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Reputation Capital
How to Navigate Crises and Protect your Greatest Asset
T.J. Winick (Author)
Publication date: 09/20/2022
In twenty years as a television reporter, T. J. Winick covered many scandals, including the British Petroleum oil spill, the Pennsylvania State University football scandal, the Catholic priest molestation scandal, and the Toyota recall of 20092010. The biggest mistake he's seen organizations make in their crisis communication is to try to make it go away by refusing to apologize, declining to comment, or going on the attack-anything to deflect attention.
Instead, Winick argues for communicating ethically, with transparency, honesty, authenticity, and empathy. Handled correctly, the way you address an egregious violation of your standards can increase your reputation capital. It can remind people of what those standards are and how strongly you believe in them.
Drawing on his intimate insider knowledge of how the media works, Winick addresses every aspect of how to respond to a scandal. He includes the Ten Crisis Commandments-universal dos and don'ts. And he gives practical advice on who you should talk to and when, who should do the talking, how to form a crisis communication team, what tone you should strike in your message, how to work with the media, and much more.
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In twenty years as a television reporter, T. J. Winick covered many scandals, including the British Petroleum oil spill, the Pennsylvania State University football scandal, the Catholic priest molestation scandal, and the Toyota recall of 20092010. The biggest mistake he's seen organizations make in their crisis communication is to try to make it go away by refusing to apologize, declining to comment, or going on the attack-anything to deflect attention.
Instead, Winick argues for communicating ethically, with transparency, honesty, authenticity, and empathy. Handled correctly, the way you address an egregious violation of your standards can increase your reputation capital. It can remind people of what those standards are and how strongly you believe in them.
Drawing on his intimate insider knowledge of how the media works, Winick addresses every aspect of how to respond to a scandal. He includes the Ten Crisis Commandments-universal dos and don'ts. And he gives practical advice on who you should talk to and when, who should do the talking, how to form a crisis communication team, what tone you should strike in your message, how to work with the media, and much more.
1
WHAT IS YOUR REPUTATION CAPITAL?
THE NEXT TIME YOU LISTEN TO, read, or watch the news about a brand in crisis, notice how its image inevitably finds its way into the narrative. It’s not surprising, since we typically process news about a scandal through a filter that’s based on our previous perceptions of the organization, product, or individual. Past actions build expectations for how the brand will carry itself in the future.
If a brand has had issues or been at the center of a previous scandal, phrases like “no stranger to controversy” or “this isn’t the first time Brand X has caused an uproar among its customers” might very well be part of the story. Conversely, when a trusted brand is in trouble, phrases like “loyal customers,” “coveted products,” or “industry leader” are often woven into the script.
For instance: In March 2022, The Walt Disney Company, one of the most respected and image-conscious companies in the world, faced a crisis of its own making. Groups of its employees were outraged when CEO Bob Chapek didn’t publicly condemn a piece of Florida state legislation called the Parental Rights in Education bill, or what its opponents labeled the “Don’t Say Gay” bill.
In his first, heavily criticized statement, Chapek wrote that Disney felt its real influence was “through the inspiring content we produce.”1 However, he would end up apologizing to his LGBTQ employees, writing, “You needed me to be a stronger ally in the fight for equal rights and I let you down. I am sorry.”2 In addition to denouncing the bill, Disney decided to freeze all political donations in the state.
But it didn’t end there. In response, Florida’s governor, a member of the traditionally business-friendly Republican Party, revoked special tax and self-governing privileges enjoyed by Disney in the state for decades. Regardless of how you feel about the Florida legislation, which is now law, it was a political lightning rod from the very beginning and one that Chapek and Disney had failed to adequately prepare for.
While other, lesser brands may have suffered a significant reputational hit as a result of such a crisis, the strength of the Disney brand remains strong. This is, in part, due to its reputation capital as arguably the most trusted family-friendly brand in the world, built over decades through its theme parks, movies, and merchandise.
