Agnes Cupcakes Issues Management

Christian Tellefsen! CM.KOM! Public Relations & Issues Management! 090989-1965

!!!CHARACTERS: 39,804

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Introduction! 2!

Methodology and approach! 3!

Limitations! 5!

Defining a crisis! 6!

Issues management! 7!

Agnes Cupcakes during the crisis! 9!

Crisis Type! 9!

Response strategies by Agnes Cupcakes! 10!

Apology in regards to answers from the questionnaire! 14!

Reputation Management! 15!

Performance! 15!

Behaviour! 16!

The aftermath of the crisis! 17!

Conclusion! 18!

Bibliography! 19!

Books! 19!

Articles ! 20!

Appendix 1. Questionnaire ! 21

Christian Tellefsen! CM.KOM! Public Relations & Issues Management! 090989-1965 !!

Agnes Cupcakes

!Introduction!!Agnes Cupcakes is a company based in Copenhagen. They offer innovative cupcakes and other

freshly baked goods as their core products. Furthermore they pride themselves in offering good

service to their customers . They have a predominantly younger female crowd as their main 1

clientele.

!Agnes Cupcakes faced a crisis in the fall of 2011. The starting point of the whole affair was an

article published in the Danish newspaper Politiken which shed light over what was included in the 2

employment-contract. The employees were mainly girls under the legal age of 18. The contract

featured threats of fines of up to 250,000 DKK if they revealed any of the company’s secrets. The

situation was soon elaborated and further criticizable points bordering law infringements came to

the public’s eye. These included no fixed work hours and the possibility of working in a completely

different store with a moments notice.

!What really ignited the whole situation was when the CEO Kristian Vangsgaard made the following

comment about his employees:

!“A third of all the girls are just ‘wannabe reality TV-stars’. They think they are working in Agnes

Cupcakes because it is ‘oh so smart and oh so cool’. Must of them do not want to do anything and

when you arrive to inspect the shops, then they are just standing around and do not want to pick up

the phone” !3

!

http://agnescupcakes.com/story.html1 1

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http://agnescupcakes.com/story.html

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Christian Tellefsen! CM.KOM! Public Relations & Issues Management! 090989-1965 This complete disregard for his employees got the public interested and soon more aspects of the

employee contract was revealed. This further worsened the crisis for Agnes Cupcakes and soon they

showed that they had no crisis communication plan which became embarrassingly obvious during

their feeble attempts to regain their reputation and avert the crisis through ill-prepared and wrong

response strategies.

!This assignment aims to show how Agnes Cupcakes could have prevented the crisis through proper

issues management, response strategies and reputation management. This will be done through the

use of hermeneutics and social-constructivism. Although these two are the main choice for most

assignments, they still have important factors to attribute with. One of the main factors of the crisis

Agnes Cupcakes faced, was they did not conform to the norms constructed by both internal and

stakeholder. Hermeneutics are used in order to process a questionnaire prepared in order to support

the actions taken by Agnes Cupcakes and whether these were correct or not.

!!Methodology and approach!!The main reason for choosing this topic is a interest in how easily a company can face a crisis by

using poorly prepared crisis communication and corporate communication. The Agnes Cupcakes

example is an exciting topic since it combines much of the theory we have acquired from not only

this subject, but also throughout our bachelor and master. The two main aspects of methodology

applied in this assignment is social-constructivism and hermeneutics.

!The social-constructivism describe knowledge and skill-sets obtained by people as a construction

achieved through social interaction (Jacobsen p. 232). Social-constructivism is also often referred to

as social-constructionism. It is important to note that I do not wish to construct any truths by using

this methodology but merely try to interpret the truth and trying to explain why the crisis faced by

Agnes Cupcakes was a product of constructed norms. The social-constructivism in this paper will

be used to highlight the interdependency between the different stakeholders in this crisis. This is

also highlighted by the relationship between the opinion of the public and the company’s way of

doing in business in a proper way to appear legitimate. The use of social-constructivism

Christian Tellefsen! CM.KOM! Public Relations & Issues Management! 090989-1965 methodology will also help to highlight that a company’s identity and image becomes a reality

through interaction with other stakeholders. These can be both internal and external stakeholders.

!Hermeneutics will also be used in this paper. This methodology can best be described as a

continuous interpretation method through investigating new theory and data. Hermeneutics is the art

of interpretation (Jacobsen 2010). This is partly in order to uncover why Agnes Cupcakes acted the

way they did, but also to interpret the survey I have conducted. In order to interpret the collected

data, use of the hermeneutical circle will be used as this facilitates a new understanding of the

collected data and when theory is combined with the empirical data, a new understanding will

presumably emerge.

!The qualitative empirical data for this paper have been collected through newspaper articles from

different Danish publishers. This can be divided into primary and secondary data. I have tried to get

in touch with former employees from Agnes Cupcakes, unfortunately no-one had time for an

interview or did not want to be interviewed. This unfortunately removes an interesting dimension

from this paper, as it would have been interesting to have a first person depiction of the situation in

the company during the crisis. Getting interviews from previous employees has furthermore also

been hindered by the fact that Agnes Cupcakes chose to close all their physical shops . Their focus 4

now is solely on catering.

