Building a Bank of Goodwill

Financial advisers often emphasize the importance of building a personal emergency fund.  What they’re referring to is a rainy day fund, consisting of a certain amount of money (e.g., 8 month’s salary) which can be drawn down during tough financial times.  Should you lose your job or get slapped with an unexpected major expense, you could rely on these savings to help you weather the financial storm.

In the communications world, a similar concept exists with regard to an organization’s reputation — this is the concept of the “bank of goodwill”.  Much like your rainy day fund, the idea behind the bank of goodwill is that companies can stockpile their reputation assets when times are good and lean on them as a buffer from negative stakeholder perceptions when times turn bad.

On its surface, the concept seems plausible.  After all, in the financial savings example, few would argue that having extra money in the piggybank wouldn’t give you some degree of financial breathing room.  But whereas money can be universally spent on a wide range of goods and services, perceptions are complex, specific to each stakeholder group, and increasingly fickle.  Additionally, academic researchers struggle to quantitatively prove the theory of the bank of goodwill.  Nevertheless, one need only look to the news for examples of big, well respected companies who have been recently blindsided by massive financial and reputation hits due to crisis or scandal.  I’ve spoken with some of these companies and they’ve all said that, if there is bank of goodwill, it gets exhausted quickly.

Outcomes-Focused Reputation Management

Here’s the broader challenge with this approach to reputation management — organizations are trying to build the company image around broadly acceptable themes, viewing a generically “good” reputation as the end goal.  If the tone of their media mentions is positive and coverage is high, then the reputation game is won, right?  Not necessarily.  Sharing messages about being generally “good” does drive stakeholder behavior.

Rather than approaching reputation as an asset to be generally maximized, a potentially better approach is to think of it as a tool to help the business execute its very specific strategy.  Strategies are set based on the unique outcomes that a company is trying to achieve, whether it’s to sell more product, recruit top talent, or influence legislation.  The stakeholder perceptions that need to be considered are unique and specific as well.

I’m not advocating that companies stop sharing stories of their latest corporate social responsibility efforts; but rather that they think more comprehensively about the specific business objectives that the organization is trying to achieve and which specific perceptions ought to be managed.

Now that I’ve provided some food for thought, I’d love to hear your perspective on the idea of reputational “goodwill.”  Post a comment below or send an e-mail to jschott@executiveboard.com.

Related CEC Resources:

• Reputation and Brand Topic Center
• Protect Your Reputation
• Managing Reputation in Online Conversations

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