Reputation now seen as top strategic risk, says Deloitte survey
P.S Will you join us at this event?– The Corporate Reputation Protection Master Class 28 – 29 November. For more info: http://goo.gl/7MNDlO
The recent agreement reached between the Construction Industry and the Competition Commission for collusive tendering got me thinking. (15 construction companies had agreed to pay fines totalling R1.46 billion for collusive tendering).
What are the signs of impending and unavoidable doom in our businesses and why do we not see, sense them or hear about them? Surely there are signs or hints that there are trouble on the horizon?
Why do we not pick up on patterns of wrong decision-making in committees?
In the book the Alchemist Paul Coelho writes about the importance of omens – prophetic signs or significance. Omens are an indication or sense of what is to come; often the writing on the wall. The allusion is to the Book of Daniel in the Bible, in which a hand mysteriously appeared and wrote a message on Balshazzar’s palace wall foretelling his destruction and the loss of his kingdom.
In business, the signs come in many shapes and definitions.
Incidents. Issues. Near Misses. Rumours. Internal chatter. Suggestions. Complaints. Patterns. CCMA cases. Grievances. Internal Audit reports.
All Signs and Omens. What more do you need to act before there is whistleblowing or a Wikileaks?
A friend of mine once said: “ Watch out for the sleeping crocodiles in your business. Catch it before it gets you”
Ultimately these omens are all signs of possible reputation risk, if we define reputation risk as anything that might potentially damage the good name and reputation of an organisation. Signs that there might be an unwanted event or unwanted publicity around the corner.
To prevent potential damage to an organisation’s most valuable asset – it’s reputation, it is important to realise that the above signs are clear indicators of a need to create better and more robust internal communication feedback systems, better discussion and listening tools and instruments and corporate culture interventions.
Also read my post on You better be Awake: Searching for Vulnerabilities. In this post, I make the point that “To close the gap or feedback loop I would certainly urge Reputation managers to establish close links with the Risk Department, Internal Auditors and Compliance Officers in the organisation. Often these are the individuals that uncover areas what I would call smouldering crises – any serious business problem which is not generally known within or without the organisation, which may generate negative news coverage and reputational damage if or when it goes “public” and could result in fines, penalties or unbudgeted expenses, loss of business and destruction of relationships.
After financial risk, reputation risk is the biggest concern that keeps board directors awake at night, according to the latest poll from EisnerAmper via Survey Says Boards Troubled by Reputation Risk – Compliance Week.
These days Reputation Risk is a a real threat or danger to the good name or standing of an organization due to the immediacy of the sharing of negative information and the impact of Social Media.
For a long time experts debated whether Reputation Risk was a strategic risk or a consequence of a risk.
What has become clear though is that it is now a“Meta risk – a potential menace to fundamental business strategy, and possibly an even greater hazard to organizational survival than a financial restatement or problematical findings in a compliance report”.
Reputation risk can occur through a number of ways: directly as the result of the actions of the company itself; indirectly due to the actions of an employee or employees; or tangentially through other peripheral stakeholders, such as joint venture partners or suppliers.
In addition to having good governance practices and transparency, companies also need to be socially responsible and environmentally conscious to avoid reputational risk.
This importance has been confirmed through a recent report “With CSR In Global Demand, Corporate Reputation Is At Stake”, according To New Research From Cone Communications And Echo Research: PR Newswire (http://money.msn.com/business-news/article.aspx?feed=PR&date=20130522&id=16510227#scpshrjmd)
This must – read report shows that CSR is now a direct driver of Corporate Reputation and major cause of Reputation Risk.
Should one do business with a company which once had a bad reputation, but now has new management? Or with a company which seems a little shaky due to a crisis or scandal? Or with known tenderpreneurs, Mamparas, etc.?…
The best advice is to proceed, but with caution. Follow these steps to avoid getting burned:
– Do your homework. Research the company and find out what the market is saying about them. Find out more about their modus operandi. Do a SWOT analysis. Do due diligence of not just tangible assets, but intangibles as well.
– Go slow. Meet with the CEO and/or company representatives. Meet with stakeholders. What is your gut feel about the management and leadership?
– Better still, get outside 3rd party independent opinion. Compare views and perspectives.
– Assess the risk. Compare your feelings and the research you conducted. If it’s positive, proceed.
Be careful who you get into bed with. Remember your reputation might be at stake.
The manner and way in which a company’s employees use the road can significantly harm the company’s public image and reputation.
The other day I was nearly wiped out by a truck that moved from one lane to another without indicating. Best of all, on the back of the truck was a notice with the words: “How’s my driving? Phone this number!” What a joke!
The way employees drive or ride on the road is a reflection of the company’s image, and highly visible to members of the public, many of whom may be customers of the company. Road crashes involving company vehicles, especially delivery ones, are also very visible, especially when pictures or company names are reported in the media. Court cases following crashes or prosecutions for driving offences are also reported in the local and national media.
On the positive side, companies which are proud of their road safety performance should include details of their driver management approach, targets and performance in health and safety reports on their websites.