!It is important to have a critical approach to the qualitative empirical data, because it is based on

newspaper articles mainly. These newspapers are Politiken and Berlingske Tidende. This is because

these newspaper where the two who covered the story. These two newspaper could potentially have

a hidden agenda and a certain bias towards Agnes Cupcakes. The two newspapers also had a

different approach in covering the crisis. Politiken, which was the main conveyor of the story, is a

newspaper which centers around Copenhagen and what is happening here. This is due to Agnes

Cupcakes is a Copenhagen-based company and did not have any shops outside the greater

metropolitan area of Copenhagen.

The articles have been weighted and the information retrieved from them have been judged as best

as possible in regards to any potential bias.

! http://www.business.dk/detailhandel/agnes-cupcakes-lukker-butikkerne4 4

http://www.business.dk/detailhandel/agnes-cupcakes-lukker-butikkerne

Christian Tellefsen! CM.KOM! Public Relations & Issues Management! 090989-1965 I have also done a survey for the quantitative aspect of this paper since it would be interesting and

essential to figure out how many people actually have changed their mind about Agnes Cupcakes in

response to the crisis and how Agnes Cupcakes have handled the situation in their opinion.

The survey has been divided into three major categories:

!• Effects of the crisis

• Communication Strategy

• Control Variables

!The survey has been included in the appendix . The three categories have been chosen as they 5

represent what I want to investigate about how the crisis affected Agnes Cupcakes reputation.

The first categories which measured the effects of the crisis has been undertaken by asking the

participants to rate Agnes Cupcakes before and after the crisis.

The second category was more focused towards the communication strategy of Agnes Cupcakes

during the crisis and asked question which answered how appropriate they felt Agnes Cupcakes

response was and how their media strategy was.

The last category was the control variables such as age, gender and awareness of event. These are

important figures as they can separate the responses so we can see whether mainly male or female

has heard about the crisis, what sort of age paid most attention and so forth.

!The survey will be used to answer subquestion from the three main categories and held up against

the view the media took on the crisis. This allows us for a detailed picture of the crisis of Agnes

Cupcakes

!Limitations!!In order to make this paper more manageable it is necessary to have certain limitations on what to

investigate. This paper will not cover more than the basics of Agnes Cupcakes as a company. It is

not relevant to the problem formulation and the economic aspect, albeit an interesting perspective,

will also not be included.

! See appendix 1.5

Christian Tellefsen! CM.KOM! Public Relations & Issues Management! 090989-1965 This paper will use theory and the described methodology in order to try to explain why Agnes

Cupcakes acted the way they did. It will use the theory from a practical point of view and will not

try to prove whether the theories are correct or not.

!Defining a crisis!!Before we begin to analyze the situation in Agnes Cupcakes it is important to have a clear definition

of what a crisis actually is. This has been defined by Joep Cornelissen as “an event or issue that

requires decisive and immediate action from the organization” (Cornelissen, 2011, p.200). The

definition can be further expanded and is described by Coombs from his book Ongoing Crisis

Communication - Planning, Managing and Responding as:

!”A crisis can be defined as an event that is an unpredictable, major threat that can have a negative effect on

the organization, industry, or stakeholders if handled improperly” 6

!With these two definitions it is clear what constitutes a crisis and it is with these definitions that the

term crisis will be used throughout this assignment.

!Coombs also mentions another important aspect; uncovering the chain of events which leads up to a

crisis. This is done by identifying risk factors and weaknesses inside the company (Coombs, 1999,

p.19). This is something which Agnes Cupcakes failed to do properly. This lackluster internal

review by Agnes Cupcakes made them vulnerable to potential issues and crisis. Later uncovering of

the crisis revealed Agnes Cupcakes appalling treatment of their employees. This can be referred to

as in improper treatment of their internal stakeholders.

The crisis they faced was based on the disregard the company had towards their employees and

more specifically their employment-contract, but it was when CEO Kristian Vangsgaard

condescendingly told the press that all his employees were just wannabe reality TV-stars that the

issues captured the attention of the public. It was a combination of the internal conflicts and the

unpredictable event which required immediate action by Agnes Cupcakes.

!!

Coombs, 19996

Christian Tellefsen! CM.KOM! Public Relations & Issues Management! 090989-1965 In order to make a clear definition of what the crisis was for Agnes Cupcakes it is necessary to sum

up. The crisis was a product of ill-managed internal stakeholders, i.e their employees and the

contracts under which they were employed. This was worsened by the ill-thought through quote by

the CEO. In accordance with the methodology used in this assignment it is necessary to highlight

this crisis is considered a crisis because external stakeholders are reacting negatively towards Agnes

Cupcakes management and are siding with the employees. Ideally, every company should live up to

the norms and standards set forth by the external stakeholders in all aspects possible. When this is

not done, companies can face a crisis as evidently Agnes did..

