Three ways a brand rebuilds a damaged reputation

Insight

The Royal Commission has tarnished if not burned some reputations and now starts the slow path to reputation recovery. Reputation can be rebuilt but there is a right way and a wrong way to do it.

Arguing it is OK to charge the dead insurance premiums is definitely the wrong way to go about it. So too is the questionable decision by some financial services brands to come out swinging against the Commission, the Commissioner or some of the lawyers acting for the Commission.

Even while there may be instances where complaints did not point to systemic failings, there is absolutely nothing to gain by prolonging coverage of a few wrongdoings – the reputation risk is just too high, particularly in the current context of a massive trust deficit. 

In his excellent paper ‘Trust and reputation in the age of globalisation’ Mark Eisenegger says: “Doubts about functional competence can be dispelled by demonstrating fresh success. Perceived moral deficiencies, on the other hand, have a longer-lasting effect on reputation, and can usually only be remedied with radical measures – such as publicly admitting fault.”

Matt Comyn, CEO of Commonwealth Bank of Australia took a big step towards this in his opening statement to a parliamentary committee in Canberra recently when he said: “Our customers and the community rightly expect that we always do the right thing. But we have seen far too many instances of unacceptable customer outcomes. As the Royal Commission hearings have shown, there have been failures of judgement, failures of process, failures of leadership and, in some instances, greed. We became complacent.”

Andrew Thorburn, CEO of National Australia Bank did the same when he first admitted he got his comments wrong about the Royal Commission in the first instance then said: “In so many cases, we have not had the care and respect for our customers that we should have and for that I am sorry.”

It’s a great start, but how do companies go about rebuilding their reputations and trust after a crisis? Eisenegger posits three things:

1. First, brands need to again prove their competence and demonstrate success in line with this. This is what Eisenegger refers to as “functional reputation” i.e. all things related to fact-based logic and performance goals such as profits. Reputational success or failure of this nature is measured by figures that can be objectively verified.

It’s interesting to observe how many people following a crisis focus solely on this measurement. For those with a vested interest i.e. employees, the executive, the board, shareholders, etc. it’s perfectly natural because they are looking for anything to align with their confirmation bias for them to be able to say “don’t worry it hasn’t really dented our results and our share price is already recovering.”

2. Second, brands need to prove themselves in the social world of the good i.e. social reputation and whether the brand is acting responsibly and in line with social norms and values. This is often the most difficult because of the gap between what is legal and what is socially acceptable. In the banks’ case they lost touch the needs of their customers and what was socially acceptable in terms of how the banks operated and treated them. Certainly in CBA’s case Matt Comyn said as much.

Unfortunately for many of these brands, the loss of reputation in the social world is a lot more difficult to dispel than loss of reputation in the objective world. A case in point is how much easier it is to dispel doubts about functional competence by demonstrating, for example, a good set of financial results.

In Eisenegger’s words: “Perceived moral deficiencies, on the other hand, have a longer-lasting effect on reputation, and can usually only be remedied with radical measures – such as publicly admitting fault.

3. Third is something Eisenegger calls “an expressive reputation” i.e. a brand’s reputation is judged according to “the emotional attractiveness of their individual character and according to how unique they appear.” Eisenegger says brands “with a positive expressive reputation appear fascinating, sympathetic and unique.”

Going on Eisenegger’s research is a good starting point for those brands whose reputations have taken a hit post the Royal Commission is instead of employing the ‘we’re doing good by the community TV’ adverts, they should start by admitting fault. Then rapidly move to benchmarking the attitudes and perceptions of critical stakeholder groups. And only then, with the benefit of these insights, can they start making meaningful change.

After all, if you want to make changes which resonate with your stakeholders you need to listen to their concerns in the first place.

Finally, successful reputation recovery in a post Royal Commission world depends on actions matching words. As Eisenegger says: “…trust is based on the experience that an agent has fulfilled our expectations in the past. And trust creates confidence that that agent will also fulfil our expectations in the future. For this reason, trust cements existing relations and at the same time acts as a magnet for future relations.”

The road to reputation recovery will be long and arduous for many. Hats off to Matt Comyn for starting the process. It will be interesting to watch what follows from others tarred with the same brush.