Ignore corporate reputation at your peril

The image of US banks with key stakeholders has been improving of late, in no small part due to the success the banks have had in distancing themselves from the subprime crisis. This in turn has led to the banking sector performing strongly on the New York Stock Exchange. At the same time, cruise line giants Carnival and Royal Caribbean have had their stock market capitalisations slashed on the back of the grounding of the Costa Concordia. For an industry that experienced a doubling in global demand over the last decade, the main operators face a herculean task to rebuild credibility and trust and, more importantly, revenues.

Closer to home, RMJM, the Scotland-headquartered architectural firm with a global reach, has been subject to a stream of negative headlines of late and remains embroiled with a leading national newspaper over coverage of its recent corporate activity. The brouhaha that has arisen from the untimely appointment of Fred Goodwin and allegations of late pay and staff walkouts are the kind of issues that can quickly turn to crises and threaten the long-term reputation of a company. Expertise agrees that how crises are handled by organisations will determine, and not insignificantly, what level of impact there is on the financial worth of the enterprise.

The largely unwritten rules of corporate reputation state that corporate objectives are easier to fulfil if an organisation maintains a good reputation with stakeholders, particularly the key stakeholders in the business like customers and employees. A no-brainer you would think. Alas, while surveys on the subject frequently indicate a link between corporate reputation and business success, research also shows that most business leaders are not doing enough to protect the reputation of their organisations.

While personal experience in dealing with a company continues to be the primary influencing factor in forming a view on corporate reputation, media coverage and increasingly word of mouth through social media are seen as main influencing points. Unsurprisingly, there is a strong correlation between investment in corporate communications and the companies with the best reputations in the marketplace.

While corporate reputation is determined mainly by operational activities and behaviour, a well-drilled communications function that improves relationships with key stakeholders through improved dialogue should not be underestimated. Researching the views of stakeholders should identify gaps between knowledge and perceptions, and a rolling contact programme with stakeholders should address this ‘knowledge gap.’ It is also important to involve senior management, particularly the MD or CEO, in the process. Corporate reputation is inextricably linked to the chief executive running the company.

The Reputation Institute and US business publication Forbes are two of the most recognised assessors of corporate reputation. The latter runs an annual league table of the most and least reputable companies and being held to account for your corporate reputation in this way has proven to be a shot in the arm to large international corporates. With such a strong reliance on the SME sector in Scotland, we only have a handful of the corporate giants that get rated by these types of agencies and publications. However, when you consider that our future corporate giants will come from this sector, and that SMEs are not immune to the reputational risks that larger companies face, perhaps our business leaders should be placing reputation further up the corporate agenda. In the oft-quoted words of Warren Buffet, “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.”