The World’s Most Admired Company survey by Fortune magazine – see 2011 study results at http://money.cnn.com/magazines/fortune/most-admired/ have been one of the ground breaking annual studies to have been conducted in the field of Reputation and have added much to our understanding of what makes companies great.
But what about those companies that did their utmost to destroy their carefully crafted reputations during the past year (and years). Many companies, institutions and individuals have made this list in the past twelve months.
Perhaps we should start a World’s Most Unadmired Company List. Without being specific, there have been many examples. Many websites and other bloggers have asked their audiences for their thoughts on the matter. Take a look at the examples cited in articles such as:
The Holmes Report – The Top 10 Crises of 2011 – http://www.holmesreport.com/featurestories-info/11377/The-Top-10-Crises-Of-2011.aspx
Australia’s 2011 List – http://prdisasters.com/?p=944
These examples show that no organisation is immune against potential crises and incidents that can destroy their good names. The question that should be arising in your mind is:”What is the potential for my organisation to find its way on to this list?”
- 95% (a lot) of major companies have suffered at least one reputational crisis in the past 20 years
- Major companies suffer a “significant” reversal of fortune every seven years
- One out of two (50%) of these reputational failures were tied to having the wrong business strategy or model; 15% from lawsuits; 10% from merger and acquisition issues. Interestingly, the CEO of Willis Global Solutions Consulting Group said that none of the crises were related to natural disasters until 2011. That is hard to believe since there have been plenty of natural catastrophes over the past 20 years that should have impacted companies such as floods, hurricanes, droughts, food shortages, cyclones, earthquakes, SARS, etc.
Also wanted to mention a recent analysis that came from the 2012 Harris Interactive Reputation Quotient (RQ) and was reported in PRWeek. Harris Interactive reported that advertising has less of an impact on company reputation than social media or new stories.
Research continues to show that word of mouth from news stories with negative information about companies drives perceptions more than we realize.
Weber Shandwick reported in their Company Behind the Brand: In Reputation We Trust that consumers are talking about more about company wrong doing than right doing and advertising may not be as able as it used to be in rehabilitating brand reputations.
The key word now is stakeholders. So many companies have customer service or shareholder programs in place, ignoring their other stakeholders. What are the perceptions of suppliers, the government and the media with regards to your company?
Let me leave you with a question: Who in your organisation has assumed a holistic (systemic) view of managing stakeholder reputation?
If there is no one, your organisation is in danger of making the unadmired company list. If you want to find out more about how you can safeguard your company’s reputation or if you want me to address your management team on this issue, e-mail me.
A new white paper by Deloitte developed in collaboration with RiiЯ Ltd entitled ‘A Risk Intelligent view of reputation – An outside-in perspective’ has once again highlighted the strategic importance of reputational risk.
The report highlights the fact that Reputational Risk is now regarded globally as a “meta risk, “standing at the forefront of key strategic and operations concerns, right alongside new competition, technology failures, talent issues, and changing regulations.
As executives in the study recognized, reputation, quite simply, can make — or break — a company. Reputation is an important factor across all four major risk areas of the Risk Intelligent Enterprise — strategic, operational, financial, and compliance — particularly of the former two, strategy and operations, because it is a constantly evolving and fully embedded part of why and how the company achieves its objectives.
This catapults reputational risk to what the writers call a meta risk, or a potential menace to fundamental business strategy, and possibly an even greater hazard to organizational survival than a financial restatement or problematical findings in a compliance report.
In the report, which makes for highly recommended reading; a three-step process of managing reputational risk is recommended including internal discovery, analysis of stakeholders and marketplace threats and opportunities, and proactive management of actions designed to protect and enhance reputation and value.
Download Report – http://bit.ly/ph6omX
In this respect, REPUCOMM offers two dedicated training programs dealing with Reputational Risk and Stakeholder Reputation.
These 2 – day training programs are facilitated in-house depending on client needs and requirements or presented in the public environment, as follows:
7 – 8 November: Reputation Risk Management Master Class – http://reputationriskmasterclass.invite43.com
23 – 24 November: Stakeholder Reputation Management Master Class – http://stakeholderreputation.invite43.com/
Should you be interested to attend any of these programs, please register online and I will do the necessary or e-mail email@example.com for a registration form.
(This article previously appeared in my Powerlines Newsletter Number 38 – April 2004)
As a company with good intentions, how do you communicate bad news such as a profit warning, in such a way that you can minimise negative market fallout.
What goes through most company management’s minds are: “What if shareholders pull their money out? Well, they may or may not.
Today, that decision can depend at least in part on a company’s reputation in the market place – how a company is perceived by shareholders and the public- whether they think it operates efficiently, has credible leadership and has a firm grasp on the industry and its place in the market.
The challenge lies in how you manage and shape those perceptions and get the right message across to the investment community about your company. Especially in the Internet Age when you have no control over the flow of information and rumours.
After all, how can you control perceptions when any investor, large or small, can gather detailed information on your operations with the click of a mouse?
