The true value of business communications is well-known for being tough to measure, especially in the flinty eyes of accountants who expect to see a clear Return on Investment for their PR spend. But if the goal of your communications is to boost or protect reputation, how do you attach a financial figure to that?
Well, for UK-listed companies alone reputation is worth £1.7 trillion. That’s according to research by BDO LLP and the Quoted Companies Alliance. They spoke directly to businesses and asked them how much they thought their reputation was worth. Based on the impact on sales, share price and employee morale, it found small and mid-cap businesses attach 28 per cent of their value directly to reputation. This compares with the 2015 UK Reputation Dividend Report, which indicated that 30 per cent of the market value of the FTSE 100 is attributable to reputation.
When thinking about reputation meltdown and its impact on business value, a recent example that comes to mind is that of Volkswagen. The company lost about a third of its value (35 per cent) in just two days following what the media imaginatively called ‘dieselgate’. That’s approximately €25bn.
Of course the threat of large scale fines, costly vehicle recalls, private settlements and the shredding of trust and integrity all play a part in damaging the company’s worth. But a huge part is also the impact on VW’s future sales. One study says that for a company involved in fraud, the financial punishment imposed by the market (this means reduced future sales) is 7.5 times greater than the legal penalties they receive.
So, in answer to the initial question, can you put a price on reputation, I guess you can. Time to ask yourself what losing 28-35 per cent of your business would mean for you and your employees.
While you think on that, here are some tips for protecting that valuable reputation:
- Have a crisis management plan in place.
When the proverbial does hit the fan, having a plan already in place will help you minimise any impact. In fact, dealing with a crisis well can actually improve a business’ public standing. Try treating the situation as an opportunity. A crisis badly handled can severely damage the financial, operational as well as reputational viability of a business. A crisis well managed can actually enhance its reputation.
- Build and boost your reputation on a continuing basis.
Share good news stories and CSR initiatives so that people know the good work your business does. This may determine how people react when a crisis does hit your company. It will also help you develop strong relationships within the media that could become handy when you have not-so good news to share.
- Be first, fast and frank.
You can’t always prevent a crisis hitting. But you do have some control over how the media covers the story. Being the first to publically announce it, rather than an unhappy customer, journalist or whistle blower, can help you set the tone. Of course, you also need to be frank and honest. It won’t make a difference being the first to announce the news if you’re found to be dishonest later down the line.
For a final thought, and as our chief executive likes to say, reputation is hard-earned and quickly lost. Be sure to look after it.
Acceleris recently won the ‘Issues and Reputation Management’ trophy at the prestigious European Communications Excellence awards. It is the second time the agency has scooped the award, winning it last in December 2013.