Riku Ruokolahti: What am I leading when I’m leading a reputation?
“When you manage reputation, you manage people’s interactions with the company. That’s all there is to it.”
At the beginning of the section on leadership maturity, I discussed the mechanisms by which reputation is formed and compared perceptions to small fragments that make up a person’s reputation. In this chapter, we will examine in greater detail the various contexts in which these fragments emerge.
About twenty years ago, psychologist Dennis Bromley argued that people interact with a company in one way or another as individuals, and that these interactions give rise to experiences. These experiences then form the basis for a kind of psychological consensus—a shared perception or belief about the company among people.
Let me ask you this, just to be a bit of a nuisance: does Nordea have a good reputation? As you think about Nordea’s reputation, you may realize that you aren’t actually thinking about Nordea at all. You might be wondering what other people might think of Nordea. This is precisely the psychological consensus Bromley mentioned. You’re trying to interpret what kind of psychological consensus people might have regarding Nordea.
Although reputation is a matter of consensus among a group of people, the mechanism by which it is formed has its roots in individuals. However, people interact with companies as individuals, and this gives rise to experiences. The existing psychological consensus is constantly changing and being reshaped based on these interactions.
Years later, Cees van Riel and Charles Fombrun took Bromley’s ideas a step further. They added an entirely new element to the interactions between people and companies that Bromley had defined: a kind of third party. That is, someone else who forms an impression of the company and communicates that impression to other people. This referred, for example, to the media. A journalist forms their own impression of the company or a matter related to the company and communicates it to citizens who consume media.
When you think about it more carefully, social media works in exactly the same way as traditional media in this context. A user forms their own impression of a company and, for one reason or another, shares it on a social media platform. The audience is just often, at least initially, more limited than with traditional media. On the other hand, communication on social media is more democratic than in traditional media in that anyone can become a publisher. Viewed this way, the existence of third parties can be considered a quite justified addition to Bromley’s original thinking.
We can also categorize these encounters in a slightly different way. As an individual, a person can encounter a company directly or indirectly. “I just bought an expired lollipop at a kiosk.” Or: “I read on Twitter that someone bought an expired lollipop.” Right? On the other hand, an indirect encounter can also be the company’s own message: “We guarantee our lollipops are fresh!”
Any interaction between a company and any stakeholder can be categorized based on the lines of reasoning outlined above. To put it simply: people interact with a company either directly, indirectly through the company’s own communications, or indirectly through the narratives of third parties.
An organization’s reputation—shaped by old beliefs and new experiences—is formed, and has been formed, solely through these points of contact. The company itself can only influence future interactions. We have no way of traveling back in time to correct past mistakes.
Reputation is put to the test in these encounters
When you manage reputation, you manage people’s interactions with the company—that is, touchpoints. To put it bluntly, that’s really all there is to it. There’s nothing else you can influence through your actions. So we focus on touchpoints: direct, indirect, and third-party communications. Each company’s direct interactions are different. They depend on the industry and business model. The same applies to indirect interactions. Everyone markets in their own way.
Although every company’s interactions are unique, the image below lists the most common types of interactions as examples. These are issues that apply to the vast majority of companies in any case. You can consider how these interactions relate to your own situation. How many interactions does your company have overall? And which of these are the most significant in terms of reputation? Do you have ways of engaging with stakeholders that aren’t highlighted here? Which of the example interactions aren’t relevant to you?
A Quarter of an Hour in the Spotlight
If you do this exercise as a group, you may arrive at a shared understanding of where and how your specific reputation is formed. In my work, I’ve noticed that, at the outset, many executive teams view reputation primarily from a media perspective. This is evident, for example, in how the results of reputation surveys are interpreted through the lens of the media landscape. When was this data collected, anyway? There was that YT story about us in Helsingin Sanomat back in May… And so on.
I would argue that management very often falls prey to a strong cognitive bias in this regard. You may be the public face of the company. It’s intense and stressful, and those around you comment on the news cycle. Articles written about the company are read most closely within the company itself. Consequently, your own experience from a media perspective is emphasized, and you tend to interpret things through that lens. External communication is the most powerful form of internal communication—or how did that go?
