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Posts Tagged ‘reputation management

Reputation. Reputation. Reputation. Your key differentiator: Corporate Social Responsibility

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Stand out by being a CSR thought leader

“In the business world, the rear view mirror is always clearer than the windshield.” — Warren Buffett

reputation

A study by Adam Friedman Associates continues to confirm the importance of Corporate Social Responsibility (CSR). CSR’s becoming a harder asset.

Executives from Fortune 1000 organizations said that the C-suite and/or board of directors involve themselves directly in “decision-making and measurement processes with regards to the company’s CSR programs.” There’s lots of talk about being different but when it comes to CSR and “getting it”, decision-makers at the forefront of thought leadership understand that CSR is a key differentiator.

Be different. Be better.

Who are you? What do you stand for? Where are you going?

Competition is fierce. Tools that define who you are and what you stand for as an organization show a company to be forward-thinking with a strategy that reaches beyond the latest quarter and far into the future.

The C-suite’s talking about CSR. Executives are more and more conscious of how CSR contributes to business.

CSR: Growing. Growing. Grown.

Results of the study show:

[T]here has been an expansion in scope and focus of CSR strategies and resource allocation. Many CSR initiatives were created in response to environmental issues and pressures, but companies are now expanding their focus to social, health, diversity, labor and safety issues. While many companies still focus much of their time and resources on environmental issues, CSR has grown to include almost any issue or concern that affects the operations and reputation of the company.

So, CSR is growing its influence.

More measurement. More third parties.

Measurement’s still not universal. But there are more third parties involved and more supplier audits. Of course, reception of programs by consumers and media are important and impact evaluation.

Transparency and volume of information have made consumer opinions more important than ever.

CSR and profitability are clearly linked for many corporations. Today’s thought leaders no longer see CSR “as a ‘soft’ discipline within the corporate structure”.

CSR directly affects profitability.

Integrate. Maximize. Get results.

Still think social media is a digital smoke screen?

The study found:

Social media has become an important tool companies use to communicate to their publics about their CSR efforts in addition to traditional media. This allows companies to communicate their CSR activities and progress in a manner that is fast, easily accessible and provides them with vital feedback from their publics.

Companies are using social media to supply their stakeholders with information and content. They are building online communities.

Companies are using social media to find out what their stakeholders care about. They’re using incoming messages to help craft future social media strategies.

Thinking strategically, companies have embedded CSR communications deep into their overall communication strategies. Employees are using social media to measure the effectiveness of CSR.

Everything that makes CSR disappear, makes CSR stronger:

In integration, find strength

Some executives believe:

[T]he CSR function may disappear altogether as corporations begin to absorb CSR into all aspects of their business and make it a part of every employee’s responsibilities. As companies begin to assess and measure the effects their CSR programs have on the business’s reputation, CSR may increase in both scope and importance. Based on the interviews conducted, some CSR practitioners said they believe CSR should not be its own function or department but rather an integrated part of the business … Senior executives should pay more attention to the views of their external stakeholders when developing CSR strategies because their sentiments will affect the company’s reputation and/or its position among competitors.

The study found businesses need to look at CSR as a growing function. CSR strategies should be integrated into all areas of business.

In a world where the media is full of stories of corruption, best practices will continue to resonate.

Loudly.

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Find the study by request.

Find more on reputation and CSR/sustainability here:

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The hydra upon you: Hype and its dangers for public relations and marketing

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Today’s post is a continuation of Silos, silly season, social.

The many-headed hydra and key messages

If you believe in dialogue, if you believe in the multiple digital channels that can help convey key messages, then you know the potential for communications. Still, there’s been so much noise during the iPhone 5 announcement, you might wonder why the heavens haven’t opened up and why we aren’t being visited by angels of innovation blessing all things with an “i” before them.

Never mind that sales are being reported as a disappointment.

In the post-Facebook IPO era, best practices, truth and open communication should be reinforced as the way to communicate. Sustainability as a strategy looms large.

Hype is a many-headed hydra. When all the hydra’s heads are talking at once, which one will consumers believe? What are the key messages? Is it just confusion?

Do target audiences believe they have a part in the conversation, or is it just the heads of the hydra talking to themselves?

