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News & Press: 2018 News Items

Your reputation won’t take care of itself

Wednesday, 14 February 2018  
Posted by: Bert vd Heever
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Reputation Management

Your reputation won’t take care of itself

Rodney Weidemann

When publisher Dwight Moody said: ‘if I take care of my character, my reputation will take care of itself’, he was clearly not thinking of the corporate world, where reputation management remains critical.

Reputation, be it private or corporate, is a concept that is wholly intangible and yet there can be no doubt that a good reputation demonstrably increases worth and provides sustained competitive advantage.

The challenge, of course, is that many organisations are more concerned with hard-edged, day-to-day business urgencies, and sometimes push the importance of a good reputation onto the backburner.

While they might not think about it as much as they should, it is clear that one of the greatest assets a company can have is its good name or reputation.

Reputation management is vitally important, explains Richard Foster, an independent corporate governance consultant, professional non-executive director and former IoDSA Chairman, as it links directly back into legitimacy, which is one of the four governance outcomes in King IV.

“The concepts of legitimacy, trust and reputation – taken together – will contribute to an organisation being accepted as being genuine and lawful and ultimately having licence to operate in the context of society,” he says.

With the importance of reputation comes the desire for reputation management, which encompasses the strategy and tactics used to influence how the market perceives your business. Reputation and the management thereof is crucial in business today, suggests Lizelle McDermott, a director at McD Squared, a marketing, communications and digital agency

“It is also particularly important because of the pervasiveness of social media. Whereas, in the past, reputational damage due to poor client service could be ring-fenced, social media makes it very easy to openly announce when one is not happy with a brand,” she says.

The who and the how of reputation management

McDermott adds that it is critical for organisations to be prepared for potential reputational crises. They should have a team in place to identify potential issues early and to implement the appropriate actions to resolve these issues.

“The responsibility for a company’s reputation management usually lies with the marketing department. That said, reputation management should be a priority across the business and developing a reputation management strategy should involve business leadership and the HR department as well, particularly when it comes to internal perceptions.”

“Developing a reputation management strategy should include identifying the desired perception the organisation wants, an audit of existing public and internal perceptions, and then the tactics that will be implemented to move from the existing to the desired perceptions,” she states.

Foster explains that when it comes to who takes ownership of this issue, the company must consider where this is driven from at a governance level by the board, particularly the Social and Ethics Committee, Risk Committee and Audit Committee.

“The risk management and oversight around reputation is critical to ensure that these risks, which are inextricably linked to many of the other risks in an organisation, are identified, suitably mitigated and/or escalated, and that the necessary controls around those risks put in place and suitably monitored.”

“At management level – given that reputation is built up with strong meaningful relationships with all stakeholders – it is evident that a department or executive should be given direct responsibility for the management thereof by the CEO. Whether there is a dedicated stakeholder relations department or function will be dependent on and proportionate to the nature, size and complexity of the business and the potential impact on stakeholders and society. There is no one-size-fits-all approach,” he says.

There is no doubt, says McDermott, that there should be a strategy in place for reputation management. That strategy will clearly define the roles and responsibilities of the individuals involved in the reputation management process.

“Generally, the individuals involved in marketing, communications and social media would work closely together. Where there is an internal reputational risk, HR would also be involved. In some cases, depending on the severity of the reputational risk, the legal team would also be involved.”

New platforms, new threats

No business is immune to reputational risk, suggests McDermott, therefore it is crucial to have a solid, well-tested reputational management strategy in place. Reputational risk can arise because of many different scenarios, including poor customer service, inferior quality products, disgruntled employees and sometimes even an innocent mistake.

“That said, many organisations presume this will never happen to them, therefore when they are hit by a crisis, they spend more time trying to figure out how to deal with the problem, rather than actually addressing it.”

Social media platforms also pose a threat, according to Foster, as – given the technology platforms available – an ill-informed or inappropriate comment could have a severe negative effect on a company’s reputation. “This could result in either management or the governing body being unnecessarily tied up in in trying to implement damage control measures, in order to protect or restore the company’s reputation.”

McDermott agrees about social media, indicating that it has definitely added another layer of complexity to reputation management.

“One of the biggest challenges most companies face in this regard is that they are not monitoring their social media assets effectively. There are a large variety of tools available to do so, but these come at a cost. They also do not pay enough attention to notifications on their social media assets. This could be due to a lack of resources, or a lack of understanding of the need thereof. “

“The second challenge when it comes to social media is that companies often use automated tools to schedule their posts beforehand. This means that if they don’t look at what is going on in the world, they could quite easily end up accidentally with an untimely post that is deemed unsavoury, because it is out of context.”

Nobody is perfect however, she says. Mistakes are going to be made, clients are going to be unhappy and a product or service my fail to measure up – that is the reality of being in business. How your company handles it, is what will be the difference between repairing your reputation and surviving, or failing to do so and going out of business.

“Perhaps the most important bit of knowledge is that reputation management must not simply be limited to times of crisis. It’s an ongoing, proactive process to build and manage your organisation’s reputation, both externally and internally. After all, you should always remember that it takes years to build a reputation that your potential customers can trust, but it can take just seconds to destroy it,” she concludes.

The perfect example of reputational damage

In the wake of the leaked Gupta e-mails and the resulting scandal, a number of companies have been implicated in wrongdoing related to this, with the inevitable result of reputational damage. In fact, in a case that hints at supreme irony, Bell Pottinger – a company that for 30 years managed the reputations of others – has found itself in a position where it could use the services it normally provides.

The company lost many of its clients after it was exposed for running fake news and smear campaigns in South Africa for the Gupta family, who are linked to allegations of state capture and corruption. The negative sentiment that built up impacted the company not only in South Africa, but in its home country of Great Britain as well. In fact, the business was expelled from the UK-based Public Relations and Communications Association (PRCA) and was called out in the House of Lords for having damaged the nation’s reputation. The fallout has been such that it has now driven the firm into administration.

Another major enterprise caught up in this scandal is that of auditing firm KPMG, which has been accused of turning a blind eye to the numerous scandals surrounding the Guptas, which has ultimately led to the business finding its reputation severely tarnished.

An increasing number of listed entities are jettisoning – or at least announced that they are reviewing - their relationship with KPMG, and the firm’s CEO, COO, board chairman and five others have exited the organisation. While KPMG’s customers are no doubt partly driven by a desire to do the right thing, at least part of their reaction must be attributed to fear that their own reputations will be damaged by continued association with KPMG, and by extension, the Guptas.

This article first appeared in Directorship magazine and is re-published with permission of the  IoDSA