Effectiveness of apology and denial communication strategies in restoring organizational trust while dealing with a CSR crisis

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Running Head: EFFECTIVENESS OF APOLOGY AND DENIAL COMMUNICATION STRATEGIES IN RESTORING ORGANIZATIONAL TRUST WHILE DEALING WITH A CSR CRISIS

Master’s thesis

Effectiveness of apology and denial communication strategies in restoring

organizational trust while dealing with a CSR crisis

Written by: Diana-Maria Ologeanu 11571624 Supervisor: Dr. James Slevin Date: 29.06.2018

Master’s Programme Communication Science

Graduate School of Communication University of Amsterdam

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EFFECTIVENESS OF APOLOGY AND DENIAL COMMUNICATION STRATEGIES IN RESTORING ORGANIZATIONAL TRUST WHILE DEALING WITH A CSR CRISIS

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Abstract

Organizational crises are challenging situations for communication specialists due to the negative effects they have on organizations. Especially situations that affect the organizational reputation, like CSR crises, can pose a real threat to the organization, such as the loss of public trust. This is why communication specialists have to make sure they use an appropriate crisis communication strategy. This study investigated how two of the most used

communication strategies, apology and denial, impacted the level of public trust in the organization, when elements such as the CSR history of the company, the attitude of an influential stakeholder, or previous distrust in corporations were involved. An online experiment was conducted, where the participants (N = 278) read a scenario about a CSR crisis, followed by questions. The results showed that choosing between apology and denial while confronted with a crisis situation is not simple. Neither using apology, nor denial as a default communication strategy can guarantee an effective solution for restoring the

organizational trust. Furthermore, the biases people have towards corporations could endanger the efforts of repairing organizational trust. Based on these results, insights for choosing the most effective communication strategy were offered to practitioners, as well as direction for future research.

Keywords: crisis communication strategies, apology versus denial, CSR crisis, CSR history of the company, bias towards corporations.

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Introduction

While working for an organization, communication specialists have to face both

predictable and unpredictable situations, such as communication crises, that can undermine the trust stakeholders have in the organization (Coombs, 2007). As part of their everyday job, communication specialists must adapt the communication strategy according to the situation, in order to minimize the negative effects of a crisis. Because there is no universal magical recipe for success, solutions have to be found, according to the particular elements involved in a crisis. Despite the significant amount of research concerning the relationship between the type of crisis response strategy and trust repair, the involvement of elements such as the previous Corporate Social Responsibility (CSR) history of the company and the support versus the disapproval of an influential stakeholder remain widely unexplored.

Trust is an important factor of competitive advantage for a company, that can determine its legitimacy and long-term growth, by strengthening its relationship with the stakeholders (Pirson & Malhotra, 2011). Situations that could diminish public trust in the organizations and make the public have negative feelings towards the company are, among others, the ones relating to the reputation of the organization, such as CSR crises (Gatzert, 2015; Sohn & Lariscy, 2014). Testing different response strategies, such as apology and denial, in combination to other factors that might have an influence, could help making predictions about the right course of action in order to repair public’s trust in the organization. As a result, this was the question guiding this study: Is adopting a denial strategy while dealing with a CSR-related crisis more effective than adopting an apology strategy in order to regain organizational trust?

One of the factors that could increase or diminish the effectiveness of either apology or denial on repairing trust in the organization is the CSR history of the company. This study

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looked into how previous involvement of the organization in corporate social responsibility practices could influence the trust of the stakeholders when the company is confronted with a crisis.

Moreover, previous studies have shown that support from an influential stakeholder can help the company to consolidate or regain public trust, phenomenon that can be found in literature under the name of trust transference (Tucker & Melewar, 2005). Given the importance of this process, this study looked more specifically into how the attitude of a stakeholder can help or diminish the organizational trust, according to the type of communication strategy used by the company.

Finally, people are often biased about the role corporate activity has in society and this opinion can affect their level of trust in the organization (Adams, Highhouse, & Zickar, 2010). Therefore, a research direction of this paper was to test if the level of organizational trust is influenced not only by external factors, like the way organizations reacts, but also by intrinsic factors, such as people’s previous distrust in corporations. As a result, in this paper it was tested if the general distrust people have in corporations can increase or decrease the success of restoring organizational trust of different communication strategies.

Therefore, this study answered the above research question, while considering the

previously mentioned factors. It was argued that there is no black or white approach, but this is a matter of considering a variety of aspects before choosing the best course of action in order to reduce the negative effect a crisis situation has on how the organization is perceived by the general public.

The paper is structured as follows. It begins with discussing the most significant findings concerning the main concepts that will be used in this study, and drawing hypotheses based on already existing research. After that, the methodology of the study is introduced, as well as

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the results. Finally, the findings were discussed and, based on them, conclusions were drawn and directions for further research were suggested.

Theoretical background CSR Crisis

Crisis situations are known to have negative effects for organizations by causing financial losses and reputational damage (Coombs, 2007). Corporate reputation is a valuable asset for any company, as a result of the multiple benefits it provides. Especially in times of distress, such as crisis situations, a good corporate reputation can keep attracting investors and maintain the company competitivity on the market (Weng & Chen, 2017). If prior to a crisis the company was perceived as having a good reputation, then it is more likely that the public doesn’t change its perception about it. In this paper, the concept of CSR crisis is used “as a major event that poses a threat to reputation associated with norms and values cherished by society, and socially expected obligations” (Sohn & Lariscy, 2014, p. 25). Therefore, a CSR crisis will challenge the confidence stakeholders have in the ability of the organization to comply with moral and integrity related principles. Mueller, Carter and Whittle (2015, p. 1180) argued that “integrity relates to perceptions that a party (individual or collective) will not exploit the other party in pursuit of self-interest”. As a result, and according to previous research, the severity of the crisis increases when the event challenges the socially accepted norms of morality compared to situations when the event is focusing on the corporate ability (Coombs, 2002; Sohn & Lariscy, 2014).

