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FACING the CHALLENGE of REPUTATION MANAGEMENT in HIGHER EDUCATION Introduction

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FACING the CHALLENGE of REPUTATION MANAGEMENT in HIGHER EDUCATION Introduction FACING THE CHALLENGE OF REPUTATION MANAGEMENT IN HIGHER EDUCATION Introduction The Operation Varsity Blues scandal has managers in 1991 after the firm became mired heightened reputation management concerns in a high-profile trading scandal. “If you lose across the higher education community. Seeing dollars for the firm by bad decisions, I will be how quickly any college or university can suffer very understanding. If you lose reputation for reputational damage, and how lasting that the firm, I will be ruthless.” damage can be, underscores how valuable an institution’s reputation is, and how critical it is to Although numerous surveys show that many safeguard it. leaders of higher education institutions place the same value on reputation as Buffet does, The book Reputation management: The key effectively managing these risks remains to successful public relations and corporate elusive. In fact, most cannot even define what communication by New York University reputation is. professors John Doorley and Helio Fred Garcia opens with a quote from Warren Buffet who addressed a group of Salomon Brothers 2 Struggling with a “soft” concept expectations when they buy products or services, employees have them when they Doorley and Garcia acknowledge the difficulty accept jobs, vendors have them when they both academics and risk managers have with partner, creditors and investors have them, and establishing a clear definition of reputational even regulators have them.” For colleges and risk. “The reason most organizations do not universities, this extends to the communities have formal programs to manage reputation that house them, the potential pool of students is that they view it as something ‘soft’— and parents considering attendance, research intangible,” they write. Yet this description partners, and the other organizations that ignores objective data. The authors point out, interact with them. “as nebulous as reputation can seem, it has real, tangible value (dollars, for example) that This definition, importantly, addresses the role can be measured. So the historical view of of external perception. While reptation’s value reputation as an intangible asset is the wrong accrues to the institution, the actions taken approach.” by stakeholders drive that value. “A reputation crisis occurs when stakeholders change Doorley and Garcia look to the tangible their expectations and behaviors,” writes fallout from scandals to argue that reputation Kossovsky. “Customers stop buying, employees management is not only possible but leave, vendors lose interest in servicing, and necessary. “And one thing is certain, as recent regulators, litigators and reporters inevitably business scandals have demonstrated in the pile on.” sharpest relief: reputations can surely be mismanaged, and in many cases, not managed This view helps to turn the nebulous concept at all.” If reputations can be mismanaged, it of reputation into concrete, measurable would follow that it must also be possible to components. Events that cause a dip in manage them. enrollment, the loss of key faculty, reductions in budget funding, or lower application rates The first step is to define the risk we are seeking for international students all stem from to effectively manage. reputational risk because stakeholders have changed their actions. Kossovsky emphasizes Defining Reputation Risk that it is resulting actions, not press coverage, that defines reputation crises: “While adverse In the article How to Manage Reputation Risk, media events can be embarrassing, they do Nir Kossovsky addresses the definitional not become reputation crises if stakeholders’ ambiguity directly. “From your boardroom and behaviors are unchanged.” C-suite to the SEC and Office of the Comptroller of the Currency, everyone agrees reputation risk exists, yet few can describe it. However, this isn’t as difficult as it seems.” Kossovsky defines reputation as the expectation of behavior that is set by stakeholders. “Customers have 3 How colleges and universities currently manage reputational risk The title of a report by United Educators (UE), The increasing likelihood of an institution facing ERM and reputational risk: More talk than a major event, the widespread lack of post- action?, hints (not so subtly) at the results from identification management processes, and the a survey of 145 higher education institutions. fact that a majority of respondents indicated Nearly 8 in 10 responding institutions has that they did not have the resources and suffered at least one major reputational event. capabilities to withstand a major reputational This widespread firsthand experience partially event form the basis for the report’s dire explains why a similar percentage consider conclusion: “Given that even one major reputational risk more important now than it reputational risk event could have a prodigious was just three years ago. impact, these numbers should be a wake up call to college and university leadership to be While the UE report is encouraging in that prepared and take the lead in managing all risks, 79% of respondents had a process in place to especially reputational risk.” know when a reputational risk event occurred, how they managed such events is less clear. “Knowing is not managing the risk,” the report notes. Slightly more than half of respondents could identify the outcome of these events, leaving a large percentage of institutions with no defined management process beyond identification. 4 A reactive vs. proactive risk Strategies for moving forward management approach The UE report offers several recommended Participants in the 2016 Arthur J. Gallagher strategies for moving organizations toward Think Tank for Higher Education Risk intentional reputational management. These include: Management added another dimension to the state of reputational risk. Notable participant • Assess and strive to steadily improve comments include: the culture of the institution and other factors that significantly contribute to the “I think we do poorly at actually preparing to institution’s reputation. manage for a specific threat. But we are very resilient and strong at responding. I could • Identify ownership and lines of give you incident after incident where we communication for specific reputational managed to quarantine, recover and clean up risks. after a bad start.” • Manage reputational and other risks in a “I would give us a 5 on a 1-10 scale for rep risk portfolio and understand how the risks are management—but an 8 on crisis response.” connected. “We are good at crisis response, and at • Share the risk register and mitigation managing all the smaller risks, but not at plans regularly with the board to gain its being intentional about managing reputation.” confidence in the institution’s developing expertise in deploying appropriate resources While these comments convey confidence to prepare for and respond to future events. in the ability to scramble after an event is identified, they also concede there are • Establish a monitoring system that will give significant hurdles when trying to get ahead of early notification to emerging reputational these events. The think tank’s accompanying damage to your institution. report The cost of reputation: Proactive steps for protecting your brand offers an explanation In much the same way that organizations for why colleges and universities continue work to establish a culture of safety, the report to struggle in this arena: “Higher education recommends a similar process with reputational institutions are notorious for having certain management. “Institutions cannot successfully distinct characteristics that make them manage reputational risks unless they build resistant to change and difficult to manage.” a governance and culture component, which Specifically, the large and decentralized nature can help set the tone, engage leaders, raise accountability, and promote desired behaviors of the institutions make it difficult to avoid the around reputational risk.” silo effect and to monitor the behavior of all participants. 5 Leveraging technology to duplicate the information to stakeholders. Risk registers and results of high performance heat maps are not the end goals. It only matters if those things move the organization towards The UE report compared self-identified high its objectives in a measurable way. As far as performers to their peers and noticed some stakeholders are concerned, ERM technology is key differences. Two traits common to the essentially a vehicle for producing intelligence high-performing group were a well-managed that shapes decisions.” Enterprise Risk Management (ERM) program, and higher levels of engagement with the board Engaging the board regarding risk. Another key trait found in high performers is the Formalizing ERM board’s connection with the risk management process. The report states, “When asked to rate The high performers took a different approach board engagement, 82% of high performers to ERM. “For starters, higher performers are agreed their board was appropriately or over more likely to have ‘a formal ERM process and engaged as compared to 53% of non-high structure’ than non-high performers (85% performers.” versus 59%),” the report states. Internal audits are an ideal tool to generate Formalizing the ERM process means moving engagement with the board. As boards grapple beyond spreadsheets and using technology with how the institution is preparing for and that helps carry out the UE recommendations managing reputational risks,
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