These days, it takes extraordinary knowledge and skill to navigate the territory of managing perceptions and building a corporate image and identity. Not only do you need to have a good understanding of how perceptions are formed and how the investment community operates, but more important, you have to find ways to get your message across in an era of uncertainty!
Indeed companies that once had time to react to a drop in earnings or an internal crisis before breaking the news to the investment community now must find ways to get ahead of the news or stay in a reactive mode and face the consequences.
In today’s high-pressure, nano-seconds environment, a company can’t afford to employ a communications policy that forces shareholders and potential investors to read between the lines when problems are present.
As a company you need to be transparent and communicate consistently and proactively. Some companies want to go quiet during bad news, but they need to communicate regularly in good and bad times.
Many companies have learnt that openness and transparency relates to much more than just financial data. A good example is the increasing interest in for example ethical investing.
More and more investors are looking at measures beyond the “financial statements”. They are increasingly looking at the drivers of reputation such as whether management is capable in running the company, whether the organisation is playing a role in sustainable development and whether it has an adequate record on managing it human capital etc.
So here are some valuable strategies and tips that can minimise the potential damage:
– Open the lines of communication and educate analysts and other stakeholders such as opinion leaders as your business climate UNFOLDS. Keep them in the loop through regular briefings and knowledge sharing LONG before whatever hits the fan, does.
– Prepare for any fallout. Message preparation should take place long trouble strikes. In today’s climate a company only has a nanosecond in which to respond. How ready is your company to respond to a news crisis? How quickly can you post new information on your website? How quickly can you communicate DIRECTLY with key stakeholders and influencers? (What about the use of social media? A CEO Blog, Use of Twitter and Facebook?)
– Take time to build relationships before a crisis hits. Build relationships with stakeholders, analysts and key opinion leaders. Another way of spelling the word TRUST is “TIME”. It takes time to build relationships and credibility. Start now. Identify stakeholders carefully. Today one person with a PC and a modem can damage your company’s reputation.
– Benchmark your communication process both formally and informally. Executives go for annual medical check-ups but they also go and see the doctor when they are feeling uneasy. Conduct regular spot checks. (Use online survey methods such as zoomerang and surveymonkey to track issues and perceptions)
– Incorporate maximum disclosure as part of your company’s strategy. That means that it’s not so much what you say; but how consistently you say it. Define what is meant by mandatory disclosure, voluntary disclosure and involuntary disclosure (I deal with that in my Stakeholder Reputation workshops)
– Manage expectations. The best way is to be honest and keep people informed. No one likes untimely surprises. No one likes bad news, but it becomes more palatable when it is less likely to damage a person’s personal position.
As a general rule I would suggest that it is better to be honest upfront. Be careful to discern between pure hype and honest information.
If you do have negative news, be honest but concentrate on sharing that the company has a clear focus on its mission and goals and a commitment to follow through on its strategies. When potential investors sense the management team’s commitment, their confidence is strengthened.
Minimising the fallout from a profit warning is an essential strategic planning exercise. It is education of the highest order.
It is an exercise that deals in perceptions and intangibles. No company is immune to this happening.
The only positive lies in HOW your company will respond.
When I facilitate my reputation management training, I always relate that building the reputation of an organisation is like layers of an onion.
The more layers of protection there is, the less chance of damage in a crisis. On the other hand it is also vital to look for potential vulnerabilities and concerns that can penetrate these layers.
These are the questions that I give out to participants with the following instructions – Here is a list of the questions that we need to answer/investigate in order to manage Reputation adequately in in an organisation. Let this partial list govern your thinking during this workshop and when we prioritise a list of action items to manage.
- What kind of company do we want to be? What are our defining traits?
- How distinctive is our Reputation from the rest of the Industry’s reputation?
- How accurate and consistent are the images that we project to our different stakeholders?
- How can we strengthen our relationships with these various stakeholders?
- Evaluate the way your organisation currently manage Reputation Risk. Is it still appropriate?
- What are the issues and problems at Business Unit level that can impact reputation?
- How do our internal features correspond to current perceptions of our Company by the different stakeholders?
- What policies, systems, procedures, rules, regulations, actions and behaviour are not consistent with the organisation’s desired reputation?
What are the issues/Problems affecting each Reputational Driver?
There was this case in a hospital’s Intensive Care ward where patients always died in the same bed and on Sunday morning at 11 a.m, regardless of their medical condition. This puzzled the doctor and some even thought that it had something to do with the supernatural. No one could solve the mystery….. as to why the deaths at 11AM?
So a world-wide expert team was constituted and they decide to go down to the ward to investigate the cause of the incidents.
So on the next Sunday morning few minutes before 11 a.m., all doctors and nurses nervously wait outside the ward to see for themselves what the terrible phenomenon was all about. Some were holding wooden crosses, prayer books and other holy objects to ward off the evil…….. Just when the clock struck 11…… What do you think as to what happened???
Scroll down to see what happened.
The part-time Sunday floor sweeper, entered the ward and unplugged the life support system so that he could use the vacuum cleaner.
