However, a recent Deloitte report revealed the worrying fact that only 19% of executives were confident in their own organisation’s ability to protect against and respond to reputation risk.
Although reputation is very obviously important to global brands and sports stars and celebrities, it can be just as important to specialist businesses and small family concerns. Reputation is often measured in the value of company shares, and experts around the world believe 50-70 per cent of a company’s market value is attributable to reputation.
Yet it’s also important for small organisations or companies which are not traded on the stock exchange. Their market value is not as easy to assess, but we know for sure that people want to do business with companies they like and trust, and that’s the value of reputation.
In fact that’s what reputation is. It’s the cumulative perception of all stakeholders - such as customers, suppliers, employees, regulators and the media - based on their experience and contact with you. It may even be based on a perception which is untrue or unfair.
Moreover, reputation is built up over time by consistent performance and behaviour, not by short term actions or corporate advertising. But it has been proved over and again that years of positive reputation can be destroyed in days or weeks by unacceptable or improper behaviour.
This brutal truth was captured by Warren Buffet, one of the world’s richest and most successful businessmen, when he famously said: “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that you’ll do things differently.”
Importantly, being smaller is no protection against bad reputation. Indeed, bad reputation distinguishes an organisation from the rest of the pack a lot more than a good reputation does. Reporters, customers and commentators are far more likely to focus on the bad stuff you’ve done rather than the good performance you have been working on. So you are best advised to expend effort in protecting your reputation and avoiding a bad reputation rather than setting out to create a good one. After all, brand is what you say about yourself, reputation is what others say about you.
In other words your reputation is in the hands of others. You can’t control what other people think and you can’t make them like you. But you can control some of the factors which contribute to how your reputation evolves.
So, apart from running your business well and providing great products and service, how can you protect your reputation?
1. Listen to stakeholders
Everyone can think of a company which ignored a legitimate concern - for example about bad service or faulty products - and found their reputation being trashed in the media or in the industry.
Even if the complaint is not legitimate it shouldn’t be ignored. When a woman posted a photo on Woolworths’ Facebook page complaining about rotten avocados she claimed to have bought from a Sydney suburban store, some sharp-eyed folks in the company’s social media team recognised the photo from two years earlier. They responded; “Hey (name redacted), we think you may have taken your photo from another customer’s Facebook post” along with a link to the original complaint. The story went viral around the world, with customers and commentators applauding the company and pouring scorn on the failed scammer.
While not every company can employ a full-scale social media team, even a small business needs a proper process to listen and respond to all stakeholders in all contexts, not only online.
2. Recognise that bad reputation can be contagious
The recent Australian Banking Royal Commission provided stark evidence that criticism of some banks quickly damaged the reputation of every finance company. Remember that a major crisis affecting one company can damage the reputation of the whole industry. For example, the Toyota recall crisis in 2009 led to a temporary slowdown in sales of all Japanese car brands.
An industry-specific problem can damage your reputation, even if your company wasn’t involved: which is a powerful reason for a strong industry association.
3. Don’t try to hide criticism
It might be tempting to remove online posts which are critical or negative. But trying to cover up or remove comments can make it look as if you don’t care about customers. When a tourist coach crashed into a low bridge in Melbourne and seriously injured some passengers, the first response was to tape over the company name on the side of the damaged vehicle and, in the face of online criticism, the company temporarily shut down its Facebook page. The crash was bad enough, but the response to it was what helped inflame the headlines.
4. Manage your social media accounts carefully
Although a reputation can be destroyed at the speed of a Tweet, too many companies assign social media responsibility to the most junior person in the office. Not long ago the Virgin Australia Twitter account sent an obscene message about Kanye West to its 40,000 followers. Naturally the post sparked national and international attention before it was taken down, and it later emerged that a junior staff member at their media agency accidentally posted to the wrong account.
Or consider the debacle during the US election when a patriotic poster for Donald Trump showed “brave soldiers” superimposed into a picture of the American flag. Problem was that they were in Nazi uniform and it turned out to be a stock photo of SS re-enactors. Unsurprisingly Trump blamed “a young intern”.
While it’s all too common to blame some un-named junior staffer - and genuine mistakes do happen - inexperienced people should not be in charge of social media and promotion.
You wouldn’t appoint the admin assistant to speak to the news media on behalf of the organisation. Yet posting a Tweet is equivalent to having a news conference with the world. Most organisations have a clear policy on who can speak on its behalf when it comes to the traditional media, and the training they need. Exactly the same should apply to social media. You need very clear policies about who can post online, and who approves all posts.
Even for a small company it’s important to have an effective social media presence. It doesn’t need to be sophisticated or extensive, but it does need to be appropriate for your needs. There’s nothing worse than scrambling to establish a Twitter account or Facebook page when your reputation is already under attack.
5. Be a reputation leader
When it comes to the reputation of an organisation, a strong CEO can be a valuable asset. Recent research showed that there is a direct link between company performance and the CEO being publicly active and visible. At the same time poor executive performance or behaviour can be a costly liability.
Think of the unimpressive showing by some of the bank executives who appeared before the Banking Royal Commission and the impact on reputation and share value. Or think of Tesla CEO Elon Musk who posted a tweet last year suggesting that one of the Thailand cave rescuers was a paedophile, and Tesla shares fell by over $2 billion. He later falsely tweeted that he had financing to take the company private. When the SEC filed a lawsuit, Tesla shares lost more than $7 billion in value, and Musk and the company each agreed to pay $20 million to resolve the case.
Your organisation might not be a global brand like Tesla, but good leadership is just as important to the way people think about your business.
So, when budget time comes around and you are looking hard at your marketing budget, or the cost of social media presence, or hiring good customer service staff, ignore the advice of Rock Queen Joan Jett that reputation doesn’t matter. Instead listen to American selfimprovement guru Brian Koslow: “There is no advertisement as powerful as a positive reputation travelling fast.”
A practical checklist to help protect your reputation
While reputation is based on what other people think about you, your products and your services, there are some steps you can take to help protect your reputation.
- Develop an effective mechanism for listening to customer feedback.
- Implement an agreed protocol for promptly responding to complaints or critical comments.
- Build and keep updated an appropriate social media presence.
- Ensure your social media officer is trained and experienced.
- Monitor traditional media and social media for what people are saying about you.
- Make sure your employees know who to tell when they see or hear something negative.
- Survey customers to find out what they think about you.
- Foster relationships with respected third party experts who can help if needed.
- Actively support social responsibility beyond just day-to-day business.
- Designate and train spokespersons to intervene when things go wrong.
These steps won’t guarantee you a positive reputation. But they are a good place to start.
Dr Tony Jaques is a Melbourne based crisis expert and Director of Issue Outcomes Pty Ltd (www.issueoutcomes.com.au). He writes the e-newsletter Managing Outcomes and his latest book is Crisis Proofing: How to Save your Company from Disaster (Oxford University Press, 2016) www.oup.com.au/books/highereducation/management-andmarketing/9780190303365-crisis-proofing
