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By DAN REYNOLDS, senior editor of Risk & Insurance®

PHILADELPHIA---When it comes to managing reputational risk in the nonprofit world, silence is not golden. That was the message being drilled home Monday morning, Oct. 11, at a workshop on reputational risk during the 2010 Risk Management and Finance Summit for Nonprofits at the Loews Hotel in Philadelphia.

In many organizations, she said, there exists a "legitimacy gap," that space between the value a nonprofit organization believes it is delivering to its stakeholders and what the organization is actually delivering. Grandiose mission statements and cultures in which dissent and critical feedback are stifled are sometimes the biggest contributors to that gap.

The overarching dynamic in the area of reputation risk management is the time it takes to build a reputation and the speed at which that reputation can crumble.

"Building a reputation can't be done at lightning speed," Herman said.

But we know that a reputation can be undone in the amount of time it took the offshore drilling rig owned by a certain British oil company to crash and burn this spring in the Gulf of Mexico.

CHANNELING COMPLAINTS

For Leslie Ratley-Beach, the Montpelier, Vt.-based conservation defense director of the Land Trust Alliance, an organization's ability to receive a complaint, strip away its tone and other irritants, and get to the kernel of the complaint is a key to both organizational effectiveness and defending against the pratfalls that can damage a nonprofit's reputation.

"Complaints really are a gift because you are so busy with the day-to-day work, sometimes you lose touch or you are missing the mark a little bit about what your customers need and want," Ratley-Beach said.

Both Ratley-Beach and Herman swear by the book of the same name, "A Complaint is a Gift," by Janelle Barlow and Claus Moller, on how organizations can use complaints to sculpt a successful reputational risk strategy.

"If someone is taking the time out of their busy day to tell you, even if the tone is not so pleasant, they're taking the time to tell you something, that is a gift," Ratley-Beach said.

Ratley-Beach said that her organization has created a culture that encourages complaints from stakeholders, and gets plenty of them. But when surveys are conducted that ask constituents how effectively officers of the Land Trust Alliance are doing their jobs, the group gets high marks. That's because of the capacity to process complaints and improve overall effectiveness, she said.

Quelling the ego and the hypersensitivity that clouds our ability to constructively receive complaints takes time, according to Herman, but it is a key piece of what she calls "active protection." That is, taking an approach to reputational risk management that takes the power away from the disgruntled bloggers and other quasi-journalists who can damage an organization's reputation and placing it back in the boardroom, where one would hope it would belong.

"The key question is whether you are going to sit back and allow other people to form opinions about you," Herman said.

October 11, 2010

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