A hand destroying a star rating with a lighter, reputational risks

How to repair a damaged reputation?

Why is reputation important?

Reputation is a huge asset to any organisation, comparable to more tangible assets such as the organisation’s financial resources, intellectual property and its team of people.

Organisations benefit from good reputations in many ways but essentially a good reputation inspires trust. It enables businesses to attract better people and to charge a premium for goods or services. Their customer base tends to be more loyal and to buy a wider range of products and services. The markets believe they will deliver sustainable future growth, so they have a higher value making them more attractive to investors and creating more value for shareholders.

But reputation is hard won and easily lost. According to an article by Robert G. Eccles, Scott C. Newquist, and Roland Schatz in the Harvard Business Review Reputation and Its Risks, “in an economy where 70% to 80% of market value comes from hard-to-assess intangible assets such as brand equity, intellectual capital, and goodwill, organizations are especially vulnerable to anything that damages their reputations”.

Today, when businesses are more scrutinised than ever, mistakes can be quickly magnified and made very public, very fast. As Warren Buffett 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”.

What happens when that reputation is damaged, can you rebuild a reputation and restore trust?

The short answer is yes, but it requires careful management, and a healthy dose of genuine humility to get it right.

How to repair a damaged reputation?

Whereas frameworks for risk management across other areas of business are well established, lack of agreement on how to define and measure reputational risk, means that many businesses simply do not actively manage it.

In consequence, many companies choose to focus reactively on contingency crisis management to limit damage from existing threats, rather than proactively managing possible current and future reputational risks with a view to mitigating them.

Reputation management is about influencing the way key stakeholders view you, your business, product or service. It’s about perception management – your reputation is your greatest asset and the credibility from other people recognising the worth of your goods or services is one of the most powerful ways of growing and developing your business.

While businesses have many demands on their time, there are good financial reasons why they can’t afford to ignore reputation management.

How did your reputation become damaged?

Deciding on a strategy to rebuild a reputation requires analysis of the cause of the damage in the first place.

According to Eccles, Newquist and Schatz, factors that expose an organisation to reputational risk range from the perceived gap between the organisation’s reputation and reality (poor governance, data breaches, negative reviews, bad news), stakeholder and society’s changing expectations, and poor communication, as well as unrealistic expectations and poor communication across different functions of the organisation.

Reputation-reality gap

Effective reputation management starts by understanding that reputation is about perception among key stakeholders (from investors, customers and regulators to employees and suppliers) across every aspect of the business (product quality, corporate governance, employee relations, customer service, intellectual capital, financial performance and ESG). Cumilatively a good reputation among stakeholders across multiple categories results in a strong positive reputation for the company overall.

Problems arise where an organisation’s reputation is unmerited and exceeds the reality experienced by key stakeholders. To address this, the organisation needs to either improve its ability to meet expectations or, as a last resort, reduce expectations by promising less. Directors should improve reporting and communications to stakeholders as part of their drive to improve overall business performance and create value for shareholders.

Changing expectations

Shifting expectations of stakeholders in the face of an organisation behaving in the same way as it always has, increases the risk of reputational damage.

Outmoded practices, changing social norms and differing regional or national attitudes can all lead to changing stakeholder expectations. Organisations can’t afford to ignore these external influences and indeed should monitor them in order to anticipate their influence and mitigate this. An example cited by Eccles, Newquist and Schatz, is American agricultural biotechnology company Monsanto’s failure to anticipate the widespread concern of the European market about genetically modified crops (in a way that wasn’t seen in the United States).

Poor communication and coordination

Poor communication across a business can set the organisation up for reputational failure by creating expectations that fail to be met.

This can be as simple as the failure of effective communication between the new product development and marketing departments, resulting in a promotional campaign for a flawed new product launched before it is ready to be brought to market. The resulting disappointment of a product that either fails to work or is introduced later than intended can damage reputation.

Without being anyone’s specific responsibility and without good internal and stakeholder communication, an organisation’s ability to identify changing expectations and manage them is limited.

To handle each of these situations, you need a plan.

Examples of individuals and organisations surviving a damaged reputation

Of course, reputation management is as important for individuals as well as organisations.

Will Harvey, professor of leadership at Bristol University, and author of Reputations At Stake, says that while reputations can be damaged beyond repair, this is more often true of individuals than organisations. “Organisations can sever ties with chairs, CEOs and rogue employees but it is very difficult for an individual to separate themselves from the damaging event.”

While Enron, Lehman Brothers and Union Carbide no longer exist, many other companies at the centre of scandals – from Goldman Sachs (sub-prime mortgages) and News International (phone-hacking scandal) to Volkswagen (emissions scandal) – have survived.

Examples of reputation disasters include:

  • President Bill Clinton – after being exposed to ridicule following a sex scandal with White House intern Monica Lewinsky, Clinton embarked on a campaign of reputation repair, resulting in him reclaiming the stage. He is credited with being a key architect of the Northern Ireland Good Friday Agreement, ensuring his political legacy.
  • Martha Stewart Living Omnimedia – Self-made millionaire, writer and television personality Martha Stewart was charged with insider trading and served a five-month prison sentence. Upon release she admitted her mistakes and took responsibility for them, apologised and began a highly publicised comeback, becoming a successful media personality again. Her company became profitable once again just a year after her release.
  • Lance Armstrong achieved international fame by winning the Tour de France a record seven consecutive times. Throughout his career he was dogged by allegations of doping which he consistently denied; he was eventually stripped of his titles and became a social pariah when his use of performance-enhancing drugs was exposed. Armstrong apologised, took responsibility and expressed regret.