!!Issues management!!!The internal problems Agnes Cupcakes faced, the conflict between the management and the

employees, could possibly have been prevented by the use of proper issues management. Using

issues management correctly is a good way to avert potential issues which could evolve into a

crisis. Joep Cornelissen identifies two types of issues:

!“(1) a public concern about the organization’s decisions and operations which may or may not

involve (2) a point of conflict in opinions and judgments regarding those decisions and

operations” 7

!Furthermore, issues can be divided into three different groups before they are considered a crisis -

latent, active and intense. The situation inside Agnes Cupcakes can best be described as a latent

issue, since the employees dissatisfaction over the contract had not yet reached the media. The

definition by Cornelissen it is clear, that the public concern over the decision-making in Agnes

Cupcakes led to the conflict between the public and the management regarding the employment

contract. This point where the public got involved also marked the transition from a latent issue to

an active issue since the newspapers and other media started to inform the public about this issue.

Issues normally go from active to intense before evolving into a proper crisis, but it could be

Cornelissen, 2011, p1807

Christian Tellefsen! CM.KOM! Public Relations & Issues Management! 090989-1965 argued, that this step was skipped due to the disastrous comments made by the CEO Kristian

Vangsgaard.

!The obvious question with issues management is whether Agnes Cupcakes could have prevented

this situation spinning out of control and what they could have done in order to curb this

development.

An organization has different tools in order to manage their issues, where the two most important

are the SWOT - (Strength, Weakness, Opportunities, Threats) and the DESTEP-analysis. DESTEP

is an abbreviation for Demographic, Economic, Social, Technological, Ecological and Political.

These two analysis tools forms part of what is now as environmental scanning in the subject of

issues management. They help the organizations to scan their environment in order to keep latent

issues from getting out of hand. Evidently, Agnes Cupcakes did not succeed in doing this properly

and therefore suffered from their own negligence. The solution to their problem would have been as

easy as having the employment contract approved by a Danish labour union. The same situation,

where a Copenhagen-based company has problems with their employees over a contract, occurred

just a few months before the same happened to Agnes Cupcakes. The company in question is called

Joe & The Juice . They had similar problems with their employees but instead of doing like Agnes 8

Cupcakes, they reacted to the negative critic from both internal and external stakeholders and

aligned their employment contract with Danish labour-union laws. This smart and easy move

avoided a crisis and even made Joe & The Juice popular than they were before.

Agnes Cupcakes should have acted after Joe & The Juice’s example and aligned their contract if

they had properly identified the issue beforehand. Whether or not Agnes Cupcakes knew that they

had a borderline illegal employee contract can be argued. I should like to think, that they were

aware of their actions or at least the CEO knew that it was borderline illegal. Otherwise it is a very

unprofessional image to have; not being completely aware of the laws under which you employ

people.

Had Agnes Cupcakes on the other hand identified the issues, another tool CEO Kristian Vangsgaard

could have used was the position-importance matrix (Cornelissen, 2011, p. 184). It is described by

Cornelissen as four separate categories; low priority, supporter, problematic and antagonistic. These

categories are given a ranking of 0 to 10 where the antagonistic scores highest (5 to 10). Agnes

Cupcakes’ emphasis should, according to this matrix, be on the antagonistic element of the matrix.

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Christian Tellefsen! CM.KOM! Public Relations & Issues Management! 090989-1965 The way to address antagonistic issues is to have counter-arguments and logic-based bargaining

with the stakeholders (Cornelissen, 2011, p. 185). As Agnes Cupcakes did not engage in

communication with opposing stakeholders and furthermore chose to delete all the negative critique

they received on Facebook, they did not apply this process to their communication. This led people

to have an even worse impression of Agnes Cupcakes and further worsened their already vulnerable

position.

!It is obvious that Agnes Cupcakes failed to properly scan their environment regarding their issues

and underestimating the importance of this action. They also failed in managing their issues

properly and what makes it even worse for Agnes Cupcakes is, that they could easily have drawn on

experience attained from the case of Joe & The Juice which occurred only a few months prior to

their own.

!Agnes Cupcakes during the crisis !The crisis started when the newspaper Politiken revealed aspects of actual employee contract from

Agnes Cupcakes. They published their article about this contract on 22 november 2011. The article

depicted the unfair conditions under which the employees had to work. As mentioned earlier in this

assignment, a leak of the employee contract from an earlier employee could indicate a latent issue

between the management and employees. This latent issue turned from latent to active when the

contract was published and the now active issue escalated to an actual crisis when the CEO made

his condescending comment about his employees.

!!Crisis Type !!With a crisis on his hands, CEO Kristian Vangsgaard now needed to act according to the type of

crisis he was facing. In order to figure out the crisis, a useful tool is the Crisis Type Matrix

(Cornelissen, 2011, p. 202) described by Cornelissen.

The crisis type matrix is divided into four different types of crises; internal-external and intentional-

unintentional. The internal-external part refers to what caused the crisis, if it was the company itself

Christian Tellefsen! CM.KOM! Public Relations & Issues Management! 090989-1965 (internal) or outside forces (external) and the intentional-unintentional aspect refers to whether or

not the crisis is caused by a deliberate action or by a an accident.

Applying this matrix to the Agnes Cupcakes shows us that internal problems was the cause of crisis.

