Reputational risk has become a meta risk at the very top of the agenda of strategic and operational concerns of organizations. And it is now more difficult to manage than it was a few years ago. Building a resilient corporate reputation means staying on top of the risk. Dominating news headlines and social media platforms with stories about the good work an organization is doing is no longer enough. And thinking that a good and resilient reputation comes naturally when an organization follows good business practices is a risky assumption on its own. PR professionals who succeed are those with a working knowledge of why a resilient corporate reputation is necessary, what corporate reputation really is, the principles of a resilient corporate reputation, why corporate reputation matters, and an understanding of the corporate reputation building process.
Why a Resilient Corporate Reputation?
If there is ever a time for PR professionals to pay very special attention to building sticky reputations for their organizations, that time is now. Today stakeholders of organizations are more engaged in the social media, and are tracking everything about an organization on the go. With social media, a small corporate mistake becomes a hash tag phenomenon, a trending international topic in seconds.
Hackers are on the prowl, stealing and releasing organizations’ information not meant for the public consumption. Declining public trust and increased public scrutiny has become the new normal. And with the internet, access to international network of activists, who can pick on an organization at the slightest infraction and draw monumental media attention, has never been easier.
Today, disgruntled customers and employees can do tremendous damage to the hard-earned reputations of organizations with just a blog or social media post. The case of Susan Fowler, a software engineer, who worked for Uber, is still fresh. Her blockbuster blog post in February 17, 2017, detailing a culture of sexual harassment, gender bias and cutthroat competition dealt a big dent on Uber’s reputation leading to the loss of 21 jobs, a board investigation and the resignation of the CEO, Travis Kalanick.
With a resilient corporate reputation, an organization can weather these challenges and come out unhurt. It is the corporate armour of defence in these uncertain times.
Corporate Reputation Demystified
Corporate reputation is not a concept that is exclusive to Public Relations’ lexicon. In their article, Corporate Reputation as a Strategic Asset, published in International Journal of Business and Social Science, Ladipo Kunle Adeosun and Rahim Ajao Ganiyu noted that corporate reputation is a concept with exceptional multi-disciplinary richness, spanning Psychology, Sociology, Economics, Marketing and other disciplines.
According to them, in Psychology, reputation is most often analyzed at the individual level and treated as a mechanism for evaluating the risk of interaction.
In Sociology, reputation, both individual and organization, is treated as a social phenomenon, and characteristic of modern society, as well as a mechanism for assessing the extent of legitimacy of a firm.
In Economics, reputation is seen as a signal about a company’s presumable actions in the market and its possible strategic behaviour in the marketplace.
In business strategy, corporate reputation is interpreted as an intangible asset and mobility barriers in the market.
Finally, they explained that in Human Resource Management, employees are considered as ambassadors of corporate reputation; whereas, in Public Relations it is treated as a practice and an object of the discipline.
Perhaps, it is this multi-disciplinary nature of corporate reputation that has made it difficult to arrive at a universally accepted definition. Today, there are as many definitions as there are those who have written on the subject.
In their article, Corporate Reputation: the Definitional Landscape, Michael Barnett, John Jermier and Barbara Lafferty place the existing definitions into three dusters, namely: Asset Cluster, Awareness Cluster and Assessment Cluster.
Definitions in the Asset Cluster are those that describe corporate reputation as resources or intangible assets of economic value an organization cannot do without. Awareness Cluster contains definitions that see corporate reputation as general awareness or perceptions stakeholders have of an organization while those in the Assessment Cluster indicate corporate reputation as stakeholder’s judgement or evaluation of an organization.
They conclude that definitions that will stand that test of time are those in the Assessment Cluster. I cannot agree less.
One assessment definition of corporate reputation that hits the bull’s eye is that given by Manto Gotsi and Alan Wilson in their article, Corporate Reputation: Seeking a Definition, published in Corporate Communication: An International Journal. According to them, corporate reputation is “a stakeholders overall evaluation of a company over time. This evaluation is based on the stakeholder’s direct experiences with the company, any other form of communication and symbolism that provides information about the firm’s actions, and/or a comparison with the actions of other leading rivals.’
Stakeholders’ evaluation of an organization is usually based on the expectations they have of it. These expectations are shaped by the beliefs they hold about what an organization should do and should not do, what the organization says about itself, the promises an organization has made through its vision and mission statements, its marketing communication messages and what other organizations in the same industry are doing and not doing.
Specifically, stakeholders’ evaluation of an organization is usually based on what are often referred to as corporate reputation drivers, namely:
- Quality of corporate governance
- Quality of organizational leadership
- Extent of corporate social responsibility
- Quality of workplace talents and culture
- Quality of goods and services
- Level of legal and regulatory compliance
- Quality of communication
- Financial performance
- Innovation and so on.
Every stakeholder has his interests, priorities and needs. Therefore, what is important to one stakeholder may not be important to the other. This explains why reputation is in the eye of the beholder. It also explains why an organization can have more than one reputation.