Just as I’m writing this, a connection of mine, Mark D’Cunha posted this on LinkedIn:

Ears that do not listen to advice, accompany the head when it is chopped off.

— African proverb

Media is a wonderful creator, but what it creates, it can take away.

Satire and blowback:

Reputational damage is best avoided in the first place

When people start satirizing a brand en masse, what does it say about a brand’s future business potential?

Some outcomes are beyond even the most careful planners’ control.

The blowback from the Facebook IPO resulted in a ton of reputational damage, left many who talked about Facebook’s short-term growth potential looking a little ridiculous while reinforcing the long-term thinking of those who understand what P/E ratio means.

Companies have bottom lines. Attenion has to be paid to profitability.

Still, attention also has to be paid to whether a brand can wear out its welcome. How much is too much?

informal
Definition of hype

noun

[mass noun]

  • extravagant or intensive publicity or promotion: his first album hit the stores amid a storm of hype
  • [count noun] a deception carried out for the sake of publicity: is his comeback a hype?

verb

[with object]

  • promote or publicize (a product or idea) intensively, often exaggerating its benefits: an industry quick to hype its products they were hyping up a new anti-poverty idea

Origin:

1920s (originally US in the sense ‘short-change, cheat’, or ‘person who cheats etc.’): of unknown origin

Credit: Oxford online dictionary

IPO gaga and the misvaluations from Mars

If you’ve followed what’s happened to the Facebook brand since IPO, you’ve more than a clue about what could happen in a less-than-best-practices environment. From a risk mitigation point of view, when the crowd’s gone gaga, there’s definitely potential but also a proportionate increase in exposure.

What happens with Facebook is still unwritten. What’s sure is that amidst the feeding frenzy of negative news post-IPO, there were also stories working hard to portray potential, still. If public relations around the Facebook IPO had been conducted differently, less energy would’ve had to be directed toward rehabilitating the Facebook brand.

Facebook isn’t the first nor will it be the last to suffer from its own success. When hype goes out-of-control, it ceases to be good public relations, good marketing. Because target audiences are left with the feeling of being had.

This is sort of like a salesperson thinking of her potential clients as “marks”. Maybe the naming of things creates destiny. Clients are people.

Growth: The greatest investment the world ever knew was the investment in you

Audiences are made up of individuals. When they get together, they have awesome power. It doesn’t matter if they’re internal or external.

If you invest in treating people like smart human beings, they’ll invest in you.

I’ll be continuing posts on Silos, silly season and social. I’d like to share them with you.

Siri, What’s “sustainability”?

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“Man is the creator of change in this world.” — Steve Jobs

How will Apple speak to its growing audiences, sustainability issues and public perception?

Just sustain it

Define “change”.

Admit it.

Sometimes, you just scan the headlines, right? And they impact on you, right?

Take a look at this one:

Siri, Do You Use Slaves?

Would you want this headline related to your product? Even if you are the biggest company in the world by market cap — or maybe, especially because you are.

Heinrich’s headline (it’s a link) made very clever use of John Stewart and The Daily Show. As Apple’s market cap has grown, so has the target placed on its brand.

And why not? Didn’t Apple make its marketing focus Microsoft (the market cap leader at the time) for years? When you become the biggest company by market cap in history right now (see below article), you have to expect this.

(By the way, The Daily Show’s taken on Apple before.)

Heinrich understood how to reframe Apple advertising well. She used a guerrilla headline to attract attention to her cause.

Expanding. Digital. Universe. There are a lot of target audiences out there.

Apple’s stepped away from greening its brand. It’s supply chain has been held up as wanting.

It doesn’t matter if Apple’s competitors are using the same supply chain (some aren’t and others are paying a lot more attention to sustainability issues.) As concerns over its closed system, sustainability, patents, etc., increase regarding the Apple brand, it’s likely we’ll see more media stories, more anti-Apple posts, challenging, satirizing or taking a negative position on Apple.

Right now, it’s hype season. The iPhone 5’s coming out. Biggest market cap in history a few days ago — ok, so that wasn’t correct, but …

When you become the biggest corporation, you’d better consider the competitive threats. Big market cap means big target audiences. Audiences have opinions.