Reputation Risk can have its origins in seemingly unrelated or small issues in an organisation that eventually becomes big things that can destroy carefully crafted reputations. “Witness, the front pages on a Sunday!”
The damage of a reputation crisis can be direct and indirect. These costs could include penalties incurred because of a lack of legal compliance, litigation, media conferences and advertising costs, hiring of crises communication and risk management consultants.
But what about the indirect costs, the effects on various stakeholders? The customers that do not return? The prospective customers that read and base their future actions on today’s impressions?
The Exxon Valdez oil spill cost more than US$ two billion in the first two months. But ten years later Exxon issued a statement to say that the spill cost them more than US$10 billion in just trying to restore the environment. Added to that tally was the news that the company was fined US$5 billion for the incident by the USA government.
And why did the incident occur? Root cause analysis showed that it happened as a direct result of a faulty HR policy – understaffing and poor working conditions. (By the way the captain was not drunk, he had been suffering from sleep deprivation, I hear).
Many organisations plan for possible business risks but few have in place systems to minimise damage to its most valuable asset – its reputation. – Some studies such as the Ernst & Young “Measures to Matter” survey showed that reputation and the value of intangibles can make up as much as 70% of a company’s share price.
Any crises situation has the potential to damage an organisation’s reputation, impact on the share price and destroy relationships. No matter the factor or risk that caused the crises situation, reputation risk is inherent in it.
Reputation damage inevitably leads to loss of market confidence, critical stakeholder actions, litigation, higher capital costs, etc.
Reputation damage can be defined as the adverse operational and financial impact to business performance when the company’s good name gets tarnished. Yet, how often do management receive training and education on how to manage reputation and minimise reputation fall out? Seldom, I will wager.
To understand the potential ramifications of a reputation risk incident, it is vital to take a reputation root cause analysis view.
Negative publicity should not be seen as the reason for only further intervention downstream, but as an end-of-the-pipe effect, which could be organisationally have been cured upstream.
Often the root causes can originate in culture(values), leadership (actions), structure(relationships) and process (systems). These variables interact and combine to produce organisational reputation results and outcomes.
To empower managers to understand this inter-play, I will facilitate a program in July which I take managers through a guided process so that they can understand how reputation risk incidents develop and evolve.
See http://reputationriskmasterclass.invite43.com/ for more information.
Sherlock Holmes: “Yes the strange incident with the dog.”
Constable: “But, the dog did nothing, Sir!”
Sherlock Holmes: “Yes! That is the strange incident.”
Lesson: Management has to be like Sherlock Holmes and have the ability see what isn’t there. They have to hear the dog that does not bark. They need to see ‘what is missing and essential’
That ability will protect the organisation against Reputation Risk.
Reputation risk has a tendency to emerge when we expect it the least.
Since everything we do and say can have an impact on the reputation of the organization, careful attention needs to be given to the management of a company’s reputation as an asset and a risk.
Worldwide research shows that many private and public sector organisations regard reputation as their biggest risk. Like all of the intangible assets whose value has escalated in recent years (other examples are talent, knowledge, know – how and intellectual property), reputation has been overlooked by organisations because it is so difficult to comprehend.
It is only when a reputation incident severely damages the credibility of an organisation or one of its brands, or its standing in the eyes of its stakeholders, that the potentially catastrophic consequences of not managing the crisis properly become apparent.
Studies of organisations that have handled crises affecting their reputation badly have identified long term and irreparable damage to share price, market share and brand value.
Many organisations make the mistake of assuming that all that is needed is media training and crisis planning. However, a reputation crisis exposes to public and media scrutiny not only the organisation’s competence at crisis handling, but the values, standards and shortcomings that existed beforehand.
The reputation strategy should, therefore, have two simple objectives – to prevent the causes that could damage your reputation, and to minimise the impact if, despite your best endeavours, a reputation crisis should occur.
It will therefore be in organisation’s interest:
- To ensure that all managers and staff members understand the nature of the organisation’s reputation and their own individual reputation;
- That the Board establish a reputation risk management strategy;
- To develop standards and controls for the action that the reputation asset building and risk management strategy places most importance on;
- To provide reputation management training, education and communication to obtain the vital support and commitment of all employees and managers;
- To pay special attention to red flags – analysis and monitoring mechanisms to provide early warning of problems or crises;
- To implement a process of continuous crisis assessment
Some organisations have attempted part of this process themselves, particularly the first four stages. In my experience, they are severely disadvantaged by being too close to the issues, or by risking avoiding taboo or politically difficult areas, or by not challenging assumptions vigorously or objectively enough.
It is often said that a doctor cannot prescribe medicine, unless he conducts a proper diagnosis. The same holds true for definitions. Unless you define something clearly, the wrong approach to deal with it may be taken.
Here then is a few of the definitions that I unpack for my audiences in my Reputation Risk Management Master Class. Use these to define and customize your approach in preparing your organization to deal with unwanted reputation damage.
Although Reputation Risk often is the consequence of lack of compliance for instance, it is vital for compliance experts to understand their role in the management of this intangible but vital asset.
