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Seizing the Reputational Narrative

Case Study Carlos Ghosn

Facing a critical situation or a crisis in the business world often means to be one step behind the action and to only “react” rather than to “act”. And letting other people – say journalists – write your story is not what you are looking for. If you find yourself in the lucky position to “own” the story, the reputational damage can be limited. Seizing the reputational narrative, therefore, can be massively helpful in restoring your reputation starting at time zero. Here is a best-case scenario.

When Prof. Umberto Eco was asked why he doesn’t just write within the fiction genre instead of writing in the historical fiction genre, his answer was clear: Real life has more imagination in it than fantasy or fiction. Right after his answer, he developed his point further with the following rhetorical question of his: Could you invent a character like Silvio Berlusconi?1

Just like Berlusconi or Prof. Eco, Carlos Ghosn too did not forget this literary dimension of reality. The escape operation of Mr Ghosn was all over the news not only because it is sensational but also because it is cinematic and stranger than fiction as if straight out of the movie Ocean’s 11. What does Carlos Ghosn’s cinematic escape teach us about owning the strategic narrative in modern reputation management? What has he done right thus far?

Lessons on Reputation Management

Firstly, Carlos Ghosn was very well aware that the name of the reputational game is chess and not checkers. Secondly, despite the very mighty budgets of the Japanese corporate world and intelligent minds of their decision-makers, Ghosn avoided falling into the trap of a dead-end street. Even in a “many against one” scenario but, he knew that there is always a solution as long as one doesn’t focus on the negative spiral. Deciding to keep his integrity was what he did right.

Elizabeth Ortega wrote in Law360: “Carlos Ghosn, the former Nissan Motor Company executive, recently gave new meaning to “thinking outside of the box” when he reportedly used a perforated box to escape from house arrest in Tokyo to a safe perch in Beirut.”2 The escape was the beginning of the new story. Metaphorically, the novel epos has taken over the place of the big old myth. After the escape, he found a way of re-organizing the unorganized series of negative events surrounding him to his advantage. The story was now reframed. Moreover, he did it in such a way that in the final analysis he comes out as the one who fundamentally owns the strategic narrative. In other words, it wasn’t a matter of controlling the narrative for him anymore. It was a matter of seizing it as early as possible.

A Hero, Not a Victim

In a press conference held in Beirut, Mr Ghosn said he would not victimize himself but would use his position to bring light onto a system that violates the basic tenants of humanity.3 As Stephen Mugo Weru wrote: “By choosing to go on the offensive, Ghosn arguably cemented his legacy as a crusader against a harsh justice system. (…) His escape has earned him newfound notoriety. Rather than being the CEO who escaped prison, he’s the man who triumphed over adversity.”4

Mr Ghosn acknowledges that he has a long way to go in restoring his sullied reputation. Unquestionably, more time is needed to reclaim some of the statures he had before the reputational crisis began. It’s still too to jump into making conclusions. Nevertheless, the cinematic case of Carlos Ghosn’s escape and his strategic chess moves do teach the world valuable lessons on modern-day reputation management.

If you, too, could use a hand in framing your reputational narrative, get in touch with us.

References:

  1. HOLDENGRÄBER, PAUL. “Interview with Prof. Umberto Eco.” http://Www.intelligencesquared.com , Intelligence Squared, 2011, www.youtube.com/watch?v=DuGpw0-B9-s&t=4685s.
  2. “Nissan Ex-CEO Illustrates Do's And Don'ts Of Image Repair.” Law360, www.law360.com/articles/1236521/nissan-ex-ceo-illustrates-do-s-and-don-ts-of-image-repair.
  3. Ghosn, Carlos. “Carlos Ghosn Blames Nissan Conspiracy and Japanese Prosecutors in Press Conference.” Guardian News, 8 Jan. 2020, www.youtube.com/watch?v=s-eJ0AJV-w8.
  4. Weru, Stephen Mugo. “4 Lessons From Carlos Ghosn's Great Escape.” Benzinga, Benzinga, 2 Feb. 2020, www.benzinga.com/general/psychology/20/02/15212093/4-lessons-from-carlos-ghosns-great-escape.

Cancelled business trips or events, media enquiries, anxious employees, and requests by your board or stakeholders on how you have prepared - By now your company has probably been affected by SARS-CoV-2, known as the Coronavirus. So, how can your corporate communications avoid misunderstandings and prevent reputational damage?

Reputation Affairs has listed useful tips to navigate your company successfully through these challenging times.

You are not (yet) affected by the Coronavirus?

If you are not (yet) directly affected you might find the following points interesting in terms of a driver for positive change within your company.

How can we help you?

We at Reputation Affairs are happy to support your company if you have any questions or challenges around the Coronavirus, especially around the following scenarios:

Get in touch with us to define your perfect strategy, we look forward to hearing from you.

Corporate Social Responsibility (CSR) guidelines for your business

These days it seems that the entire world is talking about the concept of Corporate Social Responsibility (CSR). But what exactly CSR comprises is often unknown and in fact, there is an almost infinite number of definitions for this concept. This blog sheds some light on CSR and sustainability and explains which internationally recognised tools your company can implement.

Having a CSR Manager or a Sustainability Officer has become a standard of our time, and countless companies are publishing CSR or Sustainability Reports. By the same token, publications and business practices around CSR have become so diverging that a comparison is often impossible. I’m not even starting to talk about transparency and verifiability, but for instance simply about the differentiation between CSR and Sustainability. While CSR generally focuses more on employees and other stake- and shareholders (the social aspect), the concept of sustainability refers to (but not exclusively) the environmental pillar. Typically, sustainability refers to the concept of using resources in a way that does not affect the conditions for future generations (see for instance the Brundtland Report from 1987). However, how companies execute CSR and/or sustainability programmes is highly individual and not comparable. This leads all too often to situations where businesses are accused of greenwashing – either if the PR department is more active than the CSR Manager himself or if the public simply does not understand what the company is doing. But here is the good news: there are a good handful of guidelines and initiatives which support companies in becoming good players and which do make approaches and results more comparable.

