion is low, Laufer and Wang advise its leaders to do nothing, because issuing any response is likely only to draw unwarranted—and unwanted—attention. But if the risk is high, a company’s best course of action is to issue a response to explain why its policies or products are not related to the matter at hand.
For example, when Volkswagen was caught tampering with software meant to monitor its cars’ emissions, “BMW had a high risk of contagion because the company was linked to two risk factors: COO and industry,” the co-authors write. BMW quickly issued a statement making it clear that it used no software to influence emissions tests.
Leaders must recognize the human tendency to seek out patterns and make connections, say Laufer and Wang. “Crisis contagion,” they conclude, “is an issue companies need to take seriously.”
“Guilty by association: The risk of crisis contagion” will available online for free download until March 31, 2018. It first appeared on October 10, 2017, in Business Horizons.