Reputation, reputation, reputation – the lessons from P&O Ferries

A company’s reputation takes years to build up, yet can be shredded in a moment if the media narrative is universally hostile. For P&O Ferries, whose illustrious origins date as far back as 1835, that moment came on Thursday 17 March when, without warning, it sacked its entire operational staff, to be replaced by coachloads of mainly foreign agency workers on much poorer rates of pay, with heavies on hand to sort out any protest. Chief Executive Peter Hebblethwaite later admitted to MPs that the lack of consultation broke the law, and it’s been widely described as a PR catastrophe for the company – an ‘act of corporate vandalism’. Company bosses hid from the media, leaving their side of the story untold. But a more sympathetic process with proper consultation, coupled with a well-coached and credible company spokesperson could have created a very different impression. In a situation like this it’s important to remember that reputation has a value – it’s not purely intangible. Big companies faced with tough decisions need to think more carefully how their actions will play out in the media and the court of public opinion. A study by the World Economic Forum concluded that on average more than 25% of a company’s market value is directly attributable to its reputation. So could the reputational hit in this case do more damage to the company’s value than it will save by cutting crew costs?

It’s far from impossible. If there was any sympathy for P&O Ferries’ actions (it faced big Covid-related losses last year which it said were unsustainable, as well as increased competition from low-cost ferry operators) it was nowhere to be seen. It’s not the first time that a company has felt it necessary to cut its staff outgoings in the face of low-cost competition – British Airways and many others have faced similar challenges. But from the Socialist Worker through to the Daily Telegraph, the condemnation came from all sides over the brutal way it was handled by the ferry company. Many staff found out through a 3-minute video message.

The reputational hit was intensified by the fact that the parent company DP World (ultimately owned by the state of Dubai) remains hugely profitable, and P&O Ferries had claimed millions in government furlough cash to tide it over to the better times.

Possible reputational and financial hits for P&O Ferries and DP World include:-

  • Protests, boycotts, pickets and legal actions are likely to keep this issue in the public eye, putting people off travelling for fear of disruption. Even in the longer term some travellers will prefer to book an alternative, out of principle.
  • The government is making more stringent checks on its vessels’ seaworthiness, detaining at least one in port as unfit to sail, and looking to close the loophole which has allowed it to avoid paying minimum wage for the new crews. It’s also being being urged to look at looking at taking back the company’s substantial Covid payments.
  • The government is now looking at whether DP World should be prevented from being granted lucrative licenses to operate Freeports – its main business.
  • There may even be collateral damage for Dubai as a business partner/owner, not to mention to P&O Cruises, which people may not realise is an entirely separate company, owned by Carnival Corporation.

The long-term consequences of the company’s actions won’t be clear for some time, but they look unlikely to play out in the way P&O Ferries and DP World had imagined.

More on our Media Training Courses [post updated 28.3.22]