HSBC Private Bank (UK) Limited - July 2009

Reputation management in harder times

"Good name in man and woman, dear my lord, Is the immediate jewel of their souls Who steals my purse steals trash 'tis something, nothing 'Twas mine, 'tis his, and has been slave to thousands But he that filches from me my good name Robs me of that which not enriches him And makes me poor indeed."

There is no better place to begin a study of the ticklish subject of reputation than Shakespeare. Iago, from “Othello,” may be a thoroughly disreputable character, but this means He, more than anyone, knows the value of a good name. So a good name is priceless but worth nothing to anybody except the owner itself. It cannot be bought or traded. And the same applies whether the owner is Othello, Bernie Madoff or RBS. I choose these two contemporary examples deliberately because the last year and a half has been a grim time for the trashing of reputations both individual and corporate. If one sat down to calculate the notional fall in value of corporate reputation – goodwill, if you like - over the last 18 months it would be a task beyond even the most skilled cadre of accountants. As a Herculean endeavour it would outdo those who will spend many years to come clearing up the affairs of Lehman Brothers.

Far more seriously, the reputation of business or capitalism itself has taken a bruising. The public relations firm Edelman produces an annual trust barometer which when it came out in January 2009, showed that almost two thirds of those questioned trusted companies generally less this year than last. (And these were not latter-day readers of Mao’s Little Red Book but 4500 “upper income, highly educated” individuals. Incidentally, there is no reason to believe that middle income, averagely educated people feel any more positive, either.) Good reputation cannot exist without trust. A large chunk of that trust has disappeared as the financial mess of collateralised debt obligations and stellar bonuses fed into the real economy which has contracted and led to job losses and widespread insecurity about employment.

The malaise continues within organizations. We’re getting into the season for employee surveys which measure the reputation of companies in the eyes of their employees. It’s a near certainty that scores will be down this year, even in organizations which aren’t doing that badly and have avoided wild wielding of the knife in staffing levels. Anxiety is an unhelpful state of mind when it comes to commerce. In tandem with the cyclical crash and damage to corporate reputation has come an irreversible paradigm change – the digital world. Compared even to twenty years ago there are now hundreds more ways in which people acquire information about companies now. The internet provides a great ocean of data and opinion, much of it wrongheaded and unfair but it is there and it is read. It’s a noisy Babel of gossip and chat and it turns heads and minds.

This is coupled with the phenomenon that younger generations put far more stock on those things. The young are cautious and selective about the organisations they wish to associate with or wish to work for. They are fickle when it comes to employment and very very few will join a company with the expectation that they will continue in its employment until they get the gold watch 40 years later. And it’s not as clear-cut as all wanting to work for the haloed Innocent Drinks and shunning BP or Shell. They are a good deal more sophisticated than this - they’ll want to know Shell’s policy not only on issues of sustainability but career breaks, pensions, diversity.

But when it comes to buying goods and services, rewarding organisation of which you approve with your custom, people are making positive decisions on what previously would have been low involvement. The average internet page visit lasts less than a minute so opinions are formed very quickly. Reputations are built on those multiple instant hits but the old adage remains that it can take years to build a good name but an instant to wreck it.

The digital world brings further dangers for reputation. The web means the boundaries that used to exist around organisations have been broken down – outsiders are within the walls. Take the example Apple and its brave new world of Apps where freelance programmers invent and design programmes to be used on iPhones or other Apple equipment. A great 21st business model – get others to do some hard work and take risk from which you reap some of the reward. ‘Solving life’s little problems one app at a time’ is the advertising line. Fine except that recent events have shown how this outside contractor system can go horribly wrong when Apple was hugely embarrassed by the fact that some clown with an especially warped sense of humour developed an App which involved shaking a baby to sleep. The aim of the game was to quieten the on-screen infant by shaking the iPhone until a pair of thick red Xs appeared over each eye of a baby drawn in black and white. What this – along with the coke sniffing app and the various gun shooting apps – have done for Apple’s reputation is not great at all.

So, what is to be done? It’s unfortunate that those whose job it is to guard reputation – the PR community – are not enjoying an especially good reputational phase at the moment. Never has there been a time when the general public finds itself more in agreement with Malcolm Muggerdidge’s quip that “PR is organised lying.” A part of this contamination, at least in the UK, must come from politics where smearing, mud-slinging and outright deceit seem to have been the stock in trade of the political spinmeisters for years.

What we have at the moment is a new age of austerity that is marked by a new Puritanism. This Puritanism is characterized by a scepticism, a relentless questioning and a serious mistrust of the familiar smoke and mirrors of reputational management.

Communications professionals say that reputation management is about so much more than mere spin. It involves deep-seated understanding of brands and all their nuances because they are your most delicate and intangible asset. It necessitates preparing for sudden crises and scandals, dealing with all stakeholders – staff, investors and customers. The old advice remains the best: don’t lose your reputation before you’ve got one.

Reputation management is not a science. It’s a vague, wooly instinctive business. Reputation is amorphous and hydra-headed. It is derived from a largely emotional rather than rational response. But it is people’s emotions which have to be considered and dealt with. And, the cynic might add, manipulated. If one thinks about the reputations of individuals and organisations, so much of one’s judgement is made up with a gut reaction – is this my kind of person or company or not. Do I feel they are, to adapt Margaret Thatcher’s legendary phrase, “One of Me”?

But don’t despair. It is actually possible to survive in business with an absolutely shocking reputation. To be successful you do not have to be earnest, cuddly, sustainable and touchy-feely. Ryanair is an example of this. Its recent proclamation that the airline is seriously considering charging passengers to use the lavatory is the apogee of a perverse reputation management programme the like of which has never been seen in business history. Truly Ryanair is the Millwall of the Skies – “No-one loves us: we don’t care.”

To understand Ryanair and its corporate culture you have to come to terms with the personality of its 48 year old chief executive Michael O’Leary who is a man with many enemies. Ryanair’s swashbuckling boss dismisses his flag-carrying rivals with loudmouthed contempt and isn’t too polite about some of his passengers. He swears like a trooper and printed interviews with him often contain more asterisks than letters.

He attributes the success of an Irish low-cost airline to the country’s long term experience in herding cattle. But you cannot begrudge him credit for the spectacular success of the service his airline offers.

Before the crash and subsequent turbulence Ryanair was Europe’s most successful, most profitable and most highly valued airline. Year after year, it has piled on growth and it is the largest airline in Europe in terms of passengers carried. In better times its net margins of 21% were the highest in the industry and its costs lower than anyone else’s. And, its reputation remains that, despite all the nasty hidden added costs, it is still cheaper than its rivals which is why it will continue to attract custom. The fundamental pact with his customers to which O’Leary unflinchingly sticks is to be the cheapest, the most punctual and the most efficient. They bear it usually without grinning.

Few businesses can behave like Ryanair. But having reputation set by the character and behaviour of the CEO is not a bad place with which to start. Certainly the process can be monitored and communicated by the PR team but responsibility for it must be vested with the individual at the top. As with parents at the head of a family this is where staff look to be led by example. This is yet another burden to be added to the already huge weight under which the leaders of large organisations now labour but it has to be accepted.

For a great reputation to be built and then maintained an organisation has to do the right thing and be seen to be doing the right thing from the top to the bottom. From the CEO to the clerical assistant. This is a tall order in a tough world but the rewards for those who succeed are very great indeed. And if it gets lost then we only have to return to Othello to see the consequences where Cassio moans, “Reputation, reputation, reputation! O! I have lost my reputation. I have lost the immortal part of myself, and what remains is bestial.”