Last week I had lunch with a friend I hadn’t seen since high school. We re-connected through Facebook – of course – after I noticed his comments and was reminded of our shared interests. This re-connection would have been unlikely, if not impossible, without the advent of social media.

What made it easy for my high school friend and me to connect also links people of all like interests. When those like interests are detrimental to a brand, it can cause real problems – and do so in short order. 

It used to take months – if not years – for an issue or action to result in a large-scale protest. Now, that entire process can be done over the weekend with a viral video and a few dozen pithy status updates. And scandals can hit anyone, anytime. To find examples of this, you need look no further than the Tea Party movement, the national debate on health care reform, the Arab Spring and the Susan G. Komen for the Cure funding flap, to name just a few.

How do you know when it’s time to let the storm blow over or when it’s time to come out of the bunker? Each company will have a different pain threshold and their own culture will dictate when it’s important to go public with a response. For some companies, an issue that gets noticed by employees will be more worthy of a response than if it were thoroughly picked over by industry analysts. And vice versa.

Generally speaking, when conversations move beyond a small group of interested parties, it’s usually a good sign that you have a firestorm building. For example, when a small tech story moves out of the trade press, gets picked up by the Wall Street Journal, is being posted on the mommy blogs, and is finding its way into political stump speeches, you have a problem you should address.

But if the advent of social media has made it easier to find information, it has also made it easier to respond. The changing of this equation has lowered the threshold for when you can respond. Tweeting a response to chatter on Twitter is comparatively easy as opposed to launching an ad campaign that sets the record straight. If the bulk of the conversation is online, here are five steps to follow:

1. Have a way to listen to customers online. Controversies tend to bubble on the Internet and social media long before they hit broader distribution in the mainstream media. A strong online presence – including public facing blogs, Facebook, Twitter and other channels – gives a company the early warning that conversations are percolating.

2. Communicate where the conversation is happening. Respond swiftly and authoritatively in the same channels in which the conversation is happening. Already having the online infrastructure to swiftly respond provides the ability to directly address concerns and avert controversies.

3. Figure out who’s talking. How do you tell if the conversation around your company is a growing wildfire or 10 angry people talking to each other? Most media monitoring tools can easily identify the volume of mentions around your brand. Also, look closely at who is doing the talking and how it is spreading. Are the people talking those “friends” that post what they are having for dinner and repost cute pictures of cats in costumes? Or are they Malcolm Glaswell’s “Connectors” – who share comments and content that are relevant and compel social media circles to develop opinions? These “connectors” are significantly more important than those loud-talkers who tend to speak without being heard.

4. Empower your advocates to come to your defense. An organization with a well-defined reputation will typically see conversations self-regulate. That is, those who are favorable to the company will come to its defense as critics try to amplify negative news. You, as a company, need to go on record with the facts. This will give your advocates information with which they can defend you.

5. Keep score. Make sure your advocates are not getting overwhelmed. Sentiment analysis will identify if (and when) you should engage to keep critics from getting the best of the debate.

A company has to be able to look within itself and identify which issues are credible and which are red herrings. Is there some basis in fact to the criticism, however minute, or will a person of average intelligence assume the claims being made are irrelevant? If you brush away criticisms as the rambling of a conspiracy theorist – instead of getting the whole truth out – you better pray a kernel of truth never emerges from the heap to make their rage legitimate.

With piles of information as far away as the click of a mouse, customers are being more discerning than ever before. In the current economic environment, companies are looking for every possible advantage to differentiate themselves from their competitors. Protecting your reputation will always be a balance between knowing when to engage a hostile public and when to allow the Tempest in a Teapot to blow over.

Ultimately, you should be prepared to stand before the microphones when you have (1) a high volume of “connectors” (2) saying negative things about your brand (3) your advocates are not adequately balancing the debate.

For many in corporate America, getting caught in a new media firestorm is scary. Rather than engage on issues that simultaneously benefit their business goals AND the communities they serve, some corporations are pulling back from the public arena. If there is the slightest hint of controversy, the urge to go underground is even stronger. But what may feel like a safe move is not strategically smart.

For countless corporations, when it comes to their reputations, they face the same paradox. If the first you hear about a company is some distant or even questionable scandal, your first impression – which is certain to be negative – can be difficult to change.

If you have banked some goodwill, you are in a better situation.

So, why do companies decide that defending their reputation is so important? In a recent paper by the Harvard Business School, authors Ioannis Ioannou and George Serafeim argue that “effective management of stakeholder relationships, the fundamental blocks of [reputation management], may result in better financial performance.”

Citing a series of scientific studies, they argue that “identifying and managing ties with key stakeholders may mitigate the likelihood of negative regulatory, legislative or fiscal action, attract socially conscious consumers, or even attract financial resources from socially responsive investors.” More simply put, reputation means money.

George Shelton is a senior vice president at Hill+Knowlton Strategies and head of the reputation management and corporate practice in the firm’s Austin office.

Addendum: The Southwest Effect

Take Southwest Airlines as an example. All airlines live in constant reputational peril. From flight delays to angry pilots/flight attendants, to fees, to the potential for equipment failure at 30,000 feet – all airlines are one bad day away from taking severe reputational broadsides.

Southwest has had their fair share of a garden variety of bad days like the rest – none worse than a 2008 FAA investigation indicating that thousands of passengers were flown on an aircraft deemed unsafe by federal standards.

Yet Southwest Airlines was listed as Fortune magazine’s 10th Most Admired Company – no other domestic carrier made the top 50. Part of that success is due to Southwest’s meticulously manicured reputation.

Besides being a champion for our troops and children with terminal illnesses, the “Southwest Effect” has lowered the cost of air travel and changed the family vacation forever.