Fragility of Strength

A company’s reputation cannot be good or bad, but it can be right or wrong. That is, one that helps in achieving goals or one that hinders their achievement.

The attitude of the business community to reputation management in Ukrainian practice changed in several stages. In times of economic growth, the value of reputation was exaggerated, saying that it was a key factor in market capitalization. In times of “improvement,” everything was solved thanks to backroom agreements. After the recent cataclysms – the financial and then the socio-political crisis – reputational risks and benefits have once again become the subject of general attention.

Such fluctuations only emphasize that reputation is a paradoxical asset. You can work hard on it, but lose it at one point, or not work on it at all, but become a star due to circumstances.

However, reputation is excellently monetized, turning public opinion into profit and long-term competitiveness. Sony Corporation, consistently present in one hundred of the most respected companies in the world, covered losses after five crisis years in 2013; the financial year ended with a profit, and the company restored 60% of the lost capitalization.

According to experts, in the ratings of respect, “consumer” corporate brands gave way to innovators, whose value is not so tightly tied to profitability but to expectations. Expectation is an advanced trust, the result of the right reputation. Not good or bad, but right.

A simple example. It is customary to refer to the Rothschild and Rockefeller families with no “softly spoken, kindly word.” Like, they create and destroy empires, juggle exchange rates. Controversial reputation. But the one that has been created for many years. Therefore, resistant to the ups and downs of fate. Accordingly, it is targeted because it is profitable. At least for the Rothschilds.

One of my personal recent discoveries is Nassim Taleb’s theory of antifragility (a scientific description of the same Black Swan). That is, events that threaten stability i.e., problems or entrepreneurial successes of a great power. Fragility occurs when the painful feeling of losing an asset is stronger than the pleasure of acquiring a comparable asset. But antifragility is generated by the opposite situation.

A proper reputation must be anti-fragile and redundant, like the Rothschilds’. Its creation begins with an assessment of reputational risk, not benefit. It should have anti-crisis safety net and be governed by a system based on hypercompensation (prepare for the worst, and treat the best as a reward). Only then will it be antifragile. A fragile reputation collapses at the first crisis, an anti-fragile one only gets stronger in cataclysms.

Reputation of any kind is formed in a saturated information space. Therefore, you should not lay it on a bit thick when pursuing antifragility. Criticism is usually the best way to increase reputational assets. The fact that Bill Gates criticized Google’s philanthropic initiatives to provide Internet to the African hinterland did not affect the trust of stakeholders in any way. However, it caused additional interest.

The same works for the fake epidemic that has hit the world. An innocent fake, but one that does not match the target’s reputation, is annoying; the smear campaign is maddening. However, successfully repelled information attacks only strengthen the reputation. What to do in case of such an attack? First of all, keep calm. Conduct an audit of reputational risks, and evaluate the set of “information weapons” of potential aggressors i.e., media resources, experience, and traditional methods of work of the PR team. And be a “peace hawk.” On the one hand, have your arsenal of information weapons within touching distance. And on the other hand, hold sometimes actions to force potential aggressors to peace. No one is stopping you from reporting their antisocial behaviour to the public.

Taleb has a good definition. He called people who mishandle their reputations and react nervously to criticism as “lumps-who-depend-on-words.” Life does not end tomorrow. Therefore, it is necessary to accept its challenges as an opportunity to achieve anti-fragility, benefiting from the variability and diversity of the information space.

Forbes 2014