A Bad Reputation is Expensive…Very Expensive

Reputation Management has long been the PR Industry’s term for corporate communications campaigns designed to shape a company’s public’s opinion to as positive as possible. In the online world, reputation management services seek to suppress the negative and elevate and amplify the positive references that you’ll find on the top pages of a Google search. It sounds “spinny” and manipulative. Done well, it’s not. Done poorly, it eventually backfires.

A good reputation is a strategic advantage for companies, institutions, individuals, governments. Simply put a good reputation attracts people and partners and makes transacting in the world easier and less expensive. In a world full of trolls who wield enormous influence with their negative comments and attacks (don’t even get me started on the whole Russia buying Facebook ads to influence the 2016 election) active reputation management is critical for every company, and indeed, every person.

(If we assume that 99% of people are NOT trolls – One who Urban Dictionary defines as a person who “posts a deliberately provocative message to a newsgroup or message board with the intention of causing maximum disruption and argument,” that still leaves us with about 2.6 million trolls in the US and 32 million trolls worldwide.)

The best good reputations are earned with good action and intention. Doing the right thing, causing no harm, rectifying wrongs quickly, pursuing “better,” and creating “good” are all part of the good reputation ecosystem. More on that in the future.

Conversely, a bad reputation is expensive…very expensive.

5 Different Ways A Bad Reputation Cost

One. Bad reputations increase recruiting costs by $4,723 per hire…and that’s if you can convince people to look at a job.

Two.  Bad reputations decrease your potential talent pool by almost 50% — and not even a third of the people willing to look at these jobs would consider taking the position with a 10% bump in compensation for new hires. Read more here.

Three.  The best people – good leaders, people who work well in teams, high performers – do not choose to work with companies with bad reputations. I may have have written a book about that. So you’re dealing with a lower average performance per person, which in turn has its own myriad costs.

Four. Bad reputations severely limit business opportunity. 

Uber continues to provide a living case study in this truth.

Last Friday, the City of London announced that it will not renew Uber’s operating license, saying the company is not “fit and proper” to operate in the City. While I’m sure the City’s famous taxi cab alliance pushed for this move, the City referenced Uber’s  “approach to reporting serious criminal offenses, and the way it explained its use of software that prevents regulators and law enforcement from monitoring the app” as main reasons for its decision. Uber London’s initial reaction was what we’ve come to expect from the company. And then new CEO Dara Khosrowshahi, stepped in with a more conciliatory approach to negotiations.

Time will tell if he is able to help Uber regain its footing in one of its biggest markets. Meanwhile, influential media has a great story to draft off of to expose more of Uber’s missteps that have contributed to its reputation.

Importantly, Khosrowshahi immediately set a new tone for the company going forward in his letter to Uber employees, telling them “there’s a high cost to a bad reputation” and reinforcing a new operating mode going forward. You can the letter and Recode’s take on it here.

The tremendous human hours required for negotiations up to London’s decision, and now the legal costs and more human hours in appealing the decision, plus the hours and costs of managing the worldwide media coverage of this action and reaction will go into the millions. Millions of dollars that could have been spent moving forward instead of fighting to retain the status quo.

Meanwhile, Lyft moves forward, capitalizing on Uber’s reputation.

Five.  Decrease in business. The cost of retaining a customer is far less than losing a customer. The cost of regaining a customer is far less than getting a new customer.

After Susan Fowler’s revelation of her experience working at the company, I stopped reimbursing for Uber rides for company transportation. My company is small, the impact is a rounding error of a rounding error, but based on the corroborated situation, I could not have my company use Uber’s service and maintain integrity to our values. I know my company is not alone. The overall impact of many rounding errors is dealing a blow. And while it may still look like a rounding error, that rounding error is indicative of many, expensive issues at the company.

And the company’s value keeps dropping.

It’s Not a PR Problem. A Bad Reputation is a leadership problem.

Bad reputations are often blamed on “bad PR.”

Hell no.

While bad reputations aren’t helped by incompetent communications practitioners, bad press is a leadership problem — a leadership problem that yields a culture which behaves in a way that begets negative reaction.

Take United. Is there anyone over 5 years old who hasn’t seen the video of name being dragged off of a Louisville-bound United plane at Chicago’s O’Hare airport? Anyone? Bueller? And then United’s president’s initial response where he didn’t apologize to the man, but did to the other passengers for the delayed flight. Read here and here if you were in a monastic, device-free, news-free retreat for the last six months.

“It’s a PR problem,” I heard over and over again.

No.

To call this issue a PR problem is to suggest that a well written statement will make this type of thing go away. It doesn’t work that way. The procedures United had in place had not been updated in years, were not well understood, and even more poorly communicated to the passengers on that flight. That a customer who has already paid for a flight he is already seated on could be removed for an operational issue of not having personnel where they needed them is outrageous.

Operations trumping customers in the age of the camera-enabled cell phones is decidedly bad, expensive business. While it’s true that United has rectified many procedures, and that its stock has “recovered” from the incident, stock price and dividend is not a true indication of cost. What could have United delivered if the company hadn’t spent countless, round-the-clock hours managin

g this situation? We’ll never know. The cost of a systemic overhaul that takes place in response to an issue versus well planned for efficient transition is impossible to measure. As a stockholder, I’d like those extra pennies for each share though.

A bad reputation is generally well earned. Recovering from a bad reputation usually means an overhaul of culture, behavior, standards along with higher compensation…to get to a good reputation.

Wouldn’t it just be easier and very much less expensive to start with doing everything we need to earn a good reputation?

That’s not rhetorical. The answer is yes.