Type of response strategy

Due to its potential of diminishing the negative effects that a crisis can have on the organization, crisis communication is a topic communication researchers are paying special attention to. Their efforts towards understanding it are constantly resulting in interesting outcomes for the organizations facing a crisis situation. According to previous research, even

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after a crisis, negative effects on the organization, such as a decrease in the level of public trust, can be diminished, if communication specialists use an appropriate communication strategy (Brühl, Basel, & Kury, 2018; Gillespie & Dietz, 2009; Poppo & Schepker, 2010). There are multiple types of responses to a crisis and this study will focus on denial and apology. Denial means that the company rejects the wrongdoing, while shifting the responsibility for the offensive act to another entity (Benoit & Drew, 2009). Apology is defined by the same authors as “mortification” and it expresses the regret of the accused party and its request for forgiveness (Benoit & Drew, 2009).

According to Coombs and Holladay (2008), apology is one of the most effective crisis communication strategies. Moreover, the two types of strategy differ also in terms of the level of explanation given to the crisis and, subsequently, on the extent in which the response assures the prevention of the crisis (Dutta & Pullig, 2011). As a result, compared to the apology strategy, the denial strategy offers less explanations about the crisis and fails in assuring the reoccurrence of the situation. However, the influence of other factors, such as strength of evidence, for example, can result in the outperformance of denial on apology in restoring organizational trust (Fuoli, van de Weijer, & Paradis, 2017). In this case, using an apology strategy could diminish the effectiveness of crisis communication and result in negative effects on organizational trust. The results of any crisis situation will vary in the degree of achieved success or failure in minimizing the negative effects on the organizational reputation and, therefore, trust(Pearson & Clair, 1998). As a result, as the main concept that is going to be tested in this study, organizational trust is discussed in the following section. Public trust in the organization

As Pavlou and Fygenson argued (2006), the concept of trust describes the degree to which the public believes that a company’s actions are legal, favourable, ethical and responsible. Moreover, trust is a relational construct that is built on powerful affective and social elements

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(Bachmann et al., 2015). When trust is violated, the affected public will have negative feelings, such as moral outrage, indignation, or anger towards the aggressor because of what has happened, which results in a diminished level of trust in the organization (Bachmann et al., 2015). Trust repair requires that the aggressor initiates “social rituals and symbolic acts to resolve negative emotions caused by the violation and re-establishes the social order in the relationship” (Bachmann et al., 2015, p. 1126).

The concept of trust can be explained according to its two dimensions: trusting intentions and trusting beliefs (Fuoli et al., 2017). The concept of trusting intentions refers to the

trustor’s willingness to trust the actions of the organization in situations that involve risk. The concept of trusting beliefs refers to how trustworthy the organization is perceived to be in the process of achieving its goals. Moreover, the concept of trusting beliefs includes the

organization’s genuine concern for the stakeholders’ well-being, as well as how the organization respects socially accepted moral principles. This leads to the following hypothesis:

H1: When confronted with a CSR crisis, the apology strategy is more effective than the denial strategy for restoring trust in an organization.

The CSR history of the company

Through Corporate Social Responsibility, organizations commit themselves to improve the well-being of society through “discretionary business-practices and the CSR history of the company is believed to have an influence on restoring people’s trust in the organization” (Vanhamme & Grobben, 2009, p.8). By involving in CSR, companies can gain multiple advantages, especially in terms of increasing the positive image that the public has on the organization (Sen & Bhattacharya, 2001). However, previous literature shows that companies

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should use with caution the CSR history in crisis situations. Considering how long the company has been previously involved in CSR could have a great importance in determining how its reputation could be affected. In other words, a long CSR history could be more credible for the public, and consumers can have the tendency of being more satisfied with the organization if the organization has proven a long-term commitment to CSR practices (Weng & Chen, 2017; Park, Kim, & Kwon, 2017). At the same time, a short CSR history could not only be useless in repairing the company’s reputation, but it could even damage it, by increasing the scepticism towards the company (Vanhamme & Grobben, 2009). As Coombs, (2007) argued, an organization with a favourable prior relational reputation, therefore an organization that has treated its stakeholders in a good way in the past, will have an advantage in keeping a high level of organizational trust, even after a crisis. According to the same study, when the previous reputation of the company is positive,

reminding stakeholders about the previous good work of the company, a characteristic specific to the apology strategy, could have a positive effect on regaining trust. However, contrary to Coombs view, other researchers have argued that reminding stakeholders about the CSR activity of the company can have both good or bad effects, depending on factors that are related to both individuals and the company (Sen & Bhattacharya, 2001). Moreover, Coombs’ approach is limited by a lack of differentiation between types of stakeholders and the contexts that helped the formation of these relationships. Since CSR history is an element that has an effect on building the organizational reputation, it was tested if:

H2. When the company has a long CSR history, individuals will display more trust in the company if the company responds with an apology rather than a denial.