Just consider these two slightly reframed definitions and your role:
Errors or fraud can have serious ramifications on the public perception of a institution.
Management can mitigate reputation risk by having an effective public relations program, by developing and maintaining strong stakeholder relationships, and by enacting adequate internal controls over all aspects of the organization and internal systems so that errors do not happen in the first place.
This affects the institution’s ability to establish new relationships or services or continue servicing existing relationships. This risk may expose the institution to litigation, financial loss, or a decline in its customer base. Reputation risk exposure is present throughout the organization and includes the responsibility to exercise an abundance of caution in dealing with its stakeholders such as customers and the community.
Very often the issue of materiality can blow a small thing into a large issue. (Something which Sepp Blatter is struggling with right now).
Exposing managers and compliance experts to how an incident can escalate and create huge impact is vital. Working on these definitions, will close the gap between tangible asset control and the impact of intangibles.
An organisation’s reputation remains its greatest asset and risk, and needs to be managed accordingly. If you would like to know more about Reputation Risk which is mentioned in the King Code 3 on Corporate Governance, read my blog post – or attend the next Reputation Risk Management Master Class – http://reputationriskmasterclass.invite43.com/ that I will facilitate in July.
The CEO was scheduled to give the keynote address at an important convention and so he asked one of his brightest employees to write him a punchy; 20-minute speech. When the CEO returned from the big event, he was furious.
“What’s the idea of writing me an hour long speech?” he demanded. “Half the audience walked out before I was finished.”
The writer was baffled. “I wrote you a 20- minute speech,” he said. “I also gave you the two extra copies you asked for.”
Even Shakespeare knew about Reputation Risk..because he also had a lot to say about it:
“I am my reputation” (William Shakespeare, 1595)
“Reputation, reputation, O,I have lost my reputation! I have lost that immortal part of myself, and what remains is bestial! (Othello)
Reputation is an idle and most false imposition; oft got without merit, and lost without deserving.(Othello)
Robert Scoble was quoted by Fast Company saying that “Reputations are created and destroyed online in the speed of 140 characters.” He obviously referred to Twitter and the common phrase today that reputation can be created (Susan Boyle) and destroyed overnight (Bernie Madoff).
Some things change. Some stay the same. Reputation is that one asset you cannot afford to lose.
This implies that there exist a web of relationships with a diverse range of stakeholders that needs to be monitored and managed.
But what is a stakeholder? The word stakeholder means anyone that has a legal, moral or economic stake in an activity. Some stakeholders have more clout than others, but that is also changing.
For example – Ghandi was an activist. Today with the right tools, any one person can become an activist or a journalist, hence the rising of the citizen reporter phenomenon. I can have a block of shares in a company, worry about ROI irrespective of the number of people who are retrenched. Alternatively I can be a member of the media. I will have an interest in what your organization does…because the public has a right to know.
The term ‘stakeholder management’ refers to the development and implementation of organisational policies and practices that take into account the goals and concerns of all relevant stakeholders.
The term Stakeholder Management also involves the dialogue, relationship building and process generation that take place between an organisation and its various stakeholders. Each of these stakeholders can affect an organisation’s reputation positively or negatively and necessitate different strategies to leverage the situation.
In the King 3 Code of Corporate Governance specific mention is made of the importance of stakeholder inclusivity (,i.e. that the legitimate interests and expectations of stakeholders are considered when deciding in the best interests of the company), stakeholder identification and determination of expectations and needs, the proactive management of stakeholder relationships, and that management should develop a strategy and formulate policies for the management of relationships with each stakeholder grouping.
The King Code also makes mention that the Code is on an ‘apply or explain’ basis and that the board of directors, in its collective decision-making, could conclude that to follow a recommendation would not, in the particular circumstances, be in the best interests of the company. ‘’The board could decide to apply the recommendation differently or apply another practice and still achieve the objective of the overarching corporate governance principles of fairness, accountability, responsibility and transparency. Explaining how the principles and recommendations were applied, or if not applied, the reasons, results in compliance. In reality, the ultimate compliance officer is not the company’s compliance officer or a bureaucrat ensuring compliance with statutory provisions, but the stakeholders”
In particular, the one danger that everyone is missing is Section 8.1 of the King Code 3 i.e. The Governing of Stakeholders states that the Board should appreciate that stakeholders’ perceptions affect a company’s reputation.
How can managers do this if they do not fully understand stakeholder management and its impact on governance and reputation?
Here is a quick test for you. Can your management team answer the following strategic questions:
- Who are our stakeholders?
- What are our stakeholders’ stakes?
- What opportunities and challenges do stakeholders present?
- What economic, legal, ethical, and social responsibilities does our organisation have towards our various stakeholders?
- What strategies or actions should we take to best manage stakeholder challenges and opportunities?
- Do you have a system for managing relationships with stakeholders?
- How do you measure results? What metrics do you use to assess and gauge stakeholder relationships?
- In a crisis how quickly can you communicate with your relevant stakeholders?
- Do you know the various methods to engage with stakeholders and when not to use it?
