Reputation in a Crisis: Footsteps and Horses' Hooves
Leadership StrategiesLeadershipCorporate Affairs and Communication
Article Icon Article
October 23, 2020
12 min read
Leadership StrategiesLeadershipCorporate Affairs and Communication
EXECUTIVE SUMMARY
A company’s reputation needs to be considered a vital, strategic asset that is an integral component of all business operations.
rra-image-asset-94.jpg

 

Trust, as the phrase below illustrates, can take years to build and an instant to disappear. In an era marked by a global pandemic and widespread protests against racial injustices, organizations are forced to address reputation challenges at a velocity they’ve never experienced before—and CEOs and boards have a fiduciary responsibility to effectively do so. In many ways, organizations are sitting on a reputational knife’s edge, where one poorly-worded announcement or lack of appropriate action can severely damage the goodwill created over years or decades.

“Trust arrives on tip-toes, but leaves on horses’ hooves.” 
Dutch Proverb


When events like these occur, the damage to the company and its shareholders can be immense—but it doesn’t have to be. Why are some companies able to come through troubling times relatively unscathed while others emerge battered and bruised? And what actions can companies take today to mitigate the impact of an event months or even years from now?

Russell Reynolds Associates has recently concluded an extensive qualitative and quantitative research study to better understand how today’s leading communicators and reputation specialists are thinking about corporate reputation. Specifically, we explored how to establish and nurture their corporate reputation as a strategic asset before it is most needed and leverage it as a core asset in times of tremendous upheaval. Every CEO should listen to what they have to say.

The key findings from our research are:

  1. Reputation needs to be considered a vital, strategic asset that is an integral component of any organization’s business operations. The health of an organization’s reputation impacts everything from market cap, institutional investing, customer engagement, global supply chains, as well as retention and recruitment of talent. Ultimately, reputation impacts the bottom line in ways not experienced before.

  2. For that reason, reputation needs to be a CEO, C-suite and board priority now. Too many organizations claim to appreciate the importance of reputation, yet it can often be under-resourced and/or de-positioned at several layers below the C-suite.

  3. CEOs need to become reputation evangelists. Communicators can put the right frameworks in place, but CEOs are the embodiment of an organization’s reputation. As such, they need to not just appreciate its importance, but prioritize the enterprise impact of reputation and convey the critical importance to ensure they drive consistent reputation messages to internal and external stakeholders.

  4. Words need to be backed up by actions. Organizations that communicate an inauthentic message will not be successful in the age of social media, employee activism and broad stakeholder engagement. Words need to be backed up by actions. Organizations that communicate an inauthentic message will not be successful in the age of social media, employee activism and broad stakeholder engagement.

  5. A new caliber of empowered communications leader is emerging that is required to help organizations build a robust, sustainable and credible corporate reputation. That leader needs to possess a range of disparate skills and enterprise knowledge, including related to competitive markets, geopolitical dynamics, economic headwinds, societal awareness, and then use those insights to formulate the proactive reputation strategy for the company. They understand that reputation is a corporate asset and this leader manages the asset for growth across the enterprise. Organizations are looking inside and outside to identify the best leader.

Best Practices for Corporate Reputation Building

1. Reputation is a Critical Strategic Asset and Needs to be Treated as Such

Reputation has moved from a “nice to have” to a strategic imperative for best-in-class organizations. The shift is driven by an increasing body of evidence that points to the impact of reputation on the bottom line. For example, a study by Havas’ AMO consultancy network found that in the 12 months through March 2019, corporate reputations accounted for 35.3 percent of total capitalization of the world’s top 15 stock market indices, representing $16.77 trillion in shareholder value.

Supporting this, research from The Harris Poll shows how consumers are twice as likely to purchase products and services from companies with an excellent reputation as from those with a poor one.

“We have to be seen as a fundamental enabler of a successful commercial strategy and not a disconnected corporate affairs initiative,” said Cesar Vargas, Head of External Affairs at Anheuser-Busch. “We need to be embedded across the organization, including commercial leadership.”

