Reputation Trumps Brand is a Crisis

The move by Accenture and Gillette to drop Tiger Woods shows the power of reputation and the concern of boards about reputation risk. Brands are important, but they are related primarily to customers. Reputation is related to all stakeholders, and in a crisis, companies look to manage their relationships with all stakeholders and some of these concerns may trump the customer.

Years ago, DuPont had a situation with Benlate, a pesticide that was rumored to be burning cotton crops after a rain. The division argued to maintain control of the situation and keep it between the product management and the customers. By the time the board intervened, the cost had escalated to nearly $500 million. Investors were concerned about the company's insurance protection; lawsuits were pending; employees were questioning DuPont's commitment to environmental safety. The company learned a lesson. It should have made the situation a corporate issue rather than a division one.

In contrast, when Tylenol was tampered with in 1982, J&J didn't allow the crisis to be managed by McNeil, the division that makes Tylenol. They immediately made it a J&J issue. When Kidder Peabody, the investment firm that GE used to own had an scandal involving a broker who stole from his clients, Jack Welsh immediately made it a GE issue, taking responsibility away from K-P to manage it.

Accenture had to act. It is a consulting firm. Its value is entirely intangible. That is, it does not make or sell products, but rather gives advice. Its value is its credibility, its reputation. Anything that impacts that reputation is a threat to the firm's perceived value to clients. Tiger was the association they previously wanted. "Come on, be a Tiger" was the slogan. Tiger's winning, his talent, his aggressiveness, his intelligence, his personality, were the associations Accenture coveted. Tiger is now a tainted set of attributes. His association is no longer positive. He is a joke line on Letterman and Conan. Not the stuff Accenture can tolerate.

Reputations, like brands, are comprised of symbols, attributes and associations. The difference is that reputations are based upon a larger number of stakeholders. Brands are what firms decide they want to be seen as; reputation is how stakeholders see them. The reputation of other companies that Tiger endorses are all watching this. Someone has to be first--that was Gillette. I know that the calls are going on within the management teams and board rooms of AT&T, Nike, Rolex and other companies that "employ" Tiger. They are all asking the same question: "what is the impact on our reputation? Can we take the risk? Do we want to be the last company defending our association with him? What are we hearing from employees, customers, special interest groups, the media, investors and other stakeholders?

Reputation management is the process of balancing the financial interests of the company against the needs and interests of the company's many stakeholders. An endorsement is a brand association. The endorser's attributes help further enhance the performance characteristics of the brand. Tiger is "tainted goods". He may still be the greatest golfer in the world, but his personal character is under question. His attributes no longer are desirable association.

I heard one professor on TV claim that the contracts Tiger has are unbreakable. I am not sure what this fellow knows or doesn't know about the subject of contracts. Typically, companies have a clause in these contracts that allows them to be broken if the endorser does something to create risk to the company. All of the companies that have signed Tiger are intelligent companies. I can't imagine that they do not have clauses that allow them to cancel the contract without further payment.

This is a sad situation all around. But, it is an interesting learning situation showing how not to handle a crisis and also the importance of reputation.