- Can you state how much you are spending on each stakeholder group and what your ROI is?
- Have you developed a set of rules and practices on how best to manage the process of building stakeholder reputation with each stakeholder group?
Once you have answered the above questions, then you should attempt these:
– What strategies or actions should our firm take to best manage stakeholder challenges and opportunities?
– Should we deal directly or indirectly with stakeholders?
– Should we take the offense or the defence in dealing with stakeholders?
– Should we accommodate, negotiate, manipulate or resist stakeholder overtures?
– Should we employ a combination of the above strategies or pursue a singular course of action?
All of these are vital strategic questions to ask for any project, incident or issue. Reputation Risk emerges when the reasonable expectations of stakeholders are not met.
What is reasonable? Let me use an example. The recent amount of product recalls and scandals examples illustrates this very clearly. As a consumer safety is a basic right. I therefore would expect an organization to communicate with me, and warn me of the advantages and drawbacks of a product including tips on how to use it. (I wrote a short article on this in of my Powerlines newsletters )
But do companies do this? Only those who are enlightened do so, and not all are. It is only when a body like the FDA or the Consumer Protection Act forces some companies to comply, that they will come to the party.
Take a look at the Supersize Me saga, where through a class action law suit, McDonalds were forced to start to use more ethical labelling and change their menus. Why did it happen in the first place?
They were out of touch with current thinking. It is the same with collaboration methods. There are companies who try and stop staff from accessing Facebook, write blogs and use other forms of social media, thinking they can control messages. Yet, we deal with people in companies. Real, live people – not spokespeople, not Corporate Heads, but normal day to day people.
People want to connect with other real people.
How ready is your organization to engage with its stakeholders? Is there an integrated or a fragmented approach to managing stakeholders in the organization? Would you like to learn more about this interesting and holistic field of management?
Why don’t you attend the next Stakeholder Reputation workshop in March in Johannesburg, South Africa. For more information visit http://stakeholderreputation.invite43.com
What is the point in not learning from incidents and ‘mistakes’?
Anthony Robbins writes in one book that the word mistakes should be reframed as learning experiences. He states that experiences can either be positive or negative. This an important distinction.
Not all reputation related risk incidents are necessarily negative. Maybe in the short -term, but often through speedy response and adequate communication a negative incident can be quickly circumvented.
Three years ago I was the keynote speaker at a conference In Maputo, Mozambique; organised by the National Society of Journalists.
I left via plane late Sunday evening from OR Tambo airport, Johannesburg, South Africa. Upon my safe arrival in Maputo, I heard the usual news. You here, but your luggage is in limbo, maybe on the way to Egypt.
The weather was very hot & humid, and of course I had no clean clothes . Apparently this was an usual occurrence, BUT what changed it was the actions of one of the NSJ employees. This young guy went back 5 times to the airport until he tracked down my luggage. His action and tenacity changed a negative experience around and I have been using the example ever since.
To me this is a good story, and many times these are the internal stories we should record so that we can use it in communication & marketing materials to build reputation.
However it is vital that every incident be recorded – positive or negative, is analysed and changed into a learning experience.
Thus to make it easy for you, I have drafted a couple of guidelines and questions that you should ask as you write a report on the incident.
Why write up a report?
Ever heard that statement? Even worse. A CEO saying that a reputational risk incident is just a storm in a teacup and will soon go away.
Well, sometimes it does. But most times a small reputation incident impacts and can cause real reputational risk damage.
From a learning perspective it is vital for organizations to learn from mistakes (learning experiences) and incidents. I mean what is the purpose of history, other than teaching us the value of a learning experience?
What went wrong?
One of the frustrating (or is it challenging?) aspects of being a manager is that, from time to time, you are faced with a problem or situation where it is impossible to have a "happy ending", or successful outcome.
These situations typically involve other persons … a subordinate, a customer, a stakeholder representative, or perhaps a fellow member of management (peer or boss, within or between departments).
So, think back over the past month or so and recall a specific situation at work that "went wrong from a reputational perspective" for you.
Review the incident in your mind. Then describe it beginning with the questions below giving enough detail so that a person hearing it for the first time can visualise the nature and scope of what you faced.
The "case history" that you are writing as you complete this exercise will contribute to the relevance of your mitigation strategy.
To help you structure your "case", I suggest that you answer these questions in the order listed. As you do so, put a number in front of the parts of your story to "key" them to our questions.
- What was the problem or incident?
- What factor(s) caused or contributed to the situation? Background (What were the circumstances or events leading up to the incident?):
When did this incident occur?
- Could the incident have been avoided? How?
- What remedies should be applied to lessen damage to perceptions, relationships etc.?
When you write up the incident, think of tangible and intangible impacts. For instance, what is the cost of the incident – in true cost, not actual expenditure.
Compiling this report will give you lots of information that can be used for strategic change efforts and learning for the future. Sharing it with senior management and Risk Management in the company is useful, as long as it does not become a witch hunt exercise.
It is vital to dissect reputational risk incidents, so that future damage can be avoided and actual impact be minimised.