Remember BP? Remember “Beyond Petroleum”?

When BP CEO Tony Hayward began massive cost-cutting at BP, it’s focus on sustainability went out the window. What happened in 2010 with the Deepwater Horizon Oil Spill will go down in history as one of the greatest of environmental disasters.

The disaster is now synonymous with the BP brand and a 50 per cent drop in stock price. It could have been avoided with proper risk mitigation. Sustainability leads to risk mitigation.

While Apple doesn’t face the same obvious dangers to its business that the oil industry does, it’s decision-making processes regarding sustainability may be moving in the same direction as BP. They’ve both spent a lot of time and resources in court.

Is innovation better done in the lab or in court?

Above image sent out on Twitter in response to Apple v. Samsung

iPhones have supply chain and waste issues, don’t they?

The big time: Siri, What’s “market cap”?

Audiences have opinions. Apple worked a philosophy that countered Microsoft’s, but Apple’s history isn’t going to fade away. It’s going to be subverted and used against the Apple brand. Apple doesn’t exist in a vacuum.

It’s made the big time.

Apple is awash in cash. It’s sheer size makes the company’s margins and business seem unsustainable. Doesn’t it make sense that Apple would move more toward sustainability? That it would want to improve its image from a sustainability/CSR perspective?

Isn’t that what leaders do?

Or do they litigate endlessly?

Sent by user on Twitter under #boycottApple

How does such litigation reflect on brand?

Apple has almost $117 billion in cash. Exactly the reason why people like John Stewart are taking on Apple. It’s not the “little guy”.

It’s a behemoth.

Like it or not, when you’re the biggest company in the world, stakeholders expect accountability. They expect a leader. Not just in innovation. Not just the “cool” of the product you’re creating.

But a leader in best practices, too. Across the board.

And “browning” your brand isn’t that cool. Especially when you spend cash litigating aggressively.

Stakeholders want what’s open and honest.

While Apple v. Samsung wasn’t related to Apple’s de-greening, it shows how aggressive audiences embrace issues and attack a brand accusing it of “brandwashing”.

What of a company’s own employees?

… organizations should maintain their commitments to
customers, the environment, human rights and
communities or risk significant decreases in
employees’ perceptions of their organization’s CSR
commitment …

Leaders?

Business leaders ranked the top three benefits of investing in or pursuing socially and environmentally responsible
practices as follows:

  • Positive organizational reputation;
  • Higher or sustained employee engagement; and
  • Eliminate/reduce impact on the environment.

Does momentum last forever for the largest company by market cap? Not usually.

Global research conducted by Hewitt revealed that organizations with high engagement generated total shareholder returns that were 29% above average.

Above quotations from:

CSR as a Driver of Employee Engagement — Hewitt

As Costco CFO Richard Galanti has said about CSR:

It’s not about applying to the ‘beauty contest’.

Sure it’s about great products and profits, but it’s also about a corporate vision of a sustainable future — a sticky, feel-good sensation that stands for something beyond profit. It’s about who you are as a corporate citizen. About what your vision is for humankind.

After all, isn’t “man the creator of change in this world”?

With great power comes great responsibility.

— Stan Lee (creator of Spiderman)

Related articles and links

Facebook and the Frankenstein monster: It’s hard to control the lightning in hype (but best practices help)

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It’s alive!

After all the Facebook IPO hype, how could reality measure up?

As Dr. Frankenstein learned, tapping lightning to create life is full of peril. Creations can take on a life of their own.

Is buzz any different?

Creating life in the context of reality

From an investors point of view, how could a company at various times valued at 80 to 100 times earnings, valued in the stratosphere above companies with years of history and profits, not disappoint? The more sober reaction to the IPO, showed investors were paying attention to value.

While Facebook and engagement should prove valuable over time, investors were saying, hold on a minute, what’s your strategy for increasing earnings? The thing about Facebook is:

Right now, what is most valuable for brands on Facebook is free.

Why would investors speculate on the future of what Facebook might do? In the current climate, post-financial crisis, companies that pay dividends, handsome dividends of three to five per cent have a value that IPOs like Facebook just can’t match.

The modern Prometheus

Hype has a dangerous flipside.

Sure, there’s potential, but potential for what?

