Wednesday, June 3, 2009, 2:30 PM

McKinsey study highlights erosion of corporate reputations

A new report in McKinsey Quarterly (subscription required) should prompt a fundamental reconsideration of communications strategies in many corporate headquarters.

According to the study, eighty-five percent of senior executives said that public trust in businesses had deteriorated in 2009. To read the full report, click here. Here's a sobering excerpt:

"The breadth and depth of today’s reputational challenge is a consequence not just of the speed, severity, and unexpectedness of recent economic events but also of underlying shifts in the reputation environment that have been under way for some time. Those changes include the growing importance of Web-based participatory media, the increasing significance of nongovernmental organizations (NGOs) and other third parties, and declining trust in advertising. Together, these forces are promoting wider, faster scrutiny of companies and rendering traditional public-relations tools less effective in addressing reputational challenges...Many companies, though, rely primarily on small, central corporate-affairs departments that can’t monitor or examine diverse reputational threats with sufficient sophistication. "
How should companies respond to these challenges? Here are some thoughts:

1. Words must be backed by deeds. No amount of communicating can rebuild a reputation if a company's deeds don't match it words. Communities are increasingly interested in what a company stands for - not just what it produces. Liberty Mutual, for instance, is creatively engaging the public in dialogue while projecting one of its core values - doing the right thing - with its Responsibility Project.

2. Advocates matter. With trust in businesses so low, companies cannot expect to influence public opinion on their own. They must increasingly cultivate credible third parties - yes, even bloggers - who are willing to advocate on their behalf.

3. Listen. Whether communities gather online, at shareholder meetings, or at the local townhall, they expect a two-way dialogue. The companies that offer one, like Chevron, have a stronger chance of understanding public sentiment and building trust on specific issues, if not the entire brand.

The tectonic shifts underway in the economy, public sentiment, and how the world communicates are crowding out the old rules of reputation management. What has your company done to adjust?

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