The Nepean Rep Report – Autumn Brings Falls

Welcome to The Rep Report, Nepean’s regular column on the recent highs and lows in the world of reputation. While we aren’t privy to the inner workings of the firms and crises listed, there are things to be learned from these public fallouts on how businesses can build resilience and handle sticky situations in the new age of digital scrutiny.

It has been a long couple of months. At the start of October, Liz Truss was just halfway through her premiership and most of us were blissfully unaware of what liability-driven investment was. This year’s Autumn certainly set up a number of businesses for a fall.

Tweet of Faith

When Elon Musk almost immediately half of Twitter’s employees, it shouldn’t have come as too much of a surprise. It was well-trailed throughout the protracted takeover process, with regular attacks on both the executive team and what he perceived to be a bloated workforce. A combative approach, this proved to be just the start – ultimately leaving the business in a difficult situation reputationally and existentially.

In an email to those remaining employees, Musk demanded ‘long hours at high intensity’ – delivering an ultimatum that drove out a further 1,200 employees. In the aftermath, Musk could be found publicly arguing with employees on the platform, whilst behind the scenes, reports emerged that the company was desperately attempting to hire back some of those that had been lost.

In itself, trailing bad news can soften the blow and provide time for businesses to answer questions from outside and in. However, the drastic and public approach taken left a poor impression on those outside of the Musk fan club, with fingers pointed at employees, advertisers and a host of other external agents.

But it didn’t have to be like this. Almost 200,000 employees have been laid off by tech companies this year, providing plenty of examples of how things could have been different. Take Stripe, for example: in CEO Patrick Collison’s

Though the economic climate is posing universal difficulties, the way in which companies react remains a choice. Not only will outgoing and existing employees appreciate a considered and careful approach, but how you treat your employees in these most public of moments will matter to your potential employees of the future. Failure to demonstrate a compassionate culture when times are hard may limit the talent available to you in brighter days.

All Made Up

One recent casualty of the cumulative forces working to bring down businesses was Made.com. Founded in 2010, the furniture and home accessories retailer underwent a number of years of rapid growth, particularly as consumers across the country showed willingness to splash out on some new home comforts during the pandemic. Digital-first, the brand attracted 1.5m Instagram followers and hit headlines with a number of unusual and eye-catching adverts.

In June 2021, Made.com achieved a £775m valuation in its London IPO, but then – just 16 months later – the administrators were called in. Built on a ‘just-in-time’ operational model, supply chain issues hit the business hard. Not only did it lead to complaints of slow deliveries in the short term, but it forced the business to near-shore stock: undermining the business model that had previously set it apart.

As the consumer habits that brought Made to such highs continued to change, the retailer stood still. Despite their digital reach, a failure to adapt to the wider business environment prevented the serving of increasingly demanding customer needs. Paired with a cost-of-living crisis that pushed its target market to take up needle-and-thread rather than search for new, high-ticket items and the situation has turned fatal.

With their reputation already on a downward trajectory, as complaints about product quality – leading to a telling-off by the Advertising Standards Authority – and customer service on social media continued to pile up, there was little in the way of brand-insulation when operational difficulties caused further problems. As margins got tighter, the lack of pre-emptive reputational action beyond slick marketing campaigns left the company exposed to even the slightest change in consumer behaviour.

Unfashionably Late

Finally, Adidas faced criticism in recent weeks for failing to act quickly enough in cutting ties with serial headline-grabber Kanye West. The partnership – almost a decade old – was brought down by a string of controversies. Adidas, however, lagged behind the other of West’s affiliates in the race to drop him.

After sending ‘White Lives Matter’ T-shirts down the catwalk at Paris Fashion Week earlier this year, October saw ‘Ye’ take part in several interviews and appearances – alongside making posts on social media – in which he came out with a string of antisemitic comments. After announcing the relationship was under review early in the month, Adidas ultimately ended the agreement on October 25 – bringing West’s net worth down from $2bn to $400m, by Forbes’ estimation.

In taking its time, Adidas amplified the reputational costs of association with such a controversial figure. Their apparent indecision, paired with the company’s recent financial woes – having already cut its full-year forecast for sales growth and profit – strongly implied an unwillingness to say goodbye. Financially, this is understandable: their share price fell 5% on the news, and the company stated the termination would have a short-term impact of up to €250 million, with the long-term effects expected to be far, far greater.

More recently, reports have emerged that top Adidas executive Roland Auschel has received a ‘final warning’ over remarks repeatedly made around the company’s diversity. There has been some outrage over revelations that, after receiving the rebuke, Auschel received a 26% increase in his bonus as well as a contract extension. It is a story that has been closely connected to the Kanye West controversy in the press.

In combination, these two stories demonstrate the dangers of reputational mismanagement, and the potential for issues to compound and multiply. Periods of scrutiny significantly increase the risk of skeletons bursting from the closet, as well as making wider audiences and stakeholders more receptive to negative stories. Without an active and considered approach, reputations can enter a downward spiral – with all the financial consequences that follow.

Written by Luke Roberts