Avoid the reputational damage that will damage your business
When trust in your company falters, consumers are less willing to buy your goods. Investors are less inclined to invest. Talented people become disinterested in working for you. This isn’t supposition. It’s fact, confirmed by the main findings of this year’s Global RepTrak 100 (RT100) study of corporate reputation. In this article, we examine the main findings of the study, and consider how to build and maintain the elements of corporate reputation to avoid the negative effectives of declining trust.
Damaged elite reputations are rippling to corporates
The suspicion with which people view the ‘elites’ has been made clear in politics; first Brexit, then Trump, and now Imran Khan, sprinkled with election outcomes in Italy, Hungary and Austria among others.
The reputations of people considered to be elites has been severely damaged, too, by widespread abuse of power, authority, and money – think Jimmy Saville, the allegations against Weinstein, and so on.
Media and news channels are no longer trusted to be impartial, and the spread of fake news has only served to deepen this mistrust.
The RT100 shows that people have now begun to question elements of corporate reputation, and act accordingly.
A crisis of trust caused by mismanagement of elements of corporate reputation
For the first time since the end of the Great Recession, corporate reputation as measured by the Reputation Institute, who conduct the RT100 study, has fallen.
The study surveyed more than 230,000 people in 15 countries in January and February of 2018. It asked how much they trusted big companies – those with revenues of around $50 billion and more, and whose brands were familiar to at least 40% of the general population. The results tell a dismal story:
- Only 38.5% of those surveyed said they trust companies to ‘do the right thing’
- Willingness to invest plunged by 8.1 points
- Intent to make purchases collapsed by 7.9 points
- Interest in being employed by these big corporates dropped by 6.1 points
The last in the above list could be the most damaging to a company’s fortunes.
If you attract quality people, they should help you to produce quality products and services. Without this linchpin, productivity is likely to fall, and what is produced is likely to be less satisfactory to consumers. In short, your reputation will be damaged further, and you could find yourself in a catch 22 situation and a downward spiral of falling reputation and declining profits.
What are the elements of corporate reputation?
Corporate reputation is determined by several elements. These include:
- Ethical practices
- Product and service quality
- Customer service
- Workplace environment (for example, a food safety culture in food producers)
- Corporate citizenship
What happens when companies don’t maintain the elements of corporate reputation?
We only have to remember a few high-profile examples of soured reputations to understand just how devastating the effects can be. Examples include:
- A massive data breach at Target in 2013 caused customers to stay away. Fourth quarter profits in 2013 fell by 46% and the shares fell 8%, while the S&P 500 Index gained 15%.
- Those old enough will remember how Gerald Ratner made a speech to the Institute of Directors in 1991 that led to thousands of job losses, massive financial losses, and an almost overnight fall of more than £500 million in the value of Ratners. Later claiming he was joking, Ratner said that the company’s jewellery products were ‘total crap’ and that some of its earrings were “cheaper than an M&S prawn sandwich but probably wouldn’t last as long”.
- Volkswagen shares collapsed by 40% between May 2015 and October 2016, as it became embroiled in the emissions scandal. 30,000 employees lost their jobs.
- In 2010, BP shares more than halved after the Deepwater Horizon disaster in the Gulf of Mexico.
These examples show that while corporate reputation takes a long time to build, it can be destroyed quickly – and even with just a few misplaced words by a CEO.
Fortunately, as the study by the Reputation Institute shows, it is possible to rebuild reputation.
Using the corporate narrative to improve corporate reputation
In 2017, Samsung was beset by problems with its Galaxy Note 7. They kept bursting into flames. Added to this, there was a massive corruption scandal surrounding Samsung heir, Lee Jae-yong. The company’s reputation was seemingly tarnished beyond repair.
Samsung took the bold decision of meeting the crisis head on. It issued public apologies, and it rewrote its narrative to urge people to “do what you can’t”. In a sweeping strategy, it put ethical behaviour, fairness, product value and transparency above profit. The trust turnaround has been swift and dramatic: it is the fastest improver in the Global RepTrak 100, leaping 44 places to number 23 since the year before.
Stephen Hahn-Griffiths, Chief Research Officer at the Reputation Institute, compares Samsung’s performance to that of Apple. The iPhone manufacturer improved in only one of the elements of corporate reputation: profit. Across all others, its score declined. Overall, it crashed 38 places to number 58 in the reputation index, as it batted away tax evasion, poor sales, battery tampering rumours, and conducted a battle with the FBI over encryption.
The contrast between Apple and Samsung is proof that putting purpose ahead of profit and working hard on the key elements of corporate reputation will be rewarded with growing trust.
What should you do if you have a reputational mishap?
As Samsung has shown, it is imperative that you act quickly and decisively to repair reputational damage. You should shoulder the blame and take responsibility, and review and revise your company mission to ensure that it is congruent with your values and beliefs – and those of your customers.
In short, shape your organisational culture in line with the key elements of corporate reputation, as you build a purpose-based organisation which should then benefit from increased customer loyalty, rising sales, and improving profits.
A major challenge in this endeavour is how to communicate codes of conduct and good working practices to employees, engaging them in conversation about mistakes made, the future vision, and how to achieve the new purpose-based goals. This is where the expertise of BigPicture Learning enters the frame. Get in touch with us today, and find out how our Learning Map approach can help repair, enhance, and maintain your corporate reputation.
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