While the following list is not exhaustive, it does outline the biggest, most famous, and most representative six initiatives, guidelines and principles which might help your company to become an even more responsible actor.

Global Reporting Initiative (GRI)

The GRI is an NGO that helps businesses and governments to control their impacts on climate change, human rights, corruption, and more. The idea behind the GRI is to make sustainability, ESG- and CSR reports clearer, more focused and comparable. According to a KPMG survey, 63% of the Global 100 Companies and 75% of the Fortune 250 are using the GRI reporting framework.

UN Global Compact (UNGC)

As the name implies, the initiative of the Global Compact is “compact”. In fact, they only include ten principles which are derived from the Universal Declaration of Human Rights, the International Labour Organization, the Rio Declaration on Environment and Development, and the Convention against Corruption. With more than 8000 businesses and over 4000 non-business participants, the Global Compact is the largest Corporate Sustainability (CS) Initiative in the world. The UNGC was formed in July 2000 and is one of the longest-serving CSR guidelines.

ISO 26000

The ISO 26000:2010 from the International Organization for Standardization are the perhaps best known CSR guidelines for businesses. They were published in 2010 and aim at providing guidance on how businesses and organisations might operate in a socially responsible manner, rather than imposing requirements. In other words, ISO 26000 is no certification but rather helps to clarify what CSR is and how it can be applied. ISO 26000 can be linked with the OECD guidelines for multinational enterprises and the SDGs, which are both explained below.

OECD Guidelines for Multinational Enterprises

The OECD Guidelines include a range of areas, such as human rights, labour rights, and the environment. This approach takes the supply chain into consideration, covers several business sectors and is backed by governments. While the guidelines are not legally binding for businesses, they are binding for the governments who signed them. The OECD Guidelines are especially interesting for multinational enterprises which get clear recommendations from the OECD (and consequently from the governments) on responsible business conduct. While the first version of these guidelines dates back to 1976 they were revised several times, with the latest version being published in 2011.

UN Guiding Principles on Business and Human Rights (UNGPs)

The UNGPs consist of 31 principles and encompass three pillars: The State Duty to Protect Human Rights, The Corporate Responsibility to Respect Human Rights, and Access to remedy for victims of business-related abuses. This means, that they are not only important for (international) enterprises, but also for the governments to ensure that normative standards are guaranteed within their sovereignty. Although they are rather new (2011), they are widely recognised and especially important when it comes to human rights.

Sustainable Development Goals (SDGs)

The SDGs were set up by the UN in January 2015 and are seen as a “blueprint to achieve a better and more sustainable future for all.” The UN target is that all the 17 SDGs – including 169 targets within them – are achieved by 2030. The goals range from No Poverty, Zero Hunger, Gender Equality, Climate Action, Peace, Justice and Strong Institutions to Partnerships. The SDGs are widely recognised and propose 232 approved indicators to measure compliance.

This list only provides an overview of the most common tools and it is important to understand that there are many other CSR guidelines, declarations, and principles. The International Labour Organization, for instance, published the MNE Declaration (Multinational Enterprises) as their instrument to ensure responsible and sustainable workplace practices. And the European Union published a renewed EU strategy 2011-14 for Corporate Social Responsibility in which they emphasize the multidimensional nature of CSR as well as the role of public authorities and other stakeholders to ensure that business acknowledges its social responsibility.

If you would like to learn more about instruments to implement CSR in your company, we are more than happy to discuss your options.

How Reputation Determines Investor Relations

The reputation of an organization is one of the most effective and least measured determinants in investor relations. This is because little is known about how reputation determines investors’ conscious decision-making and even less is known about the unconscious effects of reputation. Today signs indicate that many investors are becoming more reputation-conscious than before. This implies that they begin to think beyond only short-term returns and that they are becoming aware of the long-term consequences of reputation management.

According to Eccles, Newquist and Schatz: “in an economy where 70% to 80% of market value comes from hard-to-assess intangible assets such as brand equity, intellectual capital, and goodwill, organizations are especially vulnerable to anything that damages their reputations.”1 Research from FTI Consulting found that investors’ response to crises is ‘led by reputation more than numbers’.2 In other words, financial factors are seen as less important than reputational factors when responding to corporate crises.

Reputation is Multifunctional

One of the functions of reputation for investors is based on the fact that a company with a reputation built over time is a company about which there is less complexity and risk in the future compared to a company that only has numbers as indicators of its success but may not necessarily have the same numbers in the future. A firm that has been investing in its reputation is a firm that has been investing in its future. If you don’t invest in your future what hope do you have of others investing in your firm? This reasonable train of thought is seemingly comprehensive and ostensible and yet numerous organizations still fail in investor relations due to the fact that insufficient investments of time, effort, attention and capital are made in building and strengthening the organization’s reputation.

“A firm that has been investing in its reputation

is a firm that has been investing in its future.”

Does reputation equal investor’s trust?

Another function of reputation as the main intangible asset taken into account during the decision-making of investors has to do with the following reasoning: a firm without a reputation is a firm that is probably not trustworthy. Conversely, a reputable organization is most likely a trustworthy organization. As many systems thinkers and behavioural economists would agree, such stakeholders of a firm as customers, suppliers, employees, regulators, politicians, and therefore investors too can only trust firms that have something to lose. This is because for these stakeholders the component of reputation is perceived as a cashless deposit in transactions and dealings. Therefore, investors understand that financial parameters are important but the reputational reality is more vital since a company that doesn’t have a reputation to protect is a company that doesn’t have anything to lose and a company that doesn’t have anything to lose is a company that is not reliable.

