Bid-rigging: how to rebuild your company's reputation

With the aftershocks from the OFT's bid-rigging report still rippling through the industry, Amy Jackson asks just how much damage can a dented reputation do, and how can the pitfalls be avoided?

Balfour Beatty is proactive in identifying and dealing with risk under four categories: operational, commercial, environmental and reputational.

Benjamin Franklin could have been speaking about the economic as well as social impact of a sullied name when he said: "It takes many good deeds to build a good reputation, and only one bad one to lose it."

Reputation is difficult to measure and easy to dismiss. It's relevant to all sizes of operation and while it doesn't appear on balance sheets, its close relation 'brand value' increasingly does.

Reputation is now recognised as one of the most important intangible assets a company can have because it can be turned into very concrete value.

What value reputation?

Mowlem's value of £183m in 2005 - as rated by the stock market - was boosted to £255m after the equity of its name was calculated, underpinning an eventual sale value of £291m to Carillion the next year. The brand equity was based on Mowlem's standing in the industry and its competitive strength.

A 2007 survey by KPMG found that reputation was a dominant theme when choosing a contractor: 60% of global companies planning significant capital expenditure over the next five years felt there was benefit in using 'brand name' building contractors. One respondent said: "A 'name' company can better attract talented workers and higher quality subcontractors."

Skanska moved exceptionally quickly to address the exploitation of immigrant workers on a large NHS contract, as revealed at the end of June. The firm had relatively little control over the subcontractors its subcontractors were using, but as a lead contractor in high-profile publicly funded developments, it couldn't afford to let these sorts of practices be attached to its name.

But it's not only large corporate companies with shareholders that can benefit. Trading on a good reputation can mean reduced marketing budgets, quick uptake of new products and loyalty in times of crisis. This is when reputation becomes equity.

For example, while Skanska's woes may well herald a new focus on the ethics of all subcontractors in the employ of any large shareholder company, any smaller contractor able to demonstrate good practices in line with the values of its prospective clients may well find itself with a leading edge.

So returning to the OFT report, given that reputation can have a financial impact on any size of business, what could the 112 companies bound-up in the OFT investigation have done to minimise any damaging effects?

Don't do it!

The first rule is, if you don't want to reap the outcome, don't get yourself into indefensible situations in the first place. Your company has to live the reputation you want it to have and contrary to popular opinion, you can rarely 'spin' your way out of a blatant wrongdoing. Think long term, think about how practices look from the outside, think about what you could lose then make your decisions.

Build good relationships

Good public relations is about communicating your most important messages to your most critical stakeholders and sustaining that relationship. This isn't fluff. The better your existing and potential clients feel they know you, the more likely they are to believe their own judgement over that of others. So think about some form of regular communication that uses facts and case studies to illustrate your strengths and reinforce your most important values.

And if there's any hint of trouble, let them hear it from you first, in your words.

Be prepared

However credibly you run your businesses, you're likely to be hit by a crisis at some point - but anticipation is half the battle. The industry is practised at carrying out risk assessments, so think of this simply as a risk assessment for your reputation.

Common reputational risks in the building industry include health and safety, failure to complete work to time or budget, poor quality of build, flawed environmental performance, rapid turnover of personnel and legal disputes. Keeping an eye on the media and an ear tuned to industry news will help you maintain a comprehensive list of potential problems.

Anticipating where you could come a cropper will help you plan how to respond. Identify the greatest risks by awarding scores for likelihood and potential impact. Those with the greatest combined scores are the ones that deserve the most urgent attention, so both plan to avoid them and decide what you'll do if they happen.

Balfour Beatty identifies its own risks under four categories: operational, commercial, environmental and reputational. Measures to avoid or minimise each risk - including crisis communication plans - are identified and regularly updated, with the greatest risks also monitored at board level. The company's reaction to the OFT report shows it anticipated the conclusions well before 'Black Thursday'. By the time the announcement was made, it was able to declare it had reviewed its compliance with the Competition Act in June 2007 and was "confident that all of its subsidiaries are now fully compliant".

Fight, not flight

If the worst happens, engage - don't run. The OFT issue highlighted a clear difference between the reaction of the public companies with shareholder investors and that of the privately-owned companies. Six companies - all publicly listed on the stock exchange - proactively stated they were helping the OFT with their enquiries. You could argue that leniency of fines was the driver behind this, but these companies would also have been acutely aware of the PR value of taking the allegations on the chin, cleaning up any issues and moving on.

Galliford Try put the issue in context by saying the alleged cases represented a small proportion of its activity, but also stressed it was taking the matter very seriously: "Galliford Try has fully co-operated with the OFT's enquiries throughout its investigation. It will now review the OFT's provisional findings in detail and will respond accordingly."

Indicating full participation in any investigation shows a willingness to be accountable.

Don't lie

If your company is charged with wrongdoing of any kind, be careful how you react. If there is even a grain of truth you can be sure either the media or the regulators will find it, so think about how you are going to respond and remember that there is always more sympathy for a company demonstrating accountability than demonstrating arrogance.

Engaging with the media and the public in these situations is often better than remaining silent. The inherent suspicion of the public naturally assumes you have something to hide if all you can muster is a "no comment". But that doesn't mean you have to give everything away. Whatever the situation, gauge the level of sympathy, frankness and culpability appropriate for the situation, but make sure this is based on truth and is in line with any legal advice.

Demonstrate action

Never forget that talk is cheap. Having dealt with the immediate crisis and promised action, act. People want to see something change, a lesson learned, a mistake not repeated.

Unless you are really ahead of the game, this will take time to implement, but once achieved can be used to forge stronger relationships with your stakeholders or local media, particularly if they have been critical in the past. And don't sit back and relax just because you think you're through the worst of it. Truly successful management of your reputation takes a sustained and genuine effort.

These pointers are by no means exhaustive and if faced with a damaging situation, it's always best to seek professional advice based on your own particular circumstances. But if there's one message to go away with, it's this: always build your desired reputation on fact. To quote another US president, Abraham Lincoln: "Character is like a tree and reputation like its shadow. The shadow is what we think of it the tree is the real thing."

Amy Jackson is joint managing director of Broglio. She has been involved in the business of advising companies and public bodies on reputation management for more than 12 years.