Ipsos Corporate Reputation

When does reputation turbulence become a full-blown crisis?

In a world of information overload, communications leaders must be able to separate the signal from the noise in order to defend their companies when it matters most.

Communications leaders need the tools to spot a potential crisis amongst the background turbulence, as well as the corporate resilience to weather the storm when it hits.
Experience, internal networks, planning, and measurement & management tools are crucial in separating turbulence from a crisis.
Council members identify two important factors in building resilience: a thorough track record of stakeholder engagement to build reputational strength, and prior planning to understand potential triggers and team roles across the business when an issue arises.

Full-blown crises pose a genuine threat to a company’s continued survival or licence to operate. By contrast, reputation turbulence is an issue, or series of issues, which impacts the impressions of stakeholders without posing a sustained threat to the company.

The number of Council members who believe that every issue must be treated as a potential crisis, until it is proven otherwise.

For the vast majority (79%) of Reputation Council members, being able to differentiate between the two is seen as very (59%) or fairly (20%) useful. The remainder don’t make this delineation. They believe that EVERY issue must be treated as a potential crisis, until it is proven otherwise. But without doubt, communicators have a limited amount of time and resources. They  need to identify and prioritise the emerging issues that matter the most to their business.

Experience, internal networks, planning, and analytics each play important roles in helping to prepare, prioritise, react and regain a state of ‘equilibrium’.

"Our philosophy is to actively manage outside of crisis situations – like engaging in diet and exercise rather than going to shock trauma. You want to know the number for emergency services, but you don’t want to live on a bench outside the hospital. Actively managing in advance means engaging with stakeholders and communities you need in case of a crisis."
IS THE DISTINCTION BETWEEN REPUTATION TURBULENCE AND CRISIS USEFUL TO COMMUNICATORS?
How do you distinguish a crisis from turbulence?

Unilever’s Paul Polman notes that “reputation has a habit of arriving on foot and departing on horseback.” Is it possible for corporate communicators, in the heat of the moment, to distinguish between an emerging crisis and something that’s just background turbulence? A cool head, in-depth knowledge of the business, and detailed data can all help:

Experience

Like much of a communicator’s job, telling the difference between day-to-day turbulence and a business-altering crisis is as much art as science, drawing on both intuition and knowledge built up through years of experience. The key is to have a process in place which ensures that each issue gets due attention and is escalated only when necessary. A common theme among Council members is that it is the role of the communications professional to be the dispassionate ‘cool head’ in the room; one goes so far as to suggest that keeping executives calm and correctly diagnosing a crisis are core competencies of the communications leader.

Understanding

The main filter for determining whether an issue is turbulence or a crisis is its likely impact on the business’s core activities, purpose and values. In order to assess this ‘salience’, Council members say it is important for the communications function to be integrated into the business. The more information it has about operations and leadership, the better it will be at judging the likely impact of an issue. Internal networks which can be leveraged in times of crisis are critical.

Measurement and monitoring

What indicators or early warning systems can communicators draw on to help them make this judgement? While social media and the digitisation of traditional media have greatly increased the volume of turbulence that Council members face on a daily basis, they have also equipped them with more sophisticated diagnostic and predictive tools.

The volume and velocity of ‘noise’ are important; if an issue gains traction over a series of hours, then it is more likely to be heading toward a crisis. But this must be understood in the context of the news cycle, as well as the credibility of the sources and commentators. As one member points out, a big ‘Trump story’ will suck up all of the oxygen that would be devoted to less prominent issues.

An issue that provokes strong stakeholder sentiment will also demand more attention than one that does not. Especially if analysis shows that these perceptions are key drivers of stakeholder behaviour.

"Research, media monitoring, social media monitoring, talking with stakeholders and engaging with them on a regular basis. Doing polling on a regular basis to understand attitudes towards particular issues. Stakeholder discussion groups. To the extent that you can get a 360 approach going, so much the better."
How do you build resilience?