Inter-Stakeholder Relations

Different spheres and industries will continue moving towards the same meeting point where they join. This is partially due to the factor that systems analysts call equifinality. All roads lead to convergence. In other words, boundaries will continue to blur as the various spheres are coming closer to each other whether it’s financial services, environmental policy, digital media, societal responsibility, regulation and so forth.

This tendency is likely to trigger more companies to do well by doing good, to put more thought in their entire value chains, to take not only shareholders but also stakeholders into account etc. According to the Edelman Trust Barometer 2020 “84% of institutional investors believe that maximizing shareholder returns can no longer be the primary goal of the corporation, that business leaders must commit to balancing the needs of shareholders with those of employees, customers, suppliers and local communities.”3 In this context, we can expect to see the strengthening of the bridge between public relations and investor relations.

Investor Relations: All roads lead to convergence

In today’s world companies failing to align public relations with investor relations face the threat of opening themselves up to reputational risk and leaving significant shareholder value on the table. The sine qua non for strengthening the pre-existing and securing the future of a firm’s reputation is based on building a bridge between investor relations and public relations. Going beyond the multi-stakeholder approach, this has to do with the inter-stakeholder approach.

The last but not least, there needs to be a bridge just as strong between behavioural sciences and economics too. This is to say that it not only needs to be inter-stakeholder but also interdisciplinary as well. Remember the words of Warren Buffet’s confidant Charles Munger who is an investor himself: “If economics isn’t behavioural I don’t know what the hell is.”

Learn more on how we can help your business improve its reputation.

References

  1. Robert G. Eccles, Scott C. Newquist, Roland Schatz. “Reputation and Its Risks.” Harvard Business Review, 1 Aug. 2014, hbr.org/2007/02/reputation-and-its-risks.
  2. Harrington, John. “Investor Response to Crises 'Led by Reputation More than Numbers'.” PR Week, PR Week Global, 21 Jan. 2019, www.prweek.com/article/1523418/investor-response-crises-led-reputation-numbers.
  3. 3.“Investors Speak; Trust Matters.” Edelman, www.edelman.com/insights/investors-speak-trust-matters.

How to increase reputation through brand journalism

Brands face unprecedented competition for consumers’ attention and mindshare today. It’s not just that certain segments of consumers are using ad blockers or switch channel to ignore ads but it’s also that informational clutter and promotional bombardment leads them to be ever-more selective of the kind of communication they value. As a consequence of this macro tendency, some of the forward thinking brands have decided to be more conscious and creative in the ways they communicate and build relationships with their audience.

Being the Proto-Source

The practice of brand journalism, being a literary organization, an integrated media outlet, or a publisher is becoming almost the only ways to attract consumers. The approach of brand journalism is distinct from content marketing in the sense that it is more about journalism (in its almost nostalgically original sense) or about journal keeping à la travelogues than it is about brand promotion. It may give a feeling of investigative reporting, ethnographic field notes or exploratory essays. The secret code is being a proto-source from which meaningful stories or knowledge come to light in an inside out manner. In order to establish this territory in the minds of consumers, brands are required to research and develop creative content inside out, reveal the latest thinking in the field or operate as cultured enlighteners by passing on insider know-how to their audience.

Some of the good examples of this approach are: Christie’s ed-tech project1, Harvard Business Review magazine by Harvard University, some of the online courses on Coursera, explanatory videos on global economic news by WEF, Oxford Dictionaries by University of Oxford and the renowned holistic media emporium of the niche brand Red Bull called the Red Bull Media House. The energy drink’s media emporium produces games, apps, TV, musical podcasts, movies, sports events videos and magazine through creative collaborations and a global network of correspondents in some 160 countries.2

Leading Thoughts

What this direction gives to brands is that it adds value to the brand, raises awareness about it among better-targeted circles, increases soft assets and solidifies thought-leadership. By putting meaning or purpose at the core, by providing substantial content over fleeting content, brands reach their audience to guide and not govern, seduce and not sell, attract and not attack them. It connects with the audience of existing and potential customers in a more real value-adding and non-commercial manner. This is what distinguishes the thoughtful brands from the consumerist ones. Today, a steady flow of content is a sine qua non but, in some cases, the spacing effect needs to be taken into account as well.

In some cases, the real core product actually comes to life after brand journalism as opposed to before as it usually is. For instance, the Frieze art fairs that was launched in 2003 originally started as a brand extension of the art magazine, also called Frieze that was founded in 1991. The relationships built through this medium enabled the founders to attract 135 galleries for their very first show. “The number of exhibitors has more than tripled since then.” – wrote Mark Tungate, author of Luxury World.3 Instead of creating a product and then try to find the niche for it, they first built the audience and then created a brand for them.

Future of Thoughtful Brands

The ‘brand as a media outlet’ is nothing new as it has already been the direction for some of the brands for the last decade. What’s new is that there is now a new paradigm shift that goes beyond the brand as a media company. It makes the brand transform into either an economic or cultural think tank. It implies that instead of a marketing department, companies need to move to holistic brand management where there is a think-tank department within. The work of this body is similar to a guild but only based on mental craft instead of the manual one. Reaching this dimension requires unconventional research, original creativity, rare competitive intelligence, curatorial discerning Third Eye, revealing the substance (or making, in a sense, revelations) and bringing educational value. The 4Es necessary for the management of such think tanks are: emotional, elevating, enlightening and enriching. Thoughtful brands that operate as think tanks do not just work hard but also think hard. Thoughtful brands that lead the thoughts rather than hear random flows of thoughts decipher cogito ergo sum right.

Learn more on how we can help your business implementing brand journalism.

References:

  1. Christies Education. “Christie's Education's Online Courses Trailer.” YouTube, YouTube, 5 July 2017, www.youtube.com/watch?v=LDE725zSUwQ.
  2. “The New Red Bulls: Why Every Big Brand Is Launching a Media Company.” The Content Strategist, 1 Feb. 2017, contently.com/strategist/2015/06/22/the-new-red-bulls-why-every-big-brand-is-launching-a-media-company/.
  3. Tungate, Mark. Luxury World: the Past, Present and Future of Luxury Brands. Kogan Page, 2011.

