Draft:Replace, Restructure, Redevelop, Rebrand

Replace, Restructure, Redevelop, Rebrand (4R) is a corporate recovery model that outlines a structured approach for organizations to recover from significant crises, particularly those involving reputational damage or ethical failures. The 4R framework involves four key phases: Replace, Restructure, Redevelop, and Rebrand, aimed at restoring internal operations, external image, and consumer trust. The framework is associated with its originator, James S. Welch Jr. of the University of Tampa. This framework was first published in the Journal of Business Strategy in 2019.^[1]

Overview

The 4R model is a strategic framework designed to help organizations recover from crises that significantly impact their legitimacy, reputation, and status. It focuses on internal change, including leadership replacement, structural reorganization, and strategy redevelopment, and the external change of rebranding the corporate image. This recovery model was introduced in the context of Volkswagen's response to the 2015 emissions scandal, known as Dieselgate.^[2]

1. Replace

The Replace phase involves replacing key leadership and personnel to demonstrate accountability and to signal that the company is committed to change. This is often the first step after a major scandal or crisis, where previous leadership may have been directly involved in or negligent of the issues at hand. New leadership can help to restore stakeholder confidence and initiate the necessary changes within the organization.^[3]

For example, following the emissions scandal, Volkswagen replaced its CEO, Martin Winterkorn, and other senior executives, to take accountability for the crisis and to assure stakeholders of a new direction under fresh leadership.^[4]

2. Restructure

In the Restructure phase, the company undergoes significant internal changes to improve its operations, enhance efficiency, and better align with the new strategic goals. This may include revising the organizational structure, cutting non-essential positions, and implementing new systems or processes. The restructuring process is vital to ensure that the company is resilient and adaptable to market demands and regulatory expectations.^[5]

Volkswagen's restructuring efforts included revising its management structure, cutting thousands of jobs, and adjusting compensation policies to promote ethical behavior.^[6]

3. Redevelop

The Redevelop phase focuses on reevaluating and redeveloping firm strategy, including the company’s products and services, to meet current market demands, consumer expectations, and sustainability standards. This stage typically involves investment in research and development (R&D), as well as a commitment to innovation and market leadership in new sectors. Redeveloping strategy and rethinking product lines or services helps the company not only recover from the crisis but also to build a more competitive and sustainable future.^[7]

Volkswagen focused its redevelopment efforts on electric vehicles (EVs) and sustainability initiatives, signaling its commitment to environmental responsibility and green technologies.^[8]

4. Rebrand

The Rebrand phase aims to restore the company’s public image and reputation, often through marketing campaigns that emphasize the company's new values, goals, and commitment to ethical practices.^[9] Rebranding is essential for reshaping the company’s identity and rebuilding trust among customers, investors, and other stakeholders.^[10]

Volkswagen's rebranding strategy involved the promotion of its new electric vehicle lineup and an increased focus on sustainability. The company worked to shift the narrative away from its past ethical failures, re-establishing itself as a leader in clean technology.^[11]

Impact and Application

The 4R model has been successfully applied to organizations such as Volkswagen and Wells Fargo^[12], both of which experienced significant reputational damage—Volkswagen following its emissions scandal and Wells Fargo in the aftermath of its fraudulent account practices. Implementing these four recovery phases can help firms rebuild their internal operations and external image.^[13] The 4R model emphasizes the importance of leadership accountability, organizational restructuring, new strategy and innovation, and as well as internal and external communication.

Criticism

While the 4R model provides a structured approach to recovery, it has faced some criticism for not addressing deeper organizational cultural changes necessary to prevent the recurrence of crises. Critics argue that while external rebranding and product redevelopment are important, they may not be sufficient if the company does not undergo meaningful changes in its corporate culture.^[14]

References

^ Welch, J. (2019), The Volkswagen recovery: leaving scandal in the dust, Journal of Business Strategy, Vol. 40 No. 2, pp. 3-13. https://doi.org/10.1108/JBS-04-2018-0068
^ Dembetembe, G., Avidan, M., & Walls, J. L. (2024). Organizational responses to societal demands and their implications for environmental performance. Academy of Management Proceedings, 2024(1). https://doi.org/10.5465/AMPROC.2024.16576abstract
^ Welch, J. (2020). What’s in a name? Complications in overcoming reputational damage during the corporate recovery process. Strategic Direction, 36(3), 1-3. https://doi.org/10.1108/SD-09-2019-0167
^ Welch, J. (2019). The Volkswagen recovery: Leaving scandal in the dust. Journal of Business Strategy, Vol. 40 No. 2, pp. 3-13. https://doi.org/10.1108/JBS-04-2018-0068
^ Welch, J. (2020). Will Boeing soar again? Navigating a corporate recovery process. Journal of Business Strategy, 41(4), 1-9. https://doi.org/10.1108/JBS-04-2020-0087
^ Gaim, M., Sharon, R., & Jung, D. (2021). How deep was green? A close analysis of sustainability and value orientation in VW prior to the 2015 emissions scandal. Journal of Environmental Economics and Management, 88, 101-118. http://dx.doi.org/10.13132/2038-5498/14.3.685-695
^ Welch, J. (2022). Wells Fargo: A corporate recovery model to bank on. Journal of Business Strategy, 43(2), 68-77. https://doi.org/10.1108/JBS-03-2022-0045
^ Bilgin Turna, G., (2022). How “Dieselgate” Changed Volkswagen: Rushing to Erase the Traces of Greenwashing. Socially Responsible Consumption and Marketing in Practice (pp.255-273), Singapore: Springer.https://avesis.erdogan.edu.tr/yayin/4107c94e-b264-4694-bfca-58bdff716f68/how-dieselgate-changed-volkswagen-rushing-to-erase-the-traces-of-greenwashing
^ Hersel, Matt C., Gangloff, K. Ashley, and Shropshire, Christine (2023). Mixed Messages: Crisis Communication–Dismissal (In) Coherence and Shareholder Trust Following Misconduct. Academy of Management Journal. 66(2): 638–666. https://doi.org/10.5465/amj.2020.0275
^ Sneider, T. (2023). How organizations lose their way: Unethical behavior and moral disengagement in complex organizational context. Business and Professional Ethics Journal, 42(1), 109–137. https://philpapers.org/rec/SNEHOL
^ Ertz, M., & Michelet, B. (2022). Succeeding with responsible marketing: A framework and three short cases. In M. Ertz (Ed.), Socially Responsible Consumption and Marketing in Practice (Chapter 2). Springer Nature. https://doi.org/10.1007/978-981-16-6433-5_2
^ Wingard, J. (2019, November 1). Wells Fargo’s mea culpa: How to lead change after a scandal. Forbes. Retrieved from https://www.forbes.com/sites/jasonwingard/2019/11/01/wells-fargos-mea-culpa-how-to-lead-change-after-a-scandal/
^ Bucekuderhwa, C. B., Kanyurhi, E. B., Karhamikire, P. K., et al. (2024). When unethical practices harm relationship outcomes: Testing the influence of consumer-perceived unethical behaviour on trust and satisfaction in the banking sector. International Journal of Bank Marketing. https://doi.org/10.1108/IJBM-03-2023-0163
^ Hamrouni, A., Bouattour, M., Ben Farhat Toumi, N., & Boussaada, R. (2021). Corporate social responsibility disclosure and information asymmetry: Does boardroom attributes matter? Journal of Applied Accounting Research, ahead-of-print(ahead-of-print). https://doi.org/10.1108/JAAR-03-2021-0056