The crisis type of Agnes Cupcakes depends on how you look at the factors that caused the crisis. It

can be argued that is was caused by external factors, which were the publishing of the article

regarding how employees are treated at Agnes Cupcakes and then the unintentional outburst from

the CEO Kristian Vangsgaard where he remarked how his employee’s were all just wannabe reality

TV-stars. This crisis type is known as a Faux Pas or ‘false step’ translated into english. However

there are certain elements of this which does not corresponds properly to the how the crisis was

created.

This leads us to the another type of crisis Agnes Cupcakes could face, which is a transgression. The

difference between a transgression and a Faux Pas is that the transgression is created by an

intentional action by an internal factor. In the case of Agnes Cupcakes is was an intentional leak by

a former employee, who supplied the employee contract to Politiken and thusly created the crisis

for Agnes Cupcakes.

Transgression is a type of crisis which refers to an ongoing crisis where an organization knowingly

violates regulations or laws . With this in mind it is obvious that this crisis is of the transgression 9

type. This also assumes that CEO Kristian Vangsgaard was aware, or at least someone in the

management were aware that the employee contract was borderline illegal and even contained badly

disguised threats of huge fines if any company secrets were revealed . 10

Another aspect of the transgression type of crisis is about unethical leadership which is when the

management knowingly puts their employees at risk (Ulmer, 2010, p. 11). Unethical leadership also

works as catalyst during a crisis. People have very strong feelings towards an unengaged leader

with blatant disregard for his employees. This dishonesty from the leader is a hard issue to recover

from and will almost always be remembered by the public. This unethical leadership is also an

important factor in the Agnes Cupcake crisis as it further impacted the already looming crisis.

!!Response strategies by Agnes Cupcakes !

The Handbook of Crisis Communication, 2011, p. 749

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Christian Tellefsen! CM.KOM! Public Relations & Issues Management! 090989-1965 It was evident right from the start that Agnes Cupcakes did not have the proper response strategies

in order to deal with a crisis of that magnitude, if they even had any. Indeed, as they proved from

the start, the idea of having the CEO as their media through which they would communicate their

strategies proved to be a horrible idea. This showed Agnes Cupcakes had not adjusted their

response strategies to the type of crisis. They started out with a response strategy totally unfit for

the situation which they were facing.

They started by ignoring their responsibility by saying:“…they have the possibility to say no - we

do not force anyone” . The sense of lacking responsibility and being victimized were continued in 11

other quotes: “as a point of reference, every one that is employed by us is treated properly. We do

not mistreat or talk down to anybody” . What the CEO is doing is described by Cornelissen as 12 13

the non-existence strategies . This strategy simply revolves around not acknowledging the crisis 14

and trying to deny it. Obviously this was not a smart strategy as the crisis was very well alive. This

also became to the attention of the CEO as he moved on to the clarification strategy, which is also a

part of the non-existence strategies and by using this, he tries to explain why there is no crisis or

issue. These statements were soon questioned as a former employee, Natalie Rosendahl, who

described the workplace as: unpleasant and snobbish” . She went on to further comment on the 15

internal situation by saying: “it is not true that there has not been problems” . She elaborates on 16

the problems and reveals the lack of proper schedules and fixed work hours for the employees. The

employees could also risk being demanded to work at an entirely different location with little to no

prior warning. CEO Kristian Vangsgaard rebutted this with the following quote: “You always have

the possibility to say you want those and those shifts. There has never been a problem with that.

People have always gotten it the way they wanted” . 17

In keeping with accordance regarding the methodology chosen for this assignment, it is important to

stay critical towards the former employees as they could have certain motives and most certainly

have a biased view of Agnes Cupcakes as a company.

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Cornelissen, 2011, p. 20413


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Christian Tellefsen! CM.KOM! Public Relations & Issues Management! 090989-1965 The general pattern of quotes by the CEO have shown he has distanced himself from all the internal

problems and the crisis itself. He suddenly starts to put the blame on others, when questioned about

the huge fine imposed on employees who would reveal company secret’s he said: “I actually do not

know. It is determined by our lawyers”. He tries to remove the focus from himself and blaming

others why the contract is so hard and even goes on to blame the employees for the strict contract

by saying:

!“When we started we had a lot of problems with people who called in sick without being sick. So we

had to change the contracts because it ruins our business when people do not show up for work”.

!Needless to say, this is completely unacceptable behavior from a CEO and it only worsened the

situation for Agnes Cupcakes. This behavior is described by Cornelissen as the excuse-strategy

(Cornelissen, 2011, p. 204). It is interesting to look into what could be the causes of Kristian

Vangsgaard being so cantankerous. One of the explanations could be that he is an entrepreneur and

started Agnes Cupcakes. This could serve as yet another way to distance himself from the

responsibility and indeed he also tried to explain people’s malevolent opinions towards the

company by saying: “Some people might think we are pedantic but we are a start-up company and

have only been in business for one year. There is a lot of heart-blood behind our actions. We put a

lot of effort in telling people what they are signing up for when we employ them”. This shows how

he tries to explain the situation and attempting to avoid taking full responsibility by blaming the

company as a start-up and being new in the market. The explanation for his actions and pattern of

reaction goes very well with the highly biased view entrepreneurs have of their own company so it

is natural to assume, that he feels an attack on the company is also a personal attack on himself. He

does not have the ability to distance himself from the company and give an objective evaluation of

the situation and what he should. This is what made him act the way he did. And finally, it is

interesting to see, even after the crisis was over and Agnes Cupcakes had issued a formal apology

and the crisis was more or less over, he still felt victimized by the situation and blamed the Danish

people by saying: “It is a typical Danish thing to feel the need to peck on a Danish company which

is emerging.” . This lack of ability to accept responsibility shows his central role in the crisis of 18

Agnes Cupcakes.

