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Wednesday, May 28, 2008

What is corporate reputation? Is reputation a suitable paradigm for the future of corporate public relations management? Why or why not?

Corporate Reputation

Before I can start explaining what corporate reputation is, let us look at the word reputation and what does it mean. Technically, it is the opinion of a social evaluation of the public towards a person, a group of people or an organization. Reputation stands to be a very important factor to many fields, such as business, online communities or social status. Its influence ranges from competitive settings, like markets, to cooperative ones, like firms, organisations, institutions and communities.

Furthermore, reputation acts on different levels which concerns groups, communities, collectives and abstract social entities (such as firms, corporations, organizations, countries, cultures and even civilisations). It affects phenomena of different scale, from everyday life to relationships between nations. Reputation is a fundamental instrument of social order, based upon distributed, spontaneous social control.

Reputation represents the past and present of an organization performance and portrays the ability to deliver reliable desirable results to various stakeholders. Alternatively, reputation illustrates the perceptual track record of organizations. Reputation is a tremendously important personal and professional success requisite which signifies the esteem with which something or someone is perceived by important publics.

Reputation is arguably the single most valued organizational asset. Consequently, a positive and linear relationship exists between reputation and organizational success. Positive reputations facilitate and expedite the business of successful organizations and conversely negative ones damage or destroy individuals and organizations. The Journal of Business Strategy observed that reputable names actually improve business during economic expansion and periods of prosperity while protecting companies during crisis. Proactive reputation management remains universally recognized, responsible and valuable preventive practice.

Reputation Defines Described

Professional reputation definitions might be considered. Stakeholder organizational perception is its reputation, according to one definition. Another declares that organization reputation constitutes collective images perceived by key stakeholders. Another definition maintains that reputation represents accumulated organizational intangible assets including employee dedication, degree of consumer confidence, brand loyalty, management trustworthiness and organizational public image. Reputation depicts evolving images resulting from the confluence of corporate self-definition and occasional redefinition, impression management, and effective relationship maintenance with important stakeholders, also called stakeholder engagement.

Corporate reputation signifies public evaluation of organizational activity. Reputation includes elements of trust, credibility, responsibility and accountability. Reputation fundamentally concerns public perceptions regarding image, since most people outside of corporate management lack access to full information.

Some scholars contend that reputation, unlike corporate image, is owned by the public. Reputation is not shaped through corporate advertisements. Positive reputations are created or destroyed through individual or organizational conduct. Reputation manifests perceptions of organizational actions by salient stakeholders.

Six "Dimensions of Corporate Reputation" were discovered by Harris Interactive, including emotional appeal, products and services, financial performance, social responsibility, workplace environment and vision and leadership. Nevertheless, reputation is sometimes considered difficult to explain because it is intangible. The central questions involved in understanding reputation are:

* Who are our stakeholders?

* What do they expect of us?

* Which of these expectations are unrealistic?

The distinction between image and reputation was clarified by Paul Argenti, a business professor at Dartmouth College, "Your image is how each constituency views your organization. Your reputation is the cumulative image" (Guiniven, 2004).

Building reputation through stakeholder management

"Glass, china and reputation are easily cracked, but never well mended," Benjamin Franklin declared.

How reputation is actually built? The stakeholder theory says that corporations should be run for the benefit of all “stakeholders,” not just the shareholders. The stakeholders of a company include any individual or group that can influence or is influenced from company’s practices. The stakeholders of a company can be suppliers, consumers, employees, shareholders, financial community, government and media. Companies must properly manage the relationships between stakeholder groups and they must consider interest of each stakeholder group carefully.

Therefore, it becomes essential to integrate public relations into corporate governance to manage the relationships between these stakeholders which will enhance the organization’s reputation. Corporations or institutions which behave ethically and governed in a good manner build a reputational capital which is a competitive advantage. According to Fombrun, a good reputation enhances profitability because it attracts customers to products, investors to securities and employees to its jobs.

Company’s reputation is an asset and wealth that gives that company a competitive advantage because this kind of a company will be regarded as a reliable, credible, trustworthy and responsible for employees, customers, shareholders and financial markets. Reputation represents organizational past and present performance and portrays the ability to deliver reliable desirable results to various stakeholders.