Tips on how to repair your reputation

Reputation management is the practice of proactively influencing what people think of your business or brand.

Rebuilding a damaged reputation can be difficult because it takes time to build trust, but a clear action plan to manage reputation will ensure that all your team is informed and behaves transparently and consistently, ensuring alignment across the business.

Harvey says that research suggests that there are three aspects of reputation: character (how you behave); capability (how well you perform); and contribution (how well your stakeholders expect you to perform in future). At times of reputational crisis, he says, an organisation must, apart from dealing with the immediate issues, demonstrate that it can provide future value.

Effectively managing reputational risk involves the following:

1. Monitor the perception of your reputation

– First, evaluate the extent of the damage to the business’ reputation across its different areas of operation, key stakeholders’ responses to it and benchmark your businesses reputation with those of your competitors.

– Particularly important is a thorough analysis of media coverage to include both context and general sentiment as media is key to shaping the perceptions (beliefs and expectations) of all other stakeholders.

– Track social media channels – being part of the online conversation means you can seize opportunities to improve and grow your business, be aware of any possible issues and address them quickly.

– Evaluate the organisation’s ability to meet the performance expectations of stakeholders as objectively and quantitatively as possible. Again, benchmark against peers.

2. Stay on top of changing expectations

– Monitor changing beliefs and expectations through regular surveys of key stakeholders, focus groups and opinion polls with key stakeholders and identify any potential threats to reputation.

– Regularly survey industry experts to help identify political, demographic, and social trends that could affect the reputation-reality gap.

– Build up a constantly reviewed snapshot of how beliefs and expectations are evolving and consider whether there is a gap between reputation and reality.

– Identify who has the responsibility to report to the board on key reputational risks and how they are being managed.

3. Develop a trust-building plan

– Build reputation management into your business plan before a crisis arises in order to leverage customer trust for competitive advantage.

– Establish strong marketing and branding across all platforms (media, social media, marketing, brand) to engage your audience, build trust and raise awareness.

– Establish a transparent trust-building plan to demonstrate business values and your commitment to putting issues right. Communicate that lessons have been learned.

4. Develop a consistent communications strategy

– Poor communication can make a bad situation worse. Ensure your messaging is consistent in both tone and message across all communications from social media and press releases to emails to customers.

– As a business, striving to get your voice heard, strategic and consistent communications can help you to manage stakeholders’ perceptions, especially in light of a reputation-reality gap.

– Use the most appropriate platform to speak to your core audience for the scale and type of crisis.

– Create your own online content and lead the conversation in a way that shows you are addressing the problem.

– Ahead of issues arising, develop a crisis communications plan that is regularly reviewed and updated.

– Improve internal communications – excellent internal communications and employee engagement is core to being transparent and resilient. Every employee is your ambassador so they should be trained, consulted, engaged, and be given guidelines on using social media professionally.

– Understand that open communication is critical – ensure you have an outstanding communicator on the board.

– Share your communications plan with key stakeholders – investors, your team, customers, department heads, financial and legal advisors – so they are aware of your plan of action.

– Put your plan into practice and be seen to be doing this by implementing new policies and training.

5. Restoration of personal brand and reputation

If your reputation is damaged and subsequently you have retained a low profile, then that remains your reputation. However, if you follow the damage up with a consistently excellent performance, then people will tend to forget the negative. Always be completely honest.

You can give people a compelling reason to think about you in a more positive light by:

– Creating a reputation rebuilding/restoration strategy which counterbalances existing perceptions.

– Listening and increasing self-awareness, understanding your weaknesses, and committing to improving them.

– Being resilient and continuing to lead.

– Having integrity, admitting any mistakes quickly by apologising and taking responsibility.

– Curating a strong online presence of content to promote your expertise and experience and position yourself as a thought leader in your field and to suppress and counteract negative online stories (which can’t be removed) to make people forget the negative.

– Considering additional training to underline your strategic skills and competence.

– Becoming the most reliable and consistent person in the room.

– Don’t be afraid of self-promotion to ensure your work is noticed.

– Finding ways to give back and make a genuine impact – consider volunteering your time and expertise to a charity or not for profit organisation or mentoring younger colleagues.

– Learning from mistakes and sharing those lessons with your peers to help restore trust in your brand.

How to prevent your reputation from becoming damaged again?

The key to reputation management is a proactive approach. Nature abhors a vacuum and regardless of whether you decide to simply ignore reputation, every organisation and individual has one.

By simply ignoring reputation management and taking a passive approach, other people take control of your narrative, and it can be difficult to reclaim this if you need to persuade stakeholders to think differently about you.

As we have seen, a good reputation is a huge business asset. That said, too much concern about reputation management can see individuals and organisations become consumed by what others think, contributing to indecisiveness and poor judgment.

In order to avoid issues reaching crisis point in the first place, regular reviewing and monitoring of attitudes of key stakeholders from the media to customers and investors is essential.

By making one person responsible for reporting on reputation management and establishing a reputation management group, the organisation can monitor how well prepared it is to manage internal and external critical developments, opportunities and challenges, identify any strategic and operational changes needed and plan accordingly.

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