Reputational Damage Model/Method

4 Replies

Reputational Damage Model/Method

Posted by John Chivers on Jan 3, 2019 6:46 am

Many of you might be familiar with the question that follows a statement such as "this will affect all our current in-service product". That questions is: "how will this affect our reputation?"

Following on from a topic discuss in EQLP to encourage quality leaders to translate their statements into ones that matter, in terms of dollar signs. Much of this is already done: 6 sigma project success is measured in cost savings/avoidance and cost of quality is a fairly universial qualtiy metric.

I stuggle, however, to find any help or guidence in how to build a model around reputational damage. I can caluclate costs associsated with recall, repair, rework, etc. but I cannot derive a financial estimate for future lost sales through lower goodwill, un-renewed or canclled contracts, etc. Yet, we all live these realities when cleaning up after a quality failure outbreak that has reached customers. Being able to put a figure with some good maths behond it to reputational loss would give quality leaders a way to articulate (in what matters, $$$$) the future impact of not doing the recall, not patching the bug, not notifing customers.

Can anyone share any methods/models they have used before?

Re: Reputational Damage Model/Method

Posted by Michael Kirchner on Jan 3, 2019 8:46 am

John Chivers, reading your question this morning evoked a "deja vu" feeling, as I had just read an opinion piece in the newspaper about reputational damage. Here is a link to a company that is in the business of insuring against reputational damage. Perhaps this can get you started in learning about the models associated with such risk management.

Steel City RE

From their website: 

Steel City Re provides advisory services to help companies create, protect and restore reputation value.

Reputation value is the economic value of stakeholders’ expected benefits from an association, product, or service.  Reputation risk is the peril of economic or political value loss from emotionally energized disappointed stakeholders.

Hope this helps in a small way.

Re: Reputational Damage Model/Method

Posted by Amanda Foster on Jan 3, 2019 10:00 am

Fascinating question. I am interested in any answers or discussions offered on this thread.
Amanda Foster, ASQ CQA

Re: Reputational Damage Model/Method

Posted by Daniel Zrymiak on Jan 3, 2019 11:04 am

I did a quick search and found an excellent article from Harvard Business Review explaining how Elements of Value are connected to Customer Loyalty

Perceived Quality was determined to be the most valuable element that determined appeal and loyalty.  Reputation could be expressed as a reflection of perceived quality based on past experience and proven outcomes.  

The financial impact of reputation, both positive and negative, would be weighted on the criticality of the attribute to the overall offering of the enterprise.  For example, if a place like In-and-Out Burger had complaints of uncomfortable seats in their restaurants, that would not be enough to dissuade the loyal customers who prioritize the quality of the burgers.  In contrast, if a restaurant of a particular cuisine offered tainted or toxic food, that would not only damage that particular restaurant, but also create hesitations among people toward that particular cuisine.  Also consider the "Mad Cow" disease breakout.  Although a very small percentage of livestock were found to be affected, this damaged the entire cattle industry in the affected countries.  

I think a slight modification to the Failure Mode and Effects Analysis (FMEA or FMECA) model could be applied.  This model could assess and prioritize the effect on reputation based on the impact to the value element affected, the weighting of that particular value element, the extent that the failure is isolated or widespread, and the expected damage control needed to restore confidence and positive perceptions.

Re: Reputational Damage Model/Method

Posted by Duke Okes on Jan 9, 2019 4:10 pm

Read Douglass Hubbard's "How to Measure Anything."