The shocking events of the past month can show how even the most well-known and seemingly financially strong organizations can disappear in essentially the blink of an eye. The subprime mortgage fallout is the latest cause but we all can recall others, where a corporation’s reputation has come under attack because of a rogue employee, scandal, product recall, government investigation, etc. As Warren Buffett aptly noted that a good reputation takes years of good deeds to build, but it can be lost in a second due to one bad move or event. These concerns are clearly in the forefront of the minds of many Indiana CEOs. For the second year in a row, when asked to rank how important 13 different issues, ranging from topics such as business growth to raw materials prices, the CEOs surveyed in The State of Our Business: A Perspective from Indiana Executives, picked "corporate reputation" as the most important issue facing executives. In addition, the second-highest-scoring issue, according to the CEOs, is "customer loyalty and retention," an issue inextricably intertwined with a company's reputation. Clearly, the way his or her company is perceived is at the forefront of a CEO's thoughts.
A company's overall reputation is framed by various perceptions in the marketplace. First is the perception of the quality of its goods or services, and the relationship between price and quality in terms of overall value. In addition, customers make purchases based on perceptions as to treatment of employees, ethical standards, and community support and philanthropy. Remember the impact of reports of child labor practices on mass market clothing retailers? What about the incredible impact of having “green” products or being a “green friendly” company? Conversely, the reputation of almost all Wall Street firms are taking a beating over the credit crunch necessitating a congressional bailout. Interestingly, the Wall Street Journal recently reported that Bill and Melinda Gates’ philanthropy caused Microsoft to come out on top of a public opinion study of corporate reputations, edging out Johnson & Johnson which was a regular winner due to its emotionally appealing baby products. Halliburton received one of the lowest ratings due to negative perceptions in the area of ethics standards and trust.
Most executives will also tell you that the way your company is perceived as an employer will also contribute directly to its success, or lack thereof. Factors like the abundance of "best places to work" rankings illustrate that perception is at the forefront of the workforce's thoughts, and so a company which is known as an employee-friendly environment will naturally be more likely to attract top-notch talent.
The importance of maintaining a positive profile is clear, and so here are some practical tips to ensure that your company will remain a reputable organization:
Develop a Communications Plan and Policies to Reinforce the Company’s Persona – Determine your strategy for establishing and maintaining your company's desired persona. This is not just advertising or public relations, but is establishing and conveying a culture. Ben & Jerry’s did this with ice cream. A local plumbing company is establishing a distinctive clean reputation by proclaiming that its plumbers are guaranteed to smell good.
Adopt a Code of Conduct for Directors and Officers – Ensuring ethical conduct by your company's management is vitally important, regardless of whether your company is subject to Sarbanes Oxley. This legislation was meant to address problems that are not unique to public companies, and customers can be turned off just as much as investors. Properly drafted codes of conduct and conflict of interest policies will go a long way toward protecting your company from a negative image.
Appoint a "Point" Person for Public Relations – Maintaining a consistent voice will help you to carry out your goals under your public relations policies, and will ensure that the outside world has a clear contact in the event an issue arises.
Implement a Crisis Response Strategy – As we have seen numerous times in the recent past, how your company reacts in a time of crisis will immediately impact the public's view. Having a policy and strategy in place will allow your management team to react immediately in a pre-determined, well thought out way, and your company will be known as a company which adapts and deals with adversity without missing a beat.
Control the Use of Your Company's Name and Intellectual Property –Controlling how your name and your products' names, the public faces of your company, are used and marketed in the public arena is crucial. Consider consulting with individuals outside of your organization who have an impartial eye about how the public views your name.
Maintain Open Lines of Communication – Keep in constant contact with customers, employees and shareholders, even when there is no pressing issue. This can create goodwill and serve as a way to keep in tune with these groups' concerns.
Create A Friendly Work Environment and Culture – Consider the type of employer you want your company to be – the press, for example, regularly highlights and celebrates companies that are “family friendly.” Employees can be incredible advocates for their employers and their goods and services.
Though no single factor can guarantee your reputation, making sure that your team understands the issues and how to address them will help you maintain a consistent level of success. As the British writer, Joseph Hall, once said; "A reputation once broken may possibly be repaired, but the world will always keep their eyes on the spot where the crack was.”
Richard Thrapp Partner, Ice Miller LLP Richard Thrapp's primary practice areas are corporate law, mergers and acquisitions, corporate finance, commercial law, nonprofit organizations, and shareholder rights. For further information, contact Richard at Richard.Thrapp@icemiller.com
Joshua Christie Associate, Ice Miller LLP Joshua L. Christie is an associate in the Firm's Corporate Mergers and Acquisitions Group. Mr. Christie primarily focuses his practice on corporate transactions, aviation law, antitrust law and general corporate matters. For further information, contact Josh at Joshua.christie@icemiller.com
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