Alternatively, reputation illustrates the perceptual track record of organizations. Reputation is a tremendously important personal and professional success requisite which signified the esteem with which something or someone is perceived by important publics. In addition, according to MORI’s survey of about 200 managers in the private sector, 99% responded that the management of corporate reputation is very (83%) or fairly (16%) important.

Reputation is a reflection of companies’ culture and identity. It is also the outcome of manager’s efforts to prove their success and excellence sustaining through acting reliable, credible, trustworthy and responsible in the market. Reputation can also be sustained through consistent communication activities both internally and externally with key stakeholder groups. This directly influences a public company's stock prices in the financial market. Therefore, reputation capital becomes a strategic asset and advantage for that company. As a consequence, public relations must be used in order to establish long lasting relationships with the stakeholders, which will enhance the reputation of the company

CEO reputation

There is research that has shown that the reputation of the CEO is inextricably linked to the reputation of the company. CEOs set the tone, define company direction, attract talent and are the human face of the organization. Increasingly, CEOs are building their brands on credibility, not celebrity. In one of Weber Shandwick Worldwide (WSW) latest research on reputation loss, it is claimed that “CEOs receive nearly 60% of the blame when company reputation is damaged”. In times of uncertainty, the CEO is called upon to speak on behalf of the organization.

There’s no doubt that in a celebrity conscious world, CEOs are front and central on reputation issues because they are leaders but it is also in the range of stakeholders who give the organization its reputation as a result of their engagement with it, not just the CEO. Reputation results from stakeholder and public examination of corporate actions. Consequently corporate reputation management is typically delegated to the CEO. Integrity, ethics, and deeds constitute personal or organizational attributes that typically elicit judgment, and these characteristics collectively comprise reputation.

The Significance of Reputation

Virtually all authorities concur that reputation represents an exceptionally important organizational asset. Corporate communication and character constitute primary and necessary aspects of beneficial reputations. Positive organizational reputation stands among the corporation's most valuable assets, while a negative version is a substantial liability and obstacle to organizational success. The International Association of Business Communicators noted that recent corporate scandals have diminished public confidence, elevating the importance of corporate reputation among CEO priorities.

Reputation management is becoming another significant aspect of the traditional conduct of business. Similarly, in Great Britain the Turnbull Report concluded that reputation was as financially meaningful as any other capital asset in determining corporate net value.

The primacy of ethics in reputation perception was quantified in 2003 by the Hill & Knowlton annual corporate reputation survey. In response to the query, "What affects reputation?" the answer given nearly ninety per cent of the time was customer perceptions and ethical behavior.

It’s a ‘received wisdom’ that a good reputation aids the financial performance of an organization. We call it the “doing good will lead to good” notion.

Importance of a Good Reputation

A small firm's good reputation is one of its most important assets. After all who wants to work for a firm with a poor reputation for looking after its staff?

If you build up and keep a good reputation everyone will be flocking to your door, and in times when competition is fierce and many skills are in short supply, that can make the difference between your firms' survival and its untimely demise.

It's your reputation that's at stake - take control of it.

Everyone involved with your organisation from the managing director to the receptionist; from the bank manager to your customers; should be your reputation protectors. A good reputation can be severely dented by a dissatisfied cleaner or by a disgruntled customer.

Rebuilding a damaged reputation is much harder than building a good one from scratch - customers have long memories. Many people still have negative associations of one of the big five UK banks because of its connections with South Africa during apartheid. Others shudder at the thought of a particularly famous brand of vacuum cleaner because of the so called 'flights fiasco'. You may not be big enough for your fiasco to hit the national press, but bad news still travels a long way so you can't afford to get it wrong.

Incidents which damage a company's reputation for honesty or safety may cause serious damage to finances. For example, in 1999 Coca Cola lost $60 million (by its own estimate) after schoolchildren reported suffering from symptoms like headaches, nausea and shivering after drinking its product.

Most products now are of uniformly good quality so customer service and treatment of staff, more often that not, make or break a reputation. Add value and delight your customers and they will keep coming back and recommend you. Get it wrong and you won't see them for dust. Your customers may not be individuals but bigger firms. Because they have their own reputations to look after they often refuse to give contracts to smaller traders who don't meet their standards.

Restaurants are increasingly particular about where their meat comes from because their customers want to know the animals have been humanely treated. Can you deliver produce to those standards? If not, the contract will go elsewhere.

