How to Measure and Manage Your Corporate Reputation

Terry Hannington

• Editore: Routledge
• Anno: 2016
• ISBN:
  9781317120667
• Edizione: 1
• Argomento: Betriebswirtschaft
• Categoria: Öffentlichkeitsarbeit

The issue of brand has overshadowed that of reputation. It has been fashionable to re-brand, spend a lot of money on advertising and hope that you can leave your negative baggage behind. This strategy doesn't always work, witness Monday or Consignia, both victims of their 'infectious history'. Terry Hannington provides a blueprint for effectively measuring and managing your reputation. That means understanding the difference between brand and reputation, the significance of the latter and how you get your reputation in the first place. This book shows you how to measure and understand stakeholder influence via reputation assessment research techniques and, once you have done that, how to build and manage a reputation management plan.

CHAPTER 1 Introduction

DOI: 10.4324/9781315587226-1

The use of the words ‘corporate reputation’ in the title may have evoked thoughts that this book comes from the fuzzy end of the communications industry. If that is the case, wait a moment and read a little further before passing judgement. This book contends that corporate reputations significantly affect the financial performance of commercial organisations. It advances the arguments that you can map, measure, understand and manage your reputation, thereby affecting positively your organisation's financial future.

It will discuss what you can do, practically and pragmatically, whether you are a multinational or a local player, to understand and modify your reputation. We shall examine the strategic and tactical impacts of corporate reputation, how your organisation's reputation influences business opportunities and its effect on your ability to attract the resources to capitalise on those business opportunities.

The book focuses on organisations that operate in business-to-business markets but its recommendations are relevant to all types of organisation. It presents the evidence that indicates the significance and impact of corporate reputations and discusses the importance of researching and managing it. It gives pointers to help you identify whether you have a reputation issue and who within your organisation should own the issue of its ongoing management.

It is not so difficult to accept how our personal reputations affect us in our business and private lives. Corporate reputations have an equally significant impact.

In today's world, where ideas are increasingly displacing the physical in the production of economic value, competition for reputation becomes the significant driving force, propelling our economy forward. Manufactured goods often can be evaluated before the completion of a transaction. Service providers, on the other hand, usually can offer only their reputations.

Alan Greenspan, Harvard University commencement address, Cambridge, MA, USA 10 June 1999

More recently Alan Greenspan returned to the subject in a speech at New York University's Stern School of Business and stated ‘Corporate reputation is fortunately re-emerging out of the ashes of the Enron debacle as a significant economic value’.

Does your corporate reputation really matter?

We have seen the impact of a reputation crisis that caused an organisation to implode and practically cease to exist in the case of Arthur Andersen. In June 2002 a jury in the United States found accountancy firm Arthur Andersen guilty of obstructing justice by shredding documents relating to the failed energy giant Enron. The verdict virtually destroyed the 89-year old organisation, once one of the world's top five accountancy firms. By this time Andersen had already lost much of its business, and two-thirds of its once 28,000 strong US workforce.

Marks & Spencer one of the world's most respected retailers was reported to have a higher reputation than the Church or the British Royal Family in a 1998 survey conducted by Corporate Edge. The research, by the brand consultancy group, asked the public to rate organisations on their willingness to listen. Marks & Spencer came top, closely followed by Body Shop and Tesco.

In May 1998 Marks & Spencer announced profits at the top end of analysts’ forecasts. In the previous financial year to the end of March pre-tax profits had risen 6 per cent to £1.17 bn ($1.9 bn). However within a year the company fell on harder times with profits tumbling and rumours of takeover bids. They were forced to cut traditional links with British clothing manufacturers, close down overseas operations and rethink their brand. In November 2000 Marks & Spencer's chairman and chief executive Luc Vandevelde said there were ‘no quick fixes’ as sales continued to fall, and that the company, ‘had lost sight of some of the basics of retailing’. The reputation of this hitherto revered retailing institution was slipping fast with its core customer base. Its latest clothing ranges had been harshly criticised by customers for being out of touch. Marks & Spencer had failed to listen effectively.