While most management teams want buzz for their brand, they might not necessarily want the Frankenstein monster version of it. Remember, the monster spent much of its “life” trying to kill its creator. In the aftermath of the Facebook IPO, lawsuits, finger-pointing, back-stabbing, technical failures, and other endless melodramas splayed across the media, it reminds of the classic Kubrick/Sellers line: “Gentlemen, you can’t fight in here! This is the War Room!”

How long before a satirical film’s made out of this story? Think Dr. Strangelove meets Frankenstein.

Dr. Strangebook or Frankenface

It’s obvious that Facebook, Morgan Stanley and the Nasdaq are all suffering reputational body blows. While some private investors made a lot of money on the IPO, does any management team, board, shareholder, or even casual user want to be associated with such a media horrorshow post-IPO? Monstrous hype only amplifies the “is that all there is?” feeling when it goes wrong.

The monster, stitched together and ashen, stumbled into the light of day.

When the hype machine overloads, marketers and public relations professionals have to remember that there’s no such thing as lightning in a bottle. Buzz, at its most extreme, has the potential to lash out in every direction.

When the hype machine creates a monster, it can become the destroyer of brands.

Social media seems like it’s been here forever but is still new. The buzz became a monster. Was there any longer the ability to manage the hype as the Facebook IPO drew near?

The blowback says no.

Fiascos have the potential to incubate revenge. Social media users will engage, but not in the way the brand wants them to. And like the Frankenstein monster, social media users who feel betrayed have a tendency toward revenge.

Brands are sure there’s a way to profit from engagement. It’s this belief that drives Facebook earnings. When GM came out and said that they’d lost faith in Facebook ads, despite criticism of GM’s social strategy, there was a revaluation of Facebook in the marketplace.

Doubtless, there are marketers and public relations professionals that do engagement very well. Social media, is, and will continue to be a tool of engagement where the permutations of dialogue are still being explored and improved.

But it should be part of a well thought out integrated marketing/public relations strategy.

Facebook had been grabbing headlines for a long time. Hype over Facebook crackled with the energy and unpredictability of lightning.

Now, Facebook’s grabbing headlines for all the wrong reasons. Yet again. How does this reflect on the Facebook management team? Marketers are going to re-evaluate the brand and social engagement through it.

It’s value, after a brief pop, has dropped 25 per cent since the IPO despite the underwriters’ propping the stock price up. Argue with that metric.

Facebook has emerged from the laboratory a case study.

One thing is sure: Silly season is over for now.

Luke … I am your father

A characteristic of hype is that it is a lense that distorts. Those who work at brand, engagement, reputation and other features of the marketing and public relations matrix try to tell the story of organizations for the benefit of stakeholders. But practitioners have to remember how many audiences there are these days.

Hype is a bit like Luke and his dad, Darth: There is a light side and a dark side.

Practitioners have to remember that less than best practices have a short shelf life and lead to case study after case study of failures.

Facebook promised the opportunity of the century. It failed to deliver.

This is the chemistry for a backlash.

From a marketing and communications point of view, professionals will get more creative.  But they’ll also get more analytical.

Lurching out of the laboratory: The aftermath

The nightmare of creating a monster like the one that lurched out of the Facebook laboratory reinforces the idea that best practices have to align with business objectives — and they do have to be best practices.

If Facebook’s strategy was simply to make a ton of money for its private investors then it succeeded. But as far as the long-term viability of a brand, of its sustainability, Facebook leaves a lot to be desired at the moment. Is this the image companies want to leave ricocheting around on Twitter or elsewhere?

Facebook will have to spend substantial resources trying to restore its brand and reputation. Future growth depends on earnings, and future capital depends on investors. Reputation either feeds itself or devours itself.

Alienating marketers, investors and users and being held up as a flop by the media, aren’t the kind of brand associations any organization wants. Of course, this leads to many more challenging Facebook’s business strategy.

It’s safe to say that Facebook failed at engaging with its users in the short-term. Facebook has added to retail investors suspicion of markets and valuations. Investors and the general public have tired of creature features. In the U.S., 46 per cent of people surveyed said their trust in the financial services sector had decreased.

