logo
+41 44 254 80 00

The Impact of Individual Action on Reputation

Martin Riley, ex-CMO of Pernod Ricard, once warned, saying that in today’s world every brand can have its own “Tahrir Square or WikiLeaks moment. Any ill-thought out 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.” [1]

“Today, brands are only as strong as their weakest link.” - Martin Riley

Today it is much quicker and easier for an empowered consumer, informed stakeholder, or a disgruntled employee to expose or do more damage to a firm than any time before in history. A leak about a brand’s illegal activity can go viral in a matter of minutes. Conversely, hiding a brand’s semi-illicit activity somewhere along the supply chain or at C-Suite level has never been so difficult. And it’s a good thing: the era of radical transparency creates a highly risky environment for the reputation of brands.

“Increasing complexity paves the way for the butterfly effect.”

Individual action can have a serious impact on the reputation of the whole corporation. It may be an employee from the team, a farmer who supplies the source of the product or anyone from the C-Suite. This is because 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 area of a complex system can result in large differences in the whole at a later state. Something as small as the flutter of a butterfly's wings can ultimately cause a typhoon halfway around the world. Leaders, managers and executives of global brands have witnessed this effect many times particularly in the realm of reputational crises.

Employee’s Action

Firstly, it’s necessary to acknowledge that today 75% of an average corporation’s value is intangible – or in other words, its brand and its reputation are a business’ most valuable asset [2] and according to a survey by Deloitte 87% of executives rate reputation risk as more important than other strategic risks. [3]

Individual action can result in various societal effects. So, the butterfly effect is not the only consequence. Employee or ex-employee action can lead to reputational impact stemming from:

  • the butterfly effect
  • the domino effect
  • the bandwagon effect

As mentioned above, the butterfly effect is when a small change, for instance, in the internal culture of a firm causes large typhoons of scandal, crisis and disaster. The domino effect, like a negative spiral, is when, for example, a communications problem results in an ethical problem which then becomes a societal problem and when the societal problem becomes an economic problem and when the economic problem becomes a crisis for the corporation etc. The bandwagon effect is when different stakeholders begin following in each other’s footsteps in regards to decision making on the ongoing issue.

Ex-employees have more freewill today than ever when it comes to leaking information or speaking out. They are willing to participate in interviews for investigative journalists or even start campaigns against a particular corporation. Frances Haugen is an exemplary whistle blower. A person from inside Facebook (now Meta), who decided to speak out about the ill motives of the tech giant. [4] Similarly, in a Netflix documentary series called ‘Dirty Money’, former employees of the largest banks expose the dirty inner workings during interviews with investigative journalists.

“By failing to prepare, one is preparing to fail.” - Benjamin Franklin

In addition to the individuals within the workforce, a crisis can arise from an individual throughout parts of the supply chain, too. 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 who was not on any official payroll approved by the Headquarters. 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 polymath Benjamin Franklin formulated: “By failing to prepare, one is preparing to fail.”

CEO’s Action

We live in an age when the spokesperson for a corporation is not a spokesperson or, say, the director of corporate communications. Increasingly, it is the CEO himself. The ambassadorial and, for some companies, activistic role of CEOs, the increasing need for radical transparency, social media responsibility and personal branding are only some of the factors driving this dynamic. As Mat Zucker wrote, “the most successful CEOs have one thing in common: they understand the power of effective communications in shaping their companies’ brands, reputation and culture and they invest significant time and brainpower in communicating their vision, values and value. In the face of market disruptions and intense public scrutiny, the CEO is now expected to play a greater role than ever before in being the heart, soul and face of their company.” [5]

“The reputation of a brand is strongly linked to the reputation of a CEO.”

Today CEOs face heightened risk to personal reputations and the reputation of a brand is strongly linked to the reputation of a CEO. A survey done by Weber Shandwick estimated that 44% of a company’s market value is attributable to CEO reputation. [6] Another survey found that 95% of financial and industry analysts said they would purchase stock based upon a CEO’s reputation. [7] And 94% said they would recommend the stock to others based on the CEO’s reputation. [8] Corporations today can also go through what i.e., Papa John’s went through in 2018. As a result of just one comment by their CEO the stock plummeted 13% and erased $96.2 million in market value in a few hours of stock trading. [9]All in all, the impact of a CEO’s action on corporate reputation must not be underestimated. Not to mention … Elon Musk.

