One of the questions often asked is whether or not corporate reputation still matters. Considering today's connected world, with its myriad products and services available to consumers, brand loyalty is as difficult to build as it is easy to lose. According to Francois Baird, chair of communication consultancy at Edelman Africa, corporate reputation reflects reality.
"It is a reflection of the business practice of an organisation. Corporate reputation is about the ability of the organisation to satisfy all its stakeholders and being true to the reason for its existence. When the corporate or product promise is broken is when reputation really suffers. Most people are realistic about the fact that things go wrong from time to time but they are unforgiving when it comes to core business failures," says Baird.
He says companies that do well in reputation surveys are the ones who are successful in their corporate performance, delivering on their promise to shareholders and the community, and more.
The reason why these companies are at the top of their game when it comes to reputation is because they deliver on their core promises.
"Some people might argue that reputation does not really make a difference. After all, will you really buy one less soft drink if the brand has annoyed you once?
"But if there is a significant problem, people will either forgive the company and continue to use its products and services or they will distance themselves from the brand because they feel that the relationship of trust has been broken," says Baird.
This means that reputation is about trust. It is difficult to earn, but once broken it becomes more difficult to regain it. Even if an organisation has restored its corporate promise or the ability to deliver on that promise, it takes a long time to rebuild trust with stakeholders.
Improving corporate reputation
But how can organisations regain trust after going through a negative experience?
Some believe that one way is to show stakeholders that the core of the promise has been fixed. If one looks at the Sony example, compromising personal data is bad, but the reputation can be salvaged by fixing the security hole and firing the people involved.
However, if Sony products do not deliver on what they promise to do and it happens on a regular basis, then people will start spending their money elsewhere.
Equally so, following the Deepwater Horizon spill, people will think twice about giving permission for BP to build pipelines over their properties. People might forgive companies when it suits them to do so, but if the core promise keeps getting broken, they will find alternatives.
This can result in significant financial damage to the organisation that it might never recover from. If damage to corporate reputation teaches companies anything, it is that no stakeholder can be taken for granted.
"The place to start repairing reputation is not with an advertising or marketing campaign or through social investments. It is by focusing on the core business practice of the organisation.
"If, for example, a food retailer starts to take shortcuts on food safety or a pharmaceutical company compromises patient safety, there are real problems on the horizon," says Baird.
He believes that companies do not consider reputational risk in their daily operations.
That, he says, is why you have a company with a top reputation on one day and have a failure the following day because it did not think of the impact a management decision can have on its core business.
"The real issue for me is that companies who are on top in terms of reputation need to manage risk in their daily operations. If they do not, then the strong reputation will only be a fleeting success," says Baird.
Risk management therefore needs to become an integral part of the business. Managers need to consider the reputational risk for the organisation when making a line decision. They need to have a clear understanding of the core business.
"In my experience, every reputational crisis has at its core somewhere a really stupid decision made by a line manager that should have known better," Baird concludes.
Nowhere to run
Reputation has become increasingly important as companies that cannot fulfil on their brand promise feel pressured financially. Reputation is all about what a company says and does, says Andrea Crystal, lecturer at the department of strategic communication at the University of Johannesburg.
"Companies need to be consistent in their approach. Reputation, and all that goes along with it, such as integrity, ethics and authenticity, is all a company has to fall back on. It all boils down to the social currency that companies have built up," she says.
This means that if a company has a strong reputation and something happens to damage it, they start dipping into their social currency. Reputation becomes difficult to manage when companies start "spending" this currency faster than they can build it.
She says that although a company can recover from reputational damage, how it handles the crisis is one of the most important things. People are more forgiving of companies that admit their wrongdoings and put things in place to prevent it from happening again than of companies that try and act like nothing has happened.
"Reputation is the nucleus of an integrated campaign for a company. The soul of the brand is holding more water with people who are aligning their values in terms of the brands they use," says Crystal.
Companies should refrain from speaking about "reputation management" because it has become impossible to control reputation in the age of social media, she says.
"This has resulted in companies shifting away from five-year corporate reputation management plans by being more flexible and adaptable to short-term changes.
"Companies need to consider looking for good listening posts on social media to be more pro-active in their activities. They need to find issues that they can use to participate in the conversations of the day." The critical thing is for organisations to start taking part in the digital discourse.
When it comes to reputation in the modern age, Crystal says it has moved from being about control to be about influence. The brand has to find ways to weave what they stand for into their various communities of interest. However, they need to do so in ways that do not come across as being disingenuous. Employees also need to be kept appraised of everything that is going on, because they often read about bad news in the media and quickly become disgruntled."
Crystal says that we are living in an "expectation economy" and that reputation becomes a short cut as it serves as a primer of expectation. There must not be a gap between these concepts.
"With this emphasis on reputation, corporate branding itself becomes increasingly important. Organisations, in terms of issue and risk areas, need to communicate within their stakeholder networks," she says.
This provides them with the opportunity to have context-related messages as opposed to only one message. Also, it becomes pivotal that the organisation tells their story, highlighting the importance of corporate branding. And while corporate branding is only one piece of the puzzle, having that integrated approach to reputation will result in organisations being able to mitigate any potential risks before they occur, she says.
It will also equip them with the tools and processes required to manage reputational damage — when it occurs — to limit the potential damage to not only the brand, but also to the financial bottom line.