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Managing Outcomes
July 01, 2016, Vol 7, No. 13
Managing Outcomes is published by Tony Jaques, Director of Issue Outcomes Pty Ltd, for people who work in issue and crisis management
Is reputation really like a bank account?

Just about every communication professional has heard the expression that reputation is like a bank account. The idea is that you build it up in good times and draw from it when things go wrong. But is this attractive notion really as valid as it seems?

Risk guru Peter Sandman says it’s simplistic to accept that events which improve your reputation are deposits, events that damage your reputation are withdrawals, and that the objective is to maintain a healthy balance of ‘reputational capital.’

The snag is that the metaphor assumes everything is equal - that withdrawals and deposits are in common currency. That if you deposit $1,000 worth of reputational credits and then withdraw the same amount in reputational damage (or vice versa) your reputation somehow returns to neutral.

In other words, if a company does a whole lot of bad stuff, then doing an equal amount of good stuff will restore its reputation. However it just doesn’t work like that. Sandman argues that good reputation and bad reputation should be seen as separate variables which exist at the same time. What that means, he says, is that if your positives are high and your negatives are low, on balance you have a good reputation. However, if your positives are low and your negatives are high, on balance you have a bad reputation.

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It might work in theory, but does it work in reality? And do the public see it like that? The problem here lies in assuming that good actions and bad actions are measured in the same currency. In addition, it’s been proved over and again that years of positive reputation can be destroyed in days or weeks by unacceptable or improper behaviour, no matter what the theoretical ‘balance.’  That’s an argument made famous by Warren Buffett. And there's another problem too. When organisations behave badly and then keep repeating the same mistake, the reputational withdrawals are not just dollar for dollar, but multiply with accumulated penalty interest. The American academic Harlan Loeb describes what he calls reputational debt as "non-negotiable ballast" which can't be traded or hedged and which can persist for decades. Just ask BP.
So what is the right priority? The reality is that a bad reputation distinguishes an organization from the rest of the pack a lot more than a good reputation does. Reporters, customers and commentators are far more likely to focus on the bad stuff you've done rather than the good performance you have been working on. So organizations are best advised to expend effort in avoiding or repairing a bad reputation rather than trying to create a good one. Any organization which sets out on a 'programme to build reputation' has likely forgotten the old adage that branding is what you say about yourself, reputation is what other people say about you.

The bank account metaphor also suggests that badly behaved organizations can 'buy back' reputation with some high profile good citizenship. But it just aint so. When failed Australian tycoon Alan Bond died last year, some of his supporters tried to mitigate his devastating corporate collapse by emphasising that he helped Australia win the America’s Cup yachting trophy. It made a good story of reputational redemption, but it meant nothing to the investors who had lost millions. They knew the real meaning of an empty bank account. And for them it was no metaphor.

Need help to protect your reputational reserve?  Contact Tony Jaques

A Parting Thought

The Internet has spawned a new breed of critics and reputation assassins.  Armed with little more than a computer and an opinion, these chat-room transmitters and bloggers can undo a company's reputation by disseminating misinformation and innuendo.
Leslie Gaines-Ross

Tony Jaques PhD
Director, Issue Outcomes P/L

Mob: 0411 276 527
From overseas: +61 411 276 527
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