Tip Sheet: Grilled About ROI? Ask About Value of Reputation


Discussions between CEOs and communication professionals often get bogged down on one topic: What is the return on investment in public relations? It’s a difficult question because reputation itself is an intangible asset, one that can be influenced but never controlled. Nonetheless, a look at some recent high-profile crises points us toward some answers.

2012 has brought its share of communications crises for global brands: From the marine mishaps of Costa Crociere, Europe’s largest cruise line, to the interest rate rigging scandal at Barclay’s Bank to the continuing fallout at News Corp. over the phone-hacking scandal to the exposé on working conditions in China that hit computer giant Apple hard.

Public relations firms have had recent crises of their own, usually for ethical lapses. In June, Wal-Mart fired an agency after one of its professionals was caught misrepresenting herself at a union news conference in Los Angeles. This month, a New York PR firm was “outed” by WikiLeaks for trying to buff the Syrian regime’s public image after brutal crackdowns against the country’s opposition forces.

INOCULATION

Will these falls prove fatal to the firms involved? Or will they be serious setbacks followed by reputational recovery? The answer depends on how much these organizations change, how well they show this change, and how well-inoculated they were before the crisis occurred.

Each case illustrates the explicit connection between communication and the rise, fall, recovery or maintenance in the value of a reputation and a brand.

Here are three principles about maximizing the return on investment in reputation during or following a reputational crisis:

1. Communication must be aligned with reality. Let’s get this right up front: The facts on the ground will have the greatest influence on the reputations of these organizations as investigators determine whether or not was there human or corporate error, negligence, malfeasance or liability. Communications can only be used to amplify the positive or mitigate the negative that is intrinsic to each case.

2. Communication has a direct—albeit often incalculable—impact on the business. Consider the obvious link between the quality of communication, public confidence and therefore sales. This is about both the organization’s conscience and its competence. It’s not just about whether your customers like your brand; it’s about whether they trust you as well.

3. Goodwill matters: Did you have some in the bank? A reservoir of goodwill—built over time through credible, consistent public relations—is another incalculable, intangible asset when the organization has to manage a problem, from a minor issue to a major crisis.

These lessons aren’t just for the corporate world. The costly consequences of poor communication were evident in Canada this spring during a debate about the federal government’s proposed internet surveillance act.

When the minister of public safety, known for his aggressive communication style, responded to an opponent by saying “He can either stand with us or with the child pornographers,” the resulting outcry forced an embarrassing withdrawal of the bill. With little goodwill in the reputational bank, the government was thrown off its agenda, at a considerable cost of time and resources.

DON’T FALL DOWN THE RABBIT HOLE

So, let’s go back to the CEO and that conversation about communications. Clients should challenge public relations professionals to excel in research, measurement and evaluation—all of which are fundamental to professional communications.

But smart organizations resist falling down the ROI rabbit hole in trying to measure the impact of a specific financial investment in building a reputation. The resulting “paralysis of analysis” risks leaving the organization vulnerable and the playing field open for others to define the game or change the rules.

As we move ever closer to a world in which global publishing power lies in every person’s pocket, the punishment for failing to listen, engage, anticipate and respond effectively will be severe; and the rewards for an organization that invests in defining and therefore inoculating itself through communications will be rich indeed.

When a crisis breaks, the return on public relations is incalculable. PRN

CONTACT:

Daniel Tisch, APR, is president and CEO of Toronto-based Argyle Communications, and a member of the PRSA’s Counselors Academy. He can be reached at dtisch@argylecommunications.com.




2 Comments

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  • John

    Good piece Daniel on a subject that is challenging from a ROI perspective. Take the Wal-Mart de Mexico bribery allegations. Using your 3rd principle, it appears that Walmart had built up enough goodwill to more than offset the hit to its reputation from this event, assuming stock price performance is an effective measurement. john

  • Ford Kanzler

    Also agree with you on the state of PR measurement being an endless controversy. I try avoiding clients who are metrics fanatics by agreeing on how a campaign will be judged before beginning work. Often there are clear disconnects within the client’s organization that would prevent estimating any kind of ROI or sales successes created by PR efforts anyway. I feel its the ROI quest is partially driven by how closely online activity can be measured. However, PR occurs on and offline in varying degrees. Attempting to put that all together and hang a number on it can require resources equal to the campaign itself.
    Glad you wrote the article. There’s catharsis in doing them as well as demonstrating your professional expertise. We need to take our own medicine occasionally.