! http://www.business.dk/detailhandel/stormomsust-kagemand-vil-saelge-gourmet-pizza18

http://www.business.dk/detailhandel/stormomsust-kagemand-vil-saelge-gourmet-pizza

Christian Tellefsen! CM.KOM! Public Relations & Issues Management! 090989-1965 Agnes Cupcakes is more or less a textbook example of what happens when a company applies the

wrong strategies to the crisis type in question. They also show why it is important to have a

dedicated communication department to handle situations like this which is obviously not possible

for the CEO.

In order to have proper response strategies it is vital to have identified the correct type of crisis

which the organization is facing. I have earlier in the assignment described the crisis as an

transgression and with the transgression type of crisis follows certain strategies which are optimal

for dealing with crises of this type. Coombs argues that the best response strategies are a: “…

combination of strategies (rebuilding-mortification, reinforcing-integrating) are the most

effective” . 19

The rebuilding strategy is a combination of compensation and apology. The compensation in the

case of Agnes Cupcakes should not be seen as a monetary offering but more along the lines of a

compensation regarding the employee’s and offering them a proper and entirely legal contract with

no hidden threats like the huge fine they could potentially face, where they to reveal some of the

company’s baking secrets. Another aspect of the rebuilding strategy is also the rebuilding of the

brand and image in the future.

Apology is also part of the rebuilding strategy. Whenever a company has acknowledged it’s error, it

is time to apologize for their behavior and realizing the error and effect it had on all of their

stakeholders. Agnes Cupcakes did publish an excuse on their Facebook almost immediately after

the newspaper article in Politiken was published.

In order for an apology to have legitimacy it needs to fulfill certain criterias; sincerity,

appropriateness and timing. They used an acceptance strategy (Cornelissen, 2011, p. 204) and

acknowledged they had acted in a wrong manner and their previous comments about their

employees was careless and wrong. This also signaled a change in response strategies, going from a

strategy which implied a low perception of responsibility to a strategy associated with a high level

of responsibility.

Initially, Agnes Cupcakes chose to stick to the much debated fine which the employee’s had to pay

if they revealed company secrets. “... We must be able to hold onto our business secrets, and it will

continue to be a part of the contract, because it is the very essence behind our products and our

brand. But we will change - with the lawyers’ assistance - in parts of our contracts ”. 20

The Handbook of Crisis Communication, 2011, p. 32619

Appendix 120

Christian Tellefsen! CM.KOM! Public Relations & Issues Management! 090989-1965 Agnes Cupcakes also told in the apology that they would make a new and revised version of the

employee contract with help from a Danish labour union in order to make employment more fair

and proper. This was followed up by a statement a couple of months later from Agnes Cupcakes,

that they had now reached an agreement which suited all . This agreement saw the elimination of 21

the huge fine and fixed the issue with working hours.

The fact that Agnes Cupcakes followed up on their excuse showed it had sincerity and they meant

what they said, even though the timing of the apology could have been better.

Timing is another important aspect of the apology process. Where Agnes Cupcakes went wrong,

was they issued their apology far to soon which made it loose much of its credibility and legitimacy.

The CEO was still ranting about how it was not the fault of Agnes Cupcakes what was transpiring,

and yet at the same time, the company issued an apology. This discrepancy in response strategies

could suggest that Agnes Cupcakes had not realized their full responsibility and merely issued this

apology in order to please stakeholders.

!Apology in regards to answers from the questionnaire !The questionnaire is a useful tool to measure how the public reacted to the apology and through the

media Agnes Cupcakes issued the apology.

The first question regarding the apology was what words best described the apology. There was a

choice between seven words ranging from appropriate to bad. 33% answered that the apology was

acceptable and 19,4 % even found the apology appropriate. This number is surprisingly high as I

would expect people to react more negatively towards to the apology. An explanation for this can be

found in the fact, that the questionnaire was made three years after the crisis and people had forgot

the timing and sincerity of the apology. But still 58,9 % found that the apology was not credible.

Another interesting aspect is the media through which it was published, Facebook. This medium

has had a profound effect on the way crises evolve and how they need to be treated. The social

media has had a huge impact over the last years, but interestingly, 63% people of the interviewed

people did not agree that Facebook is a correct medium to issue an apology through. 67,1 % percent

would still prefer a proper press release as the medium through which the apology should be issued.

