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Reputation is everything; it is an intangible but invaluable asset. For companies, building trust and a good reputation takes time and consistent effort, but burning it down can take just one mistake. The combination of social media, growing consumer demands for corporate social responsibility and cancel culture have created a perfect storm for companies that do not carefully tread the waters of reputation.
Harvard Business Review (HBR) notes that in today's economy, 70 to 80 percent of market value comes from "hard-to-assess intangible assets such as brand equity, intellectual capital, and goodwill". In an age where marketing is strategically stitched into the very fabric of society, even when you don't know it brand reputation is a critical asset to companies.
Brands are more important to us as individuals than we realize. Most people have a preferred coffee or tea brand, a trusted car maker, a fashion label they return to repeatedly, and of course, their much-loved restaurant. When we trust products, we return to them time and again.
Reputation is based upon people's perceptions, says Matt Maruca of Maruca Strategic Counsel. "Think of it like a bank account. The more your reputation improves, the more you have in the bank. If something goes wrong, you've got capital to deal with the problem."
More literally, reputation is the strength of a company's relationship with its key stakeholders, those being its customers, shareholders, employees, suppliers and the wider community. And let's not forget the regulators, NGOs and even politicians that can seriously sway a company's livelihood.
"If you have a high-quality, well-functioning relationship with your stakeholders, generally speaking your company should do well," says Maruca. The stats back him up. Deloitte reports that 25 percent of a company's market value is directly attributable to its reputation. Forbes notes that 90 percent of consumers read online reviews of a business before visiting, and online reviews influence 67.7 percent of purchasing decisions.
The problem is that many companies don't quantify or measure value as they should; rather they see it as something to be addressed only in a crisis. HBR states, "Most companies do an inadequate job of managing their reputations in general and the risks to their reputations in particular."
It is unusual for an organization to do strategic work towards fostering and maintaining a good reputation with its stakeholders. Immediate threats to reputation generally receive attention, but as HBR points out this is "crisis management, not risk management". Businesses are consistently taking a reactive approach to managing their reputation.
Maruca believes solving this issue can start with the enmeshment of the legal and communications team, with in-house lawyers having a much more intimate relationship with their company's brand and reputation. He says it is incumbent upon counsel to ask their company questions such as, "What is our reputation? Are we measuring it in any way? Do we have data? Is that data sound? Can I work with our communications people to monitor our reputation?"
When communications and legal band together, they can share their skillset for optimum stakeholder engagement. Legal can benefit from learning to communicate without legalese, and comms can better understand the potential legal ramifications of reputational threats. Essentially, they can begin to handle reputation matters proactively.
"Sit in on each other's strategic meetings at least once a month. Share information between the two functions that you wouldn't typically," Maruca advises. Information about ongoing litigation, regulatory matters, seeking legislative changes and responses to lawsuits could be of immense value to the communications team. Such data provides insight into stakeholder frustrations and where the company can act to alleviate such issues.
Crisis management is sometimes unavoidable and for such situations Maruca offers this kernel of wisdom, "Don't fall into instinctual, defensive legal positioning."
Lawyers tend to lean into their adversarial nature, whereas extending an olive branch should be the goal when dealing with stakeholders. The goal should be to take a leaf from the comms team book and focus on open and honest communication.