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Attitude of an influential stakeholder towards the company

Among the many factors that might influence the perception of people’s trust in the organization, influential stakeholders can have an important role (Tucker & Melewar, 2005). Through trust transference, one of the mechanisms for trust repairing, an entity can build credibility through support from a trusted agent (Bachmann, Gillespie, & Priem, 2015). It is important that this agent is credible. When the third party is compromised, it won’t be able to broker trust in the company and it will damage the trust repairing process (Bachmann et al., 2015). In this paper, I tested if the valence of an influential stakeholder’s opinion towards the crisis and the company influences people’s perception of the organization, in terms of

trustworthiness and credibility.

Previous studies have shown that seeing trust repair as a result of using either an apology or a denial communication strategy is a limitation. Instead, the lack of success of these communication strategies is granted by how plausible they appear to be in third party discourses (Mueller et al., 2015). As an addition, the same authors argued that immediate recognition of guilt, together with apologies, can further undermine public’s trust in the organization. Based on these assumptions, it is expected that:

H3. When the influential stakeholder’s attitude towards the company is positive, individuals will display more trust in the company if the company responds with a denial rather than with an apology.

General distrust in corporations

Besides the attitude of an influencer towards the company, as well as the CSR history of the organization, a factor that can impact restoring organizational trust after a crisis is the level of general distrust in corporations.

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The concept of public’s general distrust in corporations can be explained by an evaluation in terms of morality, sincerity, accountability and benevolence of companies in general (Adams, Highhouse, & Zickar, 2010). As Harris and Wicks (2010) argued, it is easier to gain support for a specific organization than for the institution of business. As a result, a general distrust in the corporations can be an element of bias that could have an effect on how the public perceives a company after a crisis. Previous research has shown that the way people perceive certain organizations is related to how people perceive organizations in general (Adams et al., 2010). Companies that make greater efforts to gain the trust of their

stakeholders may appeal more to people that have high level of corporate distrust (Adams et al., 2010). Based on these findings, I hypothesized that:

H4. A high level of general distrust in corporations will decrease the effectiveness of both apology and denial on the public level of trust.

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Methods Participants

The total number of participants that completed the experiment was 278 (N = 278), with a response rate of 100% of the total number of participants, and a distribution across conditions of 34-35. The sample used for this research can be described by the following characteristics. The sample contains more male (72.7%) than female participants (27.3%). The age ranges between 18 to 70, the predominant level of education completed is Bachelor’s degree (33.5%) and the predominant nationalities among the participants are American (48.4%) and Indian (36%).

The participants were self-selected and reached through the data collection platform Amazon Mechanical Turk (Amazon MTurk). They answered to the survey by accessing the link shared on the researcher’s MTurk profile, and they received a small reward for solving the task. The main reason for choosing this data collection platform was its previously proven reliability, that, according to earlier studies, was equal or higher than when using

undergraduate samples (Buhrmester, Kwang, & Gosling, 2011; Buhrmester, Talaifar, & Gosling, 2018).

Design

For investigating the factors that contribute to the level of organizational trust, an experimental design in a form of a questionnaire was employed in the present study. The reason underlying the choice of an experimental design is the possibility of manipulating the information provided to the participants. As a result, it is feasible to observe whether

presenting different stimuli to participants in different conditions could result in the fluctuation of the dependent variable, namely the level of organizational trust.

The experiment is based on a two (communication strategy) by two (CSR history) by two (influential stakeholder’s attitude towards the company) between subjects factorial

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design, as it is presented in Figure 1. The participants were allocated to eight experimental groups, each one of them representing different levels of the independent variable

(communication strategy) combined with one level of the other two factors (CSR history and the attitude of an influential stakeholder).

An artificially created story about an imaginary company named “Avitex”, a big clothing manufacturer from US, was used. In the articles, the organization faces charges that put the organizational reputation under public scrutiny. The company was accused of knowing about and tolerating child labour in their manufacturing units from India. These were the facts presented in the first three paragraphs, identical for all stimuli.

According to the eights conditions, the first factor is the type of communication strategy, with the following two levels, namely: apology and denial. The second factor was the CSR history of the organization, with two levels, namely: long CSR history and short CSR history. Furthermore, the first factor was combined with a third factor. The third factor was the influential stakeholder’s attitude towards the company, with the following two levels, namely: positive attitude and negative attitude.

Procedure

After completing the consent form, the participants received the pre-test, measuring the level of general distrust in corporations. Following this, they received the manipulation. Therefore, they were randomly assigned to one of the eight conditions. The manipulation check followed and then, the post-test. Finally, the participants received a debrief about the purpose of the study, and they were informed that the situation was fictitious.

Manipulation of the independent variables

According to the theoretical model presented in the previous section, the first factor that was tested is the type of communication strategy, by using a nominal level with two

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company, measured on an ordinal level, by using two categories: short CSR history and long CSR history. The third factor was the influencer’s attitude towards the company, measured on an ordinal level, by using two categories, namely: influencer’s positive attitude and

influencer’s negative attitude.

In order to operationalize the three factors, eight artificially created newspaper articles were used as stimuli, according to the two levels of each independent variable. All eight articles started with general aspects of the organizational crisis. The choice of using an fictitious company and event is based on avoiding getting biased answers from the participants. If a real company or event were used, the participants might have had pre-existing opinions about the organization or the event, based for example on previous reports in the media. After presenting general information, the following two paragraphs in the

articles were different across the stimuli, according to the condition they represent, as in a two (denial versus apology) by two (long CSR history of the company versus short CSR history) by two (influential stakeholder’s positive versus negative attitude towards the company) design.

