Greenpeace activists paint over a banner with the British Petroleum (BP) logo in a protest against the BP oil spill in the Gulf of Mexico at St. Stephen's square in Vienna July 7, 2010.STR
Companies risk their reputations every day. We've watched titans such as BP, Toyota and Goldman Sachs take hits, and who knows if you might be next? In Strategy + Business, Paul Argenti, a Dartmouth College business professor, and Booz & Company consultants James Lytton Hitchins and Richard Verity argue that in the past there were four basic reputation strategies companies could adopt, but today only the last two in their list are viable.
RECKLESS NEGLIGENCE
This involves business as usual, assuming you can cut corners and shave costs with no reprisals. So no attention is paid to improving your company's capabilities in health, safety and environmental management. All that matters is keeping prices low, satisfying your customers, and meeting quarterly financial expectations. They estimate that 25 per cent to 30 per cent of companies in the industrialized world and emerging markets follow this path (including, they stress, food companies that ignore the growing concerns about obesity and health). "These companies are one misfortune away from irreversible damage to their reputation," they write.
DECEPTIVE VIRTUE
These companies seem to have some lustre through their public relations programs, rebranding campaigns, corporate philanthropy, sustainability efforts, and their espousal of high-quality business practices. They seem far-sighted and responsible, and as long as the company is well-managed and reasonably lucky, the strategy can work. But it is a gamble if the core values and business practices don't match the image being concocted. Think Enron. Few companies adopt this narcissistic strategy these days, the writers add.
BENIGN COMPETENCE
You comply with regulations; make adequate investments in improving your health, safety and environmental management; and run a credible corporate communications program. Beyond that, you focus on running an effective company, delivering quality products, and feel you have covered yourself. And you're not alone, since about 50 per cent of the world's companies have a similar approach. It's a viable strategy, but the writers insist you haven't gone far enough and could still be at risk: All you have done is meet the "table stakes." It might cover you, but it might not.
TRUSTWORTHINESS AS A COMPETITIVE ADVANTAGE
In this strategy, you make reputation management a critical capability of your organization, designed to distinguish yourself from competitors and earn you an enviable reputation among customers, investors, regulators and suppliers. "Being a reputation-driven company is a painstaking endeavour, in which you pay as much attention to maintaining transparency and living up to your public promises as to developing the next great product," they write. This won't mean you have to be flawless. But if something goes wrong, you must accept responsibility for your mistakes, and gain the commitment of all your employees to fix business practices that cause harm or no longer fit with the strategy of trust you are following.