Rebuilding corporate reputations - The McKinsey Quarterly - Rebuilding corporate reputation - Strategy - Strategy in Practice

Rebuilding corporate reputations - The McKinsey Quarterly - Rebuilding corporate reputation - Strategy - Strategy in Practice

Excerpts:

A perfect storm has hit the standing of big business. Companies must step up their reputation-management efforts in response.

JUNE 2009 • Sheila Bonini, David Court, and Alberto Marchi
Source: Strategy Practice

As governments respond to the financial crisis and its reverberations in the real economy, a company’s reputation has begun to matter more now than it has in decades. Companies and industries with reputation problems are more likely to incur the wrath of legislators, regulators, and the public. What’s more, the credibility of the private sector will influence its ability to weigh in on contentious issues, such as protectionism, that have serious implications for the global economy’s future.

Senior executives are acutely aware of how serious today’s reputational challenge is. Most recognize the perception that some companies in certain sectors (particularly financial services) have violated their social contract with consumers, shareholders, regulators, and taxpayers. They also know that this perception seems to have spilled over to business more broadly. In a March 2009 McKinsey Quarterly survey of senior executives around the world, 85 and 72 percent of them, respectively, said that public trust in business and commitment to free markets had deteriorated.1 According to the 2009 Edelman Trust Barometer, those executives are reading the public mind correctly: 62 percent of respondents, across 20 countries, say that they “trust corporations less now than they did a year ago.”

The breadth and depth of today’s reputational challenge is a consequence not just of the speed, severity, and unexpectedness of recent economic events but also of underlying shifts in the reputation environment that have been under way for some time. Those changes include the growing importance of Web-based participatory media, the increasing significance of nongovernmental organizations (NGOs) and other third parties, and declining trust in advertising. Together, these forces are promoting wider, faster scrutiny of companies and rendering traditional public-relations tools less effective in addressing reputational challenges.

Now more than ever, it will be action—not spin—that builds strong reputations. Organizations need to enhance their listening skills so that they are sufficiently aware of emerging issues; to reinvigorate their understanding of, and relationships with, critical stakeholders; and to go beyond traditional PR by activating a network of supporters who can influence key constituencies. Doing so effectively means stepping up both the sophistication and the internal coordination of reputation efforts. Some companies, for example, not only use cutting-edge attitudinal-segmentation techniques to better understand the concerns of stakeholders but also mobilize cross-functional teams to gather intelligence and respond quickly to far-flung reputational threats.

One key to cutting through organizational barriers that might impede such efforts is committed senior leadership, including leadership from CEOs, who have an opportunity in today’s charged environment to differentiate their companies by demonstrating real statesmanship. The stakes demand it; an energized public will expect nothing else. At a moment when capitalism seems flat on its back, CEOs have an obligation to bolster the reputations of their companies and of free markets.

Read Full Article: http://www.mckinseyquarterly.com/Strategy/Strategy_in_Practice/Rebuilding_corporate_reputations_2367
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This posting was made my Jim Jacobs, President & CEO of Jacobs Executive Advisors. Jim also serves as Leader of Jacobs Advisors' Insurance Practice.