How well you weather a crisis, and how you’ll be perceived post-crisis begins with how the public views your brand (i.e., positively versus negatively) in neutral times. That’s why it’s critical to spend the necessary time, resources, and energy, not just on honing your craft or perfecting your business model but also on building up your reputation capital. This means leaders behaving responsibly, always with their organization’s mission and impact top of mind, so that they make better decisions in the first place and subsequently communicate these intentions.
Reputation capital may be described in a variety of ways, but chief among the themes that run through nearly every definition are:
• its intangibility
• trust as its central component
• its importance in amassing financial capital
One often assumes reputation is a soft asset such as a skilled workforce or intellectual property, which is “not normally recognized in an organization’s balance sheet.”3 Yet there’s an increasing number of reasons to believe a dollar figure can be assigned to reputation include the following:
• a report released pre-pandemic in January 2020 that found “global executives attribute 63 percent of their company’s market value to their company’s overall reputation”4
• the growing demand for ESG (environmental, social, and governance) investing—with investor decisions based on a company’s good deeds—and its greater impact alongside profitability and financial returns
• an oft-cited Harvard Business School study that found a restaurant that boosts its Yelp score by one full star can see its revenue increase by 5 to 9 percent5
SOCIALLY UNACCEPTABLE
Conducting research for this book, I considered those brands that were notable for having earned a positive reputation (e.g., Patagonia, Nike, Disney) and a negative one (e.g., Philip Morris, Spirit Airlines, Facebook). As part of this exercise, I googled “Facebook crisis.” Here’s a small sample of the results:
The 21 (and Counting) Biggest Facebook Scandals of 2018 (Wired)
Updating the Facebook Timeline of Scandal and Strife (Creative First)
How Facebook’s Crisis Response Missed the Mark (PR Daily)
How Facebook’s Response to Whistleblower Could Make Their Crisis Worse (Forbes)
Safe to say, no single brand is so consistently putting out reputational fires as is the company now known as Meta. Among its past transgressions: failing to keep user information secure, allowing the spread of misinformation on such issues as the 2016 US presidential election and COVID-19 vaccines, facilitating the livestream of a mass murder, and reportedly causing a third of teen girls to feel bad about themselves (due to time spent on Instagram, which is owned by Meta).
All that, alone, would be enough to question what’s going on in the corner office, but it’s how CEO Mark Zuckerberg and the brand have responded to these scandals in public statements, interviews, and congressional hearings that could not lower expectations any further. Lucy Prebble, who wrote the play ENRON, about the energy company’s scandal, once noted that the tone of Facebook’s indignant responses can typically be summed up by three words: “How dare you?”6
Take a look at some of Zuckerberg’s past statements and you’ll notice they’re overly defensive and indicative of a brand in denial.
• In response to the Cambridge Analytica scandal: “The reality of running a company of more than 10,000 people is that you’re not going to know everything that’s going on.”7
• In response to allegations that Facebook has fueled extremism and misinformation: “I believe that the division we see today is primarily the result of a political and media environment that drives Americans apart.”8
The constant and consistent inability to accept responsibility or project humility leaves little doubt that its next crisis is just around the corner.
The trust in a company and the public’s assumptions about it can serve as a type of armor against reputational threats. If a brand is thoughtfully engaged day-to-day in building its reputation, it’s more likely to emerge from even the toughest of challenges relatively unscathed when it comes to public perception. It’s no wonder reputation management strategies are most effective when they’re put into place long before a threat appears on the horizon.
BUILDING YOUR REPUTATION CAPITAL
You can bank reputation capital like deposits in a rainy-day fund. Here are seven recommendations how to begin doing so.
Prioritize Culture
A strong culture begins with how an organization approaches recruiting, team building, mentoring, and maintaining the overall morale of its employees. This determines their productivity and, as a result, the profitability of the business. Over the long haul, culture and reputation inevitably become intertwined. For instance, if a company has a less-than-stellar reputation, it will have a more difficult time recruiting quality employees, which in turn impacts how those employees and management interact, which in turn can erode key cultural elements such as shared values and standards.
