Reputation is an indispensable part of any business transaction, because clients (stakeholders) generally enter into a deal with a company based on its reputation. This is largely regarded as a prerequisite for people’s willingness to do business with your company. Reputation must then be aligned with a holistic corporate communication strategy, in order to determine and locate the role a firm plays in an increasingly cynical, multi-cultural, diverse and demanding business world.
What companies should aim for in reputation management, is a state of reputational equilibrium, representing a state of balance, where the forces of service, product or moral failure are held at bay, and the company has, and maintains, a favourable rating in the minds of the public, consumers and other important stakeholders.
Corporate reputation is an asset, a competitive advantage, a resource, a value; in short a driver of economic performance. It affects the financial performance of a company and the economic wellbeing, and I dare say the psychological health of its employees. The reputation of their employer affects company executives too in many subtle and unseen ways. For instance, their chances of securing high potential job applicants in the “war for talent” are increased, and their own standing or put differently, their “resale value” in the job market is augmented. All this is very much a function of their employer’s good standing and reputation.
Finally, reputation is not static. It is continually evolving and its enhancement is dependent on the daily work and ethical conduct of all employees. In shaping the reputation of their firms managers are daily confronted with making ethically acceptable decisions whilst ensuring efficiency for their firm’s outputs.
Defining Reputation: What It Really Is?
Examining the origin of the word “reputation” aids in understanding why it can both be an ambiguous term and a complex construct. Originally, the term referred to an individual’s character. The Oxford Dictionary defined it as (1) “the beliefs or opinions that are generally held about someone or something”. In short reputation denotes, “the estimation in which one is generally held.”
Different disciplines take an interest in reputation but do not necessarily agree on the terminology. So there is no common language that binds them together. In Sociology for instance ‘Prestige’ is the preferred term; in Economics it is ‘Reputation’; in Marketing, ‘Image’ and in Accounting and Law, goodwill is used instead. Over the years these terms have become synonymous with character, good name, standing, position etc.
Warren Buffet once said, “It take twenty years to build a reputation, and five minutes to ruin it. If you think about that, you’ll do things differently.” Reputation is a most fragile resource, it can be damaged easily. Corporate reputations are constantly in danger of being eroded, damaged, dented or even destroyed. One wrong turn, a product defect, service failure or a corporate scandal can damage the reputation of a brand irrevocably. It can take many years and millions of Rands to rebuild a damaged brand.
Practice also shows that a good reputation leads to better chances of overcoming crises as reputation serves as a sort of “buffer” or “safety net”. The stability of a firm depends upon the stability of its corporate reputation.
Warren Buffet once famously said to new employees: “If you lose dollars for the firm by bad decisions I will be very understanding. If you lose reputation for the firm, I will be ruthless. For many years CEOs and other leaders have echoed a similar mantra: “Reputation is our most important asset.” But why have so many allowed the asset go to waste?
An unmanaged asset will decline in value over time and become a liability. This lack of management, if firms are not careful, can inevitably lead to the decline in corporate reputation. Whereas most large companies today have a risk and crisis management framework in place, few have a process in place to manage the overall 'reputation' asset, both the upside and the potential downside.
Using Asset Management Principles
Today companies need a rigorous, audited, reputation management and reporting process – including objectives and strategies, for accentuating the company’s achievements as well as dealing with problems and vulnerabilities. In today’s world, companies will succeed or fail based on their abilities to build and guard reputations. Companies headed by a good reputation stewards will reap the benefits of a good reputation, the greatest of which is trust - a future equity that conveys a competitive advantage of enormous value.
“Reputation is the sum of the images the various constituencies have of the company.” Says, Charles Fombrun, Professor of Communication, New York University.
Reputation = Sum of Images = Performance + Behaviour + Communication.
This definition helps make it clear that performance and behaviour as well as communication are critical components of a reputation. Few companies or non-profits take a rigorous, quantifiable approach to reputation management – measuring, monitoring and managing reputation assets and liabilities – yet such an approach is intrinsic to the concept of asset management. Measurement, acknowledgment and planning make possible proactive behaviours and communications to take advantage of reputational opportunities and minimize problems – thereby building reputational capital.
What makes us unique?
Communicators now play a critical role in ensuring the reputation of their organisations is enhanced amidst a global landscape that is defined by high risk, low trust and little patience for nuance. A positive organisational reputation will increasingly influence purchase decisions when there is little difference in price, quality design and product. There is even more competition, lack of differentiation and pricing concerns in the service sector. Thus building a highly regarded corporate reputation or corporate brand has become even more important.
Corporate reputation has two components:
Corporate reputation has the following building blocks:
Leadership and integrity;
Social responsibility; and a
Workplace environment supporting performance
Reputation comes from direct experiences with an organisation, word of mouth, advertising and media coverage. Threats to reputation include rumours, innuendos, lies, lawsuits, disgruntled employees or ex-employees, theft of data, cyber-attacks, errors and accidents, defective products, product recalls and misbehaviour of key corporate officers (drunkenness, sexual harassment etc.). The most important organisational assets are reputation, brand value, relationships and know-how. The first three of these are interlinked, but arguably the most important of them is reputation, since both brand value and relationships may be destroyed by loss of reputation.
Let Venabi Communication be your partner in managing you REPUTATION. GIVE US A CALL to start the discussion,