|
"It is impossible for ideas to
compete in the marketplace if no forum for
their presentation is provided or available."
Thomas Mann, 1896
The Business Forum
Journal
Managing
Reputational Risk: Some Observances
By Henry
H. Goldman
"Reputation is a collection of perceptions and
beliefs, both past and present, which reside in the consciousness of
an organization's stakeholders -- its customers, suppliers, business
partners, employees, investors, analysts . . . and the public at
large." Jenny Raynor, Managing Reputational Risk, 2003
A number of recent incidents involving
reputational risk have occurred showing the need for
strict observance of managing a firm's reputation. Most companies
spend a great deal of time trying to understand their company's
penchant for risk in terms of financial exposure, market pressures,
new product development, etc. Few companies spend much time
analyzing their vulnerabilities to the firms' reputations. These
recent incidents are microcosms of problems suffered by failures of
firms like Enron, Bank of New York, Arthur Andersen, etc.
Most might have been avoided if all employees had been trained in
reputational risk, had understood how their actions might impact
their companies' abilities to earn profits and to have empathy for
both customers and their fellow stakeholders. Each incident tells a
story and provides fertile grounds for firms to utilize
Reputational Risk Management as a part of their regular
in-house management training programs.
Incident #1: The
Fast Food Restaurant
A franchised outlet of a well known fast food
company is located adjacent to a community college with a heavy
evening student population. The school is located on the cusp of
the local Asian and Hispanic communities. The restaurant
furnishes fast meal service to students, faculty and
administration.
One evening, the manager was away and the
serving staff decided to have some fun by speaking only Mandarin
to the customers. When customers made attempts to order their
food in English, they were either turned away or ignored by the
"non-English speaking" staff. The young men and women working
there had a great time, but the immediate and, as it turned out,
permanent loss of business to a similar establishment one mile
down the road, caused the franchise to be sold, at a significant
loss.
Of course, the franchise holder had no reason
to think that his staff would suddenly refuse to speak English,
but a short training program on how to offer the best in
customer service might have swayed the servers to do their jobs
as they were taught and not to demonstrate their linguistic
abilities.
Incident #2: The Clothing Store
A local branch of a well known off-price
clothing store offered a sale on bras. A wife asked her husband
to stop at the shop before beginning the evening shift as a
police officer in that community. The store was not far from the
city's civic center where the police department's headquarters
were located. The police officer, in uniform, called at the
shop, located the sales items that his wife wanted and carried
his desired purchases to the closest available cashier. When he
was next in line to pay for his goods, the cashier noticed that
one of her friends was in line behind the officer. She moved the
officer's intended purchased to one side and, ignoring the
policeman, proceeded to ring up her friend's goods. The officer
pointed out that he was next to be served, but the cashier
announced that she was going to assist her friend before she
waited on the police officer. The officer pointed out that he
was due at work shortly, and asked to meet with the cashier's
supervisor. The supervisor arrived after being paged, heard the
officer's story and proclaimed, "Oh, I can't deal with that,
right now!" and departed.
The police officer left his merchandise on
the counter, left the store and went on to work. There he called
his wife, explained why he had not made the purchase and
complained to her about the cashier's and her supervisor's lack
of customer service. Both the police officer and his wife
mentioned the incident to several of their friends. There
subsequently resulted a sharp dip in sales that can be
attributed to poor or non existent customer service.
Not only was there a drop in sales, but the
outlet's reputation was damaged; none of the city's police force
nor their spouses would shop there again. Poor customer service
is one of the quickest ways to ruin a company's reputation.
Here again, is an example of how better
customer service training might have helped to sell merchandise,
but to also keep a high reputation among the firm's
stakeholders.
Incident #3: The Errant Teacher
The administration of the private parochial
school was severely shaken when it was reported that one of
their long term teachers had had an affair with one of his
female students. The police were already on the scene and the
teacher was on the lam.
The school is built around good values. The
heads of administration knew that, in order to safeguard the
school's reputation, it was important to be open with both the
law enforcement officers and with the news media, as well as the
school community.
The headmaster and his staff worked
diligently to choose the right words and the best ways to
approach the problem. The staff was interviewed by the press and
TV reporters, letters were written to parents and to community
leaders. Meetings were scheduled with older students and the
issues were met head on.
The episode was heart-breaking for all the
leaders and teachers of the school, and that pain came through
in the news reports. The public saw the situation as it was -- a
rogue teacher had done a terrible thing and the school moved
immediately to deal with it and to explain once it had become
known. All of the school's stakeholders were advised of the
situation. The school's values resonated loudly and clearly; its
reputation was not damaged.
