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By Jeremy Sampson

29 April 2010, Business Report - It was William Shakespeare who said: "The purest treasure mortal times afford is a spotless reputation." Sounds like common sense to me, so why are there so many examples of companies and people who totally disregard the importance of creating and maintaining a strong, positive reputation?

It's been known for many years (Harvard Business Review, April 1985) that word of mouth, or as they call it "one-to-one conversation", is the most potent form of communication (see chart).

Fast-forward to today and it is even more important. After all, we no longer have to physically meet to have a conversation. The use of a phone, cellphone, texting, skype, e-mails, tweets and all of the social media can really be lumped together as one-to-one. And often what seems like a private one-to-one conversation, is in reality carried out in the public domain. Actions that appear to have happened in total privacy increasingly pop up in public, sometimes much to people's embarrassment.

What happened in Las Vegas no longer stays in Las Vegas, it is global. Any journalist will tell you "off the record" no longer applies and social commentators will tell you the word "privacy" has been withdrawn from use.

South African politicians seem particularly naive, ignorant and uncaring of the damage they do to the country's reputation by their utterances and actions.

As the great US investor Warren Buffett puts it: "It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you do things differently."

We currently have many examples of issues that relate to reputation. And it is worth recalling that reputation and perception colours everything we think about.

Just to list a few recent examples:

• Julius Malema, who through his words and actions, makes the ANC look like a leaderless anarchistic rabble. Worse, his actions harm the reputation of South Africa, all its citizens and is a reason not to visit or invest in the country.
• Chief Rabbi Warren Goldstein telling Judge Richard Goldstone, one of the world's most respected legal minds, that he doesn't know how to do his job either factually or morally. As well as some other unmentionables.
• Fifa, through its draconian approach to business, failing to connect with the hearts and minds of most of South Africa. Look outside South Africa and there are lots of marketing activity relating to football, creating a huge vibe and much engagement. The official sponsors might have the local stage to themselves, but it is minuscule in relation to the world stage.
• Hitachi, the Japanese conglomerate that on its website makes no mention of Africa, and locally claims to have business relationships with a company whose backgrounds and roots it failed to check. No mention either who the directors are, the people who should take fiduciary responsibility for this debacle.
• It's all very well in saying "we carried out a due diligence" - as in the case of Hitachi - but who did it, what were their credentials, what were their terms of reference, et cetera?

From personal experience I know that many due diligences are solely one-dimensional, focussing for example only on the financial aspect. That can be a great mistake, as appears to apply in this case of Hitachi and Chancellor House.

How do you spell the word naivete? Any due diligence today should in addition to financial matters include a review of legal aspects, intellectual property, future prospects, et cetera. The corporation brand or brands are invariably the most valuable assets a company may own, so it is axiomatic that these assets should be protected and invested in to maximum effect.

The Institute of Directors' King 3 report stresses the importance of directors protecting the major assets of companies whose main boards they sit on.

Those main assets are invariably brands (trademarks to some) and reputational issues. The competency of some directors to handle these new issues is another challenge.

One of the side effects in the business of the recessionary times of the past 18 months, and especially the response to the avarice of much of the global ranking community, is a return to the value of "trust".

Following the debacle at Enron, the value of "integrity" came back into fashion, but now it is coupled with trust. Some might call them old-fashioned values, that they remain pillars of strong society.

Global communications leader Hill & Knowlton lists the top two events that can do most harm to a reputation:

• Criticism of the companies or its products in print or broadcast media, and
• Unethical corporate behaviour.

Neutralising and countering negative and adverse comment is not easy. But it is necessary before the negative comments become established as fact. Today, with so many communication channels opening up, it is crucial to attempt to manage and monitor all of them, as collectively they create the perception.

South Africa is not electronically isolated, it is part of the world.

We can all boycott companies and their products we don't like, or we don't wish to be associated with. We can all influence colleagues and friends.

And companies looking for funding from such bodies as the World Bank are now evaluated as global citizens - something Eskom seemed taken aback at. They should not have been.

The power and importance of reputation should not be underestimated. Luckily, reputation management is alive and well in South Africa.

Jeremy Sampson is the group executive chairman of Interbrand Sampson Group

Source: Business Report. View Original here