Weighing the Benefits of a Positive Corporate Reputation

In my last two blogs I discussed how actions speak louder than words when it comes to building and maintaining a positive corporate reputation. I also examined how two well-known and once highly respected companies – Volkswagen and Chipotle Mexican Grill – suffered the consequences of their actions, along with the negative impact crises had on their corporate reputation, brand, sales, and financial performance.

Reputation can also be shaped by a company’s inactions or slowness to act.

Generally speaking, corporate reputation refers to how various stakeholders or target publics perceive a company or organization. Reputation can look different to each specific public, based on their unique perspective, relationship, experience or knowledge of the organization, often depending on a general consensus of a variety of attributes.

“The Reputation Challenge: Building Corporate Reputation to Drive Business Performance,” states, “Smart businesses actively manage their corporate brand as a means of helping define, maintain and improve a reputation. While corporate brand and reputation are not exactly the same, the two are inextricably linked.”

It also says corporate reputation is “a measure of the extent to which stakeholders trust, admire and respect the company,” and brand serves as the “face” of the company, adding it “can be used as the primary vehicle for supporting and driving reputation-building efforts moving forward.”

So, what are the benefits or advantages to companies or organizations viewed as having a positive reputation?

Research indicates the following:

• Customer preference – A Harris Interactive survey of more than 20,000 U.S. residents found 61 percent said they would definitely purchase a product or service from companies that were ranked as having a strong reputation, compared to only five percent from those with a negative or less favorable reputation. In addition, 51 percent said they would definitely recommend a reputable company’s products or services to others, again compared to only five percent for those less-reputable organizations.

• Improved financial performance – Companies appearing on two of the three most recognized and credible reputation rankings (Fortune’s “Most Admired,” Forbes’ “World’s Most Reputable Companies” and Barron’s “Most Highly Respected”) scored annualized shareholder returns almost 13 percent higher than their competitors and more than 11 percent ahead of the Standard & Poors (S&P) 500.

• Ability to attract top talent – According to research conducted by Corporate Reputation Magazine, 86 percent of women and 67 percent of men who were unemployed said they would not join a company with a bad reputation. Only 67 percent of those surveyed said they would take a job with a company with a poor reputation for more money. Meanwhile, a resounding 92 percent said they would leave their current role for a company with an excellent corporate reputation. In addition, a Hill & Knowlton survey found 83 percent of MBA students said a company’s reputation was extremely or very important to them when choosing an employer.

• Public support during a crisis – Sooner or later, most companies, even the best-run organizations, will encounter some type of a crisis situation. Having a positive reputation, which I often refer to as “reputation capital,” can make surviving and recovering from a crisis much easier. It’s like money in the bank – a savings account – to be tapped into during a difficult time.

Findings published by Corporate Responsibility Magazine this past June found that while companies continue to put thoughtful effort into building their brand, their reputation is still vulnerable to harm.

According to the publication, a survey of more than 1,000 executives found 78 percent believe their organizations do an excellent job of building and managing its reputation, but only 53 percent have similar high grades for identifying risks – and even fewer highly rate their ability to develop strategies to mitigate those risks.

In my next blog on corporate reputation, I will provide a scorecard of key components for measuring your organization’s reputation and a checklist for identifying risks.

If you are seeking crisis PR support, contact Dick Shaner, Jr.: dshaner@martingroupmarketing.com