Since stakeholders already had many questions to ask of Facebook and user privacy, you’d think that someone involved with the IPO would have been more careful before tapping the lightning that created this latest beast.

The problem with the Facebook parade’s short-term thinking is that stakeholders have long-term memories when it comes to monsters (or buzz on crank). They don’t like the feeling of being had.

Remember, the Frankenstein monster hunted down its creator across continents until it found him dead.

Related:

Should companies invest in sustainability?

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Good times. Bad times.

Corporate Social Responsibility? Sustainability?

Are these ideas and a strategy better left for the good times? Post-financial crisis can a business really afford to “green” itself or think about scarce resources?

Saving on energy costs hits the bottom line. But some sustainability projects add costs. Are they worth it?

Yes. They are.

In the post-financial crisis environment, long-term thinking is as appropriate as ever. Just how are companies who have made an authentic commitment to sustainability doing?

Long-term thinking

In 16 of 18 industries studied, A.T. Kearney found:

Companies recognized as sustainability-focused outperformed their industry peers over both a three and six-month period, and were all protected from value erosion.

Let’s talk results:

  • Over three months, the 99 companies studied outperformed by 10 per cent
  • Over six months, by 15 per cent

Such outperformance in difficult times is remarkable.

Companies were part of the Dow Jones Sustainability Index or the Goldman Sachs Sustain List.

Risk management and sustainability: A partnership

The study suggests that:

Prudent risk management practices often evolve from the same approaches used to develop and execute long-term strategies to avoid disruptive events from occurring due to weak links in the supply chain …

So … Sustainability planning may have a bigger impact on long-term business performance than many think.

Sustain outperformance in bad times

In some sectors of the economy, companies practicing “true” sustainability showed remarkable outperformance:

  • Financial services by 25 per cent
  • Media by 33 per cent
  • Automobiles and parts by 33 per cent

True strategic efforts toward sustainability have shown their worth even during trying times like the financial crisis. While some companies will take a “lip service” approach with purely tactical short-term endeavours geared toward winning awards, the strategic approach toward sustainability will produce concrete dividends even in challenging times.

More importantly, it was the worst of times

It’s not about short-term reputational gains. It’s about long-term gains and avoiding the disasters that short-term thinking so often lead to.

Strategic policies like the United Nations Global Impact, where companies follow:

… universally accepted principles in human rights, labor, environment and anti-corruption … embedded into daily business practices and … applied to supplier codes of conduct, company policies, and compliance procedures for confidential reporting and auditing, among other areas …

… have an effect on the bottom line.

In light of the growing fallout over Wal-Mart’s activities in Mexico, the evaluation of cost and commitment regarding sustainability over the long-term looks highly positive, especially since it outperforms against the average even during the worst of times.

It doesn’t take a rocket scientist to understand the damage to reputation and shareholder value the Wal-Mart allegations will lead to if they’re found to be true.

But reputational damage happens the moment allegations are made, the moment the media picks up the story. Shareholders sell fast. Headlines have immediate impact.

A brand branded with a headline related to bribery, or even supply chain issues, lasts long in the memory.

The best crisis management continues to be avoiding the crisis in the first place. A focus on short-term solutions leads to long-term crises.

Study: Green Winners

Brave new reputation: What CEOs need to know

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The new boss sings the stakeholder electric

Reputation is turning into a harder asset in the highly digitized corporate world we find ourselves in. This trend will only increase as technology rockets us forward.

Do you know where your reputation is?

Companies need to think of themselves through their stakeholders. Clients, customers, employees, the general public, shareholders, strategic alliances — just some of the important relationships in a world of informational digital milliseconds.

Just as corporations depend on consumers to buy their products, companies depend on customers to consume their brand.

After they’ve digested that brand, what do they feel, think and say?

In You’ve got to do something about your reputation: Why CEOs need to pay attention to reputation management, I looked at reputation.

Let’s dig deeper.

Fombrun, business leaders and reputation management

What are reputations worth?

Plenty.

Fombrun outlines three ways reputation adds value.

  • First, “reputation affects operating performance” resulting in increased profits
  • Second, “profitability affects market perceptions of the company’s future prospects – and so, increases demand for the company’s shares.”
  • Third, “the company’s operating activities … contribute to building ‘reputational capital’”

The shadow knows

In fact, the shadow consumes. In traditional and digital ways, it contains, or will contain, everything about an organization.