Type of communication strategy

Therefore, four of the articles contained a paragraph in which the communication strategy of the company will be one of apologizing. The other four articles will show that the company denies any implication in the scandal and dismisses the allegations made against the

organization, by describing them as “lies”. CSR history of the company

Moreover, the following four articles differed by including paragraphs concerning the CSR history of the company. For two of the articles (one describing a denial communication strategy and one describing an apology communication strategy) a paragraph stating the consistency and long history of the company’s CSR activity was assigned. Previous

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successful CSR initiatives of the company are mentioned, showing a constant concern for their stakeholders. For the last two articles, it was assigned a paragraph describing a short CSR history of the company, with only recent initiatives tackling children rights.

The attitude of an influential stakeholder towards the company

Another difference between the articles was obtained by including paragraphs concerning the influencer’s attitude towards the company. The chosen influential stakeholder is a real person, named James Harmon, and he is the CEO of Children’s Care International, one of the biggest NGOs that aims to help children that have been victims to different forms of

exploitation. A real organization was chosen in order to increase the credibility of the stimuli. To the following two articles (one describing a denial communication strategy and one article describing an apology communication strategy) it was assigned a paragraph containing a positive attitude of the influencer towards the company. He appreciates the CSR efforts of the company, as well as their consistency in promoting programs that aid children from

underdeveloped areas. The following two articles will contain a paragraph in which the influencer expresses his disagreement with the company’s actions and assures the stakeholders that the NGO he leads will investigate this issue further.

The text used for the stimuli can be found in Appendix A and Appendix C. Moderator

Previous distrust in corporations

According to the theoretical model previously presented, general distrust of corporations was tested in a pre-test questionnaire, by using 4 items on a seven-point Likert scale adapted from Adams et al. (2010), varying from “I strongly disagree” (1) to “I strongly agree” (2). In order to be used further on in the analysis, a new variable representing previous distrust in corporations was computed. For creating the new variable, 4 items on a 7-point Likert scale were used, (Appendix B), where the higher the number, the higher the agreement with the

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statement, and the higher the level of previous distrust in corporations. A new variable was constructed, by using the mean function on the 4 items. A reliability analysis on the 4 items was conducted and the newly computed variable describing previous distrust in corporations (M = 5.15, SD = 1.25) has a Cronbach’s alpha of .88, therefore it is highly reliable, and it can be used further in the analysis. However, in order to use this variable for conducting an ANOVA further on, the present continuous variable was re-coded into a categorical one, with two levels (high and low). For choosing a cut-off point for re-coding the continuous variable into a categorical one, descriptive statistics were conducted. Based on the mean value (M = 5.15, SD = 1.25), as well as the median value and (5.5) and the cumulative percentage (5 = 43.8%, 6 = 78.1%), 5 was chosen as a cut-off point. As a result, the new categorical variable describing previous distrust in corporations (M = 1.56, SD = .50) has two levels, the first one indicating a low level of distrust (values from 1 to 5 inclusive), and the second one indicating a high level of distrust (values from 5 (exclusive) to 7).

Dependent variable Organizational trust

The concept of organizational trust, with its two dimensions, trusting intentions and trusting beliefs, was tested in a post-test. Organizational trust was measured by using 7 items on a seven-point Likert scale, varying from “I strongly disagree” (1), to “I strongly agree” (7). The concept of trusting intentions (3 items) refers to the trustor’s willingness to trust the actions of the organization in situations that involve risk. The concept of trusting beliefs (4 items) indicates how trustworthy the organization is perceived to be in the process of achieving its goals. Moreover, the concept of trusting beliefs includes the organization’s genuine concern for stakeholder’s well-being, as well as how the organization respects socially accepted moral principles. The full survey can be found in Appendix B.

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In order to use it further on in the analysis, a new variable representing organizational trust was computed by using the 12 items measured on a 7-point Likert employed by Fuoli et al. (2017) for measuring this concept. The mean function was used and the new variable describing the level of organizational trust (M = 4.23, SD = 1.23) has a Cronbach’s alpha of .92, therefore it is highly reliable, and it can be used in the analysis.

Results Manipulation check

It was tested whether the participants identified the manipulation and correctly

distinguished between the conditions. For checking whether they differentiated between the stimuli containing an apology communication strategy and a denial communication strategy, a new variable containing the items used for checking the participants’ perception of the

communication strategy condition, across all the 8 experimental groups (M = 1.24, SD = .43), was computed. Afterwards, a Chi-square test between the variable communication strategy (two levels: apology versus denial) and the newly computed variable measuring the presence of denial (two levels: true versus false) was conducted. A significant association between the variables tested has been found, χ2 (1, n = 278) = 28.69, p < .001, φ= -.32. The results revealed that those exposed to the apology versus denial conditions identified the conditions correctly.

Secondly, it was tested whether participants distinguished correctly between the articles suggesting a long CSR activity of the company versus those suggesting a short CSR activity of the company. In order to do so, a new variable containing the items used for checking the participants’ understanding of the CSR history condition across the 4 experimental groups was computed (M = 1.32, SD = .47). A Chi-square test was conducted between the variables CSR history of the company (two levels: long CSR history versus short CSR history) and the

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newly computed variable measuring the presence of a long CSR history (two levels: true versus false). A significant association between the tested variables has been found, χ2 (1, n = 140) = 4.48, p = .03, φ= .25. As a result, the four groups of participants exposed to the CSR history condition correctly identified it.

