Reputation is intangible, being the evaluation of ourselves by others. It is also the accumulation of years of experiences, decisions and mistakes. In the corporate world, a reputation could be described as a promise made to stakeholders, employees and to the wider society, a promise of current and future behaviour based on past performance. A good reputation inspires trust, which is good for an organisation’s long-term sustainability, but failure to deliver on promises made can build a bad reputation. At the heart of this process is communication – simply put, communication builds reputation.
In his new book, Crisis of Character: Building Corporate Reputation In The Age Of Skepticism, global corporate reputation adviser Peter Firestein writes that the idea of “the corporation as a fortress divorced form its social setting” has come to an end. The level of scrutiny and transparency demanded of organisations today means that the public has an unprecedented power to influence a corporation’s destiny, and managers must acknowledge this and be in step with people’s desire to see their own values reflected in the company’s work. Or as Firestein told Communication Director, “I think that a good corporate reputation requires an alignment of a corporation’s values with the society in which it purports to function.”
On the front line
But who is responsible for building reputation – or rather, who is responsible for creating the conditions in which a reputation is created? Just as reputation touches on so many different issues that affect an organisation – including crisis, employee relations, corporate social responsibility, investor relations – then equally as many groups have input into supporting and conveying reputation. Most visible is the CEO. Firestein sees the CEO’s role as crucial: “It has to come from the CEO, and that’s not just the CEO’s personal conduct, it’s the ability of the CEO to instil throughout the organisation a set of values and a way of carrying out the values throughout everything the corporation does”. Here, the communications function plays a crucial role: “What the communication director can do for a CEO”, he notes, “is to stress how a company is perceived – you can’t communicate without knowing what your audience thinks.” But Professor Peggy Bronn, director of the Centre for Corporate Communication at the Norwegian School of Management, Oslo, sounds a note of warning against putting too much weight on the CEO as a reputation mascot: “The CEO as chief ‘brand builder’, if you will, is a double-edged sword. It is great for firms who have an inspiring leader who connects with a wide audience and represents their organisation in a good way. The downside is when the leader’s own profile overshadows the firm. We have had a few cases in Norway where, when we removed the impact of a highly profiled leader from their firm’s reputation value, the firm’s reputation was lower. In other words, the quality of products or ethical behaviour was not good enough to place the firm in a higher ranking. In the end, who the leader is doesn’t matter if the firm can not deliver on the rest of the dimensions.”
Employees are also on the front line of reputation, as any interaction between the public and the company is a reputational make-or-break. According to Rui Martins, communication director and head of institutional relations at health association Dianova Portugal, employees must be empowered to buy into the company strategy, and to show commitment as carriers of the company’s reputation. “Employees must be given a voice,” he says, “to be motivated and engaged in creating the success of the entire corporation in facing the challenges and opportunities of this interdependent global world.”
Toyota recall
The global reality of many of today’s companies also brings another dimension to reputation. Cross-cultural communications clearly have a role to play in adapting aspects of brand and reputation to local cultural, social and economic considerations. Integrated communication is also important for building a strong reputation, as Sabine Einwiller, professor of corporate communication at the Department of Communication, Johannes Gutenberg University in Mainz, explains. “In decentralised organisations, ensuring integrated communication is much more difficult” she says. “Especially when it comes to defining central values and messages, as well as the strategy and processes for reputation management, centralisation helps. However, there has to be enough flexibility to adapt reputation management to local sensitivities and needs. Also, in times of accelerated and more transparent communication through social media, it is essential to be able to communicate very quickly and not be hindered by cumbersome and lengthy coordination processes which often come with centralisation.” A case in point here is Toyota’s experience earlier this year, when the car manufacturer’s slow reaction to concerns over faulty breaks was attributed to cultural tone-deafness. Peggy Bronn thinks that, in the case of Toyota, “we saw American consumers and politicians expecting certain behaviour from Toyota management, and this behaviour was lacking. The Japanese leader had to be told how to behave for the US.” So Toyota’s communications function apparently failed in its task of letting top management know how others saw the company and its strategy.
