Corporate reputation is a loosely defined concept, but one that plays an important role in determining a company’s overall worth. While online reputation exists on the internet, and brand reputation relates to a specific line of products, corporate reputation includes every aspect of how a company is perceived. A Burson-Marsteller survey conducted in the US found that 95 percent of CEOs believed a positive corporate reputation was vital to achieving their objectives. Reputation can make or break a company, as we know at ReputationDefender. Without this asset, executives have a hard time gaining support for new initiatives or building a regular clientele.
What is Corporate Reputation?
Michael Barnett’s 2014 book, The Oxford Handbook of Corporate Reputation, defines corporate reputation as ‘a collective assessment of a company’s attractiveness to a specific group of stakeholders.’ Companies have many stakeholders, from investors to employees to clients. Each one has a slightly different perception of the organisation based on their past experience, future expectations and what they have heard from others. Yet collectively they hold many common assumptions about the company’s products and practices, and this causes them to choose a business with a positive reputation over competitors that don’t have as good a name.
Given the multifaceted and even contradictory elements that define stakeholder perception, assessing the value of a company’s reputation is complex. Companies can have both positive and negative reputation lines active simultaneously. Apple, for example, has maintained an impeccable name in product design, even while the company’s reputation for labour standards has come under question due to criticism of one of its major Chinese suppliers, Foxconn.
Many different systems can be used to evaluate corporate reputation. One US study defined ten major ‘components’ or values that stakeholders are likely to question as they form an overall opinion of a company:
- Ethics – Does the organisation maintain high ethical standards overall?
- Employment Practices – How qualified are company personnel? What is the work environment like? Are employees paid adequate wages and treated well?
- Financial Performance – Is the company growing financially?
- Innovation – Is the corporation considered a thought-leader or an influencer within its field?
- Management Practices – Does the CEO have a good reputation? Do high-level executives share a unified vision for the future?
- Corporate Social Responsibility – Is the organisation committed to supporting humanitarian and environmental causes?
- Customer Service – Does the company put customers first?
- Quality – Is the corporate name associated with high-quality products?
- Reliability – Can the organisation be relied on to do the right thing and provide reliable customer service?
- Emotional Appeal – What is overall attitude of the organisation? Is it known for its professionalism, for a positive upbeat approach, for a laid-back relatable manner?
Companies that want to achieve better corporate reputation should focus on achieving a high stakeholder rating in as many areas as possible.
Why is Corporate Reputation Important?
Positive corporate reputation adds real financial value to a company’s stocks and shares. Given the exact same service and price, clients will choose brands offered by the company they trust more. Corporate reputation for quality gives consumers confidence in the company’s products, even if it’s something they’ve never bought before. A reputation for social responsibility and employee benefit programs means customers feel good about the money they’re spending, independent of the goods or services they receive.
Companies with a solid corporate reputation can often support higher prices than their competitors. They are better able to attract funding for new initiatives, and if and when reputation issues do arise, they’re more likely to be given the benefit of the doubt. Stakeholders who already trust the brand are predisposed to listen to a senior executive’s explanation of what went wrong and they are more likely to believe the problem was an isolated issue that won’t reoccur.
How is Corporate Reputation Created?
According to Charles Fombrun, from the Stern School of Business in New York, ‘a reputation develops from a company’s uniqueness and from identity-shaping practices maintained over time.’ Leaders define a company’s reputation through their agenda and also through their own reputations. It’s estimated that up to 50 percent of a business’s corporate reputation comes from the CEO reputation.
Unlike other intangible assets (intellectual property for example) corporate reputation isn’t owned. It is a ‘social asset’ that exists in the minds of stakeholder, making it subject to shifting public opinion and changes in stakeholder priorities. Reputation capital built up over time provides some leeway when dealing with negative publicity, but a number of bad product reviews or a string of scandals can still send a well-established company into a downward spiral.
Managing Corporate Reputation
At ReputationDefender, we manage corporate reputations by creating a positive online presence for the organisation and also for its CEO. Corporate reputation is created by both communication practices and operational practices. Effective online communication with stakeholders is an important cornerstone of any effort to manage reputation. Customers and potential employees are increasingly seeking out the companies that interest them online and judging the entire organisation based on internet search results.
However, to be affective in the long term an ORM campaign must be backed up with good operational practices as well. Positive content needs to be based on real company policies capable of earning genuine third party comments and recommendations. Even one or two independent testimonies can help to generate confidence among stakeholders and give the company more standing with industry authorities.
Companies interested in creating a solid corporate reputation should put effort into creating sound ethical operation and in promoting these practices on the internet, where the majority of today’s stakeholders can be found. To find out more about building reputation, contact our specialists at ReputationDefender.