Social medias have taken a key role in spreading news and this led me to the question of whether

people regarded Facebook as a credible news source. 34,2% were neutral and 37% thought

Facebook was not a credible source of news. The medium which people in the questionnaire

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Christian Tellefsen! CM.KOM! Public Relations & Issues Management! 090989-1965 preferred as credible was still newspapers and other printed media where 32,9 % considered it

highly credible and 56,2% considered it credible.

!!!!Reputation Management !It is more important than ever for companies to have a strong brand. Especially in a fast moving

market like the food scene in Copenhagen. Agnes Cupcakes was a well-known brand, mainly

amongst the female segment in the city though. The brand and image is closely linked to the

company’s reputation. A strong reputation is a tool which can help a company through a crisis easier

(Doorley, 2011, p. 4). Reputation scholar Charles Fombrun, professor at Stern School of Business,

New York University defines reputation as the sum of the images the various constituencies have of

an organisation (Doorley, 2011, p.4). John Dorley and Fred Helio Garcia uses these definitions and

comes up with their own:

“Reputation = Sum of Images =

Performance + Behaviour + Communication”

!These three different segments shows what constitutes a company’s reputation and how they

cumulative affect the brands reputation. Thusly, when a company is lacking in communication or

behavior, the reputation will be directly affected. If we look at Agnes Cupcakes in the three different

categories, we can see how the company’s reputation has been severely affected.

!Performance Following the crisis, the financial performance of Agnes Cupcakes deteriorated as the investors

grew concerned about the brand and all the negative publicity. This lead the to cash-flow being

stopped . This loss of reputation in the eyes of the investor eventually led Agnes Cupcakes having 22

to close all their physical shops and solely relying on catering needs. Under-performance in the eyes

of the investors is a bad thing, but inversely, over-performance can also lead to a growing

dissatisfaction amongst the public, as it tends to react negatively to companies earning a lot of

money on behalf of their customers.

http://www.business.dk/detailhandel/agnes-cupcakes-i-pengenoed22

http://www.business.dk/detailhandel/agnes-cupcakes-i-pengenoed

Christian Tellefsen! CM.KOM! Public Relations & Issues Management! 090989-1965 !Behaviour Behaviour in reputation management relates to how the company is behaving in accordance to

norms set by the general public. This is also why social-constructivism is a useful tool in

understanding the underlying behavior and what makes the public and companies act the way they

do.

The behavior of Agnes Cupcakes during the crisis was very criticizable and their fumbling around

with different strategies seriously harmed their reputation even further and made Agnes Cupcakes

look very unprofessional

!The last element of the formula is communication, which Agnes Cupcakes was so painfully lacking

that it also had a tremendous effect on their reputation.

!The combination of these three elements shows, that Agnes Cupcakes did not manage their

reputation at all, and really did not recover from the hard effect this had on their reputation and

brand. It is also important to show how important reputation management really is, as the value of a

company not only revolves around how much money they make. The intangible assets are also of

extreme importance.

!Another part of the methodology in this assignment was making a questionnaire in order to put a

number on how people has changed perception of Agnes Cupcakes. A part of the questionnaire was

dedicated to the reputation of the company and how that changed.

When looking at question 5 in the questionnaire “What words would you use to describe Agnes

Cupcakes?” we see that the predominant answers are; bad working conditions, poorly managed and

bad communication. This corresponds relatively well with that of the general public had to say

about Agnes Cupcakes.

Another interesting question on the questionnaire is question 4 regarding the change in actual

reputation. I asked people to rate on a scale from 1 to 10 (with 10 being the best) how they

perceived the reputation of Agnes Cupcakes before the crisis. The weighted average was 6,9 which

is a pretty good ranking although not brilliant. However this ranking changed drastically and people

rated the reputation as a mere 4,1 after the crisis. This also corresponds well to the hard hit the

reputation took amongst the broader public.

!


The aftermath of the crisis !Since the crisis happened in 2011 we have the luxury of seeing what long term effect the crisis had

on Agnes Cupcakes and in order to see this, I have chosen to make a questionnaire to gather

empirical data about how people have changed their view on Agnes Cupcakes. As mentioned

before, people rated the reputation of Agnes Cupcakes at 6,9 before the crisis and at 4,1 after.

However only 31,5% said, that the crisis affected their choice in buying cupcakes from Agnes.

54,2% did not buy cupcakes before the crisis. An explanation to this could be that 52,1% of the

interviewed people were male, and I cannot do anything else than point out, that male consumption

of cupcakes is just not something that happens. I can only assume, that the number of people in this

questionnaire whose purchasing pattern was affected, would greatly increase if only girls had

responded to this questionnaire.

However one thing is basing your assumptions on a questionnaire another is basing it on reality.

What really happened to Agnes Cupcakes after the crisis was more severe. After the company had

figured out their employee contract they launched a charm offensive where they supplied 5,000 so-

called “Job-cakes” to the offices of the HK union. This was criticised by creative director and crisis-

advisor Lasse Meldgaard Bloch who stated:

!“The risk is that it seems insincere. That it is something they do in order to regain trust and not

because they have discovered their actions were wrong.” 23

!This charm offensive had several potential risk factors. One of which was, that they were a

company whose crisis had given them a very high visibility in the eye of the public and combined

with a very low credibility made it very hard for them to regain their former reputation and

credibility. The charm-offensive did not prove successful and after the investors had shut down the

cash-flow Agnes Cupcakes faced bankruptcy but were bought by another investor, Morten

Strunge . The CEO Kristian Vangsgaard was fired and the business operation was streamlined, the 24

physical stores were closed and now focused solely on business to business catering.

