WHEN THE TAIL WAGS THE DOG

LESSONS FROM MOMENTUM’S REPUTATIONAL BLUNDER

 

In recent months we’ve witnessed the power of a public outcry on social media and media channels, resulting in a changed policy decision by life insurance giant Momentum.

 

Momentum’s shameful decision to deny the widow of a slain man the life policy payment led to an unprecedented level of Twitter outrage in South Africa under the hashtag #MomentumMustFall.

 

The backlash took Momentum by surprise. After all, from their point of view, they had taken the advice of their best legal minds and stuck to their guns in terms of the fine print in their policy terms and conditions. In addition, they even had the support of the Insurance Industry Ombudsman to support their decision to deny the claim. So why was the general public and their customer base so enraged by their decision? And more importantly, what happened to make the insurance giant backtrack on its decision a few days after the Twitter storm broke?

 

My view is that the organisation made a monumental blunder by forgetting about its stakeholders and viewing the decision in isolation of the potential impact on its brand and the cost of reputational damage. It’s not difficult to believe that the lawyers were called together to make sure that the policy decision was water-tight. But did they take time to consider an all-encompassing response that included the company’s reputation and the response of their customers and stakeholders to the news? Clearly not. And, I cannot help but wonder to what extent their communications or corporate affairs people were consulted on the matter.

 

The Momentum blunder has demonstrated that particularly through social media, people are finding their voice and are realising that they are being heard and that change can happen when enough societal pressure is applied in the right places. The anger resulted in so much reputational damage and in turn brand damage for Momentum that within a matter of days they reversed their decision and made the payment of R2.4 million to the widow. Momentum learnt the hard way that they can’t hide behind legalese. The basis of their decision might have been legal but was it ethical? The cost of this poor judgment has far exceeded the mere R2.4 million paid to the beneficiary and it has negatively impacted customers, staff and the general public’s view of Momentum’s core values and reputation.

 

Companies have a responsibility to act authentically and ethically with heart, and not put profit before people. They need to be in tune with and listen to their stakeholders. Gone are the days where an unhappy customer will fax a complaint to a company’s CEO and the essence of the concern is between the complainant and the rolls of fax paper lying on the floor of the mail room. Whether we like it or not, dirty laundry can be aired very publicly, very quickly. And for that reason alone, reputation management must be a boardroom issue.

 

Stakeholders are willing to forgive companies if it was an “honest mistake” not based on malice or unethical business practices. They also expect companies to own up to their mistakes and come clean about poor decisions. The South African public’s tolerance for lies, deceit and lack of ethics is at an all-time low. This further elevates the need to protect and manage one’s corporate reputation carefully and with great consideration of public sentiment.

 

I find it interesting that we don’t hear much from the rest of the insurance industry about Momentum’s back tracking decision, most likely because of the similar business models and legal frameworks that have become industry norms. No one is sticking their neck out publicly to challenge Momentum’s decision, or even praise it, most likely out of fear for the financial consequences it may have on their own brands.

 

From a reputation management perspective, what can we learn from this debacle?

  • Don’t hide behind lawyers and legalese when it comes to stakeholder engagement and reputation management. Apply the law and internal policies on a case-by-case basis taking all circumstances into account.
  • Treat your customers like individuals and realise that they have valid views about your organisation that need to be heard, whether you like it or not.
  • Your customers come from a broad base. Refine the language of your legal terms and conditions into simple and clear language so that all your customers can understand them. Summarise the salient points. Get rid of the legalese. Stop calling it “fine print”, which plays down its importance. Companies are inadvertently hoodwinking their customers every day because they make critical clauses appear unimportant or insignificant. Ensure that both the letter and the spirit of the message is in keeping with ethical business practices.
  • If your business model is compromising, or has the potential to compromise, your company’s reputation, stop and reconsider it from your stakeholders’ perspectives.
  • Instil a quality review process where other professionals can consider the potential impact and risk to your brand and reputation.
  • Communications and brand professionals should not be an afterthought after lawyering up. They should have a voice at the boardroom table and be involved in decisions that will impact brand and reputation.
  • There is a responsibility on communications professionals to not allow legal colleagues to roll over them. The tail should not be wagging the dog when it comes to reputation management. Communications professionals need to ask the hard questions and ensure that their perspectives on reputation management are taken into account. This means that communications professionals need to be both technically competent and knowledgeable about the business, all while being confident enough to challenge myopic decisions that may harm the organisation’s reputation.

 

These lessons apply to all sizes of companies in all industries. The difference between smaller companies and the bigger corporates is that the corporates can better weather a reputational knock because their pockets are deeper. Smaller companies could find themselves out of business if their customers lose faith in their brand. It’s your company’s most valuable asset – protect it with everything you have.

 

@LuniceJohnston