If resilience is the organisational ability to withstand crises, what does it take to become resilient?

"To have resilience, a company has to have a capacity to keep cool. Many issues can be amplified within the company. When a reputational problem appears, people can take this from a very personal side, feel hurt, and subjectivity can make you see a crisis in any turbulence. So, in order to be resilient, it is really necessary to have very well-established processes, but also to count on experienced professionals who have accurate analytical capacity, so that this ‘crisis management team’, with all its expertise, can do the correct diagnostic and convey a certain tranquility."

Building reputation strength before a crisis

Across geographies, Council members agree that building a solid reputation through a track record of stakeholder engagement is the best way to build resilience. This provides a thorough understanding of what drives your reputation, which issues are important to stakeholders, and which communications and initiatives are most effective.

"Our CEO is always talking about something that Steve Jobs told him; he said he broke it down and made it very simple. What you do is either a brand deposit or a brand withdrawal, and you need to have a lot more brand deposits than brand withdrawals. And the simplicity of that is, the consumer will give you the benefit of the doubt if you have been making consistent brand deposits."

It’s often said that you can’t communicate your way out of a crisis that your behaviour created. Reputation resilience means that corporate communications must be genuinely aligned with behaviour, both within and outside the business.

Planning

The second essential requirement for resilience is prior planning. Council members are united in the belief that thorough analysis and planning can not only enable a business to weather a crisis, but also to emerge from it stronger. Members highlight several important elements of planning:

  • Triggers

    To anticipate potential crisis triggers, connectivity with business lines is key. As one communicator put it, “crises are caused by operations, not by communications.” Access to data is critical. But at the same time, members emphasise the need to communicate internally; keeping internal audiences informed can help keep pressurised situations from spilling over to external audiences. Internal and external networks will be precious if a crisis hits.

  • Teams

    In a crisis, everyone needs to understand their role. Communicators need to be able to execute the plan in a dispassionate manner.

  • Practice

    The ability to keep a cool head comes from multiple rounds of practice. All of the planning needs to be pressure-tested so that when a true crisis hits, it’s second nature.

Ultimately, the ability to weather a crisis is significantly linked to prior preparation. This preparation comes from a total business perspective of building reputation resiliency beforehand, as well as within the corporate affairs department in building networks and plans, and making sense of data. Communicators’ hard-won knowledge and experience is key here. Those who are best equipped will have the strongest chance of identifying and weathering reputational crises.

"Having plans of action against specific negative events, as well as being able to manage difficult situations with clarity of mind and rationality, are strategies for building resilience. Never overlook signals, even those that appear insignificant or negligible."

Methodology: 154 interviews conducted with Reputation Council members between 25th June and 12th November 2018.

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The Reputation Council Report 2018: Full Report

Welcome to the latest briefing from the Ipsos Reputation Council.

This – our thirteenth sitting – has been the biggest and most international yet, involving 154 senior communicators from 20 countries.

As Paul Polman, CEO of Unilever, once said: “reputation has a habit of arriving on foot and departing on horseback”. In the past year, a welter of high-profile reputation scandals affecting businesses, their leaders and even whole industry sectors has, once again, focused our minds on the risks and rewards of this powerful but potentially volatile asset.

Some of these scandals have posed a genuine threat to companies’ continued survival or licence to operate. Others have fizzled out. In this edition, we examine how Reputation Council members distinguish between issues which might blow up into a genuine reputation crisis, and others that are just day-to-day turbulence. What indicators or early warning systems can communicators draw on, to help them build resilience?

The technology sector has been wrestling with some unprecedented reputation issues recently. Concerns around privacy, data leaks, advertising practices, AI and automation have come together to create the phenomenon of ‘techlash’. We talk to Council members about the implications for their own businesses and the lessons that communicators can learn from the way in which the technology sector is responding to techlash.