Good health was only restored when a new management team and fashion designer George Davies was recruited. Mr Davies had launched Next, one of Marks & Spencer's rivals, and designed the highly successful budget clothing range ‘George’ for supermarket chain Asda. His ‘Per Una’ styles for Marks & Spencer helped to restore sales.

Marks & Spencer had stopped to listen effectively but hopefully caught itself in time. If it had conducted appropriate research earlier to understand the changing perception of its reputation by its stakeholders, and acted upon the findings, then perhaps the story could have been far less dramatic, much more one of evolution rather than a painful revolution.

Where Marks & Spencer's sliding sales was in part a case of failing to listen to customers effectively, Andersen's questionable business practices revealed a view of the organisation that its customers and stakeholders rejected. They had engaged in behaviour that was emphatically rejected by its stakeholders. They did not want to be associated with a company that had so badly damaged its reputation.

The purest treasure mortal times affords is spotless reputation. That away, men are but guilded loam and painted clay.

William Shakespeare Richard II

Your reputation affects business results every day of every year

This book takes many examples from service companies but in practice reputation matters to all companies. Most companies are to a great extent service companies. They often rely on the services they are able to deliver, directly or indirectly, to complement and reinforce the effectiveness of their products. A manufacturer, for example, is not judged solely on the quality of its products but also on how well it is able to sell, service and deliver them. In the global economy product uniqueness is difficult if not impossible to achieve. Success derives from an ability to present the differentiating factors, to give your buyers a good buying experience and to be consistent in meeting your promises. The services of selling, servicing and delivering products has a tremendous impact on your success.

Irrespective of the service dimension to companies, the product itself develops a reputation over time, for performance, utility, reliability and many other qualities. Its reputation significantly affects the financial performance of the product. This book does not deal with the issue of product reputation or indeed specific service reputations but more widely with the impact of corporate reputations on future financial success.

Corporate reputation management is not only about having a good or bad reputation. It is not simply about highly public failures. Your corporate reputation affects the financial health of your organisation every day of every year. The way customers, investors, employees, suppliers, the public, analysts, media and regulators view your organisation has a profound effect on your business opportunities and your ability to attract the resources to capitalise on these opportunities. An appropriate reputation helps you to win new business, retain existing customers, attract new employees, gain favourable media coverage and acts as a barrier against competitors.

Let us put aside global rankings of corporate reputations like the one conducted by the Reputation Institute.^† Consider instead the concept of having an appropriate reputation.

• What is your corporate reputation?
• Is it helping or hindering you?
• Is your reputation, in this sector of your activity, appropriate for you to achieve your corporate ambitions?

These are the questions we need to ask and find sound answers for.

Reputation is a corporation's most important asset

Executives often talk about brand but very few mention reputation and even fewer believe they should spend time assessing that reputation and actively managing it. The contention of this book is that you should map, measure and understand your reputation. Once measured and understood you can take concrete actions to minimise the negative and capitalise on the positive affects.

In most organisations, management attempts to protect tangible assets which range from proprietary designs to trade secrets, even office furniture and fixtures. Yet they often fail to protect their organisation's best asset, its reputation, with equal vigour.

It is difficult to place an accurate value on an organisation's reputation. A crude but viable estimate is the current market value of the company minus the tangible assets. By sub-contraction you arrive at an estimated current valuation of your reputation. Does it look like it is an asset worth protecting and managing now?

RESEARCH EVIDENCE

Research into the factors affecting the selection of companies to be invited to bid for business-to-business contracts highlights the issue of reputation as a highly significant selection factor. The final choice of supplier is also strongly influenced by the buyer's perception of the supplier's reputation.

