Why and how growing businesses should think about risks to their reputation
Every day the newspapers are full of negative stories about large companies – a fraud scandal there, a product recall here. What many small and medium sized businesses don’t realise is that they are just as vulnerable to reputational damage as larger businesses.
Reputational damage doesn’t just mean bad press. A rumour circulating on social media, or via email, or between contacts in the pub, can all pose a significant threat. The net result is the same: prospective business looks elsewhere while existing clients lose faith, and may leave. Put simply, reputation affects the bottom line.
A growing business is particularly vulnerable to the reputational risks associated with expansion. Growth is key to the long-term success of a business but if growth is fast, there can be teething problems as management plays catch-up with the scale of expansion. Smaller businesses are also less likely to have the resources and knowledge to deal with reputational issues.
Let’s take a look at classic reputational risk areas that businesses can face as they grow.
As a company expands, it can be harder to keep track of quality control. Be wary of watering your product or service down, either strategically or inadvertently. In particular, make sure you do not turn your back on your long term clients, who could go public with their grievances. It can take years for a business to build up its relationship with existing clients but hours for all that hard work to be damaged.
Alternatively, the end of the relationship may have nothing to do with your service or product. In the aftermath of the horsemeat scandal the MD of Cornish food manufacturers Ginster’s was quoted in the press as saying that their sales had dropped 10-15%, even though they themselves had no horsemeat issues. They were the innocent victims of a wider loss of consumer confidence.
A growing business is sooner or later going to need to take on more employees. However, taking on more employees means a greater management burden. Most obviously, employees need to have proper training to ensure that they are able to communicate appropriately and be a good ambassador for the business. But, in more extreme cases, a rogue employee can attract a great deal of publicity for poorly judged or even criminal, behaviour.
Think about ways that your business can make a positive impact on the wider community (social, environmental, economic and political) as it grows. This might be as simple as ensuring your business is eco-friendly as it can be, or it might involve active engagement with local residents and public authorities on projects, or to ensure that your goals are aligned.
Whatever your weak spots are, deal with them before they start to cause problems for your balance sheet. Smart businesses carry out stakeholder mapping exercises to establish areas where their reputation might be vulnerable. Where necessary you should consider seeking expert advice in planning for these eventualities. You may want to have a protocol in place to manage media enquiries or to have press releases prepared in advance.
Being prepared is particularly important in the age of social media. What starts as an online rumour can quickly spiral out of control on Twitter and other sites, as many companies (and individuals) have found to their peril. In this context, an efficient and rapid response that reaches all relevant stakeholders is essential to minimise reputational damage.
Finally, don’t forget to put mechanisms in place to monitor your reputation after the crisis or incident hits. If you haven’t already been doing so, set up media-monitoring systems and talk to your stakeholders. Only in this way will you be able to evaluate the success of your efforts and avoid similar problems in future.