The question that you should ask is: “What did we learn from this incident?’
P.S If you would like to learn more about these types of techniques and others like Reputation Root Cause Analysis, you might like to attend my next Reputation Risk Management Masterclass in Johannesburg, South Africa.
|What:||Reputation Risk Management MasterClass
a 2 – day event that unpacks Reputation Risk, Reputational Incident management and response. It combines latest thinking about Reputation Risk and best practices in Crisis Management & Crisis Communication.
|When:||Monday, March 7, 2011 8:30 AM to Tuesday, March 8, 2011 3:30 PM|
Johannesburg, South Africa
Have you ever played the Name Recall Game?
You know the one where I mention a company’s name and you mention the first thing that comes up in your mind, whether visual, auditory or kinestethic (feelings) based.
This exercise basically deals with the Emotional Appeal driver in reputation surveys.
If you hear a company’s name , do you respect it and trust it?
The Year 2010 was a not a good year for many companies but it does illustrate how important it is to manage company’s reputation.
Read this article to see some of those names:
I had a radio interview last night with John Fraser of Classic FM Business. Take a listen and let me know how you thought it went.
Last week Roland Schoeman of the South African swimming team got into trouble when he called an Indian shouting spectator a monkey after he was goaded into a false start at the Commonwealth Games.
Last week, New Zealand TV host Paul Henry cracked up — for about a minute — over the name of Delhi Chief Minister Sheila Dikshit. “What’s her name? Dick-shit?” He says. “And it’s so appropriate because she’s Indian so it should be dick-in-shit, wouldn’t it?” New Zealand has reportedly issued a formal apology, and the Indian government has lodged a formal complaint against Henry, who has been suspended without pay. See video
And, a few months ago Australian swimmer, Stephanie Rice lost her Jaguar sponsorship after she made a ‘homophobic’ tweet after the Aussies win over the South African rugby team.
Three unrelated and yet perfect examples of the interconnected society we live in.
No longer can you just speak out. No longer can you just say what you want, where you want and how you want.
The Bible verse about the tongue being a two edged sword comes to mind here.
What these incidents teach is that we have to be more vigilant over what we say, when we say it or how we say it. We have to become more aware that the power of communication has now increased because of the power of social media and interconnectedness.
It is not just the 6 Degrees of Separation rule that applies, it is now the potential of words to not just be damaging but to become viral and destroy hard-earned reputations.
Think twice before you tweet, Think twice before you speak is now the new rule.
As that famous quote states: ‘It is better to let people think you are a fool, than to open your mouth and remove all doubt’
P.S – I will never forget the words of a Japanese professor: ‘The meaning to words do not lie in the words we use, they lie in people’s heads’ – Now that is something to think about.
So, you have been called in and told to cut costs by culling the workforce!
Just a simple exercise! FIFO method. First In, First Out. Basing your choice on what value the person has added to the organization.
This is the time for a Red Flag. Stop. Think. How can we part in a reputable way. This is not just a HR or cost-cutting exercise. This is an exercise that can create long-term damage to your reputation. Rather think of it as an engagement exercise of sorts.
As a consultant I always tell companies to plan any retrenchment exercise with care as it is nothing other than another large scale change exercise, and as you know the only person that loves change is a baby with a wet nappy. My experiences below is based on having advised and implementing the downsizing of a whole company as well as my experiences as a consultant the past fourteen years.
Any retrenchment exercise has not only environmental and company impact but also psychological impact on both the people being laid off as well as survivors and stakeholders. They are all faced with uncertainty. Networks of relationships are interrupted.
I believe that companies should provide options: Examples:
** Avoiding Layoffs … there really are options ..Why not provide business start up training to those people – help them to become free agents to the organization? Allow them to tender their services back to the organization.
** How about running innovative cost-cutting campaigns in the business? Ask staff to come up with ideas and cost-saving suggestions. Make it a large scale awareness exercise and innovative thinking campaign.
** Companies should provide training to people on how to deal with being laid off. Many will take it personally, iro of the current economic climate.
** Managers should be trained with how to manage layoffs carefully and thoughtfully. A question that should be asked is: Are we looking at the human cost of these actions? Layoffs are not about "headcount"; they are about people. Unfortunately layoffs spread a fear virus that can leave an entire organization weakened and open to attack.
The Fear Virus
Let’s assume that you are laying off 1000 people. Assume that each of the people laid off has close working relationships with just 5 people … that’s almost 5000 "surviving" employees who are now traumatized by watching their friends being laid off. These people are now living in and acting from fear. Plus their informal network for getting work done is shredded. Productivity? Reputation Conscious? Not likely.
Now let’s assume that each of the 5000 traumatized employees spends several hours talking about layoffs and their fears to just 10 co-workers. Now there are 50, 000 fear-based employees doing their best to do ‘’CYA’’ and avoid risk and management scrutiny.
And these people as well as the original 1000 laid off people go home and have angry and fearful conversations with their family members, neighbours and friends. They spread messages that undertake a life of its own and become a virus of its own on all the social networks.
