The financial and economic crisis has seriously eroded the trust people feel for business generally and specific corporations – and companies need a concerted, sophisticated effort to repair the damage – three McKinsey & Co. consultants write in “Rebuilding Corporate Reputations” in the firm’s June 2009 newsletter.
Today is an especially tough environment for corporate reputations, the consultants say. The onslaught of online participatory media, scrutiny from nongovernmental organizations, and waning trust for advertising make it harder to be believed. And all this comes at the same time that policy makers are eager to make an example of corporate executives and impose new laws and regulations on their industries.
Old-line PR tactics will no longer work in this environment, the authors say:
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.
A company fighting for its reputation must marshal a coordinated cross-functional response including investor relations, communications, marketing, legal and regulatory, and corporate social responsibility, the consultants write (OK, OK, they mention IR last). And reputation management must begin at the top:
… it’s the CEO who must lead a company’s overall reputation strategy, ideally with the support of a board committee focused on it. This may seem like a lot of firepower, but in today’s climate, with reputational issues threatening both shareholders and a company’s ability to achieve broader goals, that degree of high-level attention and integration is essential.
Investor relations professionals should be big-picture people, and the intersection of reputation, industry standing in the public policy arena and shareholder value is ample reason for IR to join in the effort to understand and build reputations.