Chief executives in an overseas crisis: Assets or liabilities?
How wise is it for a chief executive to front up to an angry public and a probing media during a crisis in an overseas market? That depends on the characteristics of the CEO, the type of crisis and the characteristics of consumers in overseas markets, according to Te Herenga Waka–Victoria University of Wellington’s Associate Professor Dan Laufer, of the Wellington School of Business and Government.
In a chapter in a forthcoming book, Crisis Communication, Associate Professor Laufer outlines the benefits and pitfalls of putting the boss under the spotlight during an overseas “product-harm crisis”.
Using several case studies–including Fonterra’s 2013 crisis involving a botulism scare in its whey products–and research conducted in China, South Korea and Germany, he has come up with a list of factors to help companies decide whether or not to front their CEO.
“During the Fonterra crisis, Theo Spierings, the New Zealand company’s CEO, travelled to China to be a spokesperson. This raises the interesting question of whether a multinational should send its CEO overseas to be a spokesperson during a product-harm crisis.
“Is this an effective strategy in limiting the damage to a company when compared with using a local company spokesperson from that overseas market? Are stakeholders more positively influenced by communications from the CEO, even if they are from a foreign country?”
A chief executive could be perceived as the most credible company representative because he or she is also the leader of the organisation. However, using a foreign CEO might also backfire, he says.
“Perhaps there is a liability of ‘foreignness’ that could hurt a company during a crisis? With the company facing a challenging situation, it would want to avoid choosing a spokesperson who could complicate the situation even more.”
Associate Professor Laufer’s framework lists the factors to consider when deciding whether to use the CEO as a spokesperson in such situations, including the characteristics of the CEO, the nature of the crisis, and the qualities and behaviour of consumers in the overseas market.
In terms of the CEO’s characteristics, the company needs to consider whether that person is highly visible in the overseas market, and whether his or her personal brand is associated with competence or empathy.
In addition, cultural differences need to be considered, and whether a CEO’s liability of “foreignness” can be overcome perhaps by sharing an affilation with overseas consumers, such as having things in common with a brand community.
When it comes to the nature of the crisis, the organisation needs to consider the blame the company might attract, the severity of the crisis and the importance of the overseas market.
And in terms of the characteristics of overseas consumers, it is worth being mindful of the levels of ethnocentrism, their perceptions of the country of origin, and power-distance orientation, Associate Professor Laufer says.
“The framework will help this decision-making, which involves a number of criteria to consider.
“For example, the CEO can work as a spokesperson if he or she is from a country perceived as warm or competent. But if the CEO comes from a country that does not have good relations with the nation where the crisis is unfolding, it may pay to use a local spokesperson instead.
“In the future there will be other New Zealand companies besides Fonterra involved in overseas crises.
“This framework will be of great benefit to companies who wish to assess whether their CEO will be an asset or a liability as a spokesperson during an overseas crisis.”