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.
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:
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.”
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.
Reputation, by definition, is what others are saying about the organization. This is why it is necessary to take the following steps continuously:
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:
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.
[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] “Reputation@Risk | 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/.
According to a survey by Deloitte 87% of executives rate reputational risk as more important than other strategic risks.1 Despite this fact, both awareness and active reputation management are still vastly misrepresented in corporate environments, especially in medium-size enterprises. Reputational realities, hence, are not yet there where they actually belong to.
The internal culture, value systems and specific organizational and of course historic context up the perceived and actual comportment of a company. A positive or a negative reputation strongly depends on the behaviour of an organization. It is, therefore, reasonable to assume that good behaviour equals good reputation. Manners make the brand rep. However, as in the words of Prof. Einstein: “Everything should be made as simple as possible, but not simpler.” Especially when it comes to such complex systems as corporate reputation.
“So as much as reputation management by today can be called a science, it, unfortunately, still is not an exact one.”
There are plenty of precedents in economic history that have taught us that reputation is indeed made up of non-linear, highly complex corporate fabric. The conundrum here is despite a company doing its best to behave well, reputational crisis can hit even those corporations that deserve it the least.
Given that a corporation is, in many ways, a living organism it is very analogical to the human body with its complex structure. Even those of us who take care of their body, eat well, exercise regularly and live a healthy lifestyle can still get severely ill. How is it that some people who had lived a very healthy way of life actually die younger than those who had smoked, drunk and eaten carelessly so often? The medical explanation for the suffering of those who don’t deserve to suffer lies at least partially in their predisposition towards certain diseases. The same explanation applies to today’s corporations and indeed entire industries. Some have a particular reputational predisposition that others don’t have.
If a corporation has a predisposition to reputational crisis, does it mean that whatever move it makes its investments in reputation building will fall short? Not quite. There are tried and tested ways of overcoming difficult situations. What are the measures to take before and after a crisis? How can communications professionals reduce reputational complexities to a minimum?
“No matter how complex an issue appears to be at first sight, there is always a solution.”
In some cases, the predisposition is not even inherent in the corporation itself but in the industry the company is in. Take the banking industry as an example. How many industries do you know which are described with such terms as ‘cartel’, ‘led to the global economic recession’ or ‘shadow system’ in legitimate academic textbooks? Despite the banks’ efforts to manage their reputation during the post-recession period, the ‘banking image’ began falling again in 2018 - after years of rebuilding and recovering from the 2008 financial crisis.2 The priority should be in being pro-active rather than reactive. Bad reputation management tends to react in turbulent times and overreact to almost every other thing good reputational management start in good times, prepares and when needed, responds adequately.
The returns on investment will increase if all communication that affects reputation is crafted in a way that it appeals not only to customers but also to the other stakeholders (i.e. employees, shareholders, partners etc.). It is important to remember that corporate reputation gains and retains strength only when it is applied holistically. In other words, along with the corporate communications department, all other departments such as HR, IT, board of directors, and C-Suite need to be held responsible for possible reputational realities. Culture drives integrity – especially present within long-term, often family and value-oriented companies. Almost half of the top ten brands with high reputation are from the luxury industry.3
Overcoming reputational crisis might require taking a risk to build trust. Leader and decision-makers in charge to prevent or solve problems related to reputational risk need to adopt lateral thinking. If it is not a common reputational reality then it requires uncommon sense. Integrity in this context is about making the right decision to take the right step. ROI here stands for Return On Integrity.
If you are interested in learning more about reputational realities and how your company can prepare better, get in touch with us.
According to a survey by Deloitte, 87% of executives rate reputation risk as more important than other strategic risks.1 Despite the fact that the global business class has come a long way in its efforts to linearize reputation management, it still doesn’t change the reality that, inherently, much of its nature is non-linear. It is due to its complex nature that corporations come across numerous unexpected and inconsistent veracities in relation to reputation.
The internal brand culture and holistic performance make up the behavior of a company. As any insider would agree, a positive or a negative reputation strongly depends on the behavior of an organization. This then gives way to the reasonable conclusion that good behavior equals good reputation. Manners make the brand rep. However, as in the words of Albert Einstein: “Everything should be made as simple as possible, but not simpler.” This is especially true when it comes to such complex notions such as corporate reputation.
“So as much as reputation management, by today, can be called a science, it, unfortunately, still is not an exact one.”
So as much as reputation management, by today, can be called a science, it, unfortunately, still is not an exact one. Precedents in economic history have taught us thus far that it is a non-linear or complex component. A widely known situation of such complexity that is frequently evident in the corporate world today is when a corporation finds its reputation under threat, despite its model behavior. In other words, reputational crisis, in some cases, hits even those corporations that deserve it the least.
With its complex processes a corporation is, in many ways, a living organism analogous to the human body. Even those who take care of their bodies, eat well, exercise and live a healthy lifestyle can still fall severely ill. How is it that people who have lived very healthily can actually die younger than those who smoked excessively, drank heavily and ate carelessly? The medical explanation for the suffering of those who don’t deserve to suffer lies in their predilection for certain diseases. The same applies to today’s corporations and the industries to which they belong. Some of them have a particular reputational predisposition that others don’t have.
If a corporation has a predisposition to reputational crisis, does it mean that whatever move it makes all investments in reputation building will fall short? No, it is not so. Regardless of how complex this issue appears to be at first sight there are still solutions for it because it is not the first time this has occurred in the world of commerce. There is a well-trodden road or a tried and tested way of overcoming this in order to improve business results. It’s a matter of knowing what measures to take before and after. It’s also about communications professionals being able to reduce complexity to the minimum.
“No matter how complex this issue appears to be there are still solutions for it because it is not the first time this has occurred.”
In some cases, the predisposition is not even of the corporation itself but in the industry the corporation belongs to. Take the banking industry as an example. How many industries do you know that are described with terms such as ‘cartel’, ‘led to the global economic recession’ or ‘shadow system’ in legitimate academic textbooks? Despite efforts to manage reputation during the post-recession period, banks began seeing their reputation again in 2018 after five years.2 In any case, the priority should be in being pro-active rather than reactive. Amateurs tend not to do their homework and in turbulent times tend to react, if not overreact to almost every little thing, while responsible professionals prepare and, when the time is right, respond.
“The returns on investment will increase if all communication that affects reputation is crafted in the way that it appeals not only to customers but also to the other stakeholders.”
Returns on investment will increase if all communication that affects reputation is crafted in a way that appeals not only to customers, but also to company stakeholders (i.e. employees, shareholders, partners etc.). It is important to remember that corporate reputation gains and retains strength only when cared for holistically. In other words, along with the corporate communications department, all other departments including HR, IT, the board of directors and the C-Suite need to take responsibility for all possible reputational realities. Examples of best practice are common within the cultures of many luxury brands. In fact, a study in the UK revealed that almost half of the top ten brands with high reputation were from the luxury industry.3
Overcoming reputational crisis may require taking risk to build trust. This indicates that decision-makers there to prevent or solve the problems need to adopt lateral thinking. If it is not a common reputational reality then it requires uncommon sense. Integrity in this context is about making the right decision to take the right step, which can be an unpopular one. ROI here stands for Return On Integrity.
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