Let’s say that each person spreads fear and distrust of organizations to 10 people … now we’ve got a fear virus affecting millions. At this point it tips and takes on a life of its own, creating environments where people don’t trust management and are not about to take chances, volunteer for new projects or propose new ideas. (Remember Malcolm Gladwell’s The Tipping Point)
Would that company have a good reputation? Forget it! The seeds for destruction is sown!
The same company will have to spend more the next time round to recruit staff and encourage employment (One of the dangers of Reputation Risk)
Here are some other thoughts that may help guide lay-offs in a humane and reputable way:
I firmly believe that communication is the key to successfully implementing any large-scale organizational change. Whether you are implementing new systems, redesigning business processes, or transforming organization structures through downsizing and M&A, effective communication is absolutely critical.
A former colleague used to write, "Communication is more than the tangible vehicles and tools that convey information; it is the glue that binds internal and external stakeholders to your vision, mission, goals and activities. Effective communication engages the hearts and minds of all stakeholders."
With regards to a change process, the objective of these communications is to move your target audiences along the following continuum with the stated effects:
- Awareness – individuals are conscious of the change
- Understanding – individuals have a shared meaning of the change
- Acceptance – individuals internalize the change and have a more favourable outlook
- Alignment – individuals provide appropriate levels of support for the change
- Commitment – individuals begin to claim responsibility and ownership for the change
This is only achieved by developing a communication strategy that utilizes multiple communication vehicles and delivery channels throughout the course of the change process. Most importantly, these communications must build upon each other to share a bit more of the story as it unfolds. It is not sufficient to make a global announcement the day before or the day the change occurs.
Now let me put the above into practical terms. A few "nuts and bolts” regarding lay-offs that I picked up, being part of a team that had to dismantle an organization:
- Give as much advance notice as possible.
- Have the lay-offs announced by the person with the highest authority possible, hopefully the decision maker or the top person in the organization to whom the person belongs or, minimally, the supervisor, i.e. someone the person respects or has some personal relationship with. (I believe that Standard Bank did this) For the sake of humanity, such notices should be made in person. Retrenchment notices are stone-age stuff. The notification session should be interactive sessions. Those making the announcements MUST be briefed or trained on what to expect and how to handle various reactions, i.e. give them models like the grieving process (denial, resistance, exploration, commitment), have them prepare questions, etc. If notification cannot be made in person, then telephone can be substituted if done properly and by the right person, e.g. someone the person has some relationship with. If individual notification is not possible, it might be done in as small a group as possible, but this is certainly not a preferred alternative by any stretch of the imagination. Follow-up or augment the human notification with a concrete, written set of plans or guidelines that the laid off person can refer to as he or she tries to accommodate the lay-off, e.g. steps that will take place, contact people, how to access unemployment, etc.
- If at all possible have a workshop for workers which should be held immediately (within 24-48 hours of the notice) that explains things like unemployment, severance pay, job hunting, etc. Experts should conduct the session but the leadership should be represented to help clarify how things will be implemented or viewed in the organization.
- A good counselling program should be available to the laid off workers, e.g. financial counselling, job searching, starting your own business programs, grief counselling, etc. If at all possible, a list of job opportunities should be provided.
- As much as possible, respect the privacy of those laid off for as long as possible even though that will be eventually lost as transition occurs. The word will get out but time gives the employee a chance to adjust or get thru some of the grief cycle before having to deal with well meaning co-workers. Even expressions of sympathy may be hard to take for someone in denial or resistance. If possible, give the laid off person some time off, but no more than one work day. He/she will need a support group to help deal with some of the chaos they will experience and removing them from that becomes counterproductive if too long.
- Provide a hotline. Email offers a great venue because email can be routed to an appropriate expert. If that is not available, provide a phone or drop box for people to provide concerns, anonymously if they prefer.
- The potential for workplace violence is real. Think about it, very seriously; both from the perspective or prevention and remediation.
- Remember, not only the laid off workers will be affected. Briefings or other forums where they can get information and share concerns are important for them, too. The culture will be affected, not to mention the formal and informal organization. Some thinking needs to be given to ensuring proper reconnection of the loose ends that will inevitably take place as people leave. The people who are left need to feel a sense of regained homeostasis as soon as possible.
I know many organizations do not deal with lay-offs so compassionately, i.e. notice is made and the employee is supervised while clearing his/her desk and immediately escorted off the premises. This has changed due to legal restrictions, but the above suggestions will go a long way to show why the organisation regards itself as an Admired company, as it lives up to its brand promises.
The list above is is certainly not comprehensive but some stuff I learned thru first hand observation, I offer them because my heart goes out to the estimated 50 million people worldwide who will be affected this year.
Economically it will not always be possible to put all of the above into action, but remember you want to part ways with an ex-employee in a manner that the company’s integrity and reputation will not be jeopardised.
· For those who know of professionals who will be laid-off, please ask them to contact me. I may be able to assist them with setting up their own consulting practices. For the past twelve years I have run a program called Market your Consulting Practice that have been well received by those wanting to turn their professional knowledge into a personal advantage.