The perception of that information will depend, largely, on how a corporation prioritizes reputation, Corporate Social Responsibility (CSR), sustainability and related issues into its operational activities.

Fombrun says, “reputational capital” is a “shadow asset”, invisible but effective:

Intangible equity that humbly works behind the scenes in a company’s product brands or corporate brands — these days, often in zeroes and ones, expanding into the digital universe.

Bharawadj did a study of 125 manufacturing businesses. The study found “reputation and brand equity of the business … to be the best predictors of variation in business unit performance”.

Another study looked at a group of 435 companies rated in Fortune’s most admired companies. From 1984 to 1995, these organizations were better able “to sustain superior operating performance over time.” They were also better able “to improve operating performance over time.”

Bottom line? There are lessons to be learned from the financial crisis: Companies focused on sustainability outperformed peers by 15 per cent.

Fombrun provides substance for reputation building reputation. In effect, reputation gathers strength from itself.

So, the shadow is its own shadow asset.

Reputation. Stock price. Ownership.

In a study by Gregory on “brand power,” during extreme stock volatility from October 27-28, 1997, the research team discovered while all stocks fell on the 27th, the strongest brands regained almost all losses by the 28th.

A benign shadow supports brand

Less strong brands continued to founder. These brands did not have mighty reputations to deliver them from stock price purgatory.

While accountants feel operational activities like public relations, corporate philanthropy and advertising are best treated as direct business costs, Fombrun makes a thought-provoking point:

… it’s certainly ironic that accountants have been so conservative in their treatment of all reputation-building activities yet so willing to facilitate the capitalization of unearned income that enabled Enron, WorldCom and Xerox to claim inflated returns for so long …

In a post-Enron world, wise public relations practitioners and business leaders might note that brand-building and reputation-building sound concrete compared to the manufacturing of imaginary returns.

There is a difference between the invisible and the imaginary.

The financial value of reputation

Hanging a shadow on a signpost (or shadow valuation)

What if you could hang your company’s name out on a signpost and lease it?

Interbrand did just that. In 2002, at sales of $20 billion, assuming a higher royalty rate of 14 per cent (a royalty rate of 8-14 per cent of projected sales is common), Coca-Cola could realize a potential (royalty) rate on their brand of $2.4 billion.

Over 20 years, the Interbrand research team estimated this value of the Coke brand to be worth $69.9 billion.

Today, Coke is digital, social, focused on sowing reputational seeds in a new world of information.

Deep within its brand is everything stakeholders perceive Coke to be. Coke’s shadow delivers reputational capital.

If $70 billion doesn’t catch a CEO’s attention, what will? The shadow is changing rapidly. Move with the shadow or be outcast.

The figure isn’t perfect, but it reveals reputation has financial value despite its unseen nature.

Catch RQ during bull: The Shadow Quotient

Maybe the most valuable jewel in the cache of information Fombrun reveals is the development of the Reputation Quotient (RQ).

RQ focus groups revealed why people have high regard for some companies. They felt emotional appeal, products and services, financial performance, vision and leadership, workplace environment and social responsibility were the most important qualities affecting RQ.

Fombrun points out:

“Being well regarded is closely associated with a company’s earnings, liquidity, cash flow and growth — it’s operating results. Consumer ratings are therefore tied to familiar indicators that a company is well-managed.”

But being well-regarded pays off more in bull markets when the company’s stock price is on the rise than it does in bear markets when the opposite is true.

Companies gain when their stock price increases.

Spend some time with Fame and Fortune. Extrapolate Fombrun’s ideas to this new, digital paradigm. Demystify the unknown, difficult to measure, world of corporate reputation.

Reputation is in the cyber-ether. It permeates corporate space and the expanding online universe of stakeholder perception.

Any CEO who does not understand how reputation affects the bottom line, will, after reading Fombrun.

Business leaders and their companies will also benefit when they understand how to make exceptional reputations a reality in this brave new digital world.

Keystrokes? Swipes? Maybe simply gestures. Your brand and your repuation’s out there.

What is it saying?