One source of research into this area is ITSMA, an American organisation that focuses on advising IT services marketers. ITSMA has carried out research over a number of years, as part of their service to members, attempting to understand what influences decision makers when deciding who to invite to bid for contracts and what influences their final choice of vendor. When selecting whom to invite to bid for contracts, buyers quote their prior relationship with the vendor, a seminar or workshop and recommendations from their peers as their most favoured sources of information. It seems that in this age of sophisticated marketing and electronic information sources word of mouth still has great potency.

Figure 1 is one of a number of research findings that point to reputation as being the highest ranked influencer. ITSMA asked the question ‘How influential were the following in helping you make your decision to purchase services from your vendor?’ The results, shown in the figure, are consistent with ITSMA's findings over a number of years.

The most important influencers were shown to be an overall assessment of the vendor's reputation, impressions gained via seminars or workshops, peer recommendations, vendor's sales staff and personal experience. These should not come as a surprise to us. Business-to-business relationships have always been based on trust and more specifically the trust between key representatives of the buyer and seller. Reputation in effect expresses the qualities of the trust you have been awarded by your stakeholders. This emphasis on trust seems to be even more important for the service sector where the ‘product’ is less physically tangible. Selecting a service provider is a potentially reputation-damaging activity for the person or group charged with making the decision. Any failure of service by the selected service provider is often highly visible within their organisations. They need to be convinced and very comfortable with their chosen selection.

For business-to-consumer markets, trust in the key representatives of the organisation is replaced, in many cases, by trust in the brand that stands as a symbol for the organisation. In some instances the CEO embodies and expresses the values of the organisation and becomes the most recognised symbol, as is the case with Richard Branson and Virgin.

Figure 1 How customers choose Source: Source: ITSMA, How Customers Choose Survey, 2002 Note: Mean ratings based on a 5-point scale in which 1 = not at all influential and 5 = very influential

ANECDOTAL EVIDENCE

When I meet the senior executives from the major customers of the organisations I work with, I always try to ask the question ‘Why did you do business with us?’ The most often quoted response is ‘I felt comfortable with your people’ or ‘I felt I could trust you’. I am always surprised by this level of candour admitting to the emotional nature of the decision. I can remember only a very few occasions when, for example, price or technical competence was the mentioned factor. Nevertheless, if your technical competence or price does not meet the accepted norms of your market then of course emotional factors will not sway the decision. In most cases you are in a competitive situation with a number of suppliers who are all well qualified to provide the required product or service. The winners are, more often than not, those companies that have the right kind of relationship with the buyers and are able to reassure buyers that they will deliver what they have promised.

Reputation is a corporation's most important asset. Strong and durable reputations are built over time by doing the ‘right things right’ across the organization, and taking appropriate credit for achievements. Reputation influences all the goals a corporation can set – getting a higher stock multiple, generating higher profit margins, attracting and retaining the best employees, finding strong business partners, and capturing both the attention and loyalty of customers. Reputation also is a critical factor in how well an organization weathers a crisis.

Bill Pendergast, Corporate Reputation Management Chairman Fleishman-Hillard, Washington D.C. USA

Danger signs that show you have an issue to resolve

It is easy to be critical about the lack of attention paid to reputation. There are probably multiple reasons for this: some organisations have been blinded by brand awareness concerns; in other organisations key management have been insulated from the realities of the organisation's reputation; and in some cases ‘Yes men’ surround senior executives. In their desire to climb the corporate ladder they are very adept at telling us what they think we want to hear. It is no surprise that insulated business executives are often shocked when the media attacks their organisation or when they fail to print every one of their important words. Even within more ‘in-touch’ organisations it is tough to accept criticism, even constructive criticism, from your stakeholders and hence easier to avoid it.

SYMPTOMS OF A CORPORATE REPUTATION ISSUE

The following list of symptoms is based on one developed by Elliot S. Schreiber, Industry Professor at the Michael G. DeGroote School of Business at McMaster University in Canada. It seems to hit the mark as a litmus test for danger signs to look for. Consider your own organisation honestly and objectively: how would you answer the following questions?

• Despite all of your communications and...