Even during moments of crisis, when there may be great uncertainty, an organization can’t afford to neglect its own culture. That means setting the tone from the get-go through enhanced transparency, collaboration, and communication.
Consider how many organizations demonstrated they could not only survive but thrive working remotely during the COVID-19 pandemic. Much of this ability was due to the strong culture they began with at the onset and an understanding that it can’t be ignored when times are tough; in fact, just the opposite. Doubling down on culture keeps employees engaged and motivated, translating into a better work product and more confident communication with customers or clients.
It doesn’t matter how successful, accomplished, or revered a CEO is. If they ignore or don’t believe in the importance of interpersonal relationships and how their management team runs day-to-day operations, their indifference will inevitably come back to haunt them and the reputation of the brand. Think HR complaints, lawsuits, and leaks to the press.
Reflect on Feedback
How you engage with those inside and outside your organization is the most straightforward and organic way to influence how others feel about you. Ask yourself: Is your brand helpful? Is your brand perceived as honest and trustworthy? Does your brand keep its promises? If your brand makes a mistake, does leadership admit as much and hold itself accountable?
Today’s consumers have multiple ways to provide feedback in real time. Think about how you conduct research before making personal or professional purchases. Never underestimate the power of reviews left on sites like Yelp, Glassdoor, and Amazon. When poor customer service results in negative reviews, they can snowball if not addressed promptly and appropriately.
Monitor what’s being said about your brand anywhere a supporter might be building you up or a critic might be tearing you down. Try to address a complaint or concern directly. You’ll visibly demonstrate that you take criticism seriously and care enough to rectify issues.
Just don’t think a boilerplate statement composed of corporate-speak will get the job done. If online posters believe you’re merely paying them lip service, it might make matters worse. In some cases, no reply might actually do less damage than one that’s perceived as uncaring and thoughtless. I’ll address when and when not to respond to criticism in greater detail in chapter 9.
WHOLE FOODS: A FRESH APPROACH TO CRITICISM
In 2003, the director of an animal rights group approached Whole Foods CEO John Mackey at the company’s annual meeting and demanded that the supermarket stop buying duck meat from factory farms that treated waterfowl inhumanely. The two exchanged emails and started an open discussion.
Months later, Mackey acknowledged that these conversations had persuaded him to become a vegan, and that “Whole Foods pledged to design humane standards for animals whose meat will be sold in its stores.”9
In 2015, Mackey sat down to discuss this inflection point in his personal and professional life. What he shared was remarkable for a Fortune 500 CEO in his ability to hear and accept criticism and make real change rather than excuses.
“At the time, I believed Whole Foods Market already had the best animal welfare standards of any food retailer in the US,” he told a reporter. “I was taken aback by some of her harsh criticism, but I accepted her challenge to become better informed about animal welfare. . . . By the end of the summer, I realized she was absolutely right—I was horrified by what I had learned.”10
Not every executive listens to critics with an open mind and an open heart. Though Mackey believed his market had the most ethical animal husbandry practices in the industry, he overcame the impulse to fight back. The revelation persuaded Whole Foods to tighten its standards—and its market share continued to grow. Between 2008 and 2017, the number of locations increased from 275 to nearly 500.11
Become a Thought Leader
Work to make your CEO and other executives a go-to person in a reporter’s or other influencer’s list of contacts. When journalists write a story on a particular industry trend or a conference organizer is putting together a panel of industry heavyweights, they need experts who can provide context, analysis, and insight. They can presumably reach out to anyone in, or associated with, the industry, such as analysts or researchers who work for a trade group or a government agency. So when a brand representative appears in a news story or speaks at a prominent event, readers and attendees perceive them as a subject matter expert and a standout leader in their field.
