Reputation damage does not come much bigger than BP’s fall from grace estimated at £25 billion on the stockmarket. This is the balance of the forty billion drop minus the fifteen billion costs of clear up in the USA.
Few companies spend much time managing reputation in a strategic way. we are aware of none that actually sit down and talk about reputation at the level of the CEO or strategy director until the damage has been done. This year Goldman Sachs acknowledged that criticism of it’s behaviour over the past couple of years has done great repetitional damage.
The Gulf of Mexico spill is perhaps a one off but all companies face potential reputational damage in much more modest ways which few consider. Companies via their PR companies fetishise crisis management (first aid) at the expense of crisis avoidance or reputation management (health protection). They look to respond at the expense of avoiding in the first place. This approach puts reputation management in the hands of marketing directors and not strategy directors; marketing directors who typically worship brand management and advertising: they love to take and not listen.
In the case of BP how much listening did they do to internal voices questioning safety and operational processes? Large organisations rarely welcome dissonant voices however much claim to be inclusive. All large companies need to nurture whistle blowing and the eccentric voice. Maverick is a key reputation management asset!
Exogenous events do happen, but they are rare. The more we hear about the events and circumstances of the oil spill, the more it is becoming clear that safety was an insufficient priority and that the dangers and impact of a blow-out had been minimised. As the cliche goes… This was an accident waiting to happen.
The past few years have demonstrated that the single largest risk shareholders face is the backlash from reputation damage. Company executives need to recognize the fact.