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How Not to Manage Your Reputation

The other day I wrote about how BP CEO Tony Hayward caught some heat for suggesting that food poisoning, not a reaction to chemical dispersants, was the culprit behind the illnesses that have befallen workers involved in the oil spill clean up.

Well it turns out that unfortunate comments have become a bit of a habit for Mr.

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Hayward and Newsweek took the time to compile some of the “best” ones.

On April 29, The New York Times reported that Hayward, apparently exasperated, turned to fellow executives in his London office and asked, “What the hell did we do to deserve this?” (A possible answer might be the company’s 760 safety violations over the last three years. ExxonMobil, in contrast, has had just one.)

On May 14, Hayward attempted to persuade The Guardian that “the Gulf of Mexico is a very big ocean. The amount of volume of oil and dispersant we are putting into it is tiny in relation to the total water volume.”

Only a few days later, he told Sky News that “the environmental impact of this disaster is likely to be very, very modest.” That might surprise the many scientists who see the spill as a true environmental calamity, the full extent of which remains unclear.

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Obviously it’s bad enough for BP that they haven’t been able to stop the leaking oil.

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Their stock price is taking a beating and they have become an object of ridicule and disdain (as exemplified by this series of satirical billboards). But a CEO that can’t stop putting his foot in his mouth is certainly not helping. As they saying goes,”If you don’t have anything nice to say, don’t say anything at all.”

Zappos Turns a Negative Into a Positive

Usually the pages of Risk Management and the Risk Management Monitor are full of stories about companies that have done wrong and cost themselves small fortunes in the process. But every so often we come across a story of a company that goes above and beyond the call and reminds us that when it comes to a company’s reputation, doing the right thing is sometimes more important than not doing the wrong thing.

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A case in point is online shoe retailer Zappos.com. As reported on the Consumerist, last weekend a programming error caused all of Zappos’ products to be priced at $49.95. The error was eventually discovered but not before the company lost more than .

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6 million. But rather than cancel the orders affected by the error, the company chose to absorb the loss because as Zappos CEO Tony Hsieh explained on a company blog, “it was the right thing to do for our customers.”

“To those of you asking if anybody was fired, the answer is no, nobody was fired – this was a learning experience for all of us. Even though our terms and conditions state that we do not need to fulfill orders that are placed due to pricing mistakes, and even though this mistake cost us over $1.6 million, we felt that the right thing to do for our customers was to eat the loss and fulfill all the orders that had been placed before we discovered the problem.

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Of course, a cynical person might point out that drawing attention to the error and the subsequent loss is a pretty effective form of self-serving marketing – a kind of look-how-generous-we-are-so-come-shop-with-us sort of thing. And to a certain extent, it probably is. But in the end, it is the customers who benefit and I for one will certainly check out Zappos the next time I’m looking to buy shoes. Perhaps that $1.6 million loss will turn out to be a pretty good investment into Zappos’ reputational goodwill.

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Life Unlocked

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If you’ve watched any television in the past few years, you have probably seen commercials for LifeLock, an identity theft protection service that is notable for prominently displaying CEO Todd Davis’ social security number on billboards and promotional material in an effort to demonstrate the effectiveness of his company’s system. Maybe it’s because I work for a risk management magazine and have heard countless horror stories about data theft, but LifeLock’s ad strategy always seemed like a pretty bold move that bordered on lunacy. It turns out my skepticism was justified. According to an article in the Phoenix New Times (by way of Wired), Todd Davis has had his identity stolen at least 13 times.

And it’s not only Davis who has been affected by LifeLock’s campaign. Many companies have been put on the hook for sometimes substantial charges that will likely go unpaid. Identity thieved have opened AT&T cell phone accounts leaving behind more than $2,000 in unpaid charges and obtained a $500 loan from a check-cashing company. And that was just the beginning.

More cell-phone service was fraudulently charged to Davis: Someone opened a Verizon account in New York, leaving behind unpaid bills of at least $186. An account at Centerpoint Energy, a Texas utility, was opened. At least $122 went unpaid. Fake Davises owe $573 to Credit One Bank and $312 to Swiss Colony, a gift-basket company. Two other accounts, one for USA Savings Bank and a Gap credit card, were opened successfully in Davis’ name but showed zero balances as of early 2009. There were also multiple dings by collection agencies: Bay Area Credit, $265; two for Associated Credit Services, $207 and $213; and two for Enhanced Recovery Corporation, $250 and $381.

The fun doesn’t stop there for LifeLock. In March, the Federal Trade Commission fined the company $12 million for deceptive advertising. Evidently, the FTC thought that the company was running a scam and that its claims were bogus. Looks like they were right.

Incidentally, Todd Davis’ social security number, which used to figure so prominently in LifeLock’s ads (like the one above), can no longer be found on the company’s website. I guess someone finally learned his lesson. Too bad it might be a case of too little, too late.

The Risks of Social Media: Self-Inflicted Reputation Damage

reputation risk the world is watching

When we talk about social media and reputation damage, there are two basic types: (1) Damage that is self-inflicted, and (2) damage that comes externally from others. We will discuss type two later, but since that is inherently more difficult to control, let’s start with the type that companies can more easily manage.

There are are almost limitless way that companies can look bad publicly. Just recently, we have seen Toyota hurt its brand by failing to properly correct safety issues in its vehicles and the Massey mining company expose itself to scrutiny for prioritizing its need to “run coal” over the safety of its workers. Wal-Mart has infamously garnered consistent backlash for its business practices, ranging from discriminating against women/minorities and crushing local businesses to union-breaking and failing to provide workers with health care.

But the digital world offers many new ways for companies to hurt their own brands. And Wal-Mart knows about these, too.