Nestlé’s Facebook page
It is not just locations but tools that call for a different approach. The growth of internet communication means that more people can talk about firms and products, and crises large and small take on new life, all of which can derail reputation. Earlier this year, Nestlé’s Facebook page attracted the wrong kind of attention when the page’s administrators reacted in a defensive tone to critical wall comments, shutting down sites and banning the appropriation of Nestlé logos. Sabine Einwiller describes this as a failure to communicate “in a tone of voice suitable for an environment like facebook…the communication platform for reputation management has to be adapted to the differences in media environments just as to the differences in local or regional environments”. On a more positive note, Rui Martins credits social media with aiding a closer, more accurate measurement of what people are saying about your company: “Social media has simplified my task, by allowing me in real time and without financial costs to monitor and listen what prospects, influencers, opinion leaders, politicians and the media are saying about us and how they expect Dianova to fulfil its promise”.
Crisis, risk, and reputation
These are just some of the channels and strategies in which reputation can be fostered and communicated over the years. But alongside this long-term approach, the sudden impact of crisis can capsize the most carefully-nurtured reputation, and this presents one of the more difficult roles for the communication director. Dan McGinn, CEO of TMG Strategies, believes that reputation risks are directly proportional to the success of the company. “When you’re the biggest, best, first and most”, he says, “you’re in the greatest danger of having a catastrophe on your hands. You’re so big, it breeds confidence, it breeds over-confidence. It’s hard to see the world the way the rest of the world does. It exposes you, it insulates you, and I think for those larger organisations in the world, way up above everybody else, they need to realise that they’re in peril because of their size and they have to fight against arrogance and against complacency, and it’s those lessons that I see played out over and over again.”
Firms like BP suffer in a crisis because crises are seen to expose a fundamental flaw in the corporate culture. Sabine Einwiller describes crisis as “stress situations. They reveal a lot about the true personality of the entity who is hit by the crisis, be it a person or a firm”. Peggy Bronn believes that the current financial crisis “exposed a lot of bad practices and made people realise that some business sectors need increased regulation because you can’t trust what they are telling you.” When trust in business is violated, the effects on reputation, no matter how many years are behind that reputation, can be highly corrosive.
True colours shining through
In counteracting this damage, it is a relatively simple matter to establish the appearance of transparency, with websites, Twitter accounts and Facebook updates moving the information flow along quickly and professionally. But actions ultimately speak louder than words. As Einwiller cautions, “the real DNA shows through when it comes to accepting responsibility and meeting the needs of those affected. Here it shows whether a firm is largely profit-driven and governed by lawyers and accountants, or whether they have really and truly adopted a stakeholder approach to management and take the well-being of their stakeholders seriously.” In the case of BP, Dan McGinn believes that “they need to make an examination. I think they need to take this crisis and get the full value out of it for what’s happened, and re-examine their culture and their processes to see how something like this can happen, and why their response was not exactly right. They need to make a deep evaluation because yes, there’s bad luck, yes, there are technical explanations here, but there’s something cultural that contributed here as well.”
A slick approach
In the wake of a crisis as all-consuming as the recent Deepwater Horizon debacle, can a firm ever restore its reputation? Will BP’s name now forever be asscoiated in the public imagination with disaster, in the same way as, say, Exxon Mobil? Sabine Einwiller believes that “the associations between BP and the oil spill are engraved not only in the public’s memory but also in the digital memory of electronic media. The only way to prevent even greater reputational damage is to try to also create favourable associations and thereby attenuate some of the negative associations”. The recent announcement of the imminent replacement of Tony Hayward with American colleague Bob Dudley, head of the clean-up operation, is a step in this direction. And Dan McGinn believes that, despite the likely legacy of the incident, BP can begin the process of reputation rehabilitation by carefully defending its case: “I think the argument they need to make is that, from an environmental and energy standpoint, the world won’t be better off if BP disappears. This is one of the biggest institutions in the world, we need them to be run better, we need them to operate better, but for us to solve our environmental and energy problems we need a strong BP. They had the catastrophe, and they’ve repeatedly disappointed people with the way they’ve handled it. But I think that by having a new person in charge, they still have an opportunity to stabilise themselves and demonstrate their leadership here. Whether they will or won’t, time will tell, but they still have an opportunity to recover ground, to stabilise and to make this a long term fight on their part.” So we return to the long-term approach. As McGinn suggests, despite the difficulty faced by communicators in persuading a skeptical audience that the company is able to take accountability and move on, it is not impossible. And as Peggy Bronn notes, “a lot depends on the firm’s previous reputation capital, almost a bank account of built up reputation assets. If it is substantial, a firm can survive but it’s got to put back what it lost. For some firms this account is perilously close to empty. Toyota will come back in pretty shape, BP probably won’t disappear but they will never be the same.”