Reputation Council

A reputation council is a cross-functional senior team at a company entrusted with the stewardship of the company’s reputation. A reputation council is not unlike a brand council, which may even be composed of the same people. The principal difference is that while the brand council monitors what the company says and does, a reputation council focuses on how stakeholders perceive a company and how their actions affect that perception.

CEOs have always understood that a good reputation is an essential condition for the short- and long-term success of their company, but until recently, they had few tools to manage it. The use of reputation councils has helped change this. Many of today’s most reputed companies now have a sort of reputation council. Exact figures are not known, as companies are typically discreet about their reputation management programs, but such councils are becoming increasingly common among the Fortune 500 companies.

Since the mid-1990s, the Internet, and in particular the rise of social media, has allowed the behavior of companies to have greater visibility for every stakeholder, making a strong corporate reputation a source of comparative advantage. Now that reputation represents as much as 15 percent of the market value of some companies, many executives have recognized that to protect this powerful yet delicate asset they need an active reputation management program that includes an empowered reputation council. This entry discusses the roles, responsibilities, and advantages of reputation councils and how organizations set up reputation councils.

Roles and Responsibilities

The mission of a reputation council is to provide the governance necessary to manage a company’s reputation while mitigating risks. A reputation council assesses the company’s overall risk profile, weighs the relative seriousness of each key risk the enterprise faces, and then proposes plans to reduce those threats. A reputation council is not a crisis management team; instead its focus is on preventing reputational problems from developing.

The vision of a reputation council is to act as a unifying force that creates alignment and consensus across the organization with regard to the seriousness of its reputational risks. The council advises the organization’s executive council on the measures that should be taken to contain those risks and works to ensure that every major decision is only made after considering its potential reputational impact.

The responsibilities of a reputation council include a deep understanding of (a) the company’s key stakeholders, (b) how the company is regarded by those stakeholders, (c) the root causes of their opinions, and (d) what metrics the company needs to focus on in order to maintain or improve those perceptions.

Advantages

Reputation councils offer companies a number of advantages. First, a reputation council gives a company a structured approach to think ahead in defensive rather than reactive terms. For example, if an important public policy issue faces the banking sector, a bank’s reputation council would study how various outcomes might affect the bank’s reputation. The members would return to their departments to consider the right course of action to mitigate the risks and then reconvene to develop recommendations to propose to the executive committee.

Second, centralizing the handling of reputation concerns through reputation councils also helps raise awareness of risks throughout the company. Often, in a large company, the actions of one unit may have an impact on the company’s reputation in other units or as a whole, but without a mechanism for general consideration, the company won’t perceive the reputational risk until it’s too late.

Finally, and perhaps most important, such a council serves a kind of evangelical function in making each of the company’s units more aware that its actions will have consequences for the reputation of the entire organization. Rather than leaving reputation to corporate communications’ or marketing’s purview, a reputation council spreads general awareness that every action the company takes—from the mailroom to the executive suite, from setting up a factory in China to opening a retail store in Phoenix, AZ—may have an impact on the company’s reputation as a whole.

Setting Up a Reputation Council

Establishing a reputation council is an investment. Reputation councils are typically small (five- to eight- person) groups, but they represent an expensive opportunity cost as they are composed of senior executives drawn from marketing, corporate communications, product development, investor relations, human resources, information technology, and finance. The best candidates are curious, have an affinity for measurement, are knowledgeable about the business, and are very adaptable and flexible in their thinking. The chair is typically an appointee of the CEO and should have been the chief marketing officer or chief communications officer, although more chief reputation officers are likely to emerge in the next 5 to 10 years. A newly formed council should meet often, but once established, it should meet no less than quarterly. Meetings should coincide with the budget cycle to make the recommendations more financially actionable.

Before it undertakes its regular tasks, the council should develop standard operating procedures for the group’s governance. This living document should have several sections:

• It should specify the roles and responsibilities of each participating department; for example, the information technology representative will be entrusted with questions of information security and with customer data protection.
• It should define the company’s key stakeholder groups and prioritize them. In the bank example discussed earlier, the bank might identify its current customers, potential customers, investors, and regulators as four distinct groups of stakeholders. (In general, a key stakeholder is any group whose respect the company needs to survive.)
• It should develop a “risk register,” aimed at outlining enterprise-wide risk scenarios and analyses illuminating the impact those threats might have on the business. The council should spell out the distinctive reputational risks the company faces with respect to each stakeholder group, rate those risks in terms of seriousness, and develop strategic playbooks for each of them.
• It should select a reputation framework to allow for measurement, tracking, and insights. The measurement aspects can be critical in determining the scope and potential impact of risks among stakeholder groups and in helping the company navigate potential actions and communications to mitigate those risks.

Once that is all in place, the council then needs to design cross-functional processes for making business decisions and taking actions that prevent and manage reputational risks.

The council’s annual work is charting the internal and external landscape for reputational risk and opportunity. It should monitor how the risks facing the company evolve, refreshing the register of principal risks facing the company and reviewing its priorities and recommendations for action in light of those changes.

Conclusion

In today’s transparent business environment, papering over problems is no longer an option. Stakeholders want honesty, not perfection—actions and communications that are not aligned with a company’s value and mission are apparent to stakeholders and pose reputational risk. A reputation council is the key to any successful corporate reputation management program and an essential aspect of 21st-century business strategy.