I came across the term ‘reputation capital’ the other day while listening to a TedTalk called “The Currency of the New Economy is Trust” by Rachel Botsman. In her talk, Botsman discusses the increasing importance of trust in the area of collaborative consumption. By collaborative consumption, she means services such as Uber that connects riders to drivers (not professional cabbies) through an app, or Airbnb where individuals can rent a room from a stranger.
These systems can only flourish if they can build trust and develop a solid reputation, one client at a time. If the services don’t deliver, people stop using them. But, if they can sock away ‘trust’ credits like assets, they can build their reputation capital and succeed. In a nutshell, reputation capital is the quantitative measure of the value of a person’s or organization’s reputation.
“In the 20th century,” Botsman says, “the invention of traditional credit transformed our consumer system, and in many ways controlled who had access to what. In the 21st century, new trust networks, and the reputation capital they generate, will reinvent the way we think about wealth, markets, power and personal identity, in ways we can’t yet even imagine.”
Building Your Asset
We as individuals, and our companies as entities, have reputations, good, bad or indifferent. I put a lot of stock in the value of my reputation and have worked hard over the 22 years I have lived in Victoria to build it and protect it. I work at maintaining and strengthening it with every new project. The term reputation capital resonates with me and I think of it as an asset on my balance sheet.
If that seems a bit of a stretch, think of the value of goodwill. I mean, accountants have an equation that allows them to put a monetary value on it when valuing a business for sale. Reputation is no different; it is an intangible but very real asset to a company.
Still unconvinced? Consider Goldman Sachs and AIG, financial institutions that were brought to their knees by the global financial crisis. They saw their reputation capital plunge into negative territory and their profits take a nosedive. Rebuilding that trust (and profits) will take time. According to a 2015 Harris Interactive report on the reputations of the 100 most visible companies, these companies are still ranked at 100 and 99 on the list.
The bottom line is, credibility has an asset worth in a company — it’s valuable. In fact, it can be very valuable. Of course, the reverse is also true, which is why smart organizations work hard to build their credibility assets.
Vancity is a credit union with a long-standing reputation for supporting local community initiatives and being a good employer. It was recently voted one of Canada’s Greenest Employers for 2015 by Canada’s Top 100 Employers project.
How many people, I wonder, bank with Vancity because of its reputation value? I’d guess quite a few.
Your Reputation Value
Now consider the value of your reputation — how much is it worth to your company, or to you personally? Carry out a strengths, weaknesses, opportunities and threats (SWOT) analysis on your reputation and look strategically at how you can approve its asset worth.
How do your customers view you? What do they value most about their relationship with your firm? I was working with a financial advisor who believed his reputation value had dropped over the last few years. In the past, people had viewed him as a community leader because he was active on boards and attended community events. Then, for several reasons, he had to step back from a lot of these activities. As a result, he saw a significant drop in revenues. His reputation as such wasn’t damaged, but his reputation capital had dwindled.
I know a young person who was on the fast track to being a top executive; she sat on several boards and was doing everything right. Her reputation was building, but then she started posting doubtful material on her Facebook account — nothing terrible, but jokes and sayings that included bad language, and contentious material relating to politics, religion, etc.
She had every right to express her views, but some of her business acquaintances were also her Facebook ‘friends’ and many were offended, including me. Her reputation capital took quite a hit and it will be some time before she will be able to rebuild it. One also has to consider how future potential employers might feel when they do some basic digging into her ‘reputation.’
53% of the general public proactively try to learn more about the companies they do business with. Source: Harris Interactive
36% of the general public decided to not do business with a company because of something learned about how the company conducts itself. Source: Harris Interactive
88% of the online shoppers who read reviews will take them as seriously as if it were a personal recommendation or criticism.
72% of consumers say that positive online reviews make them trust a local business more. Source: BrightLocal
Building and Managing Your Reputation Capital
Consider what aspects of your daily business life might affect your reputation capital account, either positively or negatively. Some of this is obvious, such as paying suppliers on time, providing excellent customer service, delivering on time, being ethical in every aspect of your operation, being environmentally aware and personally giving back to your community.
Other aspects are less obvious. For example, guilt by association — you and your company may be actively building and maintaining your reputation, but what about individual employees, business partners or suppliers who may be carrying out activities that, if connected to you in any way, could affect the way people view your company?
Something else to consider: we live in a time when consumers can review any product or service online, quickly and easily. They can also actively attack you or your company even if you are completely blameless. Social media is both a blessing and a curse when it comes to your reputation so you need to be constantly aware of what people are saying about you online — and also what your employees are saying about your company and what it’s like to work for you.
There are no secrets anymore, but forewarned is forearmed; ensure you are aware of what is being said about your company across all social media and be prepared to carry out damage limitation. Admit when you are wrong and put things right quickly, efficiently and to the complete satisfaction of the customer.
Reputation capital is about you and your judgement, knowledge and behaviours. It is largely contextual but generally based on skill level, trustworthiness and reliability. Simply being aware of the fact that everything you and your company does will affect your reputation for good or bad is going to help you build a significant, albeit intangible, capital asset.
And remember, as my friend and mentor Ken Stratford said to me, “Victoria is a very small town. You can spend your reputation capital in a few days if you act unwisely.”
Mike Wicks is an award-winning author, blogger ghostwriter and publisher. He is president of Blue Beetle Creative Media.