Calculating the cost of an employee social media crisis

Craig Rodney Submitted by on the 17th of August 2016

With the majority of corporate employees actively using social media, it’s simply a matter of when one of their actions will create a social media crisis for their employer, not if. Instead of waiting to see what happens, corporates need to invest in employee education and, in order to justify the investment, they need to understand the business costs of an employee’s social media mistake.

There are three primary categories of costs that a brand will incur: direct brand costs, indirect brand costs and a cash cost.

  1. Direct brand cost

    This measures the brand damage cost of negative direct brand mentions, where someone either directly names the brand, or uses the official social username. The cost is calculated by multiplying the collective reach of all the negative brand mentions by the cost of the negative mentions.

    The industry average value for a positive brand mention is R45,000 per 1 million opportunities to see, meaning the brand damage is also R45,000 for the same measure of negative mentions.

  2. Indirect brand cost

    This measures the number of negative social media conversations mentioning the incident but not directly mentioning the brand, multiplied by a lower brand damage cost. While the brand is not directly mentioned, the association from the event exists in all conversations.

    The value we attribute to indirect brand mentions is R15,000 per 1 million opportunities to see.

  3. Cash cost

    This measures the direct cash costs resulting from the event. These are real costs the brand will have to suffer as a result of the employee’s social media behaviour. Direct cash costs include human resource costs, severance packages, legal costs, agency costs to manage the crisis, and any other costs directly incurred by the brand depending on the nature of the incident.

In the case of breach of regulation or breach of confidence, the fines faced by the company can be large – all resulting from a simple employee social media post.

The three costs are best explained through a recent South African example. Chris Hart, a senior economist at Standard Bank posted a tweet which the public, and his employer, deemed to be racist. The post resulted in the following costs over a two-week period:

  • Standard Bank received over 10 000 DIRECT negative brand mentions, with a combined reach of 63 million, resulting in a direct brand damage cost of R2,8million.
  • A further 9 800 indirect brand mentions, with a reach of 32 million, resulted in an indirect brand damage cost of R480 000.
  • Standard Bank negotiated to terminate Chris Hart’s employment for an undisclosed sum, incurred direct legal and HR costs, and their agency had to manage the online crisis the two weeks. A conservative estimate puts these direct cash costs at least R2 million.

While Standard Bank was able to manage the crisis and distance itself from the  comments, the damage had been done and the costs became unnavoidable.

The only solution for any company is to train employees on safe and effective social media use, to ensure employees understand the relationship between their personal social accounts and the company they work for, and to empower them to not bring the brand into disrepute.

To find out more about the social media risks of employee social behaviour, and how to deliver effective employee training, download the Cerebra Academy info pack now.