The butterfly effect in reputation management

Something as small as the flutter of a butterfly's wings can ultimately cause a typhoon halfway around the world. Edward N. Lorenz, mathematician and Kyoto Prize Laureate, introduced this widely known and yet often overlooked ‘butterfly effect’.1

Today’s overcrowded economic context and over communicating media environment are complex systems by their nature. Complex systems are different from complicated ones. A car, a plane, a Swiss watch can be complicated but they are not complex. The traffic in the city is, however, an example of a complex system. In our hyper connected world the unprecedented and increasing complexity paves the way for the butterfly effect. The butterfly effect is the sensitive dependence on initial conditions in which a small change in one state of a complex system can result in large differences in a later state. Leaders, managers and executives of global brands have witnessed this effect many times particularly in the realm of reputational crises.

The revolution will not be televised

The revolution will not be televised. It will be triggered from a leak on social media. Even though the first thing that comes to mind when one speaks of revolutions triggered via social media (Occupy Wall St., WikiLeaks, Arab Spring etc.) is about revolutions that are more of political nature, it now applies to transnational corporations as well. It applies to them too because they are just as, if not more, powerful and enormous systems as governments (including military, parties, diplomacy etc). Most importantly, it applies to them too because they are no less complex.

As Martin Riley, ex-CMO of Pernod Ricard warned, in today’s age of democratized media communications every brand can have its own “Tahrir Square or WikiLeaks moment. Any ill-thought-through commercial promotion in Thailand or Peru can come back and bite you in the UK or Australia. Today, brands are only as strong as their weakest link.”2 One can easily think of a scenario in which the manufacturing factory in i.e. Bangalore is seen by a tourist-like person who then using a mere smartphone films an underage worker there that was not in the Headquarters’ knowledge. If it wasn’t clear whether supervising this is among the responsibilities of the HR director and if in general other responsibilities of other relevant departments weren’t clarified the ground for such a leak to happen has been prepared. As the enlightened polymath Benjamin Franklin formulated: “By failing to prepare, one is preparing to fail.”

Avoid learning the hard way

It is necessary to make value chains and supply chains transparent in order to take the necessary measures that minimize such risks and threats. While, for instance, Hermès is in many ways a true Purpose-driven brand, the company failed to control its supply chain, which eventually led to an unexpected crisis in 2015. All it took was a short clip posted on YouTube and going viral, showing the cruel slaughtering of crocodiles at a Texan animal farm used for the production of Hermès’ handbags, and the Actress and namesake Jane Birkin (as in ‘Hermès Birkin Bag, going anywhere from a few thousand dollars to $100,000) demanded that Hermès remove her name from the Birkin bag with immediate effect.3 This worsened the impact of the scandal and damaged brand perception and identity at a speed the company was hardly able to keep up with. Hermès began taking the necessary action to prevent such scandals in the future, but it paid a huge price for not extending its Purpose to its entire value chain. It learned the hard way that one small leak in social media can be enough. One short clip and one big effect.

A Matter of when, not a matter of if

The economic and systemic signs indicate that this is the WikiLeaks moment for brands’ reputations. For many global brands, it is not a matter of if but a matter of when. Some of the corporations are aware of this while others aren’t. The aware ones are already investing the necessary energy, time, attention and capital into pro-actively preventing it while others will have to learn the hard way by trying to merely react to it. What the Swiss psychiatrist Dr. Carl Jung figuratively said about humanity in general is now particularly relevant to the world of reputation management. “The world hangs on a thin thread. (…) Assume that a certain fellow, say, in Moscow loses their nerve or their common sense for a bit and the whole world is in firearms and in flames.”

Learn more on how we can help your business.

Sources:

  1. The Editors of Encyclopaedia Britannica. “Edward Lorenz.” Encyclopædia Britannica, Encyclopædia Britannica, Inc., 19 May 2019, www.britannica.com/biography/Edward-Lorenz#ref1079997.
  2. Charles, Gemma. “Brands Must Guard against 'Wikileak' Moment in Digital Age, Says Pernod Ricard CMO.” Campaign, CampaignUK, 28 Aug. 2014, www.campaignlive.co.uk/article/brands-guard-against-wikileak-moment-digital-age-says-pernod-ricard-cmo/1287257.
  3. Gibbs, Alexandra. “Birkin Wants Hermes to Remove Name off Iconic 'Birkin Bag'.” CNBC, CNBC, 5 Aug. 2015, www.cnbc.com/2015/07/29/jane-birkin-requests-hermes-to-remove-name-off-iconic-birkin-bag.html.

How reputation management helps companies to meet new customer expectations - and to create sustainable demand

Last week, Interbrand published their 2019 Best Global Brands Report1, the world's most prestigious ranking of big players' brand values. An analysis of the most interesting developments shows that the zeitgeist prevailing in society is reflected in a critical evaluation of the reputation of some brands and thus also in their brand value.

Customer expectations are developing faster and faster, big brands feel the pressure. At the top of the ranking of the most valuable brands in the world, there has not yet been any significant change, with Apple and Google leading the ranking for the seventh consecutive year. However, their gains are in single-digit percentages only. But here, there are several reasons besides the growing customer expectations for these findings.

Facebook loses USD 5.3 billion in brand value

The results become more interesting and concrete when taking a closer look at the former growth champion of recent years. Facebook has been in the Best Global Brands ranking since 2012, recording constant growth rates of up to 54 percent (in 2015) over the first five years. This year, though, Facebook slipped from 9th to 14th place after a twelve percent decline and is therefore no longer in the top ten.

“Apparently, more and more people are questioning the influence that Facebook as a platform has on current social developments,” says Simon Thun, CEO of Interbrand CEE, about the weak performance of the former shooting star - and hits the mark. The public debate about the socio-political role of major technology brands such as Google (with YouTube) and Facebook is becoming more critical, and the demand for regulation is becoming louder.

