Protecting your reputation is a prime crisis management concern
We’ve said for years that reputation is an organization’s most valuable asset, an assertion backed up again and again by real-life experience. In his Managing Outcomes newsletter, our friend and colleague Tony Jaques recently shared two real-world examples which directly support this belief. Here’s a quote:
It’s hard to demonstrate beyond doubt that the investment you make to help improve reputation will be consistently rewarded. But there can be no doubt at all that a major hit to reputation will surely damage shareholder value.
That truth was reinforced this month when two high-profile reputational crises took their impact straight to the bottom line.
The first was headline news across the country alleging bribery and corruption at the highest level at the international construction giant Leighton Holdings to gain contracts in Iraq, Malaysia, Indonesia and elsewhere. The result was $700 million, or more than 10%, wiped off the share value in a single day.
While some analysts claimed it was “an overreaction to allegations first aired more than a year ago,” there were further losses the following day before the market stabilised. As BRW columnist Leo D’Angelo Fisher commented: “As spectacular front-page headlines go, when it comes to media coverage of Australian business, this may prove to be the one to beat for 2013, and for some time thereafter.”
There were instant denials and angry letters from lawyers, and there is a long way to run before the truth will be established. But within a week three senior executives resigned and Leighton’s reputation has been hard hit.
The same happened to California “green car” maker Tesla when one of their electric cars ran over debris on the road and a fire began in the battery-pack. Unfortunately, a passerby recorded the blaze and the video went viral, with investors slashing $US2.5 billion, or about 6%, off the company’s value. Once again it was a media-driven reputational crisis, but the video rekindled concerns about the safety of lithium-ion batteries and that concern translated directly into a costly loss of confidence.
Public Affairs Council President Doug Pinkham recently wrote: “Reputation management is an inexact science because running a business is not a controlled experiment. The variables are always changing, and the markets often reward a company one day and punish it the next.”
Tony also shared a Weber Shandwick study, “Safeguarding Reputation,” that determined, worldwide, 63% of a company’s market value is directly tied to reputation, a fact perfectly backed by the two examples above.
Everything, from where you source material, to what you stock on store shelves, to what your employees post on social media, has the potential to impact your reputation. You wouldn’t leave the contents of your bank account unattended, so why would you neglect to prepare a crisis management plan that will help keep your reputation as strong as possible?
For more resources, see the Free Management Library topic: Crisis Management
[Jonathan Bernstein is president of Bernstein Crisis Management, Inc., an international crisis management consultancy, author of Manager’s Guide to Crisis Management and Keeping the Wolves at Bay – Media Training. Erik Bernstein is Social Media Manager for the firm, and also editor of its newsletter, Crisis Manager]