The key measure of reputation risk is the gap between stakeholders' expectations and reality

For a skill we are taught from pretty much the moment we can talk, the ability to apologise continues to trouble companies as much as a four-year-old who doesn't really regret pulling their sibling's hair.

Is there a gap between stakeholder expectation and reality at your organisation, asks Chris Scott
Is there a gap between stakeholder expectation and reality at your organisation, asks Chris Scott

Business leaders have at least learned in recent times the perils of being drawn into the trap of the litigation-conscious, admit-nothing forms of words that aggravate rather than calm an issue.

And they have veered away from what Lauren Bloom coined in The Art of the Apology the "if apology": "Mistakes were made in an incident concerning your pigtails, and if you suffered any discomfort that is a cause for regret".

That business leaders have taken a lead on more empathetic forms of addressing concerns is a promising start.

But, just as with our entirely fictional four-year-old, the apology means nothing if you go out and do the same thing again a few days later.

So to TSB and British Airways, whose latest round of apologies for IT-themed problems has reopened old wounds with customers and other stakeholders for whom the regrets have been coming rather too frequently in recent years.

In the case of Paul Pester at TSB, he has felt it necessary to take ultimate responsibility for the failings and pay with his job, as the number of apologies issued by the bank soared to seven. 

In that statistic is a hint to where rebuilding a corporate reputation after a serious incident lies.

Typically when trouble hits – especially of the technology kind – the urgent priorities are to figure out what is happening, why it is happening and lessen the impact (in these cases, the impact on customers).

As BA will be rapidly progressing through, they often cannot communicate a great deal concerning a cyber-breach until they find out exactly what has been lost and how – not an easy process at all.

Around this time the communication of the apology begins.

Businesses and their lawyers will be wary of admitting responsibility for any failings or wrongdoing – not least in early stages where they are not entirely sure of the scope of the problem – but it is now widely accepted that it is possible to apologise in a human way without impacting litigation (which usually follows anyway).

It is what happens after this, though, that defines how the reputation of a business will be impacted long term.

Simply saying the right things and warding off criticism is no longer good enough.

It is commonly accepted from the Harvard Business Review to countless others that a key measure of reputation risk is the gap between stakeholders’ expectations and reality.

It is this logical gap that best explains the travails of Lloyds TSB. Banking customers expect their money to be safe, their data to be safe and to be able to carry out banking activities.

When the bank falls short of that there is an enormous reputation hit.

When the bank starts communicating that things are on the mend and it is business as usual, customers’ expectations rise again.

If the reality still fails to match that, the reputation risk recurs and the prospects of expectations being raised again in the future diminish – an entity will lose the reputation it relies on to prosper.

Of course the customers are not the sole stakeholders, and the management may lose their reputation with stakeholders in the City of being able to remedy the problem and rebuild.

There rises the point where only radical change can help rebuild expectations; for Mr Pester, falling on his sword.

Or to go back to our first example, the four-year-old is sent out of the room because you can’t trust him not to pull hair again.

The lesson from this is a disarmingly simple one.

Adeptly managing your public image in the aftermath of a serious issue will mitigate impact and help rebuild trust and expectations, but if that is not matched with dealing with the substance of the underlying problem, there will continue to be an unacceptable risk of problems recurring far worse than before – with a far more devastating impact.

Apologising may smooth things over when trouble hits, but without substantive change will not be enough in the long term.

Chris Scott is the founder of reputation and privacy law firm Himsworth Scott

Thumbnail image: ©ThinkstockPhotos

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