Finally, it was tested whether participants correctly differentiated between the articles displaying a positive attitude of an influencer towards the company versus the articles displaying a negative attitude of an influencer towards the company. This time too, a new variable consisting of the items used for checking participants’ understanding of the condition displaying the influencer’s attitude towards the company across the remaining four conditions was computed (M = 1.36, SD = .48). A Chi-square test was conducted between the variables attitude of an influencer (two levels: positive attitude versus negative attitude) and the newly created variable measuring the presence of a positive attitude of an influencer towards the company (two levels: true versus false). A significant association between the variables tested has been found, χ2 (1, n = 138) = 5.37, p = .02, φ= .28. The results revealed that those

exposed to the influencer’s attitude towards the company correctly identified the conditions.

Hypotheses testing

In order to test the previously stated hypotheses, IBM SPSS Statistics 24 was used. In order to test the first hypothesis, an independent sample T-test was used, while for testing the following hypotheses, two-way ANOVA were performed. The syntax for the analysis can be found in Appendix D.

The effect of the type of communication strategy on the level of public trust

The first hypothesis that was tested states that the communication strategies used have a significant effect on the level of organizational trust after a CSR crisis. While the independent variable (communication strategy) has two dimensions (apology versus denial), the dependent

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variable (organizational trust) is measured on a 7-point Likert scale. Therefore, in order to test this hypothesis, an independent sample T-test was conducted. The Levene’s test for equality of variances was not significant, F (1, 278) = .988, p = .321. Results revealed that the apology condition (M = 4.16, SD = 1.25) doesn’t significantly influence the level of organizational trust, compared to the denial condition (M = 4.29, SD = 1.19), t (276) = -.91, p = .363, therefore the hypothesis is not supported.

The moderating effect of company’s CSR history

The second hypothesis states that the CSR history of a company moderates the relation between the type of communication strategy and the level of organizational trust. In order to test the hypothesis, I conducted a two-way ANOVA, where the independent variable is communication strategy (two dimensions: apology versus denial), the moderator is the CSR history of the company (two dimensions: long CSR history versus short CSR history) and the dependent variable is organizational trust (measured on a 7-point Likert scale). The

assumptions for conducting an ANOVA are met, because the dependent variable is on an interval level, the groups of observation are different and the groups have equal variances, as the Levene’s test shows (F (3, 135) = 1.21, p = .31). There is no significant main effect of the communication strategy on the level of organizational trust, F (3, 135) = .01, p = .92.

Furthermore, there is no significant effect of the moderator on the dependent variable, F (3, 135) = .04, p = .84. The interaction effect is also not significant, F (3, 135) = .62, p = .43. As a result, the hypothesis is not supported.

The moderating effect of an influential stakeholder’s attitude towards the company The third hypothesis states that the attitude of an influential stakeholder towards the company moderates the relation between the type of communication strategy and the level of organizational trust. In order to test the hypothesis, a two-way ANOVA was conducted, with communication strategy (two levels: apology versus denial) as an independent variable,

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attitude of an influencer (two levels: positive attitude versus negative attitude) as a moderator and organizational trust (measured on 7-point Likert scale) as a dependent variable. The dependent variable is on an interval level. Nonetheless, the Levene’s test is significant, F (3, 135) = 3.70, p = .013). After conducting the ANOVA, the results show there is no significant main effect of the communication strategy on the level of organizational trust, F (1, 135) = 1.43, p = .24. There is a significant effect of the moderator on the dependent variable, F(1, 135) = 4.92, p = .03, meaning that people who were exposed to a stimuli containing a positive attitude of the influential stakeholder towards the company (M = 4.36, SD = 1.09) have a significantly higher level of trust in the organization than people who were exposed to a negative attitude of the influential stakeholder towards the company (M = 3.90, SD = 1.35). However, the interaction effect is not significant, F (1, 135) = .726, p = .396. Consequently, the hypothesis is rejected.

The moderating effect of participants’ previous level of distrust in corporations

The fourth hypothesis states the level of distrust in corporations impacts the effectiveness of the communication strategy on the level of organizational trust. In order to test the hypothesis, a two-way ANOVA was conducted, where the independent variable is

communication strategy (two levels: apology and denial), the moderator is previous distrust in corporations (using the newly computed categorical variable, with two levels: high level of distrust and low level of distrust) and the dependent variable, organizational trust (measured on a 7-point Likert scale). After conducting the ANOVA, the results showed that there is no main effect of communication strategy on organizational trust, F (1, 278) = .845, p = .36. However, a significant effect of the moderator on the dependent variable was found, F (1, 278) = 4.33, p = .038. It means that people with a previous high level of distrust in

corporations (M = 4.05, SD = .94) have a significantly lower level of organizational trust, compared with people having a low level of distrust in corporations (M = 4.36, SD = 1.40),

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which can suggest the difficulty of changing people’s perceptions if they have already developed a bias, a result that will be discussed more broadly later on. The interaction effect is, however, not significant, F (1, 278) = .19, p = .66. As a result of this, the hypothesis is not supported.

Discussion and conclusion Conclusion

The problem that triggered this study is related to the unpredictability of situations that require special organizational communication, such as crises. Events like these require proper communication, otherwise the negative effect such a situation has for the organization can increase. If this happens, stakeholders’ trust in the company will be affected. Trust is an important asset for an organization, due to its long-term effect on the relationship with stakeholders (Coombs, 2006). Therefore, the aim of this study was to find solutions for avoiding reputational damage occurred as a result of a CSR crisis. In order to do so, this study provided a comparison between two of the most popular communication strategies, apology and denial, in a challenging context for repairing the trust of the stakeholders, a CSR crisis. While apology and denial have been broadly discussed previously, applying these

communication strategies in a situation that could highly diminish the reputation of an organization, such as CSR crises, combined with other elements, such as the opinion of an influential stakeholder and the previous CSR history of the organization, were widely

unexplored before being addressed in this study. This research wants to provide knowledge to the organizations regarding how to handle a reputational crisis situation, while taking into account both the previously mentioned elements, and the previous biases people have towards corporations. The insights that are offered answer to the research question and offer possible ways of action for minimizing the negative effects of crisis situations on the organization.

