Facebook is dealing with one of the biggest crises in its history, after it admitted on Friday last week that it has known since 2015 that Cambridge Analytica, a consulting firm that worked on US President Donald Trump’s campaign, improperly accessed data on 50 million of its users.
On Monday, the company’s stock experienced its largest decline in four years; the social media giant lost a staggering US$37 billion in market value in one day.
The incident intensified on Tuesday, with Democratic and Republican senators in the US calling on Facebook chief executive officer Mark Zuckerberg to testify before Congress, and Bloomberg News reporting that the US Federal Trade Commission is investigating whether the company breached a consent decree.
The EU is also investigating and the founder of WhatsApp called on users to delete Facebook.
The company’s executives are reportedly worried about how all of this could affect their personal reputations — and they should be. Much of this damage has been self-inflicted.
The poor judgement Facebook exercised in handling this matter is mind-boggling. As anyone with even a small amount of experience managing crises could have told the company, the worst decision an organization can make in such a situation is to stay silent.
If Facebook had disclosed what it knew as soon as the problem occurred and then followed up with steps to protect user privacy, it could have resolved the issue without outside interference and the financial and reputational losses it is now experiencing.
Instead, the incident has spiraled out of Facebook’s control.
There is a simple reason why disclosure is the most effective strategy in a crisis: The truth always emerges.
In the US, even classified government documents are regularly leaked. So a company facing a problem has two choices: to admit what happened immediately and ideally get some points for being transparent, or to try to cover things up and later be blamed for both the initial problem and the subsequent deceit.
That is why any good crisis expert would tell an organization to fess up about everything as soon as possible. It would face an initial round of negative media coverage.
However, if the company has truly come clean and then works to fix the underlying problem, the media would be left with nothing more to report. It is the fastest and easiest way to make a problem go away.
By contrast, Facebook waited three years to disclose this incident. That is what has led to so much outrage and so many investigations.
If the company had immediately announced the breach, lawmakers and the public would still have had a lot of questions about how it protects user data. However, Facebook would have avoided the charges of secrecy that have now led so many people to question its underlying values.
One reason Facebook might have decided to withhold the information for so long is that it was trying to figure out how to prevent such episodes from happening again. However, companies do not need to resolve a problem fully before they disclose it.
Helio Fred Garcia, president of the Logos Consulting Group and author of The Agony of Decision: Mental Readiness and Leadership in a Crisis said that a company determining how to address a crisis should ask itself this question: “What would reasonable people appropriately expect a responsible organization or leader to do when facing this kind of situation?”
Reasonable people would not expect a company that just learned that its data has been improperly shared to have developed a full plan within minutes to prevent such a situation from recurring.
However, they would expect the company to be transparent, express remorse, pledge to take action to prevent the problem from happening again, and follow up with an announcement about what it was doing to solve the underlying issue.
If Facebook had done this, it would not be dealing with the mess it is in today.
What is more, such a strategy would likely have allowed the company to determine how to solve the problem itself. If Facebook had quickly implemented measures to better protect the privacy of its users, it would have been unnecessary for lawmakers to step in and mandate them.
Self-designed solutions would almost certainly have been more palatable to the company than the kinds of changes now likely to be imposed from the outside.
That strategy is still the company’s best bet now — even though it is to continue to suffer massive damage to its reputation for its delay.
That Zuckerberg and chief operating officer Sheryl Sandberg initially chose to stay silent suggests, astonishingly, that they still have not learned this rudimentary lesson.
Axios reported that the delay has been because “he wanted to say something meaningful rather than just rushing out.”
Of course, it has been deeply damaging for him to let others speculate about his thoughts for the past few days, rather than making a statement himself about this problem he has apparently known about for three years.
It is no surprise that Facebook stock plummeted.
Sixty-three percent of a company’s market value is attributable to its reputation, said Leslie Gaines-Ross, chief reputation strategist of the global communications agency Weber Shandwick and author of Corporate Reputation: 12 Steps to Safeguarding and Recovering Reputation.
If Facebook had following basic, well-established principles of crisis communications, it would not now be dealing with a fully-fledged catastrophe that is mostly of its own making.
Kara Alaimo is an assistant professor of public relations at Hofstra University. She served in former US president Barack Obama’s administration. This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
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