A guy
messes up his life, and the lives of those around him. We send him for rehabilitation:
A jail term, AA meetings, community service, anger management classes, or
restitution to victims.

An organization
messes up, and manages the crisis in well-accepted ways: Quick
communication from top managers, rapid assumption of responsibility, quick and
effective ameliorative action, ongoing transparency, and never for a moment
blaming the customers. As every management student knows, Johnson&Johnson set the gold
standard for crisis handling during the poisoned Tylenol episode. J&J’s good reputation
was quickly restored.

Other companies mismanage a
customer uprising (for example, the Netflix pricing screw-up).
Still others have committed their offense before modern crisis management
principles were understood – or at a time when customer mores and expectations differed
from today’s. For instance, Brown
University was founded using profits from the
slave trade. 250 years later, Brown University President Ruth
Simmons appointed a Steering Committee on Slavery and
Justice investigating the matter and recommending rehabilitative
actions for the university.

What can rehabilitate these organizations in the long term?

The research
and practice literature is rife with advice on short-term crisis management,
but spare on the question of long-term rehabilitation for re-establishment of trust. Not surprising, as crisis management rightly emphasizes rapid
action immediately following the offense, and today’s managers in general
suffer from short-termism. The long term is important, though, so let’s see
what can be said about it.

Looking
for data on organizational rehabilitation, I find a remarkable range of
actions, inactions, fumbles, and consequences.

• Following the
  2009 crash, Wall Street banks
  did little to repent, or even change their practices. Their reputations
  are in the toilet, but their profits continue unabated.
• Kent State University built a parking lot – a parking lot! –
  over the site where US National Guardsmen shot and killed four students in
  1970. Was this simple obtuseness, or an attempt to literally pave over and
  forget the incident? If the latter, it didn’t work; Neil Young’s song about the tragedy still plays
  on the radio today. Students still enroll at KSU. A lot of other people
  shun the place, having seen no sincere efforts toward rehabilitation. On the
  contrary, a schoolteacher in Ohio was recently fired for teaching, against
  his principal’s orders, the history of the Kent State incident. (Here’s
  what was done to rehab Jackson State, site of a similar shooting.) 

• The core meltdown
  at Three Mile Island was the first major nuclear accident near major population
  centers. A federal review panel identified the shortcomings in training
  that led to operators’ wrong responses to the reactor’s indicators and
  gauges. This improved training at other sites, and generally improved
  performance of nuclear generators in the US and elsewhere. Little animosity
  remains toward First Energy Company of Akron,
  the
  owners of the TMI plant. However, the TMI experience made the public less
  forgiving of subsequent reactor
  failures. We tend to believe that lessons offered should be lessons learned.
  The Fukushima plant thus faces
  a long and uncertain road toward rehabilitation. 
  
• The meltdown
  at Chernobyl was blamed on
  reactor design, not operator training. Nearby residents got sick or lost
  their homes as humans were banned from the vicinity. The upside was that Russia
  gained a large nature preserve, and much has been learned about impact of
  irradiation on animal species. Public reaction? People say, that’s Russia,
  and shrug.
• This year the Chonghaejin
  Marine Company’s Sewol ferry
  sunk, killing 300, mostly school children. The company’s president went
  into hiding and his children fled the country. A long list of prior code violations came to light. Meanwhile, the Korean Coast Guard’s
  response was pitifully inadequate. South Korea President Park Geun-Hye
  dissolved the Coast Guard (though everyone knows a reconstituted Guard
  would have to hire many of the same people), and the country’s Prime
  Minister resigned. The sinking of the ferry was the greatest domestic
  disaster in South Korea’s postwar history. Chonghaejin has no hope of
  rehabilitation. Despite the anger directed at President Park, however, the
  New York Times sees no long term
  impact on her ability to govern the nation.
• How will Ferguson, Missouri, rehabilitate
  itself? Given the behavior of police, the DA and residents, the town will
  draw few tourists or in-migrants for many years to come. The past few days
  have brought rumbles that the case may be re-opened.
  This offers a ray of hope for the town.
• And then, New York. Its Mayor voiced
  disagreement with the court’s Eric Garner decision, and approved
  protestors’ constitutionally guaranteed right to assemble. In return, the
  police union members histrionically turned their backs on him – thus proving the
  protestors’ point that your civil rights are of little concern to the
  NYPD. I don’t want to visit New York any more, but others will, of course,
  because it’s… New York. (In my view, the separation of powers principle
  says it’s the Mayor’s prerogative and duty to state his disagreement with
  the courts, even if doing so risks violent public response - which the Mayor should also take pains to discourage and prevent. It’s also the
  Mayor’s job, not the police’s, to consider impacts on tourism revenue, so
  naturally his decisions will not always please the police union. You may
  disagree with my parenthetical political analysis, but still agree that
  rehabilitation is an issue here. On the personal level, the families and
  colleagues of the slain police officers have all my sympathy.)

• It took two
  generations to rehabilitate Germany.
  This year sees a menorah together with a Christmas tree at the Brandenburg
  Gate.

The
reader can think of many, many more such examples. They will include the
Tuskegee experiments, and torture at Abu Ghraib and Guantanamo.

Constructive
responses to date have been situational. Examples are Brown University, the rehab of the US Secret Service,
and the Federal Reserve’s initiative to
restore trust in banks. Can there be a general theory of institutional
rehabilitation? The cases above suggest the dimensions researchers must
consider:

• The magnitude
  of losses and the perceived extent of betrayal.
• The extent to
  which people feel, if it happened to these victims, it could happen to me.
• The remaining
  attractions and good qualities of the offending organization.
• Expected time
  to rehabilitation, which might exceed the natural life spans of the
  culprits.
• The perception
  that the true culprits have been truly punished. No symbolic resignations,
  no golden parachutes, no get out of jail free cards, and no fall guys.
• Whether the organization’s
  practices have truly changed. Whether the changes truly reduce danger and
  increase fairness – as opposed to changes that simply reflect empty
  political correctness.
• Evidence of
  the organization’s ongoing self-examination.

A
related question is that of organizations that suffer (or cause) a slow erosion
of trust, rather than a sudden crisis. See, for example, my blog and many other recent
articles about the tech industry betraying its early promise, gradually losing its initially cultish customer base. Will the needed rehab be of the same nature, or different?