Diverse stakeholder groups evaluate an organisation from different perspectives. That’s why reputation management requires understanding and measurement of dynamics to effect a positive impact on the company’s bottom line.
By Professor Markus Renner
Co-Founder & Co-Chairman of International Brand & Reputation Community (INBREC)
INBREC Africa Chapter is an initiative by Vuma Reputation Management
Many organisations consider their greatest asset to be their reputation, and with good reason. Research shows that a positive reputation demonstrably increases corporate worth and provides sustained competitive advantage. According to a 2016 report by Deloitte, Reputation Matters: Developing Reputational Resilience Ahead of Your Crisis, “a strong, positive reputation translates into long-term value in an organisation, represented by confidence in brand equity, intellectual capital, sustained earnings, and future growth.”
A healthy corporate reputation measurably influences the behaviour of stakeholders such as customers, regulators and investors. Reputation, or a ‘good name’, is an important factor in strengthening trust in management and employees, in products and services.
It’s a “cause and effect” relationship that works both ways, according to Deloitte: “A specific event can impact how stakeholders…perceive an organisation. If stakeholders subsequently choose to change their behaviours it may ultimately impact on, for example, an organisation’s sales, licence to operate, or market value.”
Indeed, negative headlines can severely damage the bottom line, as General Motors knows only too well. The year 2014 was a fiasco for the motor company as it suffered a public backlash following a deluge of vehicle recalls. That followed a decade of delay in recalling millions of cars equipped with a faulty ignition switch that caused a number of deaths.
Caring about corporate reputation does not necessarily equal huge financial investment. What is essential is to seek regular, honest feedback from the most important stakeholders, to analyse this feedback systematically and impartially, and to draw the right conclusions from it.
Targeted reputation measurement
A common mistake is that only existing clients are surveyed. Their feedback is important, but it may be more revealing to also survey potential clients that are using the products or services of competitors – and then to determine how this group might be convinced to move away from the competition.
Looking beyond customers, success is sustainable only if the key stakeholders trust the company and value its good reputation – a valuation that can only be reached through the analysis of data gleaned from systematic reputation management.
How do we credibly demonstrate that corporate reputation is not a “nice to have” but essential to business survival and growth? Predictive analytics, which uses techniques from data mining, statistics, modelling, machine learning, and artificial intelligence to analyse big data to make predictions about the future, has a crucial role to play in reputation research and management.
With the ability to collect, analyse, and track big data including social media posts, business trends, and other sentiments, it’s becoming easier than ever to monitor reputation. The data provides businesses with useful information about marketing, customer sentiment, and more.
In the “reputation economy”, businesses are generally judged according to nine dimensions that are fundamental to building and maintaining an organisation’s brand reputation:
1. Quality of Products and Services: An important contribution to a company’s reputation, particularly with the growth of social media. Problems could damage reputation if the word spreads.
2. Innovation: An important factor in corporate reputation and enterprise growth.
3. Business Performance: How is the organisation performing according to key performance indicators (KPIs) such as revenue, return on investment (ROI), overheads, and operational costs?
4. Ethical Business Practices: These are actions performed and attitudes held by a business and its employees that are considered professionally and morally responsible, and promote the goals of the company without sacrificing the common good of its employees, customers, and even competitors.
5. Transparency: A new goal for many businesses, winning over shareholders, employees, and the general public. When a business is open about its operations, it can earn a level of trust that it wouldn’t have established otherwise.
6. Marketing and Sales Effectiveness: Does the company link marketing, sales and service to provide a customer-centric and unified experience that maintains and grows the customer base?
7. Management Quality: Is the organisation well managed, with high-quality individuals and a clear vision for the future?
8. Employer Attractiveness: Is it seen as a good company to work for, in terms of infrastructure, working environment, benefits and general good treatment of its employees?
9. Social Responsibility: Does the company actively contribute to the social, economic and environmental betterment of society?
Think of these nine dimensions – which enable risks to be described, measured and monitored – as a framework for reputation management. The first step is to calculate which aspects of corporate reputation are fundamental to stakeholder trust and future behaviour, e.g. recommendations or purchase decisions, towards the company. Second, it is useful to identify the individual factors that lead to positive perceptions in each area.
This way, senior management receives reliable information on how the most important stakeholders perceive their company, which elements of corporate reputation are most relevant for their business, and what exactly needs to be done to shape these decisive perceptions. This results in resources being better targeted and focused.
It’s an approach that illustrates the relationship between corporate actions and stakeholder perception. Changes to stakeholder perception in turn will lead to changes in their behaviour, and this will directly impact value.
It is important to emphasise that this method is no whitewash exercise since the derived measures are indeed based on the honest feedback and concrete expectations of stakeholders in the company.
Essentially, it is about understanding stakeholders’ expectations as precisely as possible and ensuring you tailor-make your response to those expectations. Applied consistently, this approach constitutes a scientifically-based evolution of the somewhat timeworn slogan “the customer is king” to the more contemporary mantra, “the stakeholder is king”. This result is a direct and profound effect on the organisation’s bottom line. If you’re still not convinced, Deloitte estimates that reputation can account for a quarter of market value.
For more information kindly contact:
Vuma Reputation Management