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One of the main ideas that can be drawn from this study could be considered the fact that, contrary to the expectations, there is no significant difference between the effect of using an apology or using a denial communication strategy on the level of organizational trust. Therefore, it can be concluded that, despite previous research (Coombs & Holladay, 2008), apology doesn’t necessarily perform better than denial. An implication of this result could be the impossibility of predicting from the beginning which one of the two strategies can be used in a reputational crisis situation. Thus, communication practitioners should carefully analyse the situation they’re facing before setting the course of action they might want to take, since choosing by default either an apology or a denial communication strategy might not prove to be effective.

Furthermore, the results of the present study points to the importance of being supported by a credible and influential stakeholder. As resulted, the positive or negative attitude on an influential stakeholder didn’t affect the strength of using either and apology, or a denial communication strategy on the level of organizational trust. However, the attitude of an influential stakeholder had a significant effect on the level of organizational trust.

Importantly, it could be argued that this might be an interesting finding for communication practitioners, who should constantly pay close attention on the relationship to influential and visible stakeholders and seek to gain their support. Being endorsed by them could have a great impact on how the general public perceives the organization during a crisis and could

diminish the negative impact on the organizational reputation.

Moreover, despite the expectations, the CSR history of the company was proven not to have an influence on the effect either apology or denial have on the organization trust. The implications that this finding could have on the activity of the communication specialists can be drawn according to the length of the CSR history of the company they represent. While some shouldn’t be intimidated when communicating in times of crisis if the company hasn’t

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been involved in CSR activities for a long time, others shouldn’t rely on the positive effect that previous CSR activities might have on the organizational trust and take the long CSR history displayed by the organization for granted.

Finally, contrary to what was hypothesized, prior distrust in corporations didn’t have an influence on the effect of either apology, or denial, on the level of organizational trust. However, the previous distrust people have in organizations in general had an effect on how much the participants trusted the organization. Therefore, this finding is indicating that communication practitioners might have difficulty for changing people’s opinion about the organization, despite their effort for effectively communicating in times of crisis. Focusing their efforts on a long-term strategy of educating the public about the positive impact that business organizations have in society, could help the communication specialists reduce the reputational and trust prejudice once a crisis situation appears.

Discussion

The conclusions presented above can present interest and trigger discussions amongst scholars and practitioners. Notably, a discussion is likely to arise from the fact that neither apology, nor denial was found to influence the level of organizational trust. Therefore, the results were unexpected, since they differ from what was initially predicted, based on previous studies that investigated the same concepts. Possible reasons for which the results differed from the initial predictions are going to be discussed.

It is necessary to look at the theoretical reasons that could have caused the differences between what was predicted and the results of this study. One explanation for the lack of a significant difference between the two communication strategies might be the way they were used in the manipulation. For example, denial can be used in two ways, either as a simple denial, or as a way of shifting the blame to another party (Benoit, 1997; Smithson & Venette,

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2013). Since in this study denial was used as a simple denial, this might be a cause of why it didn’t result in any difference between the two communication strategies, compared to other studies where denial was used as a way of shifting the blame (Haigh & Dardis, 2009). Moreover, it has to be said that it could be interpreted that apology conditions expressed not only mortification, but also bolstering, or remembering the good deeds of the company

(Benoit, 1997), elements found especially in the CSR history conditions. As an addition, it has been found that bolstering can achieve the same social effects as the mortification strategy (Coombs & Schmidt, 2000; Fitzpatrick, 1995).

However, previous studies have shown that there can be situations where no

significant differences between crisis communication strategies, such as apology and denial, can be observed (Coombs & Schmidt, 2000), therefore we can conclude that in order to observe a difference, we need to include other factors, too. Moreover, since this study tested only certain types of apology and denial, as it was previously shown, further expanding the way of using apology and denial communication strategies could lead to finding interesting conclusions. As this study reveals, the claims of a case study do not always pass the test of an experiment. However, since crisis communication is an activity that cannot be based on assumptions, it is necessary to continue studying it, in order to be able to offer

recommendations as accurate and effective as possible. This is why further studies testing the effect of crisis response strategies, including apology and denial, will continue to bring valuable contributions.

As it was previously stated, even if the influential stakeholder’s attitude doesn’t influence the relationship between the type of strategy used and the level of organizational trust, it has a direct effect on the level of organizational trust. This could mean that through the aid of an influential and credible stakeholder, such as the one that was used in the experiment, the organization might be perceived as more trustworthy, therefore, as more legitimate (Suchman,

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1995). Thus, the results of this study confirm previous research showing that support from a credible stakeholder has a positive effect for the organization, by influencing the attitudes and opinions of the general public (Lafferty & Goldsmith, 1999). As a result, communication specialists should try to build trustworthy relationships with influential stakeholders, that could prove useful for consolidating organizational trust, both in times of crisis and non-crisis situations. The phenomenon can be approached in further studies, by exploring if the attitude of an influential and credible stakeholder has an effect of how the public perceives a well-known organization, not a fictitious one, as it was used in this study.

