Corporate reputation - what is it and how will my organisation benefit?

published 2002

Reputation is no longer a fuzzy ‘nice thing to have’.  It’s now a definable business attribute or even asset.  Why?  Because increasingly organisations appreciate there are tangible benefits from having a good reputation - and often dire consequences if you don’t!

What some say about reputation management:

• “Reputation equals rational expectations (based on product and performance) plus emotional expectations (based on behaviour and perception)”.  ⁽¹⁾
• “Business experience and research has demonstrated time and again that a good reputation helps a company sell its products, recruit the best and the brightest, and attract the most desirable business partners”.  ⁽²⁾
• “Reputation is impacted by actions, culture and media”.  ⁽³⁾
• “It takes 66% more time to make decisions if your reputation is unknown” ⁽³⁾
• “How does a successful company get credit for being a winner and build a high corporate equity? It takes a long-term building of relationships with a variety of audiences”. ⁽²⁾
• “Communications and relationships have taken on a new and increasing importance as intangible assets represent more and more of a companies’ total worth. Not just reputation, but intellectual capital, employee commitment, public trust and corporate brands are corporate assets that must be developed and preserved for business success”. ⁽³⁾
• “The reputation management challenge is to build, maintain, enhance and defend an organisation’s reputation in perpetuity”. ⁽¹⁾
• “Building the relationships that preserve company reputations in good times and bad requires proactive communications. There is a direct correlation between high levels of corporate equity and the frequency that a company’s public hear about it”. ⁽²⁾

⁽¹⁾ Fraser P Seitel - O’Dwyer’s PR Services Report August 2002
⁽²⁾ Building Corporate Reputation ­- Council of Public Relations (US) 1999
⁽³⁾ KD Paine & Partners to IABC conference June 2002

What benefits can a better reputation provide an organisation?

Companies with a good corporate reputation enjoy benefits such as word-of-mouth endorsement, market dominance and the ability to charge premium prices - for example, Armani, Rolls-Royce or Microsoft.  In the case of Microsoft, it can be argued that the early work the company put into building a reputation for innovation and functionality has sustained them through the recent period of litigation and ‘rushed-to-market’ products - although it is clear that their stock of ‘reputation’ is now running low.

A survey* undertaken in the United States a few years ago was among the first to measure the impact of reputation on business success.  It found that companies with reputations as “winners” are up to four times more likely to receive sales and recommendations.

* The Winning Edge - conducted for Brouillard Communications by Yankelovich Clancy Shulman

The study concluded that “companies with winning reputations have a clear advantage over non-winners in selling their products and services”.

According to the US business research organisation, Cambridge Group:

• Firms in the top quarter of the American Customer Satisfaction Index enjoy share price appreciation twice that of the Standard & Poors 500.
• Brands with ‘superior quality’ perceptions in the US earn net margins four times greater than ‘inferior quality’ brands.
• In the late 90s Yankelovich researchers worked with Fortune to track the impact of reputation on stock price. They defined a ‘corporate equity’ score that represented a weighted combination of awareness, familiarity, overall impression, perceptions and the likelihood to engage in supportive behaviour.
• In the 1999 survey, companies with high corporate equity had 12 percent higher P/E ratios than those with a low equity.  For the average Fortune 500 company, that translated into a market capitalisation increase of US$5billion.

Specifically, a better reputation is likely to:

• increase the likelihood of products or services being recommended or bought.
• assist in obtaining premium prices for products or services.
• help attract and retain better employees and management.
• make it easier to do business with suppliers, retailers or joint venture partners.
• help you attract investors or raise capital.
• protect from unfair criticism if the organisation should come under any pressure.

How does the communication specialist help build a reputation?

• By getting management to agree to standard messages that reflect the vision, values and actuality of the organisation.
• By identifying and using key and influential channels of communication to reach stakeholders.
• By ensuring that communication to key stakeholders and audiences is not haphazard but is planned, continuous and committed throughout the year.

Can reputation be measured?

Yes - by a variety of means.

Over recent years, major publicly owned corporations have been measured by a set of criteria originally set by Fortune magazine in the US and replicated in other countries, including Australia, which has its BRW Most Admired Companies and Business Leaders survey.  These are not strictly measuring reputation in isolation but they do contain reputation elements.

It is interesting to note how Fortune and BRW apply different measurements.

However organisations can undertake their own research to establish and track their corporate reputation among key stakeholder groups.  In doing so companies can set and measure the qualities and attributes they, and their stakeholders, believe are most important to their reputation.

And contrary to belief, it’s not just the large corporates that can afford to run and measure corporate reputation programs.  Even moderately sized organisations can do it.

The key is to ask some basic questions:

• who/what do we want to be compared to or measured against?
• who are our audiences/stakeholders?
• what do they think about us now ?
• what do we want them to think?