Lessons for Leaders
Written by Stuart Thomson. Published by Routledge in September 2020
Reputation should be considered a key business risk that requires proactive management. Attacks on your organization’s reputation can come from anywhere and have significant impacts if not handled well. This book analyzes case studies and provides recommendations for building resilience. Boards, trustees, non-executive directors, senior management, and leaders of all types of organisations need to consider the steps that should be taken to build, maintain and defend their reputation, and that means knowing what their reputation is and the audiences that matter most to them.
RBS was fined £390m in 2013 after an IT glitch left millions unable to access accounts. BP paid $60bn+ in fines and cleanup costs for the Deepwater Horizon oil spill in 2010. Volkswagen – share price fell by a third after its emissions cheating scandal in 2015.
This book provides a roadmap, not only for the corporate sector but also to charities, governments, NGOs and the public sector. Use practical steps to protect your organization’s reputation in an ever more open social media-led world, using reputation management, crisis leadership, and the role of politics in business.
Although leaders increasingly recognise the vital intangible asset that reputation represents, too many do not really understand what reputation is and the steps that should be taken to build it and their corporate value.
Leaders need to see reputation as a Key Business Risk. Reputation is intangible but vital for organizational success and survival. It takes years to build but can be destroyed rapidly. Reputation requires assessment, mitigation plans, and ongoing active management. Many organizations are not adequately prepared to handle reputational crises. They underestimate the likelihood of an attack and its potential impact.
The development of reputation should go through 3 stages:
1) Building – early stages
All organizations need a time to assess themselves and figure out what they stand for before they can tell the world about their values and work.
2) Maintaining – the steady state
In the steady state, the main goal is to keep stakeholders informed and aware of emerging issues. This means actively looking to the future and taking preventive action. The steady state can be both reactive and proactive.
3) Protecting – times of pressure
Organizations must take steps to reassure stakeholders, especially during a crisis. This may involve corrective measures. This stage is more effective if the previous stages have been followed, as this builds understanding and trust among stakeholders.
Think about who is really in control. The persons improving the reputation should have tools and connections to make the changes possible.
Threats to reputation can emerge from many sources:
- Operational failures – e.g. product defects, health and safety incidents
- Leadership scandals – e.g. misconduct, unethical behavior
- Industry issues – e.g. regulatory non-compliance, anti-competitive behavior
- Pressure groups – e.g. NGO campaigns, boycotts
- Social media storms – e.g. viral hashtags, fake news
- Rogue employees – e.g. leaks, social media rants
- Geopolitical events – e.g. trade wars, government actions
Activist campaigns that successfully damage reputation often have certain characteristics:
- Focus on specific organizational behaviors rather than vague issues
- Highlight gaps between rhetoric and reality
- Build broad-based support online and offline
- Inflict economic damage through boycotts or divestment
- Leverage shareholder activism and resolutions
- Maintain pressure over sustained periods of time
The media landscape is more complex and diffuse now, with power shifting to individuals through social media. This means more potential weak points for organizations’ reputations. Social media has dramatically increased reputational risks – news spreads fast and globally. Younger generations have higher expectations of corporate behavior. Consumers increasingly support brands that align with their values. Activist investors and organized campaigns are becoming more sophisticated. Companies are being held accountable in new ways with greater scrutiny. This is the new reality for businesses.
Organizations can overreact to bad press, making things worse by providing too much detail or unnecessarily prolonging stories. Social media accelerates reputational risk. Statements need rapid turnaround, but patience is still required. Crises require decisive, honest action focused on stakeholders’ needs. Admit fault, address weaknesses, provide evidence of change.
Organizations should build relationships with journalists over time through engagement, not demands. Understand their needs. Tailor communication style to each media outlet. Specialist media requires detailed understanding of issues. They need to proactively push out positive stories that reinforce reputation. Don’t rely on journalists alone. Overall, media interaction requires a sophisticated, nuanced approach focused on stakeholder needs, not organizational ego. Patience and honesty are key.
Media itself is not immune from reputational damage. They also have to worry about their own reputations, facing criticism for alleged bias. As media changes, reputation management must adapt.
Let’s do a Case Study on KFC’s Response to Supply Disruption. KFC had to close hundreds of stores temporarily due to delivery disruptions. How did they lessen the reputational damage? They took out newspaper ads with an image of an empty KFC bucket and the letters “FCK” on it. The ad apologized for the closures and acknowledged the frustration. This humorous, human and brave response was widely praised. It focused attention on KFC’s apology rather than just the supply failure.
Businesses need to build organizational resilience. They need to treat reputation as a priority risk and install robust crisis management plans and ensure the board oversees reputation risk management. A culture focused on ethics and responsibility at all levels needs to be built.
Investment in growing internal comms, short for communications team, so employees are prepared to be brand ambassadors is also usually a good idea. They are responsible for managing and implementing communication strategies and activities.
We need to also monitor the external landscape to track issues, narratives and emerging risks relevant to the company. Look out for early warning signs of discontent and address them. Monitor stakeholder perceptions and concerns.
Communicate Strategically. Ensure comms teams review all external messaging and campaigns.
And it’s better to communicate in plain language – avoid jargon and technical terms. Connect the dots in messaging to be coherent and consistent. Be responsive to all inquiries and complaints. Proactively tell your story rather than let others define you.
Leaders are better with purpose and values. Ensure corporate purpose and values inform all decisions and actions. The CEO must publicly role model desired culture and behaviors. Build trust by being transparent about challenges and failures and make meaningful commitments on social / environmental issues.
Businesses are also being called upon to collaborate more closely with governments and other stakeholders on joint projects and initiatives related to the UN Sustainable Development Goals (SDGs). Companies are being brought into UN discussions on financing and providing advice, reflecting their important role in achieving the goals.