Reputation Damage

How important reputation to corporation?

Reputation is one of the significant factors in companies, when reputational damage happened it not only can bring major economic damage but also impact in corporate image.

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For many companies, the most valuable property is not how much fund they have, nor in how many staff of the workforce, whereas rather in its reputation. However, reputation can be a brittle thing. Consider Coca-Cola, which became the largest cola manufacturer through its reputation for reliability and value but has suffered as incident of food poisoning in Belgium, 1999. This has contributed to a direct financial loss more than 60 million dollars.

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Another example is British Petroleum (BP), because of the oil spill in the Gulf of Mexico, BP spent for years built in its trustworthy and going green and environmental protection image and sunburst logo, its reputation quickly fell down in the midst of tragedy: its image value was reduced by 100 billion dollars. Therefore reputation is a significant property in organisations. It may let organisations suffered great loss.

How to recover reputation damage?

Finding methods to repair reputational damage can divide into two pathways: one is controlling distrust another is demonstrating trustworthiness again.

According to Dietz and Gillespie (2012), organisations trust repair has four stages:

  1. responded
  2. find reasons
  3. take actions
  4. evaluation of progress

How to prevent reputational damage?

First of all is evaluations of crisis has happened, is because after solving the reputational damage, organisations can find the experiences by evaluate the crisis to prevent such setbacks.  Generally, after reputational damage should evaluation cause and effect, weather methods to solving problems are useful by released companies report.

In addition, the choice to establish contingency plans is due to the fact that contingency plans can become reputation insurance and fast deal with emergency incident. Many companies take contingency plans such as establish CSR as a significant role in organisations’ rest-management strategy. The trend that many companies set up contingency plans is because it is an effective strategy and can help organisations take actions quickly when emergency incident happened. Not only it can help organisations deal with crisis, but also can give public confidence that companies plans as reputation insurance play an important role in organisations’ rest-management strategy.

With the increasing of social media, organisations should pay more attention to use social media to improving interaction with customers and controlling negative dissemination of information. Firstly, the fact that social media such as Facebook, Twitter and YouTobe is increasing popularity in many organisations is due to it spread fast and wide. In addition, the trend that companies spend an increasing amount of time is because using social media can allow companies accomplish interchange information quickly and help enterprises connect with their customers more effective. However, plenty of information on social media is to boots sales and hits, therefore organisations should pay more attention to control social media, which cover many negative stories.

reference

Dietz, G. Gillespie, N. (2012) The Recovery of Trust: Case studies of organisational failures and trust repair, 1st ed. London: Institute of Business Ethics.

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8 comments

  1. majeepang · November 5, 2015

    I agree with you about how to prevent reputation damage, because crisis cannot be predicted and avoided. I think every company should keep awareness on this issue, they can recruit two teams, one is a Crisis Prevention Team which comply two principles (the weakness of the company’ performance and the danger signals) to recognize the potential reputational crisis, the other one is a Crisis Response Team, which can offer enterprises response strategies to recover the relationship between customers and the public.However, in the end of your blog, you mentioned about the social media. Is all the information negative? How to prevent these media from misleading the public?

    Like

    • David_zhou · November 16, 2015

      Yea, I can see it is a very useful idea to establish two teams to prevent reputation damage.
      About social media, I will say that is true not all of the information is negative. I want to explain is that companies should pay more attention to control negative information on it. Because of the information in social network is like virus, it will have a broad impact to companies’ reputation.

      Like

  2. wattshan · November 11, 2015

    Hi David, I enjoyed reading your post. I am particularly interested in the role of social media to manage issues, both small and large that have the potential to cause reputational damage. We’re at a point now where everyday citizens are becoming journalists, and therefore as soon as something happens it is on social media in a blink of an eye. User-generated content is very difficult for businesses to monitor, control and manage – I think, businesses need to think carefully about their approach to reputational risk online – brands are very vulnerable. I would argue, it’s more about being prepared and having a strategic plan in place, as opposed to concentrating on the time and efforts on ‘risk avoidance’ – because, unfortunately being able to anticipate and control potential risks is growing increasingly difficult.

    Liked by 1 person

    • David_zhou · November 16, 2015

      Thank you, I hope you can enjoy it. I agree with you that In today’s complex situation, companies want to protect their reputation is not a easy thing.
      However, information is easily and rapidly propagated on the Internet both have benefits and drawbacks. Rapidly propagated means that information is easy covered by new information. A large number of information means that information is easy to forget. Therefore, just put something new or do nothing, then public will let it go.

      Like

  3. LauraReport · November 12, 2015

    Hi David, as you mentioned that building reputation need to take a long time and work hard but it is brittle. However, I gradually found out that through media hype also can build reputation and more quickly than before, what do you think?

    Liked by 1 person

    • David_zhou · November 16, 2015

      Yea, I can see that each issue have two sides. Reputation is easy broken it means it easy can build though some methods.
      However, If companies want to quick build their reputation. Maybe they should put more money on build their reputation online, because nowadays public live in information explosion age.

      Like

  4. Shawn · November 15, 2015

    Yes, David. I agree with you that with the fast development of social media, public praise is becoming incredible significant for companies. It becomes much more easy for consumers to comment the products they bought or share their opinions on public. The social media enables word of mouse to spread fast. And the reputation damage is the direct way to cause negative public praise for companies. Although the reputation damage may seldom happen, it is undoubtedly essential for companies to have a reaction team for reputation damage, and prevent the possibility of reputation damage.
    However, with this issue getting hot. A group of people called NAVY (水军in Chinese). They spread set comments and messages on social media to influence public opinion. What do you think about it?

    Like

    • David_zhou · November 16, 2015

      Yea, Thanks Shawn. with increasingly popularity of social media, NAVY maybe become a big problem in internet environments. If consumers realized that information is not trust, they were never believe information in that place. Therefore, companies should pay more attention to quality of information, rather than number of information.

      Like

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