The implication for PR professionals is that reputation should be managed across all stakeholders groups. This requires a strategic approach and the realization that building a resilient reputation is a team sport that should involve every department and every unit in an organization. True, reputation management is a function within the remit of Public Relations Departments, but there is a crucial need to seek and win the support and participation of departments in shaping policies, procedures and actions in order to succeed. After all, the key drivers of corporate reputation, which must be constantly improved, cuts across every department in an organization.
Beyond The Confusion
Since it is impossible to build what you do not thoroughly understand, building a corporate reputation that sticks will remain a mirage as long as there remain an iota of confusion between corporate reputation and other communication and marketing concepts such as corporate identity, corporate image and corporate brand.
Apart from understanding the differences, there is need also to appreciate how these concepts fit into the corporate reputation puzzle. In the next few lines, I will attempt to clear up the confusion and show how they are linked.
- Corporate Identity
Initially, corporate identity was seen as the visual representations of an organization through logos, uniforms and other visual identification elements. But today, some scholars believe it is a mix of elements which gives an organization its distinctiveness including culture, structure, market scope as well as the visual elements.
Rather than get enmeshed in any form of definitional arguments that pervade the academic and professional space on the concept, International Corporate Identity Group, a body of experts on the subject from renowned business schools around the world including Strathclyde, Erasmus and Harvard Business Schools, has offered a broad 4-paragraph statement which captures the essence of the concept and the differences from other communication and marketing concepts in what is called The Strathclyde Statement:
“Every organization has an identity. It articulates the corporate ethos, aims and values and presents a sense of individuality that can help to differentiate the organization within its competitive environment.
When well managed, corporate identity can be a powerful means of integrating the many disciplines and activities essential to an organization’s success. It can also provide the visual cohesion necessary to ensure that all corporate communications are coherent with each other and result in an image consistent with the organization’s defining ethos and character.
By effectively managing its corporate identity, an organization can build understanding and commitment among its diverse stakeholders. This can be manifested in an ability to attract and retain customers and employees, achieve strategic alliances, gain support of financial markets and generate a sense of direction and purpose. Corporate identity is a strategic issue.
Corporate identity differs from traditional brand marketing since it is concerned with all of an organization’s stakeholders and the multi-faceted way in which an organization communicates.”
- Corporate Image
This is the overall impression stakeholders have of an organization based on self-representation through corporate identity. In other words, it is the result of stakeholders’ interpretation of the identity communicated by an organization, and whatever it communicates otherwise.
- Corporate Brand
Writing in California Management Review, David Aaker states: “The Corporate brand defines a company that will deliver and stand behind the offering that the customer will buy and use.” The corporate brand expresses the way customers think and feel about an organization based on self-presentation of the organization.
Unlike corporate reputation which is organization-centric and is the result of stakeholders’ assessment of an organization’s behaviour and communications, a corporate brand is focused on the customer and is used only when an organization operates in a highly defined and competitive market.
Both corporate reputation and corporate brand are strategic initiatives and intangible assets, but the focus of reputation is to win the credibility, respect and trust of all stakeholders while corporate brands seek to gain relevance and differentiation in the eyes of the customer.
Relationship between the three concepts is symbiotic. The root of a good corporate reputation lies in corporate identity. It presents to stakeholders what an organization is and what it stands for. And a good corporate image sustained over a long time becomes the reputation of the entity involved. A good corporate brand contributes to the making of a good reputation of an organization and a good reputation rubs off positively on a corporate brand.
10 Resilient Corporate Reputation Principles
My research and consulting experience reveals ten key principles PR professionals should have at the back of their minds when working to build a resilient corporate reputation. They are:
- A corporate reputation is socially constructed by the diverse stakeholders of an organization.
It pays to understand what matters to them in order to adopt appropriate approaches to address their concerns.
- Corporate reputation is built based on what is known about an organization.
Corporate dialogue is critical to effective corporate reputation building. It helps you understand the attitudes, expectations, tastes and preferences of its stakeholders. And communicating an organization’s identity, corporate social responsibility initiatives, corporate performance and other reputation drivers is important.
- Good deeds alone do not grant a good reputation. It is how these deeds are perceived or interpreted that counts.
PR professionals are therefore expected to feel the pulse of stakeholders and advice their organizations on the initiatives that will meet their needs and expectations.
- A corporate reputation is only as resilient as the level of risk management in an organization.
Most PR professionals focus on managing reputational risks. This is a big mistake. Reputational risks are not isolated risks. All risks, be it supply chain risks, strategic risk or governance risk, can affect corporate reputation.
- A good reputation is always the result of doing the exceptional.
What an organization does and how it does it must set it apart from competitors. Reputation is a differentiator; so, doing what everyone is doing cannot build a resilient reputation. Pay a generous salary not offered by your competitors in your industry, and you’ll be better regarded by your employees and others in the industry for that.
- Corporate reputation is based on stakeholders’ perception of an organization.
Their perception develops from a combination of experiences with an organization. And their experiences include how you met or did not meet their expectations. Effective reputation building effort is only possible when you can influence their experiences positively.
- A good corporate reputation is not built overnight.
It is the result of consistent and sustained good works that meets the expectations of stakeholders. Effective communication of such works is also important.
- Corporate reputation is not static.
