Damage limitation

In a now famous quote, Warren Buffet, the world's second richest man, said: 'It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you'll do things differently'.

Rightly, many businesses have long taken heed of Mr Buffet's advice. However, the subject of corporate reputation in law firms, as in most professional services, is usually regarded as an issue best left to the marketing or communication departments. All too often, it is only when a crisis hits that senior management truly engage in how they are perceived by the media.

Given the current economic climate and increasing focus on law firms, this is myopic and can lead to problems. Companies inevitably find that damage to reputation caused by an issue can have a huge and lasting impact on the overall perception of their firm and its brand '“ so called legacy issues. Recent high-profile examples of law firms in the news demonstrate this point. For example, we now see regular stories in the legal and national press on law firms' bad handling of redundancies and the closing of graduate recruitment schemes.

Law firms are not immune to the bigger reputational risks that large corporates face. They may have to handle law suits, partnership disputes, major partner defections and situations where their clients are called into disrepute. Often, it is usually only at this point where senior management become truly engaged, with the support of their in-house teams or specialist external consultants, in defending the reputation of their firm or clients '“ by which time it might already be too late. A firm with a hitherto excellent reputation can become damaged through its association with a company whose public image had already been called into question by the media; when actually all the law firm is doing is representing its clients' best interests.

What is reputation?

The Oxford English Dictionary defines reputation as 'the beliefs or opinions that are generally held about someone or something'. In the corporate setting, this definition could be extended to say that reputation is 'what owners, staff, stakeholders, media and associated clients and suppliers say and think about a business or organisation'. Professional services firms spend a lot of time creating a good reputation through their people, client service protocols, mission statements, the media, Web 2.0, recruitment drives, directory listings, social responsibility projects, investment in people and the other management activities that define them as a business and as a brand. Accordingly, any one of these elements of a business can make or break its reputation. It follows that firms need to have all their stakeholders and audiences in mind when thinking about protecting their reputations '“ and this should be reflected in their risk management policies.

An early warning system

The best prepared companies are those that develop processes and systems for communicating during crises and situations '“ think of it as an early warning system. Like any other business process, reputation management should be discussed and monitored as an ongoing risk management process.

The process should start with an issues management team that includes practice or risk managers and members of the board/management committee. A chain of command should be established where overall responsibility is clearly defined. The next step is to prepare communication plans for all audiences that the issue might affect with key spokespeople assigned to each audience '“ for example, the relevant client partner would act as spokesman to the client, the team leader to their team. The firm should also employ a staff and reception policy for dealing with external inquiries. By having this type of contingency plan in place, firms can prepare properly for managing the information that is communicated around an issue in a controlled manner and, importantly, stop the issue from turning into a crisis.

In-house PR professionals are extremely busy promoting their firms in a positive light, and engaging in a serious issue or crisis can take up a disproportionate amount of their resource; particularly at a time when the promotion of 'good news' is paramount. Often specialist PR consultants are brought in to deal with issues and crisis management. External consultants can help to inject clarity into the situation by removing the emotion from what can be highly charged, emotive situations. The consultant also acts as a buffer between his client and the media, mediating between both parties' respective positions in relation to the issue, which can help to ensure that the client's relationship with the media remains in tact once the storm has passed.

At all stages, a PR's job is to inject clarity into a crisis ensuring that the journalists are properly informed so as to best reflect the firm's position.

Why is reputation important

Intangible Business, a global brand valuation company, used historical sales data and a qualitative expert panel data to analyse a retail brand's financial contribution and strength in the eyes of the consumer. In its annual top 100 survey, it revealed that Tesco's brand is worth more than any other UK company. At £8.4bn it is worth almost double that of second place Sainsbury's (£4.9bn). While it is difficult to compare professional services firms with established retail brands, it is easy to see how reputation has a monetary value attributed to it. Accordingly, damage to reputation can have a detrimental affect on a firm's balance sheet.

Diageo chief executive Paul Walsh believes a company's reputation will hugely influence a consumer's purchasing decision. And this does not just apply to large corporates with a consumer market. Law firms will face their own reputational issues and challenges.

One of the biggest communications challenges comes in the form of the Legal Services Act, which promises to revolutionise the UK's £19bn legal profession making it more accountable and transparent to its clients and the public in the process.

A huge majority of law firms have not even started to consider the reputational impact of the Legal Services Act. A recent survey in The Lawyer magazine found that around 30 per cent of the top 100 UK law firms were in favour of attracting external investment. Accordingly, this means that law firms will need to think about the new audiences that they will be communicating with as a result of the regulatory changes and, as we start to see a huge number of new entrants to the market with significant marketing budgets at their disposal, the importance of good reputation becomes even more pronounced.

The issues do not end there. Corporate and city law firms will need to maintain a dependable reputation as larger companies are now more than ever concerned about green issues, corporate social responsibility, and the reputation of the firms they retain. All law firms also face increased regulation with the new bodies that will oversee them, which means that they face increased media scrutiny.

Achieving differentiation

A recent article by McKinsey consultants mentioned that a growing number of firms are attempting to imitate the success Cola-Cola and Nike have had with their reputations to differentiate themselves in the market place and extend 'across multiple concepts and into multiple channels'. This means these brands now extend further than what the actual product is, i.e. drinks or trainers, and instead become lifestyle choices.

While this may sound like marketing fluff detached from the professional services arena, the basic issues are vital for professional services firms: you are selling an intangible service which does not differ radically from that of your competitors.

The challenge is to somehow achieve differentiation. There is neither a simple nor quick solution to this issue. As firms prepare to come out of a recession, it is vital to plan ahead with flexibility and a willingness to adapt. In the evolution of any species, it is those most adaptable to change that survive and thrive; companies are no different. This is where the value of reputation becomes important.

As Warren Buffet extolled: you must spend those 20 years building a good reputation and ensure it does not get ruined in only five minutes.