You can't afford to ignore laws on employees' rights or health and safety. You can't treat people differently because of their sex, race, disability or age. You can't ignore the issues that concern your customers or their customers. Talk to your customers, big and small, staff and anyone else who has an interest in your business. Listen to their concerns.

Work out how to best serve everyone so that they will want to buy from you, hire your services, work for you or invest in your firm. Be entirely honest about what everyone can expect. If staff or customers have complaints deal with them quickly and fairly.

If you have made a mistake, admit it and let everyone know what you've done to stop it happening again. Give that little bit more edge than your competitors and your reputation will be the best. And then go on working to keep it there.

Is reputation a suitable paradigm for the future of a corporate public relations management? Why or Why not?

The role of the corporate public relations management is rapidly changing, responding to the sea changes all around us: the rise of consumer-generated social media, globalization, the incredible personalization of information technology, greater expectations on corporations for transparency and social responsibility, and increasingly inter-connected stakeholder groups including often-adversarial activists..


So what is reputation? ‘If you have a reputation for always making all the money there is in a deal, you won’t make many deals’. J. Paul Getty. It is a fact that reputation can be measure but there is also a need for generic scale to measure both internal and external aspects of reputation, image, and identity, a scale that is capable of assessing our attachment to an organization as well as the more tangible things we might be able to rate them for. Reputation also drives financial performance in predictable ways.

Despite its complexity, there are some ‘rules’ for reputation that will bring increased business performance if followed and reduced business performance if ignored. Based on existing thinking on how reputation is managed, it is a useful paradigm for today’s context. If someone says or something has a clear ‘reputation’ it is saying that it is expected that some kind of entity to behave consistently and therefore predictably in certain circumstances.

This kind of expectation is built through an accumulation of all of everyone experiences and interactions together with reports of those of others, together with the (filtered) views of others of the entity’s reputation. Constantly people expectations evolve as experience accumulates and as we accept some or all of the views of others and the evidence of our own experiences. The first view is likely to be a simple stereotype based upon limited information. People draw upon a library of stereotypes to make an initial judgment. This simple starting point can change dramatically but is more likely to evolve.

Indeed dramatic change in reputation is the exception rather than the rule. However, highly significant incidents, such as a crisis, can trigger a change in our views. The perception of reputation can also be shaped in part by the deliberate actions of the entity we are appraising, motivated to mould our perceptions to create a favorable disposition towards it.

An individual or organization can manage the public view of their reputation through what it chooses to communicate to them. Formal communication will dominate this process when the entity is something we cannot or do not interact with. Thus a product brand is normally something the public cannot interact with while the image the public have of a service organization they use every day will be dominated by the informal communication the public are involved with, by being with employees or being in a building associated with the entity.

People also form an impression of organizations by working with or for them. If the organization is their employer, the experiences they have during the working day, the ways of working, its rules, its culture, and the views of others when they discover where they work all influence what they have called ‘identity’. Somehow reputation and financial performance are interlinked but those links are not obvious. To help understand what drives performance we need better measures of reputation.

Corporate public relations must do more than merely adapt to these sweeping changes in the communications dynamic. Corporations need their PR professionals to move beyond helping them communicate to stakeholders; they need guidance on how to engage in fluid conversations (that means listening as well as talking, respectfully understanding the new rules of engagement). And they need their PR professionals to be an important input into the business, to participate “at the table” when business decisions are made rather than serving only as a mop-up crew called in to clean up a messy situation. Participation at the table requires PR professionals to understand the business thoroughly to be respected by the company’s operations as a full partner in making decisions that may affect the company’s reputation and the value of its brands.



Many large corporations always have a so called public relations department dedicated to manage their reputation. In addition, there are many public relations’s firm out there claiming their expertise in terms of reputation management. Until recently, there is a growing demand for big corporation to build their companies with credibility and reputation. These initiate the public relations industry to grow. Public relations had become “mission critical” to success – albeit that most organisations under-invested in the practice.

Public relations practice has become more important and is increasingly at the heart of strategy-making, but significant progress still needs to be made. The function is increasingly at the centre of strategic decision-making, providing foresight, “outsight” and insight to influence the decision-making process and support to build, maintain or create good relationships. Reputation needs to be integrated as part of their core function. The drivers of today business success understand globalization, the demand for greater transparency, the understanding of risk and how a company’s reputation can be affected positively and negatively. Now the thing to do is the discipline is to grow in size and influence but the industry is not yet mature and has some way to go.”