It changes as stakeholders’ expectations change. After all, it has its root in their minds. Therefore, monitoring stakeholders’ issues and expectations and addressing them quickly is the key to building a corporate reputation that sticks.
- Corporate reputation is rooted in good corporate governance.
Organization for Economic Co-operation and Development (OECD) is the global custodian of standards and best practices in corporate governance covering issues of transparency, corporate structures, stakeholders’ rights, accountability, equity and inclusiveness among others. Only organizations that abide by and implement these principles are well regarded today. As Peter Ulrich notes in the book, Business in the Nineties: Facing Public Interest, “today’s companies or corporations are to be understood as quasi-public institutions which are expected to create values of different kinds according to a variety of societal needs.’’
- Corporate reputation can only be successfully built inside-out.
The quality of employees and their attitudes toward the organization and its stakeholders count. Understanding and managing their issues and getting them on board the corporate reputation building train are the necessary first step.
Why Corporate Reputation Matters
A good corporate reputation is worth its weight in gold. It generates value for organizations on many fronts:
- It impacts corporate performance by attracting and retaining high caliber staff, providing an opportunity for firms to charge premium prices for their goods and services, attracting and maintaining good relationships with suppliers and strategic partners, providing a reserve of goodwill as a competitive barrier during challenging times and enhancing share prices.
The 2017 UK Reputation Dividend Report reveals that 39% of the shareholder value of 350 largest listed companies combined and valued at €986 billion in January 2017 came from corporate reputation.
- It is a valuable resource for competitive advantage. In an article, Firm Resources and Sustained Competitive Advantage, Jay Barney identifies reputation as a valuable, rare, inimitable and non-substitutable intangible resource which can provide a sustained competitive advantage for organizations. It is a complex social resource that takes a long time to build, and the duration of time cannot be shortened by competitors.
- Corporate Reputation impacts an organization’s value in the marketplace. The 2017 UK Reputation Dividends Report reveals that reputation alone contributed a whopping 57.6% to the value of Royal Dutch Shell.
- Corporate reputation is a powerful resource to leverage on and win against activists or competitors’ attacks which could prompt a crisis for an organization. Kevin T. Jackson has this to say in his book, Building Reputational Capital: “Firms with reserve of reputational capital get cut more slack when a crisis hits. It creates a “presumption of innocence” and raises the “standard of proof” needed for those attacking your firm to gain credibility.”
- With a good reputation, it is easy to stabilize customers demand for goods and services during economic downtimes.
- A good reputation confers on an organization bargaining power and credibility with regulators, creditors and government.
- Finally, it boosts the impact of PR campaigns and other marketing communication messages.
Corporate reputation matters because organizations operate in a reputation economy, which according to the Reputation Institute is “a world in which perceptions are reality, in which reputation dynamics drive value creation and value destruction.”
The Resilient Corporate Reputation Building Process
Organizations cannot wish a resilient corporate reputation into existence; they must behave their way into it. This requires taking concrete and calculated step-by-step actions and recognizing the fact that a resilient corporate reputation can only be built on stakeholder-friendly policies and effective communication.
I believe that the process should take the following steps:
- Set up a reputation task force or committee. Reputation management may be within the remit of PR and communication department, but the complexity and multi-functional nature of corporate reputation demands inputs from all departments of an organization. This makes it easy to spot reputation – specific issues from different departments. The task force should report directly to the CEO.
- Identify and evaluate reputation risks. According to IPSOs Reputation Council Report 2016, identifying reputation risk may require:
- Social listening and traditional media tracking
- Opinion leader tracking
- Broad stakeholder engagement.
- Engagement with policy makers
- Public Affairs and government teams monitoring policy, tax and regulation developments.
- Monitoring of NGO activities in other industries
- Legislative landscape monitoring
- Competitive landscape monitoring
What stakeholders say or think about your organization across all reputation drivers matters. Gaps in their expectations present risks that must be managed by closing them. Determine the ones that require urgent attention, given the impact they can have on your organization.
- Develop a corporate reputation building / management plan. The plan should include a statement of reputation challenges, problem areas within and outside the organization and the strategies and timeliness for addressing them Of particular importance is the need to specify what you will do to bring every member of the organization on board.
- Implement the plan. Begin by training members of the organization on reputation awareness, covering how to identify stakeholder issues and the mechanisms provided to address them. Building a resilient corporate reputation requires an enterprise-wide competence.
Tell your organization’s stories, especially on areas of achievement relating to stakeholders’ interests.
- Evaluate your efforts by asking yourself some relevant questions: Have you done all that you specified in your plan to do? Have the messages hit the bull’s eye and interpreted as intended? Have stakeholders’ behaviours, attitudes and perceptions toward the organization moved in the intended direction? Your answers to these questions should determine your next move.
In conclusion, building a resilient corporate reputation is no mean task, and it is not a day’s job. It requires deep thoughts and analysis of your organization’s business environment for effective navigation of the shifting sands of stakeholders’ expectations, interests and changing perceptions. It demands enormous commitments from the top management, especially the CEO, and everyone in the organization. Success is only guaranteed when everyone buys into the vision. There are no other options.