!!

http://www.business.dk/detailhandel/agnes-for-tidligt-ude-med-charmekampagne23

http://www.business.dk/detailhandel/mobilmillionaer-koeber-agnes-cupcakes24

http://www.business.dk/detailhandel/agnes-for-tidligt-ude-med-charmekampagne

http://www.business.dk/detailhandel/mobilmillionaer-koeber-agnes-cupcakes


Conclusion !Agnes Cupcakes is a great example of how a company can face a devastating crisis when they do

not employ correct crisis communication. The complete lack of appropriate response strategies

showed how the dug themselves even deeper into the crisis. This was made worse by their hothead

of a CEO who showed complete lack of awareness and responsibility.

The public reacted very negatively to his comments and the way Agnes Cupcakes handled their

situation. The questionnaire supported the claims made about the reaction of the public and showed

a genuine drop in reputation from 6,9 before the crisis to a mere 4,1 after. The way Agnes Cupcakes

handled their apology was also critiqued, both because it was in a wrong medium and also an

untimely apology. They mended their ways however and made a sufficient employee contract which

eliminated many of the points which sparked the transgression type of crisis they faced.

This example of ill-managed response strategies, issues management and crisis communication

show the importance of being prepared to combat all the types of issues a company can face. It

should therefore serve as an example of how not to handle a situation like this, especially because it

was easy to avoid and they already had the experience from Joe & The Juice they could draw upon.

!!!!!!!!!!!!!!!!!


Bibliography!!Books !Coombs, Timothy (1999): ”Ongoing Crisis Communication – Planning, Managing, and

Reponding”, SAGE Publications.

!Coombs, W. Timothy, Holladay, Sherry J. The Handbook of Crisis Communication. John Wiley &

Sons. 2011

!Cornelissen, Joep. Corporate Communication: A Guide to Theory and Practice. London [etc.: Sage

Publications, 2011. Print.

!Doorley, John and Garcia, Helio Fred; Reputation Management: The Key to Successful Public

Relations and Corporate Communication; 2d edition 2011, published by Routledge, an imprint of

Taylor & Francis Group.

!Jacobsen, Michael Hviid; Videnskabsteori i statskundskab, sociologi og forvaltning, 1st edition,

2010, Hans Reitzels Forlag.

!Ulmer, R., Sellnow, T., and Seeger, M. 2010. Effective Crisis Communication: Moving from Crisis

to Opportunity. Sage Publications.

!!!!!!!!!!

Christian Tellefsen! CM.KOM! Public Relations & Issues Management! 090989-1965 Articles !http://agnescupcakes.com/story.html!!!Business!!http://www.business.dk/detailhandel/agnes-cupcakes-lukker-butikkerne!!http://www.business.dk/detailhandel/stormomsust-kagemand-vil-saelge-gourmet-pizza!!http://www.business.dk/detailhandel/agnes-cupcakes-i-pengenoed!!http://www.business.dk/detailhandel/agnes-for-tidligt-ude-med-charmekampagne!!http://www.business.dk/detailhandel/mobilmillionaer-koeber-agnes-cupcakes!!Politiken!!http://politiken.dk/erhverv/ECE1457650/bageri-truer-mindreaarige-med-boede-paa-kvart-million/!!http://politiken.dk/debat/ledere/ECE1459617/der-er-gaaet-kage-i-arbejdskampen/!!http://politiken.dk/erhverv/ECE1457669/chef-for-agnes-cupcakes-vi-mishandler-ingen/!!http://politiken.dk/erhverv/ECE1459425/tidligere-agnes-ansatte-ubehagelig-og-snobbet-arbejdsplads/!!http://politiken.dk/erhverv/ECE1459921/agnes-cupcakes-opgiver-kaempeboede-til-mindreaarige/!!!!!!!!!!!!!!!!!!

http://agnescupcakes.com/story.html

http://www.business.dk/detailhandel/agnes-cupcakes-lukker-butikkerne

http://www.business.dk/detailhandel/stormomsust-kagemand-vil-saelge-gourmet-pizza

http://www.business.dk/detailhandel/agnes-cupcakes-i-pengenoed

http://www.business.dk/detailhandel/agnes-for-tidligt-ude-med-charmekampagne

http://www.business.dk/detailhandel/mobilmillionaer-koeber-agnes-cupcakes

http://politiken.dk/erhverv/ECE1457650/bageri-truer-mindreaarige-med-boede-paa-kvart-million/

http://politiken.dk/debat/ledere/ece1459617/der-er-gaaet-kage-i-arbejdskampen/



http://politiken.dk/erhverv/ece1459921/agnes-cupcakes-opgiver-kaempeboede-til-mindreaarige/

Christian Tellefsen! CM.KOM! Public Relations & Issues Management! 090989-1965 Appendix 1. Questionnaire !!!

