Can you Risk your reputation ?


Executive Summary: Sometimes your reputation in the industry is everything for you. Reputation is sacrosanct and hence any risk to the reputation of the company is considered high

I worked at Sony for many years. For a company such as Sony, the brand reputation is sacrosanct. Which means any incident or event which will bring bad name to the company will be considered a “high” risk event. This is much more accentuated because the company is Japanese .

For example a pharma company makes a mistake with its formulations or it gets contaminated, then it has very high risk of reputation. This is due to the nature of the product, where lives can be at stake, the consumer will not again buy their product due to lack of trust. Add to this, any liabilities they have to pay for damages and also regulatory punishments. On the other hand a company making toilet bowls may have lesser reputation risk when compared to the pharma company. Parryware will have to fix the batch of products and perhaps recall the faulty batch and not have worry of loss of life due to non perfomance.

The degree of reputation risk is also a cultural phenemenon where some societies attaching a huge importance to it. “Loss of face” is considered a huge loss for Japanese where it may be taken lightly in other cultures.

Sometimes mistakes do happen and how do you handle when mistakes happen at large companies and large brands ?

Have a look at Johnson&Johnson (J&J) on how they handled a handled a significant crisis. In 1982 J&Js Tylenol medication commanded a market share of 35 percent and it accounted for 15 percent of company profits. A pretty huge number for one product and for J&J which has several products.

In 1986, a individual managed to lace J&Js tylenol with cyanide and about 7 people were killed after consumption. Word got out that it is due J&Js tylenol. Even though J&J was not directly responsible for the deaths it was coping most of the blame.

Hearing the news, the stock market responded and the market cap of the company fell by about 1 billion dollars. In the same situation other companies may have responded pretty defensively. But not J&J.

J&J bit the bullet and took the sour pill (pardon the pun). It ordered *all* the Tylenol medicines off the shell. This is not only in the state affected but all the states in the US. It went to destroy all these medicines with a huge loss to the company. Also it went to prevent future incidents by designing a tamper proof medicine dispenser. By these actions it became a champion of customer cause.

The good will resulted in J&J capturing back 70 percent of market share loss pretty immediately. It was reported that many customers converted to J&J tylenol who were using other pain killers.

Now this case has become a shining piece of crisis management for other companies to benchmark.

What value do you put for reputation at your company ? Can you put a number on it ? How would you go about determining a number ? How would you respond to significant crisis ? Do you have a plan.

Appreciate your comments.

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