Despite the business importance of reputation, many companies still prioritize quarterly earnings over reputation concerns, according to Sanjay Gupta, Chief Customer Officer at TIAA. “It’s a constant tension delivering quarterly results versus doing what’s right for the customer. In that moment, it’s easier to increase prices to meet your numbers and bury it in the fine print.” Gupta, like other leaders we spoke with, said he takes comfort from the fact that his company is mission-driven and is making the effort to invest in the long-term health of its reputation.

2. Reputation Needs to be a CEO and Board Priority Now

Reputation management is like flossing teeth: everyone says they do it every day, but the truth is more complicated. Our study found universal recognition of the importance of reputation at the highest levels of organizations. Yet, in conversations with experts, reputation is often prioritized by the C-suite only in a crisis and even then, internal structures and processes hinder fast and effective responses.

Fred Cook, Director of the USC Annenberg Center for Public Relations and Chairman of Golin, said too often CEOs focus on reputation reactively. This may lead to communications operating at one level removed from the C-suite, either under marketing, strategy or another function.

There remains a delta between CEOs’ professed appreciation for communications and a nuanced understanding of how that role has evolved. Rachel Konrad, Chief Communications Officer at Impossible Foods, has spoken with a number of CEOs who profess to prioritize communications, but often conflate it with earned media impressions. “Earned media is the easy part,” she tells CEOs. “The hard part is developing a deep narrative that ties your brand to an irresistible trend or purpose that you are accelerating.”

For Tricia Primrose, Global Chief Communications & Public Affairs Officer at Marriott International, CEO focus is imperative to successfully building the organization’s reputation. “Part of my yearly goals includes managing our reputation enterprise-wide,” she said. It’s how my team and I are evaluated, and it’s part of every conversation at the highest levels of the organization.”

3. CEOs Need to be Sophisticated Reputation Evangelists

If reputation leaders are the “moral compass” of an organization as Rachel Konrad described, then CEOs are the most powerful embodiment of its true north. An engaged, enlightened and charismatic chief executive is an invaluable asset for any communications leader. Tricia Primrose at Marriott, says “when you have a CEO who values communications, it makes your job infinitely easier. When you have a CEO who values communications and is a good communicator you’ve hit the jackpot.”

Moreover, CEOs need to demonstrate a nuanced understanding of the complexity of reputation building. They need to appreciate that reputation building is a multi-year, multi-stakeholder process.

Today, the stakeholders that impact and are impacted by your reputation include customers, regulators, institutional investors, shareholders, influencers, prospective talent, and partners/NGOs, as well as employees and media.

“There is no such thing anymore as internal and external,” said Sanjay Gupta, Chief Customer Officer at TIAA. “You have to assume that anything you say or do will show up externally. There is a new level of transparency, which you welcome if you’re a company doing the right thing. If not, you should be very fearful.”

“You have to have a holistic approach to reputation,” said Michelle Russo, Chief Communications Officer at the US Chamber of Commerce. “Any sustainable change has to start from within. If you can get your employees aligned, they will be ambassadors of your brand and reputation.” If your core employee base is not evangelizing on behalf of your company, “how are you going to explain your mission to people who are not getting paid?” she continued.

In our survey, communications leaders identified a range of stakeholders as putting almost equal press on reputation building.

Playing the long game is particularly hard for executives accustomed to managing a business on a quarterly basis. Leaders we spoke with stressed the importance of measurement and milestones as a key component of educating the C-suite and board on the imperative of reputation building.

“If you are not telling your story it doesn’t mean your story isn’t being told,” explained Kathleen Tregoning, Chief Corporate Affairs Officer at Cerevel Therapeutics. “You can’t operate with the philosophy of ‘let’s just keep our heads down focus on the business, and our work will speak for itself.’ There is just too much ambient communication out there to adopt that approach.”

For companies in the service industry, reputation building is the equivalent of retail politics. At Marriott, Tricia Primrose appointed a liaison officer whose job it is to manage in-bound complaints and comments from guests before they become an external issue. “It really demonstrates the grass-roots nature of reputation. It’s built by being responsive and doing the right thing.”