Consider that consumers view earned media (appearing in a third-party news source based on merit and not money) as more trustworthy than advertising. In fact, a 2019 report found that only half of consumers trust paid ads, while 92 percent say they trust earned media.12
Additionally, a brand should leverage channels like its own blog, Medium, and the LinkedIn Publishing Platform to share thoughts on relevant ideas and issues to articulate its unique approach and value. This complements earned-media coverage without having to rely on the traditional press to disseminate important messages.
Cultivate an Online Audience
Brands can’t wait until a threat emerges or a crisis occurs to begin a dialogue with their followers on a channel that’s remained relatively dormant. They must spend the time necessary to establish a unique voice across those social media platforms followed most closely by key constituents. Encouraging a back-and-forth with followers helps brands earn online credentials by cultivating a reputation of accessibility.
In the event of a product recall, data breach, or outage, these pages and feeds tend to be the first places those impacted will turn for information and answers. If a business has established itself as trustworthy and responsive, these channels can be integral in assisting those in need and sharing vital information.
Today’s most respected brands excel at online customer service, and this extends to social media. To illustrate this point: One afternoon, a few years ago, I was crossing a busy city street when a brand-new pair of glasses fell off my face and onto the ground. As I safely made it to the curb, I turned around just in time to see them crushed by the tire of a passing vehicle.
I sat back down at my desk and posted an image of the cracked lenses and twisted frames on Instagram, tagging Warby Parker, the company from whom I had purchased them just a week earlier. A representative from the eyewear company wrote me back within an hour, and I had a new pair of glasses, free of charge, less than a week later. Not surprisingly, I remain a loyal customer to this day.
Create Content
Every organization today, no matter its focus, is its own media company with the ability to create videos, infographics, podcasts, blogs, e-books, and other collateral that are free to access and that demonstrate the brand’s value. By establishing a rapport with the consumer that isn’t solely transactional in nature, the greater the likelihood of building a long-lasting (and eventually profitable) relationship.
Many brands use this content to employ the type of storytelling once traditionally reserved for the press to humanize their businesses and make it more relatable. For example, posting employee and passenger-centric videos such as “A Day in the Life of a Flight Attendant” and “How We De-ice a Plane,” which aren’t focused merely on cheap fares, helps Southwest Airlines distinguish itself from other low-cost carriers. It’s a soft sell that entertains and informs while establishing a visceral connection with personal and business travelers alike.
One of the original pieces of creative content dates back to 1895, when John Deere, the agricultural equipment company, published a journal called The Furrow.13 Along with information about Deere products, it mainly focuses on agricultural news and provides solutions to issues that plague professional farmers and lawn-care enthusiasts. The company understood that producing something that its customers would enjoy reading and come to depend on could be just as valuable as a catalog of the latest products and equipment.
Exercise Corporate Social Responsibility
Initiatives aimed at impacting society in a positive way can include everything from a business donating a percentage of its profits to a worthy cause to efforts to reduce its carbon footprint to a hiring process focused on diversifying its workforce. Yet today’s savvy consumer can recognize virtue signaling (the insincere attempt to demonstrate you’re well-intentioned) or purpose washing (the disingenuous embracing of a greater cause), so be prepared to deliver on your promises when committing to be an advocate.
Don’t settle for writing a check or engaging in activities that are more performative than substantive. Strive instead to volunteer time, author opinion pieces that shine a light on the causes your business cares about, sit on boards of like-minded organizations, and talk about your brand’s commitment earnestly online and elsewhere to raise awareness.
While your organization can choose to support any cause or nonprofit, consider those closely aligned with your mission. For a bank, perhaps it’s establishing financial literacy for young students with visits to local schools. A residential real estate developer can combat homelessness by partnering with nonprofits that work with landlords to prevent evictions. Food manufacturers or restaurant groups can help combat food insecurity through organizations such as World Central Kitchen, which mobilized in response to COVID-19 and has delivered meals in regions hit hard by natural disasters.