Moreover, it is necessary to discuss the lack of effect of the CSR history of the company on the relationship between communication strategy and organizational trust. As previous studies have shown, instead of increasing the effect of communication strategies, mentioning the CSR activity of the company, whether it has a long or a short history, does not always have a positive effect on the organization, depending on other factors that are involved in the situation and that have not been tested in this study, such as company-specific factors and individual-specific factors (Sen & Bhattacharya, 2001). Moreover, stakeholders are more sensitive to negative CSR information, rather than positive CSR information (Sen &

Bhattacharya, 2001; Skarmeas & Leonidou, 2013). Because the reputational crisis used in this experiment is a CSR crisis, the negative information displayed by the crisis plot might have cast a shadow on the further information related to the CSR history of the company and thus reduce the effect of this factor. As a result, communication specialists should use with caution CSR history in times of crisis as an instrument for consolidating the organizational legitimacy and, therefore, the organizational trust. An interesting direction for further studies could be investigating a CSR crisis when the CSR activity is at the core of the organizational business model.

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Finally, it is important to discuss the direct effect of the level of previous distrust in corporations on organizational trust. Previous studies have shown that when people get limited information about a company, they are more likely to form opinions based on their previous attitudes about companies in general (Adams, Highhouse, & Zickar, 2010). As a result, controlling for the individual biases could have been a good idea in order to get more objective results while measuring people’s trust in the organization. Moreover, the effect of previous distrust in corporations on organizational is yet another proof of how important it is to consider people’s stereotypes about corporations and to take further steps into educating the public and efficiently managing stakeholders relationships.

Strengths and limitations

This study has both strengths and limitations. Firstly, a fictitious organization was used in order to describe the articles used as experimental stimuli. The reason for this choice was avoiding that previous perception of the company biases the results. Moreover, the results weren’t influenced by an already existing crisis, since the situation was fictitious, too. Using these elements results in an increased level of internal validity. As an addition, the responses were gathered using the data collection platform Amazon MTurk, which was proven to be at least as reliable as samples consisting in undergraduate students (M. Buhrmester, Kwang, & Gosling, 2011; M. D. Buhrmester, Talaifar, & Gosling, 2018). Furthermore, the participants were randomly assigned to one of the eight conditions and they had the possibility to fill in the questionnaire in an environment that is familiar to them, another element that increases the internal validity and reliability of this study. Another strength of this study is that by using an experiment as a research method, causal conclusions can be drawn. Lastly, there was an almost equal number of participants in each group.

However, this study doesn’t only have strengths, but also drawbacks. One limitation is that the number of participants included in this study is somewhat low and might affect the power

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to detect the effect. Even though the total number of participants for this study was 278 (N = 278), the number of respondents for each one of the conditions was about 34-35, so this might be a reason for the lack of significance of the analysis. Replicating this research on a larger sample might produce significant results.

In summary, despite the shortcomings of this paper, the explanations offered in the discussion section should provide enough proof for demonstrating that the presented conclusions hold up. Moreover, the study has provided directions for future research by placing under scrutiny two very popular crisis communication strategies, apology and denial.

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Appendix A Stimuli - text

At the centre of the most recent scandal that shakes the fashion industry is Avitex, one of the biggest clothing companies in the US, that has to respond to accusation of using child labour in their manufacturing units in India.

Avitex is a US clothing manufacturer, headquartered in New York, that owns a variety of clothing and footwear brands. Founded 16 years ago, the company managed to grow

exponentially over the years and their products are successfully distributed and sold all over the world, both in physical and online stores.

A journalistic report accuses Avitex of using child labour in their manufacturing process, by allowing their subcontractors to use minors as workforce. Moreover, Avitex is accused of exploitation subjecting the children to long working hours, exposing them to pesticides and paying them below the minimum wage.

Avitex responded to the accusations in a press conference, where their spokesperson declared:

Type of communication strategy:

Denial: “We assure you that we embrace the possibility of ensuring that human rights are upheld all around our value chain. We are firmly committed to protecting human rights in every aspect of our business operations. We strictly control all our suppliers and as a result we can guarantee that accusations of child labour are not true. The materials presented in the media don’t have any legal ground and, based on their very low credibility, we consider

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them lies that are meant to confuse the public opinion and to overshadow the good societal impact of our company.”

Apology: “We assure you that we embrace the possibility of ensuring that human rights are upheld all around our value chain. We are firmly committed to protecting human rights in every aspect of our business operations. However, child labour is a very complex issue, difficult to tackle because of the extremely complex supply chain. Despite our very strict guidelines and control for suppliers, some of our operations in India have been

subcontracted to third-party factories that we weren’t aware of. We immediately ended our collaborations with the supply chain actors that made this situation possible, and we deeply apologize for what has happened. We assure you that we take all the necessary measures in order to avoid this situation from happening again.”

CSR history

Long CSR history: On top of this, Avitex has a long corporate social responsibility history of involving in programs that help children in need. Every year, our most successful footwear line runs the campaign Improving Lives, in which we donate part of our revenues to programs that provide clothes, shoes, and access to education for children living in underdeveloped areas”.

Short CSR history: Even if our involvement in doing social good was not very visible along the years, Avitex is very concerned about the problems that children in disadvantaged areas have. This is why we decided that this year we’ll tackle these issues by running the

campaign “Improving Lives”. Throughout this campaign, we’ll use a part of the sales generated by our most successful footwear line in order to provide clothes, shoes, and

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access to education for children living in underdeveloped areas.

