Late last year a small private liberal arts college just down the street from me announced that it would make substantial cuts to its programs–dropping over a dozen majors, reducing others to minor status, laying off a number of full-time faculty and staff, and eliminating a number of open faculty positions. Now here’s the spoiler: Two weeks later this decision was reversed. But what happened during that time and its potential implications for the future of the college’s reputation and its consequent fortunes provides a useful cautionary tale of how any organization, be it a college or a business of any sort, needs to tread carefully when making decisions that may negatively influence key stakeholder groups, even when the decisions are made in the normal course of business, after careful consideration and with the best of intentions.
Although a stunning move for the college, this initial decision to make major program reductions was not a unique event in the world of post-secondary education; it followed similar actions at some other American colleges, not all of them smaller private schools. Earlier in 2015 a large U.S. public university said it would cut dozens of programs across its system, following what the administration termed an analysis of “program productivity.” (It should be noted that even more drastic in the higher education sphere are the total closings of some colleges that have occurred over recent years, and there is fear of more, as evidenced in the 2015 Inside Higher Ed Survey of College & University Chief Business Officers, where nearly one in five of the respondents said they believe their institution may have to shut down in the coming decades, with 1% projecting that might happen in just the next five years.)
The local college’s administrators made it clear that they considered the planned cuts a well-reasoned business decision in response to a substantial budget shortfall (due in large part to declining enrollments) that they saw no other way of bridging. The school’s President was quoted as saying that they had considered student enrollment, market demand and potential cost savings when deciding what needed to be eliminated. Hence the targeted programs were said to be less in demand, with relatively few students enrolling in them. Similarly, at that large public university mentioned above a board member summed up their own situation up by saying “we’re capitalists, and we have to look at what the demand is, and we have to respond to the demand.”
Early reported reactions to the local college’s announcement among students, faculty, alumni, and other groups suggested an immediate shaking of confidence in and support for the school among some members of those key stakeholder groups. There were student rallies and protests, petitions calling for reversal of the decision, letters to the administration from individual students and alumni, and other critical commentary. For example, a current senior told a reporter “I don’t know how proud I’m going to be to say that I’m [an alum of the school].” A faculty member and union representative was quoted as saying that “our faculty is dispirited” and that “morale is completely destroyed. ” Perhaps the most extreme comment I saw, which shows how far reactions to these kinds of events can go, called the announcement the signal of a “death spiral” for the school.
For two weeks the pot boiled; local and national media carried news of the announcement and reactions to it, and the news and resulting conversations coursed through social media channels.
Then the college announced that the cuts would not take place after all. This had followed intensive negotiations with the school’s faculty union that yielded concessions including a faculty wage freeze and incentives for early faculty retirements–concessions that apparently could not be agreed to before the public announcement of the cuts. Some days after that announcement of the reversal, as is often the case, online or elsewhere, it was much more difficult to find out about the “good news”–the decision’s reversal–than about the “bad news”–the initial announcement and its aftermath. An online search for entries about the decision at that time yielded a long list of news reports, social media commentary, etc. describing the cuts, with some reports and discussions speaking of them as if they already had been carried out and were not only announced plans. Only a very few descriptions of the reversal of the decision were sprinkled throughout that much longer list of results covering the initial announcement. Even now, some months later, there seem to be as many or more entries that only describe the initial decision as there are those mentioning the reversal. So to that extent some damage to how the college is perceived may have occurred in a short amount of time last Fall–especially disconcerting at times of the year when many college-bound students actively research and apply to schools.
The actual longer-term consequences for this college and its reputation of course can’t be known now. Even though the targeted programs have escaped the axe for now, how confident will prospective students be to enroll in them and other programs? Will these events and the publicity regarding the school’s financial situation have a meaningful negative impact on its overall future application volumes and thus cause admission volumes to shrink even further? More broadly, will this be seen as evidence the school’s leadership is (a) clear-headed and realistic or (b) desperate? And beyond the initial decision, does the reversal make them appear (a) indecisive or (b) flexible? Will confidence in the school among contributing alumni, partners, and investors be shaken, with consequent erosion of the financial picture? These all seem to be aspects of the school’s reputation that are at risk to some degree. But perhaps it’s possible that, despite the elephantine memory of the Internet, these events will fade to such an extent that long-term consequences will be minimal. Or, future positive actions of the school may be able to counteract reputation damage accruing from these recent events. Only time will tell.
So what’s the important broader lesson and reminder that I see in all of this? It’s that for any organization, not only schools, it should always be remembered that potential risks to reputation can arise not just from deliberate employee malfeasance or extraordinary events and circumstances deemed totally out of its control. Discussions of reputation risk often tend to focus most on the impacts of unplanned, discrete events–ethical lapses (such as insider trading), harmful actions initiated by outside forces (e.g., online and database security breaches among retailers), or accidental events (think oil spills or manufacturing plant mishaps). But the reputation and consequent fortunes of an organization and its brands also can suffer from well meaning and perhaps necessary actions motivated by legitimate business concerns, and the impacts may be even more damaging in those cases. For example, bad behavior of some employees and even top executives might be viewed as aberrations treatable by ousting the rascals (rather than as being symptomatic of deeper issues such as a sick corporate culture). But sometimes official management decisions–and, as in the college’s case, 180-degree turnarounds to decisions–may cast doubt upon the competence, quality, and stability of the entire organization and can have implications with even more negative consequences for its reputation among important stakeholders than actions by “loose cannons.” And while reactions among important stakeholders may in some cases be predictable, at other times such reactions may not be sufficiently anticipated and accounted for in the absence of proper due diligence prior to going public with decisions.
Any organization needs to integrate its planning and strategies with thoughtful consideration of the short- and long-term implications and risks arising out of what may be necessary, carefully considered, and above-board management actions that will be visible to key stakeholder groups. In some cases research can often be a wise and responsible part of planning, for example to better understand the potential implications of decisions among various audiences before they’re announced and acted on. Such knowledge gained up front can then better inform communications plans and implementation timetables, and may even lead to reconsideration of the exact nature of planned actions. As an example, and in the best tradition of armchair quarterbacking, one has to wonder whether the liberal arts college’s announcement was premature and should have been delayed until further more private internal discussions had occurred. This is especially so in light of the turnaround just two weeks later seemingly made possible because one key stakeholder group, the faculty, became convinced of the seriousness of the administration’s intentions only through the vehicle of the very public announcement of the substantial planned cuts. The cost of the official announcement preceding the faculty decision to make concessions may well be some amount of damage to the reputation of the school that could be difficult to repair.
For a school, business, or any other type of organization, proper management of reputation risk includes keeping up to date, through careful listening and dialogue (via multiple channels), with the perceptions, attitudes, and intentions of the organization’s key stakeholder groups. This can be important to do not only in times of unplanned and accidental crises, but also, as this case reminds us, during the course of regular day-to-day management of the organization.