Download Is reputation damage a ticking time bomb for your

 Employee Risk Management Is reputation damage a ticking time bomb for your organization? Helen Rideout This is PART 1 of a three part series of whitepapers on employee risk management. Employee risk ‐ Is reputation damage a ticking time bomb for your organization? “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that you’ll do things differently.” Warren Buffett Although Warren Buffett’s words are sound advice, the speed in which business reputation can be destroyed is still overlooked by many organizations. A classic example is the now immortal comment by Gerald Ratner, the former Chief Executive of Ratner’s. Having described one of his products as ‘total crap’ in the early 1990’s, he saw the value of his company nosedive by £500 million. He was then forced to sell the business; probably making these the two most expensive words ever uttered. Whilst this is an extreme example, it does show how fragile an organization’s reputation can be. Plus, it is worth noting that this happened before the age of social media. In today’s connected world, if the wrong statements or actions become public knowledge, the fallout is magnified. This added impact of social media is well illustrated by the real‐time tweeting of redundancies at HMV’s head office in January 2013. During the meeting with HR, the social media team used the company’s official Twitter account to communicate developments to HMV’s 67,000 followers. Apparently, one tweet alone was re‐tweeted 1,300 times within a 30 minute period; sending it viral. Also of interest was the fact that senior members of the marketing team (including the marketing director) did not know how to shut the Twitter feed down. That alone added to its brand damage as did the total lack of effective crisis management. Unfortunately for HMV, their poor handling of this incident also received a lot of bad press. Whilst these examples proved to be highly damaging for both businesses, its impact was felt in different ways. For example, Ratners’ brand image was ruined, whereas with HMV, the harm was mainly to its reputation as an employer. Another distinguishing feature is that Gerald Ratner’s comment was said in jest; it was not intended to harm his business in any way. This can be contrasted with the employees of HMV who deliberately set out to cause damage as revenge for being made redundant. So, the big question is – can you detect if your organization is at a particular risk from reputation damage. If so, what are the most common triggers likely to be? The answer is ‘yes’, it is possible to identify if your organization is at a greater risk of reputation damage. This is because there may already be evidence of underlying problems that, if not dealt with, can quickly escalate into bitter resentment on the part of the workforce. If this happens, any damage caused, eg comments on social media, is likely to be deliberate. In this situation, one or more of the following will exist: 1) high staff turnover rates; 2) low workforce morale; 3) higher than expected levels of sickness absence; 4) deteriorating employee performance; 5) incidences of whistleblowing; 6) industrial sabotage, such as previous theft of confidential information; and 7) the departure of groups of employees to either compete against you, or work for competitors. What is apparent with these undercurrents is that they reflect levels of employee disengagement that is already quite intense. For example, high staff turnover and sickness absence are classic indicators of discontent that manifests itself in a permanent or temporary withdrawal from the workplace. Yet, they are all also measurable to varying degrees. For example, the mood of the 1
workforce (seemingly the least tangible of the seven) can be determined by quantitative feedback from employee surveys as well as qualitative input from focus groups. It can also be deduced from appraisals, team meetings and exit interviews. In other words, examining data that should already be available will tell you whether or not you have a potential problem. In addition to these underlying factors are specific triggers that can work individually or combine to stoke resentment. These can be broken down into several different but interconnected areas. For example, the existence of a ‘toxic’ organizational culture will create the right conditions for staff to want to damage your company in some way. This could arise in a workplace where bullying goes unchecked and/or where complaints about workforce stress are ignored. Such an environment is also likely to place little value on staff well‐being generally. It follows that the longer such matters go unaddressed, the greater the likelihood that one or more employees will retaliate. Poor employment law compliance can also lead to reputation damage. One example is the public battering that the NHS’s image has taken following its shoddy treatment of whistleblowers. Also, with redundancy, unscrupulous employers have been named and shamed by the media for sacking unsuspecting staff via text message. More recently, other employers have been accused of exploiting unemployed youngsters and graduates. This is by advertising unpaid internships that are really proper jobs that should come with a pay cheque. Just three examples, but in fact, any major breach of employment law has the potential to cause lasting harm. More so if employers see the introduction of employment tribunal fees as an opportunity to ride roughshod over employee rights. Likewise, deteriorating employee relations can also lead to image loss. A case in point involves British Airways whose poor employee relations with unions led to strike action in 2011. Apart from allegedly reducing its profits by some £150 million, these strikes also badly damaged its consumer brand with many customers switching to other airlines. Another well‐known trigger, especially in non‐unionized workplaces is failing to consult with staff over organizational changes. This refers to the type of consultation that is a legal requirement as well as a more general failure to give employees a voice on issues that affect them. Again the resentment this can foster