The Truth Will Set You Free: Debunking Three Myths About Corporate Reputation

Back in 2006, a landmark survey of American healthcare executives was presented at the Health Academy Conference of the Public Relations Society of America. The subject of the survey was the importance of reputation and, as you might expect, the vast majority of respondents agreed that negative events would adversely affect their companies’ reputation and organizational performance. Sixty-four percent of respondents rated reputation as critical to their organizations’ success.

Actually, the only thing surprising about the survey is that thirty-six per cent of respondents did not think reputation was such a big deal.

The Reputation Institute (RI) defines reputation as the level of trust, admiration, respect and good feelings between people and companies.  RI’s latest survey figures show that only 16% of consumers say they would definitely buy products or services from a company with a weak reputation versus 41% for firms with an average reputation and 64% for those with excellent reputations.

In fact, no one escapes the judgement of reputation.  Politicians and celebrities innately know this to be true, and are always in the process of moulding and burnishing carefully-crafted public personas.  For companies it is a bit different. Corporate leaders generally think of their firm’s overall reputation purely in terms of product strengths, or in terms of financial performance or processes, often leavingthe heavy lifting of defining and building reputation to marketers and communicators who may or may not have the skill sets and corporate support to be true reputation champions.

Yet, according to RI, a full 60% of the public’s willingness to buy, recommend, work for or invest in a company is driven by perceptions of who a company is and what they stand for.  Only 40% is driven purely by product quality or technical innovation.Anyone who has bid an RFP, pitched a product or service proposal, or presented a business plan knows this to be true.

If this is so obvious then why aren’t companies more reputation-aware?  Our firm, Reputation Leadership Group, has identified three critical myths that, frankly, can cloud the judgement of business leaders when they think, as in fact they often do, about their company’s reputation.

Myth # 1: Awareness equals Reputation

While we all know the mighty can and do fall, companies often persist in equating levels of brand awareness with having a strong reputation.  This is not irrational.  Awareness matters.  Flying below the radar screen does not mean your firm will avoid getting a bad reputation.  There is a very real risk to invisibility.

But, at the same time, to know you is not necessarily to love you.  As companies from Enron to BP to AIG have discovered, a strong brand embellished with award-winning corporate social responsibility (CSR) programs and tasteful advertising won’t save you when the chips are down.

Your reputation is defined by your behaviour.  The motto of His Majesty’s 3^rd York Militia Regiment during the War of 1812 was, simply, “Deeds Speak”, a powerful set of words that continues to this day as the motto of the York Regional Police in suburban Toronto. Fortunately, the vast majority of organizationsbehave well, do good things every day, and have motivated employees who want people to know about the value they add.

By good things, I don’t mean philanthropic programs or CSR initiatives, however desirable those activities may be in their own right.  It is about your daily work. Building reputation is sometimes necessarily selective, as you can’t please everybody, but it is always founded on your integrity and how you act within your core business. 

The reputational Holy Grail, in this instance, is to ensure you are well known and well regarded for who you really are.  As we’ll see with Myth #2, this also means coming to terms with admitting who you are not, and finding a way to deal respectfully with those who don’t like what you do.

Myth #2: My reputation is what I say it is (i.e., Ignore your lying eyes)

This is a killer, and companies fall into this trap all the time.  More than thirty years ago, Ford famously took to the US airwaves with a massive campaign proclaiming that “Quality is Job One!”  But a reputation for quality can’t be faked, and the company’s products at the time did not come close to living up to the tag-line.  The auto industry has learned over the years to focus on building quality instead of merely proclaiming it, and today’s cars, not least from Ford, are vastly superior to even the best cars of the 1980s.  Even so, in that chastened industry the boasting is now largely gone.  Car companies today are far more likely to let longer warranties or third-party J.D. Power rankings speak to attributes such as quality.  In other words, they are allowing their actions to speak, although they are rightly making every effort to communicate those actions.

Some industries are innately polarizing.  Think of mining, big oil, big finance, big pharma, or, heaven help us, big tobacco.  Let’s look at the oil sector.  For years BP was lauded for its “Beyond Petroleum” campaign and vast CSR spending, but this “reputational reserve” was merely seen as disingenuous and insincere when the company was faced with an immense environmental disaster caused by its own failures.  ExxonMobil, by contrast, was pilloried for many years for being insufficiently apologetic about being in the oil business, however environmentally responsible and safety-conscious they have been.  In the end, we believe ExxonMobil, by being proud of what they do as a company, has succeeded by building a solid positive reputation amongst its many stakeholder groups without falling into the trap of trying to be something they are not.

The lesson here is that Good Works will not themselves lead to salvation, and telling the world about your stellar reputation when there is less there than meets the eye will fool no one.

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Myth #3: I don’t need to care about reputation – I just need to manage risk.

This myth involves primarily the peril of benign neglect, and the related danger of confusing reputational risk with operational or financial risk.Companies need to be mindful of the many worlds in which they work and the myriad reputational risks on the horizon.  We have identified a clear disconnect between many firms’ GRC (Governance, Risk Management and Compliance) or ERM (Enterprise Risk Management) functions, which are usually located within finance, IT and legal departments, and those of reputation management, which are usually sited within communications and/or marketing departments.

GRC and ERM functions focus on financial and regulatory risks, and sometimes fail to see the wider reputational issues the firm may be facing.  Goldman Sachs, for example, has both what is said to be the world’s best risk management system and, according to the Reputation Institute, one of the worst corporate reputations in America.  Yet at least one expert, MadhuaCharyya of Bournemouth University, in New Frontiers in Risk Management, argues that the long term benefit of good ERM is a good reputation among stakeholders.  So, in fact, we’re all working towards the same goal.  We just don’t know it and, as a result, risk working at cross purposes.

Reputation-building programs need to be closely aligned to –and aware of- the firm’s risk management functions, and vice versa.  For smaller firms, this is as simple as ensuring the firm’s reputation-building activities are closely aligned to business strategy and the company’s long term objectives.  This will sound self-serving, but the reality is this effort is often best undertaken initially by credible outside parties in order to avoid the spectre of internal turf battles and ownership issues.

In fact, all parts of the enterprise have a stake in corporate reputation, and that’s why corporate reputation – not just corporate risk or company brand — is increasingly getting the attention of the C-suite.

Conclusion

In what is coming to be called the “reputation economy”, managing your company’s reputation is a full-time job.  The whole organization must think about reputation well beyond mere branding or positioning, or beyond just managing financial risk.  Employees, managers and executives all have to be engaged and reputation-aware.

Penetrating the myths of reputation isn’t always easy.  Every day business leaders have to fight the natural instinct to falsely believe that a high public profile or having the ability to talk a good game will be all it takes to build a good reputation.  And even those leaders who know better may not be aware that, despite having great financial risk management or a couple of award-winning sustainability programs, no one in the organization is taking the macro view of reputation or looking for the danger signs.

Fortunately, as canny firms of all sizes are now showing every day, the tools to build and manage reputation are more accessible than ever. Surmounting the myths and embracing your firm’s reputational realities and reputational objectives are the first steps.