Christopher P. Skroupa: You are reputation experts. How do you define resiliency as it relates to reputation?
Linda Locke: A resilient reputation is one that sustains challenges from crises and shifts in the market. A resilient organization bounces back quickly from major shifts in its environment or incidents that impact it. The market demands resiliency—a company must be able to make a swift recovery after planned and unplanned events and outages because that is what stakeholders expect. To create resiliency in a company’s reputation, an organization must adapt to a continuously changing environment. There are two sides to reputation resiliency that must be given equal consideration to effectively sustain company value: preventing the conditions of risk and managing the consequences of events. For reputation, the “environment” means the stakeholders whose perceptions are important to the company.
Skroupa: How can companies manage reputation risk in the same way they approach other risks?
Beth Rusert: Reputation is built—and broken—by the business decisions made every day in every business. Most managers are aware of the filters or parameters of business decision-making: who needs to support the decision and how it will impact operations, or stock price and whether it delivers competitive advantage. They rarely consider how it will impact reputation; they think it is something that happens magically in the PR group. Reputation is about the perceptions of stakeholders. When you deliver on their expectations, you build a well of trust that you can draw upon when things go wrong. If you don’t deliver on expectations and something goes wrong, it confirms negative attitudes and likely drives the individual to take action against you.
If managers understand the expectations of their stakeholders, whether framed as values or attributes, when faced with major decisions they can ask: As the result of this decision will our stakeholders consider us more or less ethical? More or less fair? More or less innovative? To truly be resilient, we believe organizations need to build enterprise-wide reputation competence. The entire organization needs to understand what stakeholders are thinking and when those attitudes change. They need to become adept at taking an outside-in perspective.
Skroupa: Why do companies struggle with reputation resiliency?
Melissa Lackey: In many companies we observe that the risk team has low literacy in reputation and the reputation team has low literacy in risk. Here’s the thing: you need to have a cross-functional team to understand what reputation means for each function. If you wait until a crisis to bring together a team to manage an incident, they will need time to figure out how to best integrate their disciplines and think cohesively. It is important to create a cross-functional council before a crisis so they can teach each other, and then make decisions together. Organizations are often introverted: they think about how they want others to think about them, rather than stepping outside of their corporate bubble and operating from the perspectives of the stakeholders.
In contrast, organizations with resilient reputations pay attention to the shifting—and often opposing—demands of stakeholders. They navigate intentionally, while understanding the values and expectations of their stakeholders. They know when perceptions change, and they adapt to maintain trust and supportive behavior. An organization that strives to meet the demands of resiliency plans for reputation risk just like it plans for all other forms of risk. Today there is little appetite or sympathy for companies that are surprised when their reputation declines.
Skroupa: How does innovation impact reputation risk management and resiliency?
Julie Steininger: Buyers expect significant innovation from certain companies and sectors, and less from others. For example, Apple has built its reputation on innovation in design. If people are satisfied that the current level of innovation is sufficient, they are less likely to worry about other attributes of reputation, like the company’s leadership or financial performance or even the working conditions of their employees. If a firm builds its brand on innovation and then languishes (BlackBerry comes to mind), sales slip, revenue drops, and the reputation of the brand diminishes. Reputation is about building trust. If a firm has a strong reputation for innovation and it falters, with a well of trust to draw from its stakeholders may give it a pass and time to recover. When there are multiple missteps, it often takes a long time to recover; Samsung comes to mind.
Skroupa: Why aren’t organizations using reputation in resiliency planning?
Rusert: Resiliency is the hallmark of a well-managed organization. Organizations are judged by how well they anticipate and plan for risk events and, when they happen, how well they respond to them. Most large organizations are accustomed to planning for resiliency in operations; they measure themselves rigorously on how quickly they bounce back to normal operations after an interruption. Few organizations, however, consider the “risk of risks” when planning for resiliency —and that is their reputation. Reputation is a foundational risk that—while an intangible asset—is highly affected by every other type of risk.
Skroupa: How does a company make reputation resilience a competitive advantage?
Locke: Through auditing your reputation risks, and those of your competitors, and by studying their history of managing through major events, you can create a competitive advantage that enables reputation resilience. If you see your competitors handling the same types of reputation risks over and over, it’s a signal that they are not planning for resilience and are merely handling each crisis as a one-off. That is a mistake because they aren’t learning. Those who are recognize the opportunity to fortify their organization.
It’s crucial to audit for reputation risks that are lurking in your organization: where do the gaps exist between what you say and what you do? For example, a few years ago BP received a lot of attention for its promise to move “beyond petroleum.” Many external stakeholders believed that was an authentic commitment to the environment. However, if we had interviewed the employees of BP, we may well have found that environmental impact was not a filter for decision-making. And the impact to BP’s stockholders? BP encountered a 55 percent drop in the value of its stock within two months of the Deepwater Horizon incident, from $59.48 a share all the way down to $27 a share. Fast forward seven years later and BP’s stock still hasn’t recovered to what it once was.
Melissa Lackey is President and CEO of Standing Partnership. Since joining the firm 17 years ago, Melissa has evolved the company and guided clients through an ever-changing, complex environments. She works closely with senior executives in higher education, health care, professional services and other industry sectors to build trust with those who matter most to their business success. Whether through targeted stakeholder engagement campaigns, crisis response/management planning or digital strategy development, Melissa’s leadership and business acumen make her someone whom clients depend on.
Beth Rusert is Senior Vice President and Partner at Standing Partnership. Beth helps clients leverage organizational strengths to drive business growth while managing potential reputational risks. She plays a key role in contributing to the company’s business strategy and leads its marketing. Her extensive background in strategic planning, public affairs, issues and crisis management and corporate social responsibility helps clients achieve their goals through effective messaging, stakeholder relations, thought leadership, coalition building, change communications, and issues and crisis planning.
As Senior Vice President and Partner, Julie leads the firm’s agriculture and nutrition work as well as making sure everything at Standing Partnership is running smoothly. As a strong advocate for stakeholder engagement, Julie helps clients make the connection between a positive reputation and stakeholder trust. She encourages her clients to listen to and understand the expectations of those impacted by their decisions and actions.
As Senior Vice President and Partner, Linda leads the company’s healthcare practice, helps clients understand reputation and risk, where they intersect, and what they should do about it. She built an international reputation for her expertise as senior vice president and group head, Reputation and Issues Management, for MasterCard worldwide. She developed strategy and analytics for the company, helping leaders understand how people feel about financial services affects business. A leader of innovation during her time there, she led the launch of social media and global crisis communications planning, and she developed the company’s first reputational risk management program.