The risks that are likely to generate the most damage to an organisation’s reputation are those directly related to its checks and balances, and to the way it does business.
For instance, a bank that had been saved from the brink of collapse with taxpayers’ money, can hardly afford to pay its CEO a hefty bonus at the end of the year – after all, the bonus received for doing a bad job (effectively), could be put to better use for the healthcare or social services.
Had the initiative to forgo such bonuses generated from RBS itself, that would have been commendable – but it hadn’t. It was the UK Government who had to step in and do it.
Reputation today is no longer as trivial as it was 1-2 decades ago. A lot of weighting is placed on the way an organisation is perceived, its track record and its ability to learn from its mistakes.
Reputation matters, but there are clear instances where there is a clear disconnect between the reputation of some organisations and the power they yield.
RyanAir, although it has a really bad reputation for its service, in-flight conditions, reliability and the manners of its CEO, it’s still in business, it’s still making money and it’s still very much used by people across the UK although, of course, you may get moved from your seat because your skin colour may upset other passengers:
As long as RyanAir provides a cheap service that meets someone’s budget or ability to use it, regardless of their reputation they’ll still be flying.
And this where the very tenet of reputation impact on business is becoming a paradox: when you have power or provide a niche service, someone will still do business with you regardless of your reputation.
A perfect example in this regard is President Trump’s pragmatic approach to Saudi Arabia’s assassination of Jamal Khashoggi, the Washington Post journalist:
After all, as he recently stated in another interview, “US needs Saudi Arabia more than they need us” – because of the significant hold on the American Government that the US weapon manufacturers and oil giants have. UK is also highly unlikely to stop selling arms to Saudi Arabia because, the rules of international trade dictate that if one player leaves the table, another one steps in.
At the opposite end of this spectrum we have the recent scandal of Pret and its food labelling:
While many holes have been found in its marketing claims, Pret is still booming, no shops have closed down, they are still doing business and, although they handled this whole scandal pretty badly – nothing devastating happened to business.
Very many customers of Pret don’t have any allergies, so the sad loss of two lives doesn’t affect their brand preference because, as someone recently told me, “they have really nice sandwiches”.
My favourite one has to be Facebook – although they took a huge blow in terms of their market value following the data selling and Cambridge Analytica scandals, and though they lost several million of young subscribers, they are still very much “alive” and thriving. Why? Because they have the financial power to bounce back and start again, promising to make amends.
Whether their new attempts at starting over will succeed or not, no spokesperson can ever cover their potential future inability of putting proper data safeguards in place, protecting their users and making Facebook a safe place. People’s privacy cannot be spun by any politician, nor lobbied by any former Government “figurehead”. So, good luck to Nick Cleg.
Reputation does matter for many businesses and organisations, especially for those who are just beginning their journey on the market place or those that exist with donations from the public coffer (mainly).
If you have a corner shop or a village bakery, you care about your customers probably much more than any giant corporation will ever care about theirs: it is with every loaf or pie you sell that your reputation is increasing. The more you do good, the more credit you get and leeway you receive in case something ever goes wrong.
The risks to any organisation’s reputation are generic across the board (don’t steal, don’t kill, don’t corrupt, don’t abuse your power etc.), but they are also very specific to the sector/market the organisation operates in. For instance, the second highest risk to a Care Home for vulnerable people is to have staff that is not sufficiently trained, monitored or verified:
Mr Trump is still the President of the United States – he is a very powerful man, regardless of his views on women, his racist discourse, his involvement with Russia during his presidential campaign and his less than ethical ties with a variety of financial transactions.
Ryan Air and United Airlines are still flying. Saudi Arabia will still be buying weapons and selling oil, regardless of how many killing squads will send against its public critics. Pret will still be selling sandwiches and soups, although those consumers with allergies may avoid buying their products for a while.
What keeps leaders awake at night is not the potential reputation damage – it’s their ability to ensure that they have enough power, and have accrued sufficient public goodwill to save themselves in case something bad happens.
We all make mistakes; reputation today is what you do after your mistake has been found out.