Minimize Reputation Risk With The Use Of Mental Models


photo_8716_20091014Behavior in organisations is shaped by the ways in which people think about the world around them.

The suppositions that shape their ways of thinking are called ‘mental models’ by Peter Senge. In the Fifth Discipline , Senge describes mental models as ‘deeply ingrained assumptions, generalizations, or even pictures or images that influence how we understand the world and take action.’

Lately every article on the Internet seems to focus primarily on the use of social media and the impact of online reputation.

Whilst this is not wrong it is also a mental model, one which is taking precedence on the real factors that impact reputation, namely that of the behavior, performance of the organization and the impressions and perceptions it creates whilst achieving its objectives.

To manage reputation in a business, change has to occur on a deeper and more fundamental level. It is not just about scanning what people are writing or saying about you. It is about inculcating a sense of pride and understanding that a company derives its reputation from its stakeholders and the way it is perceived because of its actions and performance.

I believe that Reputation Managers need to re-examine their mental models if it really wants to build and safeguard a company’s greatest asset. The understanding and changing of mental models is one of the disciplines of a learning organization and is another vital tool to reduce opportunity for reputation risk.

Certain mental models initially shaped the Reputation Management profession and helped people to understand the importance of reputation. Until now, those models like Public Relations served us well. Traditionally, it was believed that the Reputation of the organisation could be managed and protected by a small group of PR professionals using tools such as strategic communication.

But that approach no longer can be the only way. With so many things that impact and influence reputation, a more systemic and organization –wide approach has become necessary to protect this fragile asset and most volatile and dangerous risk.

BP serves as a crucial example. It undertook a venture in the Gulf of Mexico that turned into a fiasco of the highest nature.

It undertook a venture for which it had not thought through all risk and which they now admit, they had no recourse for action, if things went wrong. From a reputation point of view, no amount of PR could stem the negative reputation risk that emerged. In fact, the only thing that will be a tipping point, will be stemming the flow. And, then to restore the damage.

BP even admitted that they did not have the right tools for low – probability high impact events! Other experts called the problem – complacency. Point remains – perhaps their mental models were all wrong. They used methods from the past.

Interestingly I watched a video this morning on oil spills that resonates here for me together with recent reports that BP undertook an enterprise for which they knew there were no remedy.

Watch – History repeats itself – The more oil spills change, the more they stay the same – a must watch video – http://www.wimp.com/oilspills/

The BP case clearly demonstrates the amount of damage that can be done to an organisation once its reputation is damaged. It is particularly significant because the more diverse and physically spread an organisation is, the more it becomes immune to risk, and yet the more it becomes exposed to the possibility and consequences of damaging its reputation.

However as reputation damage can harm organisations of all sizes and activities, why is it the most misunderstood and ill-managed of company’s risk management activities? Is it because there was a misconception in the past that PR after the fact could restore trust in an organization?

Once an organization has done something that reveals or even gives the possibility that its products or services are unsafe or unreliable, or that there were incompetent, corrupt or self-serving people in key positions, no amount of immaculate crisis response or highly paid PR consultants can prevent the fall out – as has been demonstrated by the numerous companies unable to restore market confidence after a crisis. The fallout almost ever leads to loss of earnings, loss of sales, share value decreases and breakdown of relationships, unless carefully managed.

One institution defines Reputation risk as the risk that an activity, action or stance performed or taken by the organization or its officials will impair its image in the community and/or the long-term trust placed in the organization by its stakeholders, resulting in the loss of business and/or legal action/and (loss of face – in a situation of negative public opinion). Essentially all risks and all related components of an organization potentially impact on reputational risk.

Read http://247wallst.com/2010/01/05/the-15-most-hated-companies-in-america for examples of companies that got it wrong the past few years.

Reputation management is thus no longer primarily a function of the corporate communication department. To address effectively the variety of risks and complex issues that corporations face today, reputational risk management must be mandated from the top of the organisation and driven and implemented by all key business functions jointly. Ownership of reputation has to start with top management. They will need to make it a priority and set the example through their attention to it and application of corporate responsible practices.

Reputation Culture change will require "executive walk the talk" or culture shaping by role modeling. If the executive team does not live out the values, norms, beliefs, customs, traditions, etc that constitute placing a premium on reputation, then any change in culture or shift in stakeholders opinion of an organization will be a none starter i.e. The Executive team need to change their mental models about managing reputation.

Reputation Risk management also needs a corporate custodian that ensures plans and skills are up to date throughout the organization. Processes must be established, and tools that facilitate and speed up crisis response are critical.

Therefore, Reputation Risk Management can only be effective if it operates holisticallynot as a specialist function to be activated in an emergency but as a major influence on the organization’s actions, behavior and standards. The key to this is to understand that to manage Reputation Risk, a multidimensional approach will be needed that includes the convergence of risk management, reputation management, stakeholder relationship management, crisis management, corporate communications, training, corporate governance and sustainable business practices.

Simply put, to protect the corporate reputation asset, mental models need to change.

Advertisements