Pro-Active Steps and Tools

Reputation, by definition, is what others are saying about the organization. This is why it is necessary to take the following steps continuously:

  • Map who the key stakeholders are
  • Pro-actively monitor mentions or keywords of your brand on websites, in the media and on social media
  • Use tools that are capable of monitoring online and offline mentions, keywords and regularly review alert limits/configurations
  • Generate positive visibility through organic and paid online content (including Search Advertising) and align and invest in SEO (Search Engine Optimization) on and off-site.
  • Flag or report negative content unfairly published about your firm pro-actively, Google, Wikipedia, Amazon and pretty much any “rating” sites offer standard processes for this.
  • Pro-actively ask for online rankings, ratings and/or reviews from pre-existing customers
  • Measure your Net Promoters Score (NPS) and contrast this with what you monitor on and offline
  • Build and protect bridges in the area of press relations; print, tv, radio and deep journalism still matter
  • Resort to the law only as a last resort – but don’t shy away from it when it comes to protecting your reputation

Positive reputation starts from within and then spills over. It’s inside out. This is why it is necessary to measure the following internal factors so that if something goes out of order, it is spotted on time:

  • Use scenario training to evaluate management processes (it is almost analogical to emergency procedures in a fire drill)
  • Measure the level of employee satisfaction
  • Pro-actively monitor both internal processes/systems across the value chain and external developments
  • Evaluate how on-brand is your day-to-day decision-making or communications
  • Make sure the daily internal behavior is in accordance with the brand values (are the values lived inside the firm or are they just filling the website’s vision/mission page?)
  • Be crystal-clear on your social-media guidelines for our employees
  • Support the CEO in building and protecting his/her personal brand – also and especially in digital channels

Individual action can either make or break the reputation of an organization. It’s not only the CEOs action but also the actions of every employee. The current economic and systemic signs indicate that this is the WikiLeaks moment for brands’ reputations. For brands, it is not a matter of “if” but a matter of “when”. Take pro-active steps now to build, protect and above all: strengthen your reputation.


References

[1] Charles, Gemma. “Brands Must Guard against 'Wikileak' Moment in Digital Age, Says Pernod Ricard CMO.” Campaign UK, CampaignUK, 28 Aug. 2014, https://www.campaignlive.co.uk/article/brands-guard-against-wikileak-moment-digital-age-says-pernod-ricard-cmo/1287257. 

[2] 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.

[3][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.

[4] Perrigo, Billy. “Why Whistleblower Frances Haugen Decided to Take on Facebook.” Time, Time, 22 Nov. 2021, https://time.com/6121931/frances-haugen-facebook-whistleblower-profile/. 

[5] Zucker, Mat. “The CEO Content Strategy-Your Chief Executive as a Reputation Channel.” Forbes, Forbes Magazine, 26 June 2020, https://www.forbes.com/sites/matzucker/2020/06/23/ceo-content-strategy/?sh=48a6a292f32a. 

[6] “81% Of Global Executives Report That External CEO Engagement Is Now a Mandate for Building Company Reputation.” Weber Shandwick, 17 Apr. 2018, https://www.webershandwick.com/news/81-percent-of-global-executives-report-external-ceo-engagement-is-a-mandate/. 

[7] Gaines-Ross, L. CEO Reputation: A Key Factor in Shareholder Value. Corp Reputation Rev 3, 366–370 (2000). https://doi.org/10.1057/palgrave.crr.1540127

[8] Erskine, Ryan. “Does Your CEO Have a Personal Brand? If Not, It Could Be Affecting Your Bottom Line.” Forbes, Forbes Magazine, 17 Dec. 2017, https://www.forbes.com/sites/ryanerskine/2017/12/17/does-your-ceo-have-a-personal-brand-if-not-it-could-be-affecting-your-bottom-line/?sh=7a4e3b0f2f09. 

[9] “How CEO Reputation Impacts Corporate Reputation.” ReputationManagement.com, 26 Oct. 2020, https://www.reputationmanagement.com/blog/ceo-reputation-management/. 

Reputation Affairs™ renforce et protège les entreprises, les familles et les personnes influentes lors de problèmes de communication complexes. Reputation Affairs™ est un département bien ciblé de Brand Affairs™, une agence reconnue, au service de la communication des marques, des relations publiques et des réseaux sociaux.
Reputation Affairs™
c/o Brand Affairs AG,
Mühlebachstrasse 8,
8008 Zurich, Switzerland

T: +41 44 254 80 00
E:[email protected]

© 2022 Reputation Affairs.