Warren Buffett, a man who knows a thing or two about value creation and protection, once said: 'It takes 20 years to build a reputation and five minutes to ruin it. If you think about that you’ll do things differently.'
It’s a lesson that TSB has learned to its cost as it grappled for four days with its major IT issue.
No organisation is immune to a crisis, whether system outage, cyber-attack, fire, flood, terrorism or fraud. So, businesses are rarely damaged simply on the basis that an incident has occurred. However, they will be severely penalised if they respond inadequately.
TSB’s crisis communication response was textbook, with its CEO Paul Pester visible, communicative and quick to say sorry. The company deployed its website and social media to good effect, and even took out full page national newspaper adverts to apologise for the incident. Nevertheless, its inability to fix the problem quickly negated this comprehensive communication.
Successfully protecting your reputation in the event of a major issue requires you to do two things speedily and effectively: communicate with stakeholders and fix the underlying problem. Unfortunately for TSB, they only succeed in the former, and great communication without problem resolution is never enough.
A crisis of this magnitude can have a significant long-term cost, both reputational and financial. Mention Talk Talk, and people still recall their data breach in 2015. BP’s relative share price performance still lags behind its peers eight years after the Gulf oil spill. If TSB loses just 1% of its customers as a result of this incident, the cost will be huge, without taking into account possible fines, compensation and, most costly of all, management time.
For TSB, the problem is exacerbated by the fact that its wounds are self-inflicted. Crises which hit from outside – extreme weather events, terrorism, power cuts – must still be managed well, but stakeholders understand that businesses are to some extent innocent victims. When the crisis is caused by your own actions, tolerance is less likely to be shown.
Damage to reputation can be particularly severe when the crisis – and your response to it – cuts across your values, and what people perceive you stand for. TSB is one of the warmer banking brands and has placed much emphasis on customer care (or ‘local banking’ as they call it). Given this positioning, the customer impact of its recent crisis is likely to be particularly harmful.
The bank’s priority now is to win back the trust of its customers, a process which will take many months. Succeeding in this challenge requires the underlying technical problem to be resolved without recurrences, continued communication with its customers and exceeding their expectations in terms of compensation and future customer care.
A crisis is the acid test for business leaders. The ability of TSB’s leadership team to rise to this challenge will determine the impact on a reputation built over 208 years.
Jonathan Hemus is managing director of Insignia, a specialist crisis management consultancy.
Image credit: Elliott Brown/Flickr