The retail giant famously invited scorn in 2006 by partnering with two RV campers turned bloggers who drove around the country, spending their nights in Wal-Mart parking lots and detailing interactions with — what seemed to many — overly positive employees with nothing but nice things to say about the company. The trouble that ensued was not due to the fact that Wal-Mart had launched a PR campaign to help counteract some of its negative publicity. The fallout resulted because the bloggers, who were presented as regular Americans with homespun, folksy tales of how great Wal-Mart is, were not as independent as it seemed. They were, at least to some degree, on the Wal-Mart payroll. (The exact relationship between the company and the campers is detailed here and the plan did start out as an organic idea that was later co-opted and supported, financially at times, by the retailer. Ultimately, however, it was — like most things in the online world — the perception of impropriety that was the lasting memory, not the actual facts.)

The problem was transparency. Readers — aka, customers and critics — felt duped by the insincerity. They believed that Wal-Mart had set the whole thing up as a ruse. And there is perhaps nothing that those who can do damage to a company on the internet loathe more than being lied to.

So while this incident obviously didn’t do irreparable harm to one of the biggest corporations in the world, it did leave a bad taste in the mouths of many consumers. It was a good opportunity turned bad, simply because there was a lack of disclosure.

This is lesson one about using social media: Be honest.

You don’t have to always be perfect and you don’t have to always tell the world everything about your operations in social media, but you cannot lie. Inevitably, dishonesty comes out, and a firestorm of “WAL-MAAART SUCKS!!!!11!1!!!” backlash is the result.

The second lesson, which I will tell you before we even get to the example to ease your suspense, is: Be respectful.

The online culture that has developed on blogs, internet forums and social networks (all of which fall into the realm of social media and user-generated content, which are really one in the same) is not particularly polite. Anonymity allows people to write things they would likely never say in real life, and hostility often results.

But if you are a professional brand operating in this space, you must be careful to avoid mudslinging. When irrational, cruel voices enter the fray, you must take the high ground. You have to be better than that.

One employee at Ryanair did not heed such advice.

After a freelance developer named Jason wrote on his blog about a flaw in the airline’s system that allowed him to book a free flight, one of Ryanair’s employees reacted … let’s just say … inappropriately.

This was his/her response:

“you’re an idiot and a liar!! fact is! you’ve opened one session then another and requested a page meant for a different session, you are so stupid you dont even know how you did it! you dont get a free flight, there is no dynamic data to render which is prob why you got 0.00. what self respecting developer uses a crappy CMS such as word press anyway AND puts they’re mobile ph number online, i suppose even a prank call is better than nothing on a lonely sat evening!!”

After some follow up discussion from Jason, he/she added this:

“Website is not perfect, Life is not perfect… if you would work in your pathetic life on a such big project in a such busy environment with so little resources, you would know that the most important is to have usual user behavior scenarios working rather than spending time on improbable and harmless things.”

This was the wrong way to address the issue.

Companies always have to weigh whether or not to respond to online criticism. Some choose to do so aggressively while others choose to mostly ignore it.

Dell famously was able to reverse some of the reputational harm done to it by the many critics who had detailed their experiences with “Dell Hell” customer service online. According to Jeff Jarvis, one of the company’s most high-profile critics, Dell reached out and learned about how to improve from those with complaints.

After some prodding by Jarvis, who was a — if not the — lead instigator of this burgeoning anti-Dell sentiment, to “join the conversation your customers are having without you,” Dell began to address the issue. The company turned its customer service around. It contacted people who had had negative experiences. It launched its own corporate blog to publicly discuss its flaws. And, according to the company’s leading critic, it worked.

“Dell transformed itself from worst to first in the era of customer control,” wrote Jarvis. “Dell had been the poster child for what you should not do. Then it became the model of what you should do.”

Just because it worked for Dell doesn’t mean it will work in all cases. When dealing with the “loud minority” who perhaps have irrational anger towards your brand, putting your head in the sand and pretending you never saw it can be the proper response. The last thing you want to do is give credence to an outrageous claim by acknowledging it.

But if the criticism is valid — and coming from and at least marginally civil source — and you do decide to interact in social media in an attempt to improve how people view your company, make sure to do it with respect. There is no point in making things worse.

An article from WebWorkerDaily on what things do and do not work on company FaceBook pages provides some good perspective on both of these lessons:

Let’s face it. Social media is not about you being in control anymore. The customer is in the driver’s seat. You are along for the ride, but fortunately can give some directions or guidance in appropriate ways. Sure you can delete things from your Facebook Page, but in the world of social media, that is an attack on transparency (not to mention freedom of expression and spirit of online community). Someone says something negative about you on your Page? Look at it as an opportunity to right a wrong or to give your side of the story with unrestrained candor.

Appropriate candor should be the takeaway. Talk to your customers and talk to them like you would any normal person in a normal conversation. Be honest and be respectful and you should be OK. How you go about actually improving your reputation through social media is a whole different can of worms, but as long as you stick to these principles, you should at least not inflict self-damage.

Training your employees who will be the online gatekeepers of your brand is the key to success in this realm, and Ecoconsultancy tells us why in its post on the 10 Common Social Media Mistakes.

Social media may look easy, but it really isn’t. How your employees behave can have a big impact on your company’s social media reputation. For companies that are actively involved with social media, setting expectations and creating policies for employees is the best way to ensure that they help your reputation, not hurt it.

Education and guidelines/policies are necessary before you delve into social media. You wouldn’t hire a marketing exec to shape the face of your brand who didn’t know anything about marketing. And you shouldn’t allow anyone unfamiliar with the pitfalls of social media to speak for your brand online either.

We will talk more about social media policies in the future.

(And if you missed the introductory post of our ongoing Risks of Social Media Series, you can read it here.)