4. Organizations Need to Back up Well-Meaning Words with Appropriate Actions

A robust corporate reputation now underpins business success in ways it never did before. Stakeholders— customers, investors, regulators and employees—expect institutions of all types to exemplify reputational ideals of societal purpose, ethical business practices, employee and supplier diversity, among others.

In its 2020 Global Communications Report, the USC Annenberg Center for Public Relations defined this as the era of “new activism.” The report found that almost two-thirds of those working in communication predict activism’s influence will increase in the coming years. This trend is even more pronounced outside of the US (74 percent international vs. 60 percent US). This likely poses a growing threat to companies who develop practices in opposition to the views these groups represent. But it also offers an opportunity to those who are committed to placing purpose at the center of their communications.

Ray Day, vice chair at the Stagwell Group, contends that you earn a reputation and build a brand. Reputation is not something you manage; it’s an outcome based on an equation of business performance, plus behavior, plus communications.

Each executive we interviewed spoke with passion and conviction that reputation and character cannot be decoupled, and that the era of “spin” is over. “Your story and mission have to be inevitable, to accelerate a movement that changes the world,” said Rachel Konrad. In the case of Impossible Foods that is radically changing the world’s eating habits.

One executive we interviewed pointed to some of the reputational crises facing a number of technology giants as illustrative of a “funk in the culture.” The problems arise, the executive continued, when there is a disparity between internal culture and external PR. In too many companies, they treat the reputational symptoms, but not the disease.

“Companies are going to find themselves in a more and more transparent era,” said TIAA’s Gupta. “The notion of saying one thing and doing another is going to be called into question faster and faster. You’ll find that companies that don’t embrace change risk losing customers to competitors.”

There is a communications component, but words must be accompanied by concrete actions,” said Tregoning.

5. New Leadership Skills Required to Effectively Build Reputation

Organizations need to fundamentally rethink the role of Chief Communications/Corporate Affairs Officer in light of the rising importance and complexity of reputation building. Without question, communications needs to move away from a narrow focus on media/analyst relations and employee engagement to a more strategic, enterprise-level role. To that end, senior leaders we spoke with were unanimous is characterizing their unofficial role as “Chief Reputation Officer” and “Chief Storyteller.”

According to Ray Day, the most successful reputation leaders spend at least as much time focused on the future as they do managing the present. He compared reputation building to a team sport where defense and offense operate symbiotically. Too many CCOs and their equivalent, he contends, spend their day firefighting and managing the communications needs of the CEO.

“Our job is to always be looking ahead to find opportunities to reinforce our messages and anticipate circumstances when we will be challenged,” said Jon Harris, Chief Communications Officer at ConAgra Brands. For his team, the ideal ratio is three-to-one. “We do have our share of crises, but I would like to think we’re 80 percent proactive and 20 percent reactive. Our job is to have the frameworks and processes in place to mitigate the effects of issues before they become a crisis.”

Ideally, the reputation leader of the future will combine what used to be considered left- and right-brained qualities: creativity and analytical thinking. Importantly, that leader will have the capacity and capability to manage multiple competing tensions.

AGILE + STRATEGIC

In many ways, the reputation leader of the future will have to combine the qualities of a sprinter and a marathon runner. In other words, they will need to build teams and lead to respond to rapidly changing market dynamics, almost in real time. On the other hand, they need to build strategies, frameworks and processes that are resilient enough to stand the test of time.

Many large organizations with healthy balance sheets are weighed down by sclerotic processes that make it difficult to manage reputation, particularly in a crisis. The current pandemic is something of a litmus test for companies in terms of how quickly they can respond to a crisis unfolding in real time.

Fred Cook at USC explained that it comes down to the speed with which media moves in today’s environment. “You simply don’t have the time to do focus groups, research or set up internal committees in the teeth of a crisis. Your ability to respond quickly is a matter of relevance or being left out of the conversation.”