Empty promises of Facebook and Google

While Facebook in particular claims to meet these demands for stricter controls on content in the future, the reality is completely different. Facebook’s monitoring algorithm may find graphic elements such as swastikas and runes or linguistic terms such as “foreigner” and “home country” and can bring them into a socio-political context. However, the search algorithm cannot read between the lines. Even if questionable statements in critical posts are determined electronically and checked by human intelligence in a second step, the sheer mass of postings, comments, photo and video uploads worldwide remains so immense that control and regulation is in fact simply impossible.

Finding and, above all, classifying e.g. hate speech in social media content in all countries, languages, and cultures of the world would require an army of neutral experts. The involvement of the community which can report dubious content does not make a significant contribution either since neither expertise nor neutrality is given. In this respect, authorities and politicians worldwide reveal huge naivety that goes hand in hand with equally inadequate digital competence - leaving experts from the digital industry speechless for years.

Facebook and Google / YouTube will never be able to keep their promises. And that brings us to reputation management as we understand it - or to the diametrically opposed understanding of it. Reputation management starts at the very core of a company, not just where messages are conveyed to the outside world. The good reputation of a company and a brand is increasingly based on credibility and authenticity. As one of the world's leading brand consultancies with more than 40 years of experience, our industry colleagues from Interbrand have no difficulty in drawing the right conclusion: “In a world where customer expectations will continue to move faster than businesses, brands can no longer be considered separate to businesses,” says Charles Trevail, Global CEO of Interbrand. “Today, more than ever, brands will be judged on what they do, not just what they say.”

Has the German automotive industry really understood the warning signs?

The contradiction of “being” and “appearing” applies to the troubled German automotive industry, too. While Mercedes-Benz, BMW, VW, Audi, Porsche and MINI recorded growth rates of up to 18 percent in previous years, the brand values of the six German car brands currently grow by an average of only five percent (between Porsche’s nine percent and BMW’s one percent). Volkswagen, for example, assures that the proportion of electric cars in their fleet will increase to at least 40 percent by 20302, but this promise comes - if I may say so - at least ten years too late. During the last decade, the German automotive industry has lost its credibility through Diesel-gate and fraud on the consumer and, hence, lost accordingly in the growth of brand value.

So far, the promises of the automobile brands are still only promises. Relevant deeds are still to be delivered. However, it is not yet too late for a “reputational turnaround”. To achieve this, these so-called “best global brands” must now actually invest tens of billions in the (their!) future, - in the development of alternative forms of drive, but also in infrastructure. Mind you, per year, and without an investment quotas brake. The planned investments of the automotive industry are only peanuts in relation to their possibilities - and in view of the investment gap, they have created for at least ten years. They now need to act quickly and decisively. If the industry only fixes what was missed in the last ten years and continues like this for another ten years, the big investment in development will be accompanied by steadily increasing costs for the “reputational turnaround” - and the longer the more difficult it becomes. Because even if the first steps are done, the industry will continue to be criticized by the public for a long time, as it has badly lost the consumers’ trust.

In the situation of Facebook and YouTube on the other hand, a “reputational turnaround” is even more difficult to achieve, as control mechanisms for critical content as shown would devour enormous sums. Here it is probably easier and much cheaper for the company to keep a social media platform “somehow alive and running” for as long as possible and at the same time to look for an alternative platform with a (still in the medium term!) intact reputation (a rogue, who thinks of Instagram now - and the consequent question, what’s next?).

So, what can good reputation management do?

Let’s go back to the damage that actually can be repaired. Even the best reputation management in the world cannot turn a desert into a blooming landscape. However, in prioritizing communication measures, it may highlight the positive content that corresponds to customer expectations - thus helping companies in twofold respect.

First, communication shows that the signals from society and customers’ expectations are being understood (in this context, the claim of another car manufacturer also very widespread in Germany, "We have understood", from 1994 (!) suits perfectly - and unintentionally takes on self-ironic traits). Here too, however, the messages and claims must, of course, be followed by verifiable, tangible actions.

Second, communication with the aim of promoting “quick wins” in reputation management can make its contribution in order to actually generate a genuine, sustainable reputation management in the long term. Targeted communication for the above-mentioned measures, such as those promoted relatively offensively by Volkswagen, can have a positive impact on consumers and society in general, even if these are only peanut investments for the company. By demonstrating the relevance of these peanuts, these contents, by evaluating the success of the communication measures, a rethinking within the company can be driven forward. Positive customer feedback will point the management in the right direction, away from greenwashing, hesitation and empty promises, towards change - ultimately convincing companies to turn peanut investments into relevant investments.

After all, the motivation for this development could be purely economic. Demand will grow with growing confidence in the company and in technology, just as the number of e-cars sold will grow with the number of charging stations. Here, the trench must be overcome, the chicken or egg dilemma has to be solved - if not by politicians, then by the manufacturers themselves. Good reputation management does not aim at trends to satisfy hipsters and appear in a good light at short-term goals but to turn trends into sustainable developments and ensure a positive reputation for the company over time. Once a company's damaged reputation has been credibly restored through real performance and investment, sustainable demand and long-term profit will result.

By: Mats Wappmann, Berlin

Learn more on how we can help your business.

 

Sources

1 https://www.interbrand.com/best-brands/best-global-brands/2019/ranking/

2 https://www.volkswagen-newsroom.com/de/pressemitteilungen/volkswagen-plant-22-millionen-e-autos-in-zehn-jahren-4750

No: 1 Risk Among All Risks

Read part one of “Preventive Reputability” to learn about the risk and impact of reputability issues.

