How Negative Coverage Can Provoke Fundamental Shifts in Organisational Strategies

One of the main reasons why businesses are still ‘scared’ to jump on the bandwagon and put themselves out there on social media platforms is because of the potential criticism and negative comments they might receive from users. Indeed, such negative reviews can be damaging to a company’s reputation, but hiding behind the scenes is no good either – these conversations are happening with or without the company’s involvement, so businesses might as well start participating in them to potentially change people’s minds, gather ideas how to improve their products and services and so drive the conversations into a positive direction.

Similar applies to negative media coverage. A new academic study coming from the US, Burr Under the Saddle: How Media Coverage Influences Strategic Change (registration required), shows that even though negative press is unpleasant and especially unwelcome by the C-suite, it can also influence strategic decisions to make significant company improvements. As the authors of the paper identify, “the media is neither an enemy nor an ally to upper management... but one of a number of key stakeholders that can significantly shift a firm’s direction, often for the better.”

This is the first study ever to focus on the impact negative press has on business strategic choices. The researchers analysed the activities of 250 firms from the 2001 S&P 500 for five years and since then gathered data from more than 40,000 articles in leading business publications, focusing on negative keywords and phrases to define the tone of the coverage. They also examined other sources that gave information about the firms’ CEO characteristics, stock returns, profitability, strategic changes, governance structures and other factors relating them to the total media attention the organisations received.

What the researchers found was that the majority of negative press came directly from the authors of the articles talking about some sort of disappointing aspect of the company.

What’s really interesting is that after analysing all that data, the authors found a correlation between the volume of negative press that a company received and the likelihood that it would undergo a strategic shift that was responsive to at least some of the problems identified by the media.

Another interesting finding was that the firms more likely to make strategic changes were the ones with the higher number of independent board directors, who in general rely more heavily on external factors to make informed decisions.

So, what this study shows is that external determinants can also have a significant impact on strategic decisions, not just internal factors as we usually think. Downbeat coverage can be a wake-up call and act as a catalyst for positive organisational change. This in turn also suggests how important it is for companies to pay attention to media coverage and to trust and listen more to their PR people and agencies. They have the abilities and knowledge to monitor and analyse press and make sure that the warning signs are not being ignored.

Indeed, having to communicate bad coverage to the top levels of management is a tough job for PR professionals, but what matters here is the approach. At the end of the day, the media cannot be controlled, so companies should open up their eyes and years to try and understand what the real reasons behind such negative reporting are and what can be done to change that.

The bottom line is that negative press should not be ignored, because it signals areas that need improvement or complete strategic change. Otherwise, the negativity would just continue and it would eventually play a damaging role to overall organisational reputation.

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