As everyone knows, not owning up to a mistake only makes matters worse in the long run. When big businesses try to deflect blame or don’t recognise the gravity of a situation, the damage and fallout can be catastrophic. There are plenty of examples where businesses still don’t get this basic truth, opting instead to insult people’s intelligence with delusory PR and buck passing.

Mary Jo Jacobi is a Criticaleye Associate who has worked on reputation management issues for some of the world’s biggest companies, including BP after the Gulf of Mexico oil spill, Royal Dutch Shell during the reserves miscategorisation and HSBC during the Asian financial crisis. She says: “It is absolutely true that it takes 20 years to build a reputation and 20 minutes to destroy it. You have to be prepared and if a crisis comes, take it seriously and have the available resources to manage it.”

Denial and delay only compound issues, especially when the media sniffs blood and anarchic hearsay is loosed upon the web. Andrew Griffin, Chief Executive of reputation management specialist Regester Larkin, says: “The important thing is to acknowledge failings and mistakes, visibly demonstrating the steps that are being taken to fix them.”

Ian Ryder, Deputy CEO of BCS [British Computer Society], the Chartered Institute for IT, confirms that speed is the name of the game. “Failures occur when organisations aren’t quick enough or open enough. They have ill-prepared or poorly equipped spokespeople, which ignores reality and the level of potential damage,” he says, noting that some businesses will be beyond salvation (think Enron, WorldCom, Ratners et al).

During the oil reserves crisis at Shell, Mary says that the critical factor was the board’s willingness to accept changes were needed and fast: “Shell realised that wholesale reorganisation was essential,” she says. “It restructured by completing the merger of Royal Dutch Petroleum and Shell Transport and Trading, creating Royal Dutch Shell with its single head office in the Hague.”

If alacrity is a must, so is demonstrating that the root problems are rectified. Furthermore, the overall situation should be seen as an opportunity to, as Royal Dutch Shell did, make improvements. Andrew says: “It’s a case of tying reputation to a long-term business strategy: what do you want to achieve and how can you build a reputation that will help achieve it?”

It will take time. News Corporation’s decision to end the News of the World may have been swift and dramatic, but it did very little to regain public trust in terms of the ethics and trustworthiness of the group and the UK sub-division of the organisation. Andrew continues: “Evidently, this is an organisation which needs to rebuild [its reputation]. In order to do this, it needs to understand how it was seen before the crisis. Was it seen as responsible or ruthless? Respected or tolerated? Which stakeholders were supportive and likely to remain so through thick and thin?”

A good impression

Lord Browne of Madingley, the former Chief Executive Officer of BP, observes that it is vital to appreciate the link between the image and standing of an organisation and its ability to deliver impressive financial results: “There is a growing realisation that reputation is a long-term asset that requires strategic thinking in order to drive real value for shareholders.

“They now see that reputations are built on trust created over time and this comes from the performance, behaviour and values of a business. Having a good reputation can see an organisation through the bad times, when others with more fragile reputations may flounder.”

There is no foolproof contingency plan. The best governance won’t be able to stop determined fraudsters or rogue directors and, for global organisations, it’s inevitable that something will go wrong. In the public sector too, there are failings and mistakes which attract the worst kind of attention. Genie Turton, a Criticaleye Associate and former senior civil servant, says that the “front line of government and of some large companies is enormously long and complex and it is impossible to prevent things and events happening that may blow up into a crisis”.

That’s not to suggest various scenarios and contingency plans shouldn’t be drawn up so an organisation isn’t the proverbial rabbit in the headlights. Mary comments: “It has to be seen as an opportunity rather than treating it as a nuisance that must be endured. Intelligent companies think the unthinkable. They prepare for the worst while expecting the best. They listen to their people and use social media. Crucially, they are willing to hear bad news and act upon it before a crisis can occur.”

For Genie, this has to be the right approach: “Just as, in the safety area, we now try to spot and report ‘near misses’, analysing the most frequent causes of accidents, so it is worth investing in some analysis of what did not happen and what type of issue has the potential to grow into a crisis. The response to a complaint can be more important than the thing that went wrong. It is worth analysing how a response is handled too.”

Mary reveals that a disaster can be guaranteed when companies take shortcuts to wriggle out of a crisis. “They don’t tackle the root causes or honestly assess the wider implications of what went wrong. Some try to move on too quickly, creating the perception that it is in denial about the importance and impact of the crisis for the stakeholders.

“Reputation and brand exist in the perceptions of the stakeholders and smart companies recognise the importance of those perceptions. The crisis is over when the stakeholders say it is, not when the company decides it’s over.”

If communication is sloppy and an organisation is seen to be reluctant to accept responsibility, then it can soon be seen as dishonest. Then it really does have problems. Boards and CEOs now need to realise that the expectations of stakeholders and the public are higher than in days gone by, so they have to be smarter and switched on when the worst comes to pass.

Please get in touch if you have any comments about the issues raised here.

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