Today 75% of an average corporation’s value is intangible – or in other words, its brand and its reputation are a business’ most valuable asset1 and according to a survey by Deloitte 87% of executives rate reputation risk as more important than other strategic risks.2 However, despite knowing the impact of reputational damage, indicators point to the fact that most organizations still invest in managing reputational crises rather than in preventing it. In other words: reaction instead of action and damage limitation instead of proactive improvement.

Benjamin Polak, a British professor of economics and management at Yale University, said that the next time there is a Nobel Prize in game theory, it would be for the idea of reputation.11 Rory Sutherland, Vice-chairman of Ogilvy One, wrote: “Reputation acts as a kind of cashless deposit in human dealings. As any mafioso or game theorist knows, you can only trust people who have something to lose.”12 In the definition of Cambridge Dictionary, reputation is the opinion that people in general have about someone or something, or how much respect or admiration someone or something receives, based on past behaviour or character.13 This means ‘reputation’ is more about what other people are saying unlike ‘brand’, which is what the organization is saying about itself. But the key question is who are other people? Contrary to common belief other people here doesn’t mean anything that is being said by anyone is of equal importance, let alone impact. Not all opinions and perception are of equal impact. Thus the other people in relation to reputation can be segmented using the approach of multi-stakeholder thinking. However, in order to truly apprehend what reputation is, it is necessary to know what it is not too. Reputation is not the level of popularity, buying audience, being all over mass media, green washing, loud signaling, fast communication etc.

What can be done to minimize the reputational risks?

Signs indicate that organizations across various industries and countries will continue facing the reputational threats that can come from:

Firstly, it is necessary for organizations to be truly aware that the risks of reputational damage exist in a world of increasing complexity and accelerating speed for exposure. Secondly, it is critical that organizations start seeing reputational risk as the number one risk among all other kinds of strategic risks there are.

For not being aware, for example Bayer had to learn the hard way in 2019. The smart organization learns from its own failures and mistakes while the wise organization learns from others’ failures and mistakes. Those organizations that think education, learning, becoming aware or training is expensive end up learning the hard way that is much more costly, which is why Preventive Reputability (PR) requires continuous learning and measurement of ongoing reputation-related operations.

In order to avoid suffering from reputational damage, it is necessary implement Preventative Reputability (PR). Preventive Reputability (PR) is the key to analyze and minimize reputational risks. It is about thorough constructivist consideration beforehand (pro-active, preparation, prevention etc.) and being considerate about others (respect, relationships, manners etc.). It is not incidental that the etymological root of the word reputation – from Latin ‘reputatio’ - is translated as consideration.14

The priority needs to be in being pro-active rather than reactive. The amateurs never do their homework and in turbulent times tend to react, if not overreact to almost every other thing while responsible professionals prepare and, when the time is right, respond. Preparedness has proven to mitigate risks. Handling a brand’s reputation requires thinking ahead and planning. As the enlightened polymath Benjamin Franklin said: “By failing to prepare, you are preparing to fail.”

Action steps

  1. Developing awareness, consciousness and sensibility about reputational risk entails monitoring both of internal processes/systems across the value chain and external developments. This way if something goes out of order, it is spotted on time. Since reputation, by definition, is what others are saying about the organization it is necessary to identify and map who the key stakeholders are. Consequently, this involves such criteria as social proof, the Net Promoters Score (NPS), employee satisfaction, network effect, key influencers, press relations, social responsibility and so forth. Is there enough continuous content development for your website or social media channels to make your voice present and reputation visible? Have you contacted the satisfied stakeholders for them to write a review on i.e. Google about your service/product?
  2. Using scenario training to test reputation management systems is a sine qua non. It is almost analogical to emergency procedures in a fire drill. It leads to simple steps as double-checking, for instance, the direct contact info of an HR director that is in the manufacturing factory in i.e. Bangalore in case a tourist-like person filmed an underage worker that was not in the Headquarters’ knowledge. At the same time if it wasn’t clear whether supervising this is among the responsibilities of the HR director, clarifying the responsibilities is another step.
  3. Integrity starts from within and then it spills over. It’s inside out. Discovering, identifying, articulating, aligning and communicating the underlying drivers of values, culture and ultimately Purpose enable socially responsible practices and processes internally and across the entire value chain. How on-brand is your day-to-day decision-making or communications? Is the daily internal behavior in accordance with the brand purpose? Are the values lived inside the organization or are they just filling your website’s vision/mission page?

Learn how we can help you in proactively improve your reputation.

 

References:

  1. “ECON 159: Game Theory.” CLCV 205 - Lecture 2 - The Dark Ages | Open Yale Courses, oyc.yale.edu/economics/econ-159/lecture-16.
  2. “The Price of a Good Reputation.” The Spectator, The Spectator, 6 Oct. 2012, www.spectator.co.uk/2012/07/the-wiki-man-the-price-of-a-good-reputation/.
  3. 13.“REPUTATION | Meaning in the Cambridge English Dictionary.” Cambridge Dictionary, dictionary.cambridge.org/dictionary/english/reputation.
  4. “Reputation.” Merriam-Webster, Merriam-Webster, www.merriam-webster.com/dictionary/reputation.

No: 1 Risk Among All Risks

Today 75% of an average corporation’s value is intangible – or in other words, its brand and its reputation are a business’ most valuable asset1 and according to a survey by Deloitte 87% of executives rate reputation risk as more important than other strategic risks.2 However, despite knowing the impact of reputational damage, indicators point to the fact that most organizations still invest in managing reputational crises rather than in preventing it. In other words: reaction instead of action and damage limitation instead of proactive improvement.

Impact Across Various Sectors

The impact of reputational damage is evident in most sectors. It is there not only for transnational corporations but also for universities, B2B companies, charities, investors and CEOs. One of the major reasons why, for instance, the banking sector has been behind when it comes to implementing the best practice in reputation management is because the way they define reputation is incomplete and inaccurate. Despite the banks’ efforts put in managing reputation during the post-recession period it began falling again in 2018 after five years.3 In 2019 the series of reputational crises among the Scandinavian banks (Danske Bank, Swedbank and Nordia) reinforced the damage even further. Shares of these banks began falling continuously while negative media coverage about them grew exponentially and internationally.