8/5/2014 KwikSurveys: Free online survey & questionnaire tool

http://kwiksurveys.com/app/item-liveresults.asp#/ 1/5

Results for: Agnes Cupcakes crisis Record No: 1

Responses PercentageYes

71 95.9%

No

3 4.1%

Do you know the company Agnes Cupcakes ?

Responses PercentageVery much

11 14.9%

Much

22 29.7%

A bit

30 40.5%

Did not hear about the crisis

11 14.9%

How much did you hear about the crisis they had in 2011?

Responses PercentageNewspaper

19 27.9%

Social Media

13 19.1%

Through friends

23 33.8%

Other medias (TV, press releases etc.)

13 19.1%

From what source did you hear about Agnes Cupcakes and the crisis?

1 2 3 4 5 6 7 8 9 10 ResponsesWeightedAverage

Beforethecrisis

4 (5.63%)

0 (0.00%)

2 (2.82%)

1 (1.41%)

9 (12.68%)

11 (15.49%)

11 (15.49%)

18 (25.35%)

6 (8.45%)

9 (12.68%)

71 6.90 / 10

Afterthecrisis

11 (15.71%)

9 (12.86%)

14 (20.00%)

8 (11.43%)

8 (11.43%)

9 (12.86%)

5 (7.14%)

1 (1.43%)

1 (1.43%)

4 (5.71%)

70 4.13 / 10

5.52 / 10

How would you rate Agnes Cupcakes before and after the crisis in terms of reputation on a scalefrom 0-10?




Responses PercentageGreat cupcakes

38 51.4%

Untrustworthy

8 10.8%

Bad working conditions

35 47.3%

Strong Brand

20 27.0%

Innovative

5 6.8%

Poorly managed

31 41.9%

Bad communication

26 35.1%

Other

12 16.2%

What words would you use to describe Agnes Cupcakes?

Responses PercentageStrongly agree

0 0.0%

Agree

11 15.1%

Neutral

38 52.1%

Disagree

17 23.3%

Strongly disagree

7 9.6%

To what extent do you agree with the following statement: Agnes Cupcakes is a competentcompany?


1 1.4%

Agree

35 47.9%

Neutral

28 38.4%

Disagree

7 9.6%

Strongly disagree

2 2.7%

To what extent do you agree with the following statement: Agnes Cupcakes is an original cupcakecompany who provides high quality gourmet cupcakes.

Christian Tellefsen! CM.KOM! Public Relations & Issues Management! 090989-1965 !!!!



Responses PercentageOK

68 100.0%

Agnes Cupcakes issued the following apology on their Facebook page "Agnes Cupcakes regretsabout the statement on the staff. It is not our attitude! It is a wrong and thoughtless opinion. We areextremely pleased with our staff, which is a big part of the success we have had. Good service tocustomers is part of our product, and therefore the opinion mentioned is very unlucky. Sorry. For

your information, we have talked to all our stores about the matter".

Responses PercentageAppropriate

14 19.4%

Adequate

8 11.1%

Acceptable

24 33.3%

Unserious

18 25.0%

Untrustworthy

19 26.4%

Inappropriate

5 6.9%

Bad

2 2.8%

Other

7 9.7%

What words would you use to describe this message?


30 41.1%

No

43 58.9%

Did you find Agnes Cupcakes apology credible ?


1 1.4%

Agree

18 24.7%

Neutral

29 39.7%

Disagree

20 27.4%

Strongly disagree

5 6.8%

To what extent do you agree that this apology was the appropriate way to respond to the situation





27 37.0%

No

46 63.0%

Is Facebook a correct medium for a proper apology ?

Responses PercentageTV

8 11.0%

Newspaper

10 13.7%

Press release

49 67.1%

Twitter

2 2.7%

Other

4 5.5%

What other media channel would have been more appropriate?

Responses PercentageHighly credible

1 1.4%

Credible

17 23.3%

Neutral

25 34.2%

Not credible

27 37.0%

Not at all

3 4.1%

How credible to you consider Facebook and other social media as a news source ?

Responses PercentageHighly credible

24 32.9%

Credible

41 56.2%

Neutral

6 8.2%

Not credible

1 1.4%

Not at all

1 1.4%

How credible do you consider newspapers and other printed media as a news source ?




Responses PercentageVery likely

1 1.4%

Likely

6 8.2%

Neutral

9 12.3%

Unlikely

24 32.9%

Highly unlikely

33 45.2%

How likely is it that you will share and comment on a crisis like the Agnes Cupcakes on socialmedias


33 45.8%

No

39 54.2%

Did you purchase Agnes Cupcakes before the crisis?


23 31.5%

No

50 68.5%

Did the crisis affect your choice of buying Agnes Cupcakes?

Responses PercentageMale

38 52.1%

Female

35 47.9%

Gender

Responses PercentageStudent

53 72.6%

Fulltime work

13 17.8%

Parttime work

2 2.7%

Unemployed

1 1.4%

Other

4 5.5%

Occupation

Christian Tellefsen! CM.KOM! Public Relations & Issues Management! 090989-1965 !!!!!!!!!!

Agnes Cupcakes Issues Management

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