[1] Welch, J. (2019), The Volkswagen recovery: leaving scandal in the dust, Journal of Business Strategy, Vol. 40 No. 2, pp. 3-13. https://doi.org/10.1108/JBS-04-2018-0068

[2] Dembetembe, G., Avidan, M., & Walls, J. L. (2024). Organizational responses to societal demands and their implications for environmental performance. Academy of Management Proceedings, 2024(1). https://doi.org/10.5465/AMPROC.2024.16576abstract

[3] Welch, J. (2020). What’s in a name? Complications in overcoming reputational damage during the corporate recovery process. Strategic Direction, 36(3), 1-3. https://doi.org/10.1108/SD-09-2019-0167

[4] Welch, J. (2019). The Volkswagen recovery: Leaving scandal in the dust. Journal of Business Strategy, Vol. 40 No. 2, pp. 3-13. https://doi.org/10.1108/JBS-04-2018-0068

[5] Welch, J. (2020). Will Boeing soar again? Navigating a corporate recovery process. Journal of Business Strategy, 41(4), 1-9. https://doi.org/10.1108/JBS-04-2020-0087

[6] Gaim, M., Sharon, R., & Jung, D. (2021). How deep was green? A close analysis of sustainability and value orientation in VW prior to the 2015 emissions scandal. Journal of Environmental Economics and Management, 88, 101-118. http://dx.doi.org/10.13132/2038-5498/14.3.685-695

[7] Welch, J. (2022). Wells Fargo: A corporate recovery model to bank on. Journal of Business Strategy, 43(2), 68-77. https://doi.org/10.1108/JBS-03-2022-0045

[8] Bilgin Turna, G., (2022). How “Dieselgate” Changed Volkswagen: Rushing to Erase the Traces of Greenwashing. Socially Responsible Consumption and Marketing in Practice (pp.255-273), Singapore: Springer.https://avesis.erdogan.edu.tr/yayin/4107c94e-b264-4694-bfca-58bdff716f68/how-dieselgate-changed-volkswagen-rushing-to-erase-the-traces-of-greenwashing

[9] Hersel, Matt C., Gangloff, K. Ashley, and Shropshire, Christine (2023). Mixed Messages: Crisis Communication–Dismissal (In) Coherence and Shareholder Trust Following Misconduct. Academy of Management Journal. 66(2): 638–666. https://doi.org/10.5465/amj.2020.0275

[10] Sneider, T. (2023). How organizations lose their way: Unethical behavior and moral disengagement in complex organizational context. Business and Professional Ethics Journal, 42(1), 109–137. https://philpapers.org/rec/SNEHOL

[11] Ertz, M., & Michelet, B. (2022). Succeeding with responsible marketing: A framework and three short cases. In M. Ertz (Ed.), Socially Responsible Consumption and Marketing in Practice (Chapter 2). Springer Nature. https://doi.org/10.1007/978-981-16-6433-5_2

[12] Wingard, J. (2019, November 1). Wells Fargo’s mea culpa: How to lead change after a scandal. Forbes. Retrieved from https://www.forbes.com/sites/jasonwingard/2019/11/01/wells-fargos-mea-culpa-how-to-lead-change-after-a-scandal/

[13] Bucekuderhwa, C. B., Kanyurhi, E. B., Karhamikire, P. K., et al. (2024). When unethical practices harm relationship outcomes: Testing the influence of consumer-perceived unethical behaviour on trust and satisfaction in the banking sector. International Journal of Bank Marketing. https://doi.org/10.1108/IJBM-03-2023-0163

[14] Hamrouni, A., Bouattour, M., Ben Farhat Toumi, N., & Boussaada, R. (2021). Corporate social responsibility disclosure and information asymmetry: Does boardroom attributes matter? Journal of Applied Accounting Research, ahead-of-print(ahead-of-print). https://doi.org/10.1108/JAAR-03-2021-0056

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