A leading phone carrier wouldn’t manufacture exploding phones…
Just like a car company wouldn’t produce cars that don’t stop...
Or a credit agency would never hand-out the names, birthdays, & social security numbers of 143 million Americans …
Except, if you’re Samsung, Toyota, or Equifax – you would. And when you do, your company will lose its most valuable asset – its reputation.
A few weeks ago, the Lacher team outlined the risks we estimate to be the most prevalent in 2018. Reputational damage headlined the list, and for good reason. Even when your company does everything right, your reputation is still at risk.
This installment of our blog will serve to effectively prepare business owners to understand and minimize the risk of a damaged reputation.
Why Should I Care About Reputation?
An investment in reputation is a sound bet on your company’s future. Given a ten-year period, a stellar reputation will prove to be more valuable than your current highest paying client ever will.
After all, research shows that companies with great reputations will out-earn their industry counter-parts, attract loyal customers, and retain their best team members. Every company wants to maintain profitability and increase share-holder value, and reputation is the pathway to doing so.
How Can I Measure Reputation?
We urge business owners to ask themselves two things: Are we Trustworthy? & Are we Innovative?
Being trustworthy is the foundation of a great reputation. So how is trust earned?
Trust is earned when businesses consistently deliver on expectations. Businesses need to provide outstanding products and services, and maintain an unwavering pledge to operate using best practices and thorough procedures.
Internally, trustworthy companies foster dynamic and cohesive cultures, and they often leverage total rewards to do so. (More on total rewards in the coming weeks 😊)
Externally, companies can gain trust by being transparent and fair in all their transactions – you’re more likely to establish lengthy business relationships this way. Companies also need to invest in their communities, and when they do, they need to effectively communicate what their initiatives are.
If being trustworthy is the toast, innovation adds the jam. And when it comes to innovation, Apple is the template.
Apple is always in development mode – and it shows. They’re constantly releasing new products and evolving features for their consumer base. But their innovation is best because it’s multifaceted.
At Apple, they’ve designed a $5 billion headquarters to be the next mecca of innovation. They allow employees to dress down when they need to turn the focus up. They’ve created group work spaces to promote collaboration. Diversity and inclusion is mandated.
Above all, innovation promotes a prosperous future – and that’s something consumers will stand behind
What are the Impacts?
Unmonitored, reputational damage can challenge corporate standing and financial solvency. When you lose clients, you lose profit – and sometimes they don’t come back.
When Samsung’s phones were exploding they lost $10 billion. Sure, Samsung overcame their losses in a few years, but a small business with a fraction of Samsung’s capital could never overcome such a mishap.
To conceptualize how a damaged reputation can haunt a company, let’s examine Toyota’s 2009 fall from market dominance.
In 2009, Toyota held the largest stake in the US auto market at 17%. However, a mass production of defective accelerators and brakes forced Toyota to recall 14 million vehicles and pay out over $3 billion. When the dust had finally settled in 2012, Toyota had lost over 3% of their market share.
Unlike Samsung, Toyota has yet to recover from their reputation blunder. Presently, Toyota is third in market share and they’ve failed to gain back the 3% that they lost. A corporate giant like Toyota can afford to lose 3% of their market, but that same loss could kill any small business on the corner of main street.
How Should Your Company Respond if Reputational Damage Does Occur?
Hopefully, your company will never have to amend any reputational damage! But if crisis arises, here’s what you need to do:
- Control the narrative by releasing a timely and accurate statement
- When appropriate, take complete ownership
- Develop a plan to rectify the incident
- Develop procedures that address the root cause of the issue
- Pay up to rectify losses
It’s clear that reputational damage is a serious risk, and now it’s time for businessowners to invest in their own reputation. We’ll continue to discuss the Lacher list of risks in 2018, so check back soon for more info on Data Privacy & Security.