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The CEO Asked if Your Corporate Reputation is at Risk

If your CEO asked, “Is our company’s reputation at risk?,” how would you answer? Think about it for a moment, while absorbing a few facts.

  • According to a Reputation Dividend study, more than 20 percent of the value of S&P 500 companies is directly linked to their reputations. That’s $4.6 trillion in market cap.
  • Four out of five people won’t buy from a company with negative online reviews. And a Corporate Responsibility Magazine survey found 76 percent of potential employees are unlikely to accept a job offer — even if they are unemployed — from a company with a poor reputation. Conversely, 93 percent of employees would leave their current job to work for a company with a good reputation.
  • When United Airlines damaged musician Dave Carroll’s $3,500 guitar and denied his claim because it was filed just outside of the airline’s 24-hour time limit, he wrote a song called “United Breaks Guitars.” More than 150,000 people watched his YouTube video — just on the first day — and it now has more than 19 million views. That caused a 10 percent dip in UAL shares — worth around $180 million, according to media reports.
  • A Harvard University study found that restaurant revenues increase by 5 to 9 percent for every ratings star on Yelp. That’s a potential 18 percent annual revenue swing between a restaurant with a three-star rating and the place next door with a five-star rating.
  • Even fast-growing digital giants aren’t immune. When Facebook’s Cambridge Analytica data scandal broke, exposing personal information from millions of users, the company was slow to react. Facebook lost $37 billion in market value, a #deletefacebook hashtag campaign was launched and CEO Mark Zuckerberg received an invitation to appear before Congress.

These eye-opening examples reinforce the value of your company’s reputation. But they still don’t answer the question posed by your boss. That answer depends somewhat on the industry you are in, the quality of your organization and management preparedness.

An Oxford Metrica study points out that nearly everyone is at risk. In fact, all public companies face an 80 percent chance in any five-year window that they will encounter a crisis event or issue that will drain 20 percent of the company’s shareholder value. Clearly, the answer to the “Is our company’s reputation at risk?” question is yes — and the clock is ticking.

What should you do now that you know you are operating on borrowed time? Here are five steps:

  1. Plan for the Inevitable: A Mower survey of marketing executives found 57 percent of companies did not have a crisis plan. This is executive suite malpractice. A plan won’t prevent a crisis, and it doesn’t guarantee your company will flawlessly perform when an issue develops. But it will give you a leg up on companies that learn this lesson the hard way.
  2. Form a Team: When a crisis hits, you can’t waste precious time deciding who must be in the room making key decisions. You need to have senior leadership alignment on the right team, and the team needs the power necessary to do their job. Prolonged debates and delays while waiting for approvals can cause more damage than the underlying crisis itself.
  3. Focus on Facts: When a crisis strikes, facts are your friends. Have a system in place to gather information rapidly, encouraging candor among employees and managers as they report details to senior leadership.
  4. Practice Your Two-Minute Drill: Just as football teams practice how to move the ball and score quickly in the final minutes, your organization needs to have an annual crisis response exercise. People need to know their roles and responsibilities. Understanding the real-time speed of an emerging crisis is eye opening.
  5. Scan the Horizon: The miscues of other organizations and trending media stories provide examples of the kinds of issues your company might face. Identifying potential issues before they become problems might just prevent a future crisis.

Guarding your company’s good reputation requires preparation and discipline, because it’s not “if” you are at risk. It’s “when.”

 

Learn more about Mower PR & PA crisis communications and issues management services.