Did you know that a 2019 Deloitte study indicated that 20% of all reported issues within organizations were mismanagement? And, in that same study, 73% of all those issues were smoldering (vs. sudden). Looking at those two statistics, we can understand that the majority of reputational issues are problems management knew about but failed to do something about it. It’s crucial, as leaders, to close that gap about ‘what we know’ and ‘what we do about it’. We often see that it’s easier for managers to turn their head, rather than have the difficult conversations or take the appropriate actions to cease systemic problems at the moment they are aware of them.
With a better understanding of the internal issues that many organizations face, research found that 88% of surveyed executives are explicitly focusing on reputational risk as a key business challenge. Protecting your brand value is acknowledging the fact that reputation management is a necessity and should be an annual investment. Having a reputation risk management system in place is key, and the infrastructure that needs to be implemented operates at the intersection of leadership, strategy, and communications. When one of those pieces of your business is not effective, new problems begin to arise and smoldering issues grow larger. In order to understand that you have the ability to protect your organization, let’s take a look at a couple main-stream examples.
WeWork’s former CEO, Adam Neuman, was accused of behavioral issues and cultivating a “frat boy culture” within the workspace. In addition to the attitude, there was an extreme lack of organizational clarity on the operating fundamentals, including past and future financial performance reports – which was bad timing due to their desire to go public. The consequences were their IPO was delayed, the outcome was significantly reduced, the CEO resigned, employees lost their jobs, and there were findings of misrepresented business prospects.
Penn State had the infamous systematic sexual abuse case within the Nittany Lion’s athletic department. This investigation led to a university/community-wide crisis based on allegations of who knew about the behavior and didn’t take action. The consequences included criminal charges for numerous school officials, NCAA sanctions, over $60 million in fines, leadership changes and the football program was rewritten for the past 15 years.
These are good examples of how smoldering issues can turn into sudden issues….and sudden issues make the news in seconds. Any person with a recording device or an iPhone can wreak havoc on your brand.
Bottom line – Protecting your company’s valuation depends on how well you are prepared to face the court of public opinion. Crisis happens to everyone. The difference is those who are prepared to address smoldering issues proactively can prevent them from erupting. When done well, you can turn short-term adversity into long-term advantage.