How social media can damage a company’s reputation – and how to address it

 

More than a decade after the first iPhone hit the market in 2007, it’s becoming clear how social media can impact an organisation’s reputation.

Generally, reputation is more significant in today’s world, due in part to the lightning speed at which news can spread. To illustrate the growing impact of reputation, a 2017 study from Ocean Tomo estimated that intangible assets like reputation account for 75% of a company’s market value.

In the mid-1980s, it was less than one-third.

Surprisingly, only about 30% of respondents to NC State’s latest State of Risk Oversight survey are concerned that “social media [is] harming the organisation’s reputation and brand.” Non-profits expressed the greatest concern at 42%.

Whether organizations acknowledge it or not, social media can have tremendous impact on non-tangible assets like reputation…

From a scandal, mishap, or poorly thought out social media post, the impact can be felt much faster (velocity) and more forcefully (impact) than in the past. For example, one negative review on the popular site Yelp can cost 30 customers on average, so it should be clear how one post can start a chain reaction of consequences.

These challenges don’t just apply to organisations in developed countries, but worldwide. In prior times, companies would have time to craft a response and the recovery time would be much shorter.

But the growth of what Logic Manager CEO Steven Minsky bills as the “see-through economy” means that organisations can no longer solely rely on a PR team to clean up the mess from a scandal or other adverse event.

It doesn’t take long to find examples of companies that get and stay in trouble due to negative publicity on social media.

The best (and likely the most well-known) example is the 2017 incident involving a passenger being forcibly dragged off a United Airlines flight due to overbooking. The story spread so fast that the company lost about a billion dollars in market value the morning following the incident. And true to internet form, memes, some of which were pretty humorous, began popping up and taking their permanent home in cyberspace.

The United Airlines incident is by far not the only example I could point to. Other organisations whose reputations are reeling from effects of social media include Chipotle, Samsung, Uber, Facebook, and more.

Social media posts by employees can have damaging effects on an organization’s reputation as well…

Much time is spent discussing the reputation impacts of social media posts from individuals outside an organisation, but the impacts of posts by employees do not receive the attention it deserves, in my opinion.

Many employees will identify their employer on social media profiles and share posts from the organisation on their social media accounts. What this does is place an inextricable link between the organisation and what the individual posts on their personal profile(s).

Often times this can reflect poorly on the organisation and harm their reputation and brand.

If the employee posts pictures of themselves with friends enjoying alcoholic beverages at a party or concert, for example, it will reflect on the organisation one way or another.

Another source can involve the employee venting to friends about their job. If the employee runs to their Facebook or Twitter profiles to get their frustrations about work off their chest, they can expose the organization to a host of reputation consequences.

The most high-profile example to consider is the case of Elon Musk, who in August 2018 tweeted the following: Am considering taking Tesla private at $420. Funding secured.

This one short message set off a firestorm of investigation by the US Securities and Exchange Commission and negative press coverage for Musk and the Tesla brand. The SEC accused Musk of misleading the public with statements that “caused significant confusion and disruption in the market for Tesla’s stock and resulting harm to investors.”

The consequence for Musk was the loss of his chairmanship of Tesla for three years and a $20 million fine.

How can employers and employees protect themselves from reputation damages from social media posts?

This can be tricky considering boundaries between work and personal life, not to mention any free speech concerns that could arise.

But in order for organisations to protect their reputations in situations like this, it’s vitally important they have a written code of conduct for employees and social media.

Without a code of conduct, employees will likely not consider the risks to their employer of what they post online. Furthermore, if an employee loses their job for a social media post and there is no code of conduct, the company could be opening themselves up to a wrongful termination lawsuit, which would further erode the general public’s perception of them.

Employees who want to post pictures of their personal life or their feelings about a particular issue should refrain from mentioning their employer or sharing posts from the company. Do not provide a link between the organization and you personally, because once this linked is established, the individual will have to be that much more cautious about what they post.

Doing something as innocent as sharing a photo can be misunderstood since photos can be cropped, which is why it’s important for both employers and employees to maintain original copies in the event they have to defend their reputation.

My personal rule is to keep a strict separation between the two – I only use LinkedIn for professional networking and use Facebook for speaking with old friends and other personal acquaintances. Nowhere on Facebook do I discuss what I do. For that information, you need to go over to my LinkedIn profile.

Ultimately, organizations will have to adapt to this reality – ERM is one tool for ensuring an organization can safeguard its reputation in the digital age

As social media and the inherent value of reputation continue to grow, organisations will have to adapt their strategies for safeguarding how the general public views them. This will especially be true as the purchasing power and status of the “Millennial” generation grows.

Having a system and culture for identifying, assessing, and managing both risks and opportunities (i.e. ERM) is one tool organisations have to ensure they do not suffer the kinds of losses experienced by United, Tesla, Uber, and many others.

Not only does ERM minimize the negative by helping you avoid bad press, it also helps maximize the positive by ensuring decisions are made that lead customers, employees, and other stakeholders to eagerly support the organization publicly.

As Norman Marks explains in the beginning of this webinar sponsored by OCEG, these efforts should be about “…helping the company succeed, not avoid failure.”

If you are ready to better understand reputation risks in your organization and take steps to minimize negative events and maximize the impact of a positive reputation, I recommend checking out a couple of prior articles: 4 Ways to Survive Reputation Scrutiny and Improve Reputation Risk Oversight and 5 Ways to Better Understand and Quantify Reputation Risk.

For more articles by Carol Williams, visit: https://www.erminsightsbycarol.com/