is overlooked at an employer’s own risk. Last but not least, is where any harm caused to an organization’s reputation occurs accidentally. This may be due to poorly drafted HR policies, such as an ineffective social media policy that does not adequately protect your organization against employee misuse. Alternatively, it could be attributed to poor training. This may result in unacceptable levels of customer service (eg long response times), or weak product knowledge. Closely related to this is having a sub‐standard process or procedure in place. Accidental reputation damage can easily arise because the process itself is at fault. This is amply illustrated by HMV’s failure to assume control over its social media feeds before announcing the redundancies. So just taking the examples outlined in this article, the reality is that reputation risk is a ticking time bomb for many organizations. One explanation is that the board are genuinely unaware of the risks, or it could be due to a head‐in‐the‐sand attitude. If the latter, senior management are likely to isolate themselves from anything that would suggest that a problem exists. However, it could also be down to the fact that nobody is sufficiently in charge of managing reputation. Therefore no‐one really owns it and has responsible for it. Often the fall‐back position is to assume that the PR team or 2
agency can handle anything that goes pear‐shaped. But surely as HMV’s experience shows, it is preferable to do what you can to prevent problems from arising in the first place? Part 2 will examine how an employee risk management approach can be used to identify and manage the main reputational threats. 3
Reputation risk hotspots 1. Signs that your organisation may already be at risk There may already be underlying problems if you have one or more of the following: •
high turnover rates •
disengaged employees •
higher than expected levels of sickness absence •
deteriorating employee performance •
incidences of whistleblowing •
industrial sabotage, ie theft of confidential information •
key teams leaving to compete directly/work for competitors. 2. Key trigger points for reputation damage Toxic organisational culture •
Employee resentment can build if the following exists in your organisation: o
a ‘robust’ management culture that can be perceived as bullying o
long working hours being seen as the norm o
increasing numbers of grievances being raised o
historically high number of tribunal claims o
complaints about stress are ignored/trivialised o
little attention paid to employee wellbeing o
a ‘presenteeism’ culture o
corporate scandals, e.g. LIBOR fixing o
poor communication with the workforce over major changes. Employment law issues •
An organisation’s reputation can suffer where: o
their use of unpaid internships lead to accusations of slave labour, eg Tesco o
there is bad publicity due to tribunal claims o
redundancy procedures haven’t been followed, eg sacking staff via text message i a whistle‐blower has been victimised for acting in the public good, eg in the NHS o
lack of equal pay makes them less attractive to female job seekers o
it doesn’t pay a ‘living’ wage ii o
inappropriate employee monitoring can lead to complaints to the Information Commissioner and/or the charity – Liberty. o
4
Employee relations •
Failing to foster employee relations can lead to: o
deteriorating relationships with trade unions o
strikes that can damage your brand and profit margins, eg British Airways o
other union activities designed to harm your reputation o
employee resentment due to senior management’s lack of consultation. HR policies/people management •
Poor or badly applied HR policies can lead to reputation damage due to: o
failure to manage employee social media use o
not managing the content uploaded to business social media channels o
poor recruitment practices o
insufficient understanding of employment law requirements o
sub‐standard customer service due to cuts to training budgets o
poorly motivated employees o
lax management of employee behaviour during business trips/client entertaining o
badly targeted training that fails to meet business needs o
weak financial controls that have led to theft and/or fraud o
refusing to employ army reservists iii . Health and safety •
A failure to comply with health and safety legislation can lead to: o
HSE prosecutions, fines and imprisonment o
bad publicity in the local or national press o
difficulty in recruiting staff due to having a toxic brand, e.g. Network Rail’s experience iv employee resentment due to poor safety practices. o
i
The Accident Group is one employer that suffered bad publicity due to its sacking of staff by text. The final report of the Commission on Living Standards iii
Daily Telegraph article on employment discrimination against army reservists iv
The Times article on Network Rail's toxic brand ii
5
Employee Risk Management presents a straightforward, legally‐grounded process that will enable employers to identify, manage and reduce the potential threats that come with every employee ‐ as well as with anyone else who works for the organization, including contractors, volunteers, interns and temps. It covers everything from recruitment through to the end of the employment relationship. Readers will learn how to protect against threats as diverse as: managing employee social media use, an ageing workforce, remote working risks, data security and data protection. Helen Rideout is a qualified barrister (non‐practising) with a Master's Degree in Employment Law and Postgraduate Diplomas in Human Resource Management and Occupational Health & Safety. With 20 years' work experience in HR‐related roles in the private and public sector, unionised and non‐unionised environments, and large, medium and small employers, she is now MD of Savvy HR Ltd, providing consultancy services to businesses on employment risk and reputation management. Formerly a Chartered member of the Institute of Occupational Safety and Health, she currently holds Associate membership of the Chartered Institute of Personnel and Development (CIPD) and Specialist membership of the Institute of Risk Management (IRM). Available to purchase now www.koganpage.com 6