Choose a Highest Value
One of corporate America’s most respected CEOs is also one of its sharpest critics. Marc Benioff of Salesforce has gone so far as to call for a “new capitalism,” in which brands don’t just take from society but also give back, insisting the idea that a business must decide between profit or purpose is a false choice.14
Accumulating reputation capital is a natural by-product of such a philosophy, one in which a brand regularly demonstrates and communicates that it’s not just out for itself and that it views its employees, customers, and corporate partners as part of one large ecosystem. Central to this, Benioff suggests, is that every CEO chooses an ideal such as safety, truth, trust, or responsibility as their highest value and then figures out how to effectively operationalize it.15
Although choosing a highest value can cost a brand revenue and market share in the short term, the understanding is that it will pay off in the long term: the fostering of a better workplace culture leads to the recruitment of better employees, which leads to better service, thus making the brand more attractive to potential customers.
A business that’s continually on a concurrent journey toward profitability and improving the planet will be less likely to generate crises of its own making. It will also be more insulated against reputational damage when one does occur.
For example, CVS Caremark’s highest value is health. That’s why, in 2014, the company received universal praise for announcing that its more than 7,600 drugstores nationwide would stop selling cigarettes, cigars, and chewing tobacco.16 It might seem like a no-brainer for a healthcare provider (i.e., not feeding a nicotine habit that will lead to negative health outcomes), but when you’re talking about a projected loss of $1.5 billion in annual revenue, the decision couldn’t have been arrived at easily.17 According to CVS’s president at the time, “The sale of tobacco products is inconsistent with our purpose.”18 Yes, it is. It makes it hard to believe that competitor Walgreens still sold tobacco products as of early 2022.
DEBRIEF
Today’s customers make it clear they want to do business with organizations that reflect their own beliefs. To review, my recommendations on how to start building reputation capital are:
• prioritize culture
• reflect on feedback
• become a thought leader
• cultivate an online audience
• create content
• exercise corporate citizenship
• choose a highest value
Not every organization that adopts these principles will necessarily be recognized as outstanding among its peers. Conversely, some brands that ignore (or seemingly ignore) many of these best practices continue to thrive.
Certain businesses, including those in highly regulated industries—like airlines, professional sports leagues, energy companies, cable television, and, yes, social media—exist in markets where there’s limited competition. Consumers have only so many choices when it comes to watching a professional football game, heating their home with natural gas, or selecting a cable provider.
Case in point: Facebook reported 2.89 billion monthly active users in the second quarter of 2021.19 It’s become ubiquitous in how we get news—36 percent of US adults say they regularly get news on the platform20—and how businesses advertise—Facebook’s domestic ad revenue accounted for a 23.8 percent share of the United States’ total digital ad spending in 2021.21 Even with its pattern of betraying the public trust, Facebook continues to be wildly profitable. All the complaints and gnashing of teeth haven’t slowed the social network’s exponential growth or put a significant dent in its stock price.
And yet, beginning in late 2021, the toll of facing one crisis after another appeared to be chipping away at the social network’s profitability. Consider:
• Facebook is reportedly now paying a “brand tax” to tech workers who are afraid that working at the company could jeopardize their future job prospects.22 As a result, 2022 expenses at the company were projected to jump as high as $97 billion from $70 billion.23
• In January 2022, a federal judge allowed the Federal Trade Commission’s effort to break up Facebook to proceed in the courts. The FTC wants to reverse Facebook’s acquisitions of Instagram and WhatsApp, arguing the social media giant represents a monopoly.24
• In February 2022, Facebook set the record for the largest one-day value drop in stock market history, losing more than $232 billion after it reported weaker-than-expected first-quarter revenue.25
• All social media platforms face significant risk due to the possible reform of Section 230 of the Communications Decency Act, the law that protects these companies from being held legally liable for user content.
Are the years of missteps by the company now known as Meta finally hitting home? We’ll see. It reinforces the notion, however, that sustainable success is most assured when brands make decisions aligned not just with profit but also with the greater good.