Attitude of an influencer:

The scandal became so big, that it caught worldwide attention. When asked about this incident, James Harmon, the CEO of Children’s Care International, one of the biggest NGOs fighting against child labour, declared:

*Positive (for denial): Up to our knowledge, we are not aware of the company using child labour in their manufacturing units. Moreover, their consistent efforts in supporting children from disadvantaged areas are admirable and an example for other big companies in the fashion industry.

*Positive (for apology): The situation in which Avitex is involved is regrettable, and indeed, keeping all the stakeholders involved in the supply chain under strict control is challenging. I hope they learn from their mistakes. However, their consistent efforts in supporting children from disadvantaged areas are admirable and an example for other big companies in the fashion industry.

*Negative (for apology): Avitex attitude is offensive towards their customers and public opinion in general. It is impossible to be unaware of what’s happening in your supply chain. The company should make sure these situations do not occur and failing to do so makes them highly responsible in this situation.

*Negative (for denial): Avitex attitude is defiant and offensive towards their customers and public opinion in general. We expected to see a different attitude from a company that has been accused of such practices. Children’s Care International will carefully follow the course of events and will make sure the public has access to accurate information.

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Appendix B Dear participant,

My name is Diana and I study Corporate Communication at the University of Amsterdam. Therefore, the following questionnaire is part of the research that I conduct for my Master thesis.

Filling in the questionnaire is voluntary, it can be ended at any time and it takes about 5 minutes. The answers will remain anonymous, will be used only for research purpose and will not be passed on to third parties under any conditions. By continuing, you agree to these terms.

For more information about the research, feel free to contact me at any time (diana-maria.ologeanu@student.uva.nl).

Thank you for your time and cooperation!

Multi-item scales and manipulation checks included in the questionnaire.

Distrust of multinational corporations (from 1 [strongly disagree] to 7 [strongly agree]) Multinational corporations do not care about acting ethically.

People who run multinational corporations will lie if doing so will increase company profits.

Multinational corporations do not take responsibility for their actions.

Multinational corporations will break laws if they can make more money from it.

Organizational trust

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Avitex seems very capable of running a successful business. I feel very confident about Avitex’s skills.

I see no reason to doubt Avitex’s competence.

Perceived benevolence (from 1 [strongly disagree] to 7 [strongly agree]) Avitex seems very concerned about the welfare of people like me.

The needs and desires of people like me seem to be very important to Avitex.

Avitex seems to be interested in the well-being of people like me, not just themselves.

Perceived integrity (from 1 [strongly disagree] to 7 [strongly agree]) I like Avitex’s ethical values.

Strict moral principles seem to guide Avitex’s behaviour. Avitex seems to have a great deal of moral integrity.

Trusting intentions (from 1 [strongly disagree] to 7 [strongly agree]) Authorities should keep an eye on Avitex. *

Stricter controls should be introduced to ensure that Avitex does not violate any laws. * Avitex should be allowed to operate without any direct supervision by the authorities.

Manipulation checks (from 1 [strongly disagree] to 7 [strongly agree]) The representatives of Avitex deny the allegations of using child labour. The CEO of World Resources Institute supports the company.

The company has a long history of helping children in need.

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● Male; ● Female.

Please indicate your age.

Please indicate your nationality.

Please indicate the highest level of education that you have completed: ● Middle School; ● High School; ● Bachelor’s Degree; ● Master’s Degree; ● PhD; ● Other.

You have been exposed to an artificially created article, that aimed to compare the

effectiveness of different communication strategies responding to an organizational crisis.

Please click on the button in the bottom right corner in order to send your answers. Thank you again for completing this experiment!

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Appendix C Articles used in the experiment

1. Apology x Long CSR History

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2. Apology x Short CSR History

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3. Apology x Positive Attitude of an Influencer

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4. Apology x Short CSR History

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5. Denial x Long CSR History

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6. Denial x Negative Attitude of the Influencer

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7. Denial x Positive Attitude of an Influencer

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Appendix D Syntax

DATASET ACTIVATE DataSet1. COMPUTE manip_check_comm_strag=SUM(Man_check_1.1,Man_check_2.1,Man_check_3.1,Man_c heck_4.1, Man_check_5.1,Man_check_6.1,Man_check_7.1,Man_check_8.1). EXECUTE. COMPUTE manip_check_history=SUM(Man_check_1.2,Man_check_2.2,Man_check_3.2,Man_check_ 4.2). EXECUTE. COMPUTE manip_check_influencer=SUM(Man_check_5.2,Man_check_6.2,Man_check_7.2,Man_che ck_8.2). EXECUTE. CROSSTABS /TABLES=apology_vs_denial BY manip_check_comm_strag /FORMAT=AVALUE TABLES /STATISTICS=CHISQ CORR /CELLS=COUNT

/COUNT ROUND CELL. EXECUTE.

CROSSTABS

/TABLES=CSR_history BY manip_check_history /FORMAT=AVALUE TABLES

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/COUNT ROUND CELL. EXECUTE. organizational_trust=MEAN(Q15_1,Q15_2,Q15_3,Q20_1,Q20_2,Q20_3,Q21_1,Q21_2,Q2 1_3,Q24_1,Q24_2, Q24_3). EXECUTE. FREQUENCIES VARIABLES=organizational_trust

/STATISTICS=STDDEV MEAN SKEWNESS SESKEW KURTOSIS SEKURT /HISTOGRAM NORMAL /ORDER=ANALYSIS. RELIABILITY /VARIABLES=15_1,Q15_2,Q15_3,Q20_1,Q20_2,Q20_3,Q21_1,Q21_2,Q21_3,Q24_1,Q24 _2, Q24_3

/SCALE('ALL VARIABLES') ALL /MODEL=ALPHA