Public vs Private: Are the stakes higher for commercial organisations in a crisis?

By Katie Collison

Recent events and corporate crises have got me thinking – are the immediate impacts and long-term consequences the same for both public and private sector organisations?

The Financial Crisis – a case in point

Blame for the 2008 financial crisis has been apportioned to both the private sector banks, and also their public-sector regulators (namely the FSA) for failing to ‘limit the impact of the misjudgments made by the financial institutions’.

So how do the impacts and consequences compare for each?

The banks are being restructured. A total of eight CEOs have stood down, former RBS CEO Fred Goodwin has been stripped of his knighthood, and bankers have been subjected to a relentless pillorying in the media.

Similarly, the FSA is undergoing reform. However, this reform looks likely to generate jobs and not cut them. It also doesn’t appear that any senior staff have been forced to step down either; quite the opposite, in fact, as the Managing Director of the FSA was recently installed as CEO of the newly formed Financial Conduct Authority (FCA).

The price of public perception

A company’s existing reputation and level of brand awareness influences the length of time that a story stays in the news, and the ferocity with which it is pursued by the media. It may also determine whether the promise of an inquiry is enough to appease the masses or whether there are calls for heads to roll and compensation to be awarded.

The weight of public opinion during business as usual does not generally side with big corporates, be they oil companies, media giants, or retail banks. Are the ‘big bad corporates’ therefore more likely to face more severe consequences after a crisis, simply because of their negative public image and the idea that they are in some way deserving of their fate?

I would argue, at least in part, yes.

Trust and the Bottom Line

The stakes, and the likely impacts felt by public and private organisations, are different, in the same way that their objectives are. Ultimately, the purpose of any commercial organisation is to make money; while the public sector exists in order to provide a public service.

Private companies’ priority has to be maintaining profitability, whereas the main objective of publicly funded organisations is to retain the confidence and trust of the public. However, a loss of trust can seriously undermine any organisation’s reputation – affecting the bottom line of a commercial body as much as the viability of a public one.

Cornerstones of Crisis Management Thought Leadership Paper

Essentially, it seems, trust is the highest stake for both private and public sectors – an invaluable asset that is very hard to regain once lost.

What are your thoughts? This subject raises some thorny issues, and writing this post has sparked considerable discussion here at Steelhenge – we’d be interested to hear your views.

Learn to respond effectively to a crisis with our white paper – ‘The Cornerstones of Crisis Management’ – the first of our thought leadership series Crisis Management: Key Themes for Success is available to download free here

About Katie Collison

Senior Consultant. Steelhenge’s longest-serving Project Manager, heading up business continuity exercises for public and private sector organisations.

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