Corporate reputation management has become a key aspect of managing any company.

With the rise of social media, the level of potential reputational risks has increased.

That’s why it’s imperative to have a corporate reputation management strategy that can both prevent reputational damage and, in case of a reputational incident, handle the situation in the best possible way. 

In this blog post, we will look at what corporate reputation management is, how a corporate reputation can be managed successfully, and how you can implement a reputation management strategy for your organization. Let’s get to it!

What is corporate reputation management?

A definition of corporate reputation management is the practice of influencing how stakeholders perceive an organization. Factors, which can contribute to stakeholders perceiving an organization’s reputation as positive, could be values such as ethical leadership or sustainable practices, and output like high quality products or services. 

Why is corporate reputation management important? 

Corporate reputation management is important for a variety of reasons. A company’s reputation can influence how others perceive it, even if they have never come across it before. If a friend tells you they had a bad experience with a company you do not know of, chances are you are not inclined to do business with it – and vice versa. 

As Warren Buffett once famously stated, “It takes 20 years to build a reputation and five minutes to ruin it”. The fear of reputational risk has only increased among top business people. A survey conducted by consulting company KPMG in 2022 among 1300 CEOs at the world’s largest businesses showed that reputational risk, such as a misalignment with customer or public sentiment, is a top concern among CEOs.

Reputation equals trust, and the market economy is built upon trust. If a company has a great corporate reputation, it can have great benefits. If it’s damaged, the company can lose everything from employees to customers. A reputation can make or break an organization – it all depends on whether it’s good or not. That makes corporate reputation management important for any company. 

Central benefits of a good corporate reputation

To assess the potential benefits of a good corporate reputation, let’s look at stakeholders and how they can be influenced by a good reputation: 

• Employees: A well-regarded company will often find it easier to recruit talented people. If word on the block is that a company is doing great work, for example has great guiding principles and strong brand management, it can be attractive to come work for that company.
• Customers: If a company is reputable, it means that it can be trusted to deliver on its promise. This is attractive for customers. New customers can be more willing to do business with the company while existing customers can turn into lifetime customers if the company keeps on delivering on its promise. 
• Suppliers: A company’s corporate reputation can also influence their supply chain. Suppliers may be more likely to do business with companies that have good corporate reputations. The company may also have more negotiation power that can get them better terms as their reputation unlocks more supplier opportunities.
• Regulators: For regulated companies such as financial institutions, a good relationship to regulators can be imperative. A good corporate reputation may influence regulators to perceive the company as trustworthy and credible, leading to less scrutiny, faster approvals, and a more open dialogue in general. 
• Shareholders: For non-listed companies, a good corporate reputation can be a key selling point in an investor pitch. It can be proof of trust from stakeholders which investors will find attractive, and it may even lead to a higher valuation. For listed companies, a good corporate reputation can often be read directly from the stock price. A good corporate reputation can get companies through economic downturns which is attractive to investors.

Real life examples of good and bad corporate reputation management

Bad corporate reputation management can have vast consequences. That was exemplified by Wells Fargo in 2016 when it came to the public’s knowledge after the bank was fined $185 million that employees at Wells Fargo had created two million fake accounts without consent from clients. 

The scandal started when clients began to notice that they were charged fees and received debit cards they did not recognize. Initially, employees at individual Wells Fargo branches were blamed, but focus later shifted to management who had incentivized sales people to open as many accounts as possible. Some of the sales targets were ‘extremely aggressive and even mathematically impossible’, according to the Vanity Fair. 

Wells Fargo defended themselves by stating that the responsible employees comprised just 1% of the company’s total workforce. The market saw this as management running away from their responsibility, and shortly after Wells Fargo reported that its new bank account openings had dropped 44% year-over-year. 

The scandal became a case study in how not to react to a controversy. It resulted in a massive blow to Wells Fargo’s corporate reputation, CEO John Stumpf resigned, and the bank was hit with lawsuits totaling more than $3 billion that are still affecting them to this day.

How to come back from reputational damage

Incidents like the Tylenol scandal taught companies and professionals how to deal with reputational damage, and that it is possible to come back from seemingly irreparable damage with proper corporate reputation management – or simply good behavior.  

No matter how much a company invests in corporate reputation management, there will always be a level of reputational risk. A often cited reputation recovery framework is the Trust Radar found in Daniel Diermeier book, Reputation Rules. It consists of four axes which serve as guidelines to helping companies restore their corporate reputation in case of a PR crisis.

Online corporate reputation management

Back when Johnson & Johnson swiftly reacted to the Tylenol scandal, incidents were geographically limited, and communication flowed through traditional media. In today’s digital world, managing corporate reputations online is becoming increasingly important. 

Criticism can come from anywhere in the world, and even if the incident is happening locally, companies can face criticism globally. This can evolve to a PR crisis that in the worst case scenario can turn into boycotts with massive loss of revenue as a result.

Social media plays a key role in managing corporate reputations online. However, other digital town squares such as news and review sites are also important places for a company to be present in order to manage its corporate reputation.

How to ensure good online corporate reputation management

1. Monitor sources of reputational risk
   
   By monitoring social media, news and review sites where criticism towards your company can arise, you can identify potential reputational threats before they create a ripple effect and turn into scandals. It may sound like an impossible task to monitor all these sources, but you’re in luck – there’s a range of software services such as Google Alerts that monitor the web and alerts you of any mentions of your company so you can act on it in a timely manner.
2. Face the criticism
   
   It’s not a recommendable online corporate reputation management strategy to go into hiding if a bad review pops up on Trustpilot or criticism towards your company starts trending on social media. According to research by InMoment, up to 94% of respondents say a negative review or social media comment has convinced them to avoid a company. If such a review or comment is left unanswered, it could lead to loss of revenue.
   
   Instead, respond to the user and initiate a dialogue to show that you are aware of the criticism. This can deescalate the situation as it demonstrates that you are aware of the problem and work on fixing it. It may even be perceived as a responsible move which could convince potential customers to buy from you despite the bad review. 
3. Use reactions and reviews to your advantage
   
   Positive reviews and reactions can be some of the best pieces of marketing material a company can dream of. This can be used for social media posts, as testimonials on a website, or elsewhere as social proof. This is quite obvious. What is less obvious is that negative reactions can also be used to your advantage.
   
   Companies like Oatly have taken this to its extreme by making a dedicated website to everyone who hates their company. Less bold companies can also make use of negative feedback for internal training and as valuable learnings for making corrective changes in order to strengthen the protection of the company’s reputation.

Corporate reputation management services

There’s a wide suite of tools available for different domains of online corporate reputation management.  

Start protecting your reputation – get onboarded with Templafy

Corporate reputations are one of the most valuable assets a company can have, and managing it is only increasing in importance. The sooner you get started enhancing your brand and ensuring compliance, the more your reputational risks will decrease. Book a demo today and let Templafy help you protect your corporate reputation!