We’re also beginning to see greater scrutiny of the role that CEOs should play in external communications, against a backdrop of issues such as pay ratio reporting, gender inequality, shrinking CEO tenures and the ‘celebrity leader’. In this edition, we explore Council members’ playbook for CEO-led communications, and look at how the CCO can ensure that these communications build, rather than destroy, reputation value.

The opportunities and challenges that come with communicating in a global context is a theme we’ve examined in past editions. In this sitting, we ask Council members how they strike the right balance between global and local messaging and narratives, and how they keep a finger on the pulse of their reputation (or reputations) around the world.

Lastly, we’ve introduced some new, ‘quickfire’ sections, in which we analyse Council members’ views on a number of contentious, topical talking points, such as the death of CSR, the distraction posed by social media, the need to pick a side in a polarising society, and whether consumers will overlook poor corporate behaviour if the price is right

I hope you enjoy this edition of the Reputation Council report. Please do get in touch if you’d like to find out more about any of the issues covered or discuss how they might affect your own business.

Milorad Ajder
Global Service Line Leader
Corporate Reputation
milorad.ajder@ipsos.com

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Global Perspectives on Sector Reputations

Which industries are facing the greatest reputation challenges at the moment?

NORTH AMERICA

Media: 44%

Tech: 44%

Pharma: 31%

Despite lingering reputational issues still plaguing the financial services sector, the recent assault on media and tech means that these two industries are seen to be facing the greatest reputational challenges in North America. Each of these industries is named by 44% of Council members.

Beyond these two industries, pharmaceuticals now holds the third position in terms of reputational challenges at 31%. Cost and value continue to drive the conversation, and with the US government putting more of a spotlight on drug costs, these reputational challenges are likely to continue.

"[Media has] got a constant drumbeat of ‘fake news’, how do you overcome that?"
"These are self-inflicted wounds [in the tech industry] – companies are not thinking through the implications of their actions on their customers."
LATIN AMERICA

Construction: 50%

Energy: 41%

Mining: 34%

In Latin America, construction rises to the top as the industry facing the greatest reputational challenges this year (50%). A number of corruption charges have embroiled not only specific companies throughout the region but also politicians and civil servants.

Energy (41%) and mining (34%) round out the top three most challenged industries, predominantly due to environmental concerns and a perception that they bring limited benefits to the local markets.

"There is a public perception that mining pollutes, does not produce profits for the country, and is a group of companies that do not add local value but add value to those who extract the material and take it away."
EUROPE

Finance: 44%

Energy: 43%

Finance remains one of the industries facing the greatest reputational challenge in Europe (mentioned by 44% of Council members). In the words of one Council member, “this crisis has not been solved yet, given that the image reconstruction process appears to be very slow.”

Additional challenges for the financial services sector include cyber security concerns and emerging FinTech players challenging the traditional financial companies.

Energy also continues to face reputational challenges, cited by 43% of Council members in Europe. Issues continue to focus on environmental concerns, climate change, sustainability and consumer costs.

"When energy companies don’t immediately pass on price savings from a barrel of oil to a consumer or to a client, then the negative repercussions are there immediately."
ASIA PACIFIC

Finance: 88%

Energy: 71%

Media: 71%

Consistent with last year, the financial services industry continues to suffer reputational challenges in APAC, though mentions are higher this year at 88% (up from 73% in the last wave). Council members continue to cite the lingering effects of the financial crisis.

The energy sector is also mentioned more frequently than last year (71%), and while affordability and sustainability are still key reasons, government policy is now referenced far more frequently by Council members.

This year, media is also mentioned by 65% of Council members in APAC, with many attributing this to a changing media landscape as well as the resounding cry of ‘fake news’.

"The energy policy is a mess. Can’t separate from political environment."
"The Trump phenomenon and the constant hammering of ‘fake news’."

In full: how Reputation Council members around the world perceived each sector's reputation

Methodology: 154 interviews conducted with Reputation Council members between 25th June and 12th November 2018. Base: All Reputation Council members – Global (145), North America (16), Europe (80), Latin America (32), APAC (17).

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