Corporations that have built up the “muscles and skills” to respond quickly and creatively in a crisis, as Cesar Vargas described it, can execute big ideas in days and weeks, rather than months. Vargas used the example of hand sanitizer at Anheuser-Busch. Given the company’s well-oiled logistics function that is used to converting its beer production to emergency drinking water to help in wildfires or other natural disasters, it was relatively easy to pivot to producing hand sanitizer in response to the global COVID-19 pandemic.

CREATIVE STORYTELLER + DATA SCIENTIST

The ability to discover and tell compelling stories is fundamental to the reputation leader of the future. Increasingly, organizations need to become publishers of high-quality, multi-media content that reflect their best qualities. As Jon Harris describes it: “you are only as good as the stories you tell.” That storytelling needs to permeate all aspects of communications, from internal messaging to external executive speeches.

“You can’t manage what you can’t measure,” wrote management consultant and author Peter Drucker. All of the reputation leaders we spoke with stressed the importance of measurement, although some opined that their methodologies were not as robust or frequent as they would like.

“My strategy is to move from talking and platitudes to data points and storytelling,” said Michelle Russo, Chief Communications Officer at the US Chamber of Commerce. Increasingly, according to Russo, that storytelling is visual in nature.

Conversely, the leader of the future needs to understand data as a way to shape strategies and tactics. For Cesar Vargas at Anheuser-Busch, annual benchmarking involves in-depth research with influencers in media, policy, and business to better understand their perceptions and expectations of companies. “It’s about responding to the external environment…the better people understand who we are, what we stand for, and why it matters, it impacts everything, including commercial success,” he said. “All of these outcomes are tied to how strong your reputation is.”

At ConAgra, Jon Harris measures perceptions internally and externally. “We are focused on managing our reputation across all our key stakeholders including employees, media, customers, consumers and, of course, our shareholders. We often talk about our ‘refuse to lose’ obsession with creating impact and driving value creation. It’s really that reputation we want to reinforce across all stakeholders.”

“The only way to manage your reputation is to know where you stand at a given point in time, and that starts with regular and robust measurement.”
Jon Harris, Chief Communications Officer, ConAgra Brands

CROSS-FUNCTIONAL COLLABORATOR + CEO COUNSELOR

The best communications leader will have the ability to bring the organization along on the reputation journey. At the same time, they have to be able to present a single voice to the C-suite and in particular the CEO. In the past and to some extent today, communications was responsive to the needs of the C-suite. The reputation leader of the future needs to act as the “moral compass” of an organization as Rachel Konrad described. They need to reflect but also shape the behaviors of a company in order to build a robust reputation.

From Insight to Action

If the last six months have taught leaders anything, it is this: a seemingly robust corporate reputation can vanish in an instant. The damage done to an organization’s reputation from real or perceived missteps can last months or years, and affects everything, including the bottom line. How corporations act before and during world-changing events, such as COVID-19 and the movement to address racial inequality, will determine whether they strengthen or damage their reputation. As such, CEOs have a responsibility to effectively—and proactively—define how reputation is managed within their organization. Here are three ways they can start to act:

The best time to have started building a strong corporate reputation was years ago, but the second-best time is right now.

Acknowledgements
The report that follows is the distillation of hours of interviews with reputation leaders at some of the world’s leading organizations, including Anheuser-Busch, the Chamber of Commerce, ConAgra, Impossible Foods, Marriott, Sanofi and TIAA. We owe a debt of gratitude to everyone for their candor, wisdom and unique insights. We also conducted an extensive quantitative study with a broader set of communications leaders and the results are included throughout this report.

AUTHORS
JENNIFER DOIDGE is a senior member of Russell Reynolds Associates’ Corporate Affairs, Marketing Officers and Consumer Digital practices. She is based in San Francisco.
SEEMA THREJA KATHURIA is a senior member of Russell Reynolds Associates’ Corporate Affairs, Consumer, and Board & CEO Advisory Partners practices. She is based in Chicago.
TR STRAUB is a senior member of Russell Reynolds Associates’ Corporate Affairs practice, and co-leads the Diversity, Equity & Inclusion practice in the America. He is based in Washington, DC.