You’ve got to do something about your reputation: Why CEOs need to pay attention to reputation management

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Scandals. Scandals in extremely visible corporations fill the media. Enron, WorldCom, Tyco, SNC Lavalin,  Goldman Sachs, BP, News Corporation … The list goes on.

Business decisions, such as fee, pricing and user privacy missteps, have dogged Bank of America and Netflix. Simply put, there have been a lot of examples of how to damage a reputation.

Charles Fombrun says perception creates its own reality. If this is so, every business leader needs to think about the reality his company is portraying.

What does the company look like to assertive stakeholders?

Since a corporation’s reputation affects a lot of stakeholders, what is today’s savvy CEO to make of reputation issues?

Think about it. Before we make a purchase, the reputation of a company or product impacts on us.

What do people say about a product? What have influencers said about the new smartphone we want to buy? What are suppliers’ business practices? How does advertising influence our purchase?

When investing our money, a company’s reputation undoubtedly affects us. We turn to people, as Charles Fombrun, writer of Fame and Fortune says, who have knowledge “better than our own”.

“Clearly,” Fombrun says, corporate “reputations affect the judgments we make”. Consumers and their perceptions have a definite effect on blackening corporate reputations.

Eighteen industries covered in one recent study only improved their reputation scores slightly over last year.  Even worse:

  • 16 per cent of companies ranked “poor” on reputation, down 3 per cent from a year ago
  • None came in with a “leading” ranking, the top score, where 14 per cent did last year

Fombrun makes a strong case for effective reputation management and public relations. In the future, it will be all the more important. Fombrun says reputation “is a key source of distinctiveness”, and that “it differentiates [a company] from its rivals.”

Lars Thoger Christensen adds that transparency is crucial because “the investment policies of pension funds … are regularly scrutinized these days by investors.” Because of pressure groups, business analysts and “other inquisitive stakeholders,” many organizations “feel more vulnerable”.

Transparency, one of the foundations of a reputation, is now necessary. CEOs can’t ignore more assertive stakeholders. Christensen feels corporate communicators must “transform [transparency] from a market condition to a business strategy”.

The Economist writes public relations firms are becoming  “not just service providers, but also purveyors of strategic advice to senior management”. The best firms and practitioners are the ones already providing strategy.

In a world where, as William Briggs of San Jose State University says “79 per cent of Americans take corporate citizenship into account when making purchase decisions,” and 71 per cent consider it “when making investment decisions,” a corporate leader who ignores this fact does so at his or her peril.

Reputation affects the drive to recruit and retain employees. In a study cited by Fombrun, undergraduate students preferred to work for companies regularly in “the 100 best companies to work for.” Interviewed MBA graduates chose “high reputation firms in consulting, investment banking, and high technology”.

Sometimes what glitters is gold, at least for attracting talent.

Institutional investors focus on corporate reputations. Fombrun says these investors control “80 per cent of all U.S. trading activity.” To further bolster reputation, Fombrun says in recent years “a number of institutional investors have flexed their muscles on various corporate governance issues, questioning the reasoning behind executive pay packages,” and that vision and leadership are “at the heart of the crisis in confidence”.

In the wake of the financial crisis especially, investors are tired of corporate smoke and mirrors. In the U.S., 46 per cent of people surveyed said their trust in the financial services sector had decreased.

According to Fombrun, strategic positioning pushes reputation into prominence. Reputation “is a mirror.” When stakeholders like and support the company, “an upward spiral results that attracts more resources to the company.”

But, if people are unhappy with what they see, a downward spiral can lead to a “reputation-damaging criminal indictment”. Think Arthur Andersen, British Petroleum or News Corporation.

Every CEO should remember the above companies and their plunges into corporate limbo.

In a study featuring CEOs’ views on reputation management, CEOs said they didn’t expect or look for return on investment (ROI) alone with respect to public relations expenditures. CEOs use public relations regularly to enhance and protect reputation.

As advertising struggles, businesses now think of public relations and the management of reputation as mission critical. Social media innovators continue to make strides in reputation management.

Interested in exploring:

  • What reputation is worth?
  • How reputation affects a corporation’s stock price and ownership?

Find out more:

Brave new reputation: What CEOs need to know

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