The lasting impact of reputational damage is observed in the investment world as well. Research from FTI Consulting found that investors give far more importance to reputational factors than financial considerations when responding to corporate crises.4 In the area of non-profit organizations reputational risk is the biggest perceived threat to charities too. Charities need to take a longer-term view of risk or face “increasing threats” to their prosperity and security, according to a new report by a specialist insurer Ecclesiastical Insurance.5 The damage that came from the Oxfam scandal spilled over to the perception of the rest of the sector too. Reputational risks are there for universities just as they are there for businesses. “A scandal covered in a long-form magazine article resulted in about a 10% drop in the number of applications a school received or roughly the same impact on applications as a 10-ranking drop in the influential U.S. News and World Report College Rankings.”6

In the sphere of tech giants the impact of reputational damage on Facebook stands out the most. Its shares at the end of 2018 reached lowest closing share price in nearly 2 years.7 During the beginning of this reputational storm the company lost about $150 billion in market capitalization in less than two hours.8 Between 2018 and 2019 Facebook was among those who saw the biggest drop in brand reputation rating from 94 down to 43.9

In today’s day and age there is growing radical transparency in value chains as the world witnessed with such global cases as Volkswagen’s emission crisis or Hermes’ Birkin Bag scandal. It only takes using a smartphone by someone from PETA and record a short video of cruel practices at a crocodile slaughter farm, which was in the value chain for production of the famous handbags by Hermes. The rest of it unfolded so rapidly increasing the damage in the multifaceted way. It is much quicker and easier for an empowered consumer, informed stakeholder or a disgruntled employee to do great damage today or expose a firm than anytime before in history.

CASE STUDY: Boeing

In the aviation industry the world’s largest commercial aircraft manufacturer has been undergoing a multifaceted public relations nightmare. Two Boeing aircrafts of the same make and model fatally crashed killing almost 350 passengers within few months. As the investigations by the Department of Justice continued, in total more than 60 countries and airlines have suspended flights with this particular plane model.

 One thing is clear: repairing the software or any other internal technicality of the plane won’t be enough to restore the trust in the aviation brand. Boeing will need to invest considerable amount of time, effort, attention and capital into repairing its reputation too.  Not only will it be costly but it will also take long time for the brand to repair its reputation. According to experts, it is estimated that overall (loss of market share, stock fall, loss of brand value) it will cost them almost $40 billion.

The brand faced the reputational consequences that came from:

The butterfly effect is when a small change in the software caused large typhoons of crisis and disaster.

The domino effect, like a negative spiral, is when a communications problem became a technical problem that became a communications problem again which then became a societal problem and when the societal problem became an economic problem and when the economic problem became a fundamentally holistic problem etc.

The bandwagon effect is when different stakeholders began follow in each other’s footsteps in regard to decision making on the ongoing issue. Although not necessarily in this sequence everywhere but it went from airlines to regulators, from regulators to governments, from governments to other stakeholders as customers, online flight-ticket platforms, investors, shareholders, employees etc. For instance, the online flight-searching platform Kayak announced that, in the wake of the crisis from the fatal crashes, they’ll enable fliers to filter out the plane model they do not want to fly.10

Even though there isn’t much competition for the aircraft brand it still isn’t the only good choice out there either. As the airlines are likely to reconsider their options and postpone purchases with Boeing, a bigger slice of the market will likely go to Airbus to which Boeing has already been losing market share.

Read part two of “Preventive Reputability”, to be published on 12 August 2019, to learn how to minimize your risks.

Learn how we can help you proactively improve your reputation.

 

References:

  1. Linssen, Alexander F. Brigham Stefan. “Your Brand Reputational Value Is Irreplaceable. Protect It!” Forbes, Forbes Magazine, 19 June 2013, www.forbes.com/2010/02/01/brand-reputation-value-leadership-managing-ethisphere.html#5c0f008b3790.
  2. [email protected] | Deloitte | Survey, Global, Reputation, Risk.” Deloitte, 30 Oct. 2018, www2.deloitte.com/global/en/pages/governance-risk-and-compliance/articles/reputation-at-risk.html.
  3. Garver, Rob. “Bank Reputations Fall for First Time in Five Years: 2018 Survey.” American Banker, 28 June 2018, www.americanbanker.com/news/bank-reputation-survey.
  4. January 21, 2019 by John Harrington. “Investor Response to Crises 'Led by Reputation More than Numbers'.” PR Week, www.prweek.com/article/1523418/investor-response-crises-led-reputation-numbers.
  5. “Reputational Risk 'Biggest' Perceived Threat to Charities, Report Reveals.” Charity Update, 25 June 2019, www.charityupdate.co.uk/news/community/reputational-risk-biggest-perceived-threat-to-charities-report-reveals/.
  6. Kingkade, Tyler. “How Media Coverage Of Campus Scandals Impacts College Applications.” HuffPost, HuffPost, 8 July 2016, www.huffpost.com/entry/college-scandals-applications_n_577e6ac1e4b0344d514e1bf9.
  7. Rodriguez, Salvador. “Here Are the Scandals and Other Incidents That Have Sent Facebook's Share Price Tanking in 2018.” CNBC, CNBC, 21 Nov. 2018, www.cnbc.com/2018/11/20/facebooks-scandals-in-2018-effect-on-stock.html.
  8. “Facebook Lost Approximately US$150 Billion in Two Hours.” Stuff, www.stuff.co.nz/business/world/105770399/facebook-lost-approximately-us150-billion-in-two-hours.
  9. Feldman, Sarah, and Felix Richter. “Infographic: Brand Reputations That Took a Hit in 2019.” Statista Infographics, www.statista.com/chart/17269/drop-in-brand-reputation/.
  10. Isidore, Chris. “Kayak Will Allow Flyers to Filter by Plane Model, Including the 737 Max Jet.” CNN, Cable News Network, 13 Mar. 2019, edition.cnn.com/2019/03/13/tech/kayak-737-max-filter/index.html.