This incident, while tragic, might have been
avoided if the school's administration had performed either a
vulnerability analysis or a SWOT, and, therefore recognized the
reputational risk of teachers having affairs with students.
Incident #4: The Teaching Hospital
A small but prestigious medical college was
quite concerned about its reputation when it was discovered that
some cadavers in the school's willed-body program had been
mishandled. Apparently not every body or every body part was
where it was supposed to be.
In a word, the situation was ugly. The news
media were enjoying themselves when writing about the problem
and the TV reporters were having a field day. Local comedians
were also using the school as a butt for their jokes. The story
could have had very negative consequences for the school's
reputation. The medical school notified law enforcement agents
of the situation cleaned up the program and answered every
question asked by the media and by the investigators.
This incident is very much like the one about
the fast food restaurant. As it turned out, some of the medical
students themselves were moving the body parts around. It was
their joke. Like the servers in the restaurant, the medical
students were having fun at the school's expense. It was handled
professionally and required the use of a crisis consultant, but,
in the end, no damage was done to the school's reputation. A
small number of students were expelled and the new student
orientation program was modified to make certain that these
kinds of games would not be played in the future.
The incidents related here are only the scrapings
of the skin. Many more such events take place every day. In most,
but not all, cases using one of the vulnerability exercises might
have shown these organizations where risks to their reputations lay.
That would have permitted making decisions in advance rather than
after the fact. Remember, it's always easier to close the barn doors
after the horses have been stolen.
These stories also suggest that organizations,
world-wide, both for and not-for-profit can benefit from
reputational risk management training, of which little is currently
being done.
Henry H. Goldman
is
a Fellow of The Business Forum Institute and
is the Managing Director of the Goldman Nelson Group. Henry got
his Masters Degree at the University of Iowa and did his Doctoral
Studies at the University of Southern California. He is a
Certified Professional Consultant to Management (CPCM); and has
published numerous articles in trade journals and was Associate
Editor of Taking Stock: A Survey on the Practice and Future of
Change Management (Berlin, Germany). He is a member of the
American Society for Training and Development (ASTD); Association of
Professional Consultants (APC) and the Institute of Management
Consultants (IMC). Henry has consulted and/or offered training in
South Africa, Tanzania, China, Hong Kong, Indonesia, Macau,
Malaysia, Philippines, Singapore, Barbados, Georgia, Kosovo,
Tajikistan, Turkey, Saudi Arabia, the United Arab Emirates and of
course North America. He has also taught at Baker University:
Lee’s Summit, MO, 2008, Adjunct Professor of International Business;
National Graduate School: Falmouth, MA, 2004-2008, Adjunct Professor
of Quality Management; California State University: Fullerton,
2005-2006, Lecturer on Taxation; University of California: Berkeley,
2002, Adjunct Professor of Management; University of Macau (China),
Adjunct Professor of Management, 2001-2003.
Visit the Authors Web Site
http://www.goldman-nelson.com
Return to
The Business
Forum Journal
 Search
Our Site
Search the ENTIRE Business
Forum site. Search includes the Business
Forum Library, The Business Forum Journal and the Calendar Pages.
Editorial Policy: Nothing you read in
The Business Forum Journal
should ever be construed to
be the opinion of, statements condoned by, or advice
from, The Business Forum, its staff, workers, officers, members, directors, sponsors or shareholders. We pass no opinion whatsoever on the content
of what we publish, nor do we accept any responsibility for the claims, or
any of the statements made, within anything published herein. We merely
aim to provide an academic forum and an information sourcing vehicle for
the benefit of the business and the academic communities of the Pacific States of America
and the World.
Therefore, readers must always determine for themselves where the statistics, comments, statements and
advice that are published herein are gained from and act, or not act, upon such entirely and always at their own risk. We
accept absolutely no liability whatsoever, nor take any responsibility for
what anyone does, or does not do, based upon what is published herein, or
information gained through the use of links to other web sites included
herein. Please refer to our:
legal
disclaimer
Home
Calendar The Business Forum Journal
Features
Concept
History
Library
Formats
Guest Testimonials
Client Testimonials
Search
News Wire
Why Sponsor
Tell-A-Friend
Join
Experts
Contact The Business Forum
The Business Forum
Beverly Hills, California United States of America
Email:
[email protected]
Graphics by
DawsonDesign
Webmaster:
bruceclay.com
©
Copyright The Business Forum Institute 1982 - 2010 All rights reserved.
|
