Reputation Rules

Morgan O'Rourke


June 1, 2011

These days it seems like more and more companies are becoming proof that it takes a lifetime to build a reputation and only seconds to destroy it. BP and Toyota immediately spring to mind, but even Johnson & Johnson, a company once lauded for its deft handling of the tainted Tylenol scare in the 1980s, has suffered reputation damage after a string of recent recalls. These incidents underscore the vulnerability of a reputation in today's business world. Social media and the 24-hour news cycle mean that it is increasingly difficult for companies to avoid public scrutiny for any mistake, no matter how small.

Generally, businesses understand the importance of protecting reputation. The problem, however, is that few have developed strategies for doing so effectively. That is where Reputation Rules comes in. Written by Daniel Diermeier, a professor at the Kellogg School of Management at Northwestern University, the book doesn't just discuss the value of reputation and demonstrate the threats. The book also offers unique insight on how reputations are damaged and guidance on how they can be repaired.

For example, by understanding why people trust a company and how societal importance and audience interest combine to increase awareness of an issue, companies can anticipate problems before they happen. And if they do happen, they can then use these factors to their advantage to address the issue. A simple product recall, for instance, might have little societal importance and spark little interest, but if the recall is the result of a fatal accident, importance and interest go up. Failure to then build trust with an effective response to the crisis may result in reputational damage when the company is viewed as unwilling or unable to help on an issue that now has great societal importance and high audience interest.

Reputation is a difficult asset to quantify but its importance cannot be understated -- it can make or break a company. For that reason alone, protecting your reputation should be a top priority for every organization.


Morgan O’Rourke is editor in chief of Risk Management and director of publications for the Risk & Insurance Management Society, Inc. (RIMS)