However, this is not the case for other stakeholders. The so-called external impact on a company’s media visibility is much more limited. Unless a national crisis is involved, management teams generally tend to overestimate the media’s impact on a company’s reputation. You might be carrying out a million service interactions with a workforce of ten thousand employees, reporting their success live to stakeholders, while at the same time there’s a truly interesting story about you in Tusari, where you were interviewed—a story that most of the magazine’s readers will skip.
However, I am by no means trying to deny the media’s influence on corporate reputations. I am simply trying to put the issue into the right context.
Quality and quantity
I’ll come back to the topic of encounters. The truth lies in the number of encounters and their significance. There are huge differences in significance. It is quite
a different matter to realize you’ve bought two expired packages of licorice than to sell them yourself simply because the kiosk owner is forcing a summer worker to sell last year’s licorice.
If you want to make a big splash and create an exceptionally vivid picture of how your reputation was born, I recommend that you quantify the number of your encounters
and work together to assess their significance. By quantification, I mean numbers. Numbers indicate the absolute number of encounters, and only through numbers can you communicate to one another how much weight you actually place on the significance of each encounter relative to the others. Otherwise, you’ll quickly end up with a shared list of really important things, but the items on the list won’t be in order of importance. Everyone will prioritize what they prioritize, and no common direction will emerge.
Now I’ll let you off the hook. In practice, I’ve found that quantifying and prioritizing business interactions with numbers is, in many cases, a real nightmare. It would be great if everything were based on numbers, but you can’t always achieve this without making unreasonable efforts and falling behind on the project schedule. To help you move forward, ensure the discussion is constructive, and make sure everyone is on the same page, I offer you the following four-quadrant framework to spice up your brainstorming session.
This model was developed to facilitate discussions in management workshops on reputation. You are welcome to use it to assess the number and significance of your touchpoints.
The horizontal axis of the graph represents the number of encounters. The greater the number of encounters, the further to the right the data point falls. The vertical axis, on the other hand, represents the significance of the encounter. The greater the impact of the encounter, the higher the data point is plotted.
I’ll give a few examples here to make it easier to understand. Let’s take a fast-food chain, for instance. The daily number of customers can be really high. Customers often come to the restaurant in a hurry and hungry. There are many interactions, and they matter to people. If something goes wrong, the customer can easily get very upset. On the other hand, exceeding expectations puts a smile on the customer’s face, and then the visit to the fast-food joint is easily a success.
What about the sustainability report from that same fast-food chain? How many people actually read it? And would the reader feel really bad if they didn’t like the report? Yep, a chance encounter with the screen beckons. What if we printed the key points of the sustainability report in really big letters on the disposable paper liner of a plastic tray? That’s right—it’s a reinforcement. There are plenty of encounters, but people aren’t really paying attention, and few are interested. On the other hand, this allows us to effectively get our message across.
It just so happened that a seasonal worker who had been with us for two months noticed that the food waste calculations in our sustainability report weren’t just optimistic—they were actually complete nonsense. We have a limited number of staff, but our impact is as deep as possible. Disappointments and successes now have a major impact. We weigh the risks and opportunities.
Aamulehti is running a major, carefully researched feature on the sustainability of fast-food chains, and you’re flaunting your food waste calculations on the front page. Few people care about this as much as they do about ending hunger in an acute famine, but this time, the number of interactions wipes the floor with your sustainability napkins. Help.
Social media and journalists are a daunting combination for many executives. But you’ll notice that even in this example, the traces of these phenomena lead to direct encounters. Few phenomena arise without real-life events involving people. The current media environment, in a way, puts pressure on companies to better navigate their real-life challenges. Public crises are often the result of a company failing to meet the expectations of its stakeholders in the real world. In this sense, companies’ direct interactions are under greater scrutiny than ever before.
The first chapter of this book argued that reputation is both a company’s greatest risk and its most important intangible asset. This model aims to provide insight into where perceptions of you are formed and what influences them most. I view reputation management primarily as competitiveness management, but through my hypothetical example, I aim to demonstrate that the discussion of touchpoints and their significance to stakeholders is also highly relevant from a risk management perspective. Enjoy the discussions!
Riku Ruokolahti has written a handbook on corporate reputation and reputation management. The excerpt published here, “What Do I Manage When I Manage Reputation?”, is taken from the first section of the handbook: “The Holy Trinity of Reputation, Business, and Management.”
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