Definitions create the lenses through which we look at the world. The renowned psychologist, Abraham Maslow said that if the only thing you have is a hammer, you tend to treat everything as a nail. I start every workshop and presentation with definitions, so that I can establish a common framework through which I can work with my audience. In particular there are a number of definitions to describe reputation and reputation risk, each serving a slightly different purpose. These need to be further explored so that you can decide on how you will manage reputation. The classic definition is that Reputation is all that is generally believed about your character, respectability, credit, integrity or notoriety. (Latin: reputatio reckoning). But that is not enough to guide us. I also use these definitions that give it more meaning.
- Reputation is a state of mind – A set of memories, perceptions and opinions that sits in your stakeholders’ consciousness
- The net result of the interactions of all the experiences, impressions, beliefs, feelings and knowledge all stakeholders have about a company
So what then is Reputation Management? It is a consulting discipline that realizes that it is important to think of Reputation as an asset and a risk. The definition of a Manager is that he or she is a person that needs to manage of all assets and resources allocated to him or her. With reputation being an asset with a direct financial link, that can be measured, should it not therefore also be managed? With some studies showing that as much as 55% of a company share price value can be derived from its reputation, surely there needs to be an increased focus in organisations to actively and systemically manage this perceptual asset. Many organisations believe that a PR department with just a few employees is sufficient to do this. I beg to differ and will expand on this in some of my future posts. I believe that the most effective way to manage it as an asset is to create a process that cast a look at all aspects that could impact on the organization’s perceptual asset.
The definition that I therefore like to work with says that Reputation Management is the building, sustaining, and protection of an organization’s good name, generating positive feedback from stakeholders and resulting in the attainment of strategic and financial objectives. It implies that there is a definite financial link between reputation and the bottom line and puts the emphasis on the building this asset and increasing its value.
However Reputation is also the greatest risk an organisation can face. As Warren Buffett have said : “It can take 20 years to build a good reputation, and only 5 minutes to destroy it”. We therefore have to also consider the following definitions in our approach to building the reputation asset and protecting it from damage.
The first definition is that Reputation risk is the risk that an activity, action or stance performed or taken by a company or its officials will impair its image in the community and/or the long-term trust placed in the organisation by its stakeholders, resulting in the loss of business and/or legal action. The second definition is that Reputation Risk is the loss of earnings that occur in a situation of negative public opinion. It normally results in loss of sales, share value decreases and breakdown of relationships. Many a crises have led to stock price decreases and impact in other areas of the business.
The 3rd definition is one that I use in my Stakeholder Reputation workshops. Reputation Risk emerges when the reasonable expectations of stakeholders are not met. This definition requires a different view. It essentially involves taking a look at each stakeholder’s needs and expectations, matching the drivers of an organisation’s reputation and minimising the gaps that exist. From the above definitions it must be clear that essentially all risks and all related components of a company potentially impact on reputation risk. This implies that reputation needs to be systemically managed in organisations.