What companies can learn from academic Institutions

 

Despite small budgets, Universities (academic brands) are much more successful in building and managing reputation than many international corporations. They know the differences between brand and reputation – and how strategic communications enables them to outperform competitors despite fewer resources. So, what lessons can businesses learn from the most reputable universities? How do certain academic brands manage to stay at the pinnacle among the elite schools of the world so durably? And what are the shared characteristics and patterns among the best practices of these successful institutions?

Schools of Thought

First of all, there are several factors that make a university highly reputable or give it a strong reputation in a specific area. In this article, the aim is to look closer at only those moves and approaches which can be adopted by corporations, boutique firms, agencies and organizations in general. Some of the frequently referred sources for rankings of universities are the QS World University Rankings, US News Best National Universities, Times Higher Education World University Rankings etc. Below is a comparison of Times Higher Education rankings for 2018 and 2019 years.1,2

2018

2019

If a university has achieved a decent position but isn’t able to go further, it will most likely focus on rankings by subject such as Nuclear Engineering, Finance or Social Sciences. This way it can elevate itself to being one of the top 10. This strategy can be adopted by companies, too. If you are not the most reputable in general, then you can become the most reputable by department, area, product category etc. For example, S.T. DuPont is not among the most successful ten luxury brands in general but when it comes to lighters it, is practically number one.

Among the factors that lend strength to an academic brand’s reputation is that these organisations behave as think tanks. Through innovative thinking they stay ahead of time, defining the future. They implement best practice in brand journalism (i.e. Harvard Business Review magazine or Oxford Dictionaries), communicate results of their R&D and invest in long-term thought leadership.

“Among the factors that give strength to an academic brand’s reputation is that they behave as think tanks.”

What are the implications and applications for businesses? The secret code lies in the notion of building a position where from which meaningful stories or knowledge come to light. In order to establish this territory in the minds of consumers, brands are required to research and develop creative content inside out, reveal the latest thinking in a particular field or operate as cultured enlighteners by passing on insider know-how to their audience. So in order to strengthen the intangible value as the top academic institutions do, firms need to be present in the knowledge economy in the way universities are by contributing and educating.

Building the Right Bridges

Companies that have mastered holistic brand management can establish a competitive advantage.

“A pattern that emerges when analyzing the best performing universities is that they build the right bridges to stay relevant and to avoid being isolated.”

A pattern that emerges when analyzing the best performing universities is that they build the right bridges to stay relevant and to avoid being isolated. This includes media relations. Reputational risks exist for universities just as they do for businesses. “A scandal covered in a long-form magazine article resulted in about a 10% drop in the number of applications a school received or roughly the same impact on applications as a 10-ranking drop in the influential U.S. News and World Report College Rankings.”3

Strategic communication in order to build healthy media relations is key. For example, universities make room for some professors to build their personal brands ‘out there’, so to say, apart from their responsibilities within the university. Jonah Berger from UPenn or Gerald Zaltman from Harvard University are good examples of this approach. These individual brands publish books, deliver speeches, become thought-leaders and influencers who develop relationships with the industry, the media and the public, add value to the reputation of the university. They are affiliated with and raise awareness about the brand of their university. They do the indirect ambassadorial work that benefits both themselves and the university. There are many firms the world over who can apply this approach by behaving this kind of ‘conglomerate brand’ at the heart (individual/personal brands), encouraging encourage intrapreneurship at the same time.

“Academic brands gain further strength by getting involved in co-branding.”

In addition to that, universities recruit, collaborate with or invite high-profile practitioners who are influential in their industry. Academic brands gain further strength by getting involved in co-branding. As Frølund, Murray, and Riedel wrote: “Following corporate giants like General Electric, Siemens, Rolls-Royce, and IBM, which have collaborated with universities for years, a variety of younger companies including Amazon, Facebook, Google, and Uber are using universities as a key part of their early-stage innovation and new ventures strategy.”4 Collaborating per se isn’t the point. Collaborating with the right commercial brands is what does the work.

The Main Lesson

The main key takeaway for business and brand leaders  is that focus needs to shift from one directional messaging such as ‘advertising’ (traditional and online) to focus on brand building and reputation management through sharing knwledge. Opportunites and channels abound. From social media to events, from public relations to influencer marketing. The key is to build and maintain a constructive culture rather than a competitive environment. It isn’t incidental that most of the top universities of the world actually manage to stay more or less in the same ranks for decades and centuries. They don’t stop once they’ve become reputable. They are well aware that retaining a strong reputation is more difficult than attaining it and so they continue investing intellectual efforts, capital and time in retaining the reputation they’ve built.

Learn more how we can support you in achieving your reputation goals.

References:

  1. “World University Rankings.” Times Higher Education (THE), 9 Apr. 2018, www.timeshighereducation.com/world-university-rankings/2018/world-ranking#!/page/0/length/-1/sort_by/rank/sort_order/asc/cols/stats.
  2. “World University Rankings.” Times Higher Education (THE), 19 Feb. 2019, www.timeshighereducation.com/world-university-rankings/2019/world-ranking#!/page/0/length/25/sort_by/rank/sort_order/asc/cols/stats.
  3. Kingkade, Tyler. “How Media Coverage Of Campus Scandals Impacts College Applications.” HuffPost, HuffPost, 8 July 2016, www.huffpost.com/entry/college-scandals-applications_n_577e6ac1e4b0344d514e1bf9.
  4. Frølund, Lars, et al. “Developing Successful Strategic Partnerships With Universities.” MIT Sloan Management Review, sloanreview.mit.edu/article/developing-successful-strategic-partnerships-with-universities
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