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How the banks can repair their reputation: Banking Royal Commission Special Part One

By Alex Liddington-Cox and James Fitzpatrick


All of the big four banks have had their approach to crisis communication exposed by the Banking Royal Commission, with National Australia Bank proving to be the worst.

In the first of our two-part series on the Banking Royal Commission, we’ll show how companies can learn from their mistakes by familiarising themselves with crisis message strategy best practice, learning the science of the apology and adopting honest words.

The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, conducted by former High Court Judge Kenneth Hayne, has produced a scathing report that highlighted repeated cases of banks putting profits before customers, rampant conflicts of interest, pushing products people don’t want and charging customers for no service – in some cases, after they’d died.

As according to the Message Strategy Tool when your company is in crisis and you’re deciding on your message strategy, one of the first questions you have to ask is, “What’s the likelihood that my stakeholders will attribute blame to us?”

If the likelihood is low, your company can be more confident and aggressive in its response. It may be appropriate to refuse to apologise, even dismiss or contradict the opponent. However, when the likelihood of your stakeholders attributing blame is high, this response is counterproductive and destructive.

This is where NAB went terribly wrong. NAB Chairman Ken Henry took the extraordinary step of dismissing the Royal Commission’s senior council Rowena Orr’s questions in a performance that was described as “arrogant,” “didactic” and “tone-deaf”.

Fast forward to today and those chickens have come home to roost. NAB, along with Henry and chief executive Andrew Thorburn, have been singled out by the Hayne report (page 411) and a lot of the criticism stems from their message strategy (and attitude).

“…I was not persuaded that NAB is willing to accept the necessary responsibility for deciding, for itself, what is the right thing to do and then having its staff act accordingly.”

Hayne added he thought it “telling”:

  • “that Dr Henry seemed unwilling to accept any criticism of how the board had dealt with some issues”.

  • “that Mr Thorburn treated all issues of fees for no service as nothing more than carelessness combined with system deficiencies”.

  • “that in the very week that NAB’s CEO and Chair were to give evidence before the Commission, one of its staff should be emailing bankers urging them to sell at least five mortgages each before Christmas.”

Finally, Hayne concluded “Overall, my fear – that there may be a wide gap between the public face NAB seeks to show and what it does in practice – remains.”

Those words will undermine any PR campaign NAB opts for to repair its image in the aftermath of the report. While ANZ, CBA and Westpac have hardly escaped criticism, they have convinced Hayne, and by extension their stakeholders, that they’ve acknowledged there’s a problem and are sorry for it.

Choosing the right type of apology

While ANZ, CBA and Westpac have read the tea leaves correctly and apologised, any listeners of the Freakonomics podcast will know not all apologies are equal.

Ben Ho, an associate professor of economics at Vassar College formulated a ‘model for apologies’ with the aim of predicting the effectiveness of apologies.

The model concludes that for an apology to be effective, it should be:

  • costly to the individual giving the apology: this isn’t necessarily a ‘financial’ cost, it could be also be ‘social’ cost (e.g. admitting your own incompetence and accepting a blow to your reputation); and/or

  • a commitment to do better in the future: mindful that a ‘commitment’ apology will backfire if you continue to make the same mistake in the future.

How to structure an apology

The structure of an apology might sound trivial, but this process is often easier said than done – and it may drastically improve (or decrease) the effectiveness of your apology.

Sociologists Karen Cerulo and Janet Ruane from Rutgers University analysed over 183 well-known apologies from leaders and organisations between 2000-2012.

They identified seven sequencing formats and categorised the apologies into five strategies:

  • Denial

  • Evasion

  • Reduction

  • Corrective action

  • Mortification

Using public sentiment data, Cerulo and Ruane measured the effectiveness of each type of apology and structure. The results highlight the following conclusions:

  1. The least effective apology is the ‘offender-driven apology’ in which the apologiser begins by talking about themselves and giving all sorts of information and motivation for their mistakes (e.g. I’m sorry I got caught doing the thing, it’s because of this reason, and now I’m sorry I have to apologise.)

  2. What you say first, and what you say last, is the most important content. Cerulo and Ruane explain that what you say first will be important in priming the audience and pointing them in a certain direction. They found the most effective apologies started with the apologiser talking about the victim (and talking very little about themselves or any justifications), expressing significant empathy and remorse from the outset and ended with some form of restitution.

  3. The sooner the apology the better: unless advised otherwise by lawyers, apologise as quickly as possible.

  4. Apologise for what you did, not for what people thought or felt (i.e. the apology that says ‘I’m sorry you were offended by what I did’ likely does more damage to your reputation than saying nothing at all).

  5. Don’t give context. Cerulo and Ruane found that the public don’t care about context. The ‘why’ of what you did is less important to people than your regret and remorse.

How can the Banks use this methodology to repair their reputation?

We’ve compiled the above research and merged it with our existing ‘Crisis Response and Message Strategy Formulas’ to create a brand-new approach for post-crisis reputation management; the Honest Words Methodology.

We then applied the Honest Words Methodology (and the above research) to the big four banks scenario post the release of the Banking Royal Commission Report.

Accordingly, we’ve come the following 5-Steps:

Step 1

Use the British Standard Crisis Communication Response Process to establish:

A. Campaign Objectives (e.g. retain customers, restore public’s trust, retain government relationships)

B. Define audience & prioritise stakeholders (e.g. staff and affected customers)

C. Develop strategy (explained in next step)

D. Select communication channels (that will reach the priority stakeholders)

E. Publish

F. Monitor and analyse feedback

G. Adjust and go back to ‘b’

Step 2 Follow the Coombs Message Strategy Formula to develop the appropriate message strategy. We’ve gone ahead and done that and the result is:

  • Responsibility attribution = strong (severe threat)

  • Intensifying factors involved

  • Strategy therefore should include: Instruct, Care/Support, Compensate and Apologise

  1. Explicitly take responsibility for the situation and ask people for forgiveness

  2. Offer money or other compensation to people directly affected

Step 3 Using Ho’s apology model, ensure our apology includes:

  • An obvious public cost to us (suggest both status and financial)

  • A commitment (that we’re confident we can make) that it won’t happen again

Step 4

Using Cerulo and Ruane apology structure, ensure our apology:

  • Begins by focusing on the victims

  • Expresses empathy and remorse

  • Doesn’t include any justifications or unnecessary context

  • Ends with restitution

Step 5 Using the Crisis Shield Message Model, ensure your message also includes:

  • An explanation of the key facts​

  • What we’re doing to fix the problem

  • What we want you to do

We’ve summarised the above steps in the following image:


We’re confident in this Honest Words approach – it’s backed by research, best practice and our own first-hand experience. We take it with us to every crisis engagement.

If you’re interested in learning more, we’re now teaching the practical application of our Honest Words Methodology in our Crisis Media Training Workshops.

Contact our team today if you’d like further information.

#crisis #honestwords #banks #BRC