Llorente y Cuenca’s Jorge Cachinero on reputational freefall

Jorge Cachinero, group senior director at one of Europe’s leading communications consultancies, made some interesting comments today during an Instituto de Empresa talk. Alongside a dozen years teaching at IE, at Llorente y Cuenca and other firms he has lead brand innovation and strategy for some major international brands including consultancy, automative and tobacco companies. He recently has been highly concerned with the repetitional free-fall of the banking industry, reflected by today’s article on that topic in the Financial Times.

PariahModelJorge has written a couple of papers on the topic recently: if you’d like to see the key one visit this Dropbox link. His PARIAH process helps firms to reverse such freefall, emphasising the difference between “story doing” and “storytelling”.

Reputation management seems to be the major management discipline for the 21st century. There’s no other task that’s both crucially important and so weakly cultivated. In this century, wider ranges of stakeholders are making their voices heard, and focussing only on profit does not make companies sustainable, or even maximally profitable, in the long run (See also London finance professor Alex Edmans‘ work on that topic).

Reputation is becoming systemic: There are four systemic risks that companies must assess, alongside legal and social environmental issues, business operational processes and nature’s own risks is also the way the leadership directs the organisation. There are several example of major financial institutions facing their death because they have failed to manage their reputations. Barclays, one of the UK’s largest and most respected commercial and investment banks, was certainly too focussed on the upside of short-time risks. Management and key stakeholders had to push the CEO out as a last resort to save the bank. Stakeholders, of course, includes the external audience as well as the firm’s executives and shareholders.

Nor was Barclays unique, as the crisis at HSBC and the exposure of banks’ involvement in money laundering for drugs cartels shows that other banks shared the sort of weak morals that Barclays showed when manipulating the LIBOR rate. “Dirty right from the start” said Jorge, “Without any respect” for the legal and social constraints.

Reputational recovery, for those organisations, includes huge fines: The ten largest bank fines range from $451m (for Barclays) to $1.9bn (for HSBC). UBS, Standards Chartered, JP Morgan, ING, RBS, Goldman, Credit Suisse and ABN AMRO are also on the list.

Cachinero makes a strong point: stronger repetitional management could have been a wise investment for those organisations. He feels that these organisations cannot operate sustainably unless they operate on a more ethical basis. However, perhaps these fines are nothing compared to the profits produced by similar but unpunished actions? There’s a continuing conundrum and, while these events show one major cost of reputational crises, it remains unclear how communications professionals can gain the clout (or even the internal visibility) needed to prevent them.

PS There’s a recording of Jorge speaking on this topic on the IE Business School website.

0.00 avg. rating (0% score) - 0 votes