A good reputation creates trust and acceptance in the marketplace. It broadens the scope of action in collaboration with suppliers, business partners, regulators, or communities, as well as in dealings with customers and colleagues. Corporate reputation is considered to be a central intangible asset, a parameter of a company’s perceived competitiveness. In that regard, scientists and practitioners agree.
Often enough, the reputation of a company only gets on the management board’s radar screen once it is at stake. Food scandals, interest rate manipulation and unfair competition, Euro crisis, mistrust, shaken consumer confidence: according to an international Deloitte study the threat to a company's reputation is the biggest strategic risk.
Reputation – an indefinable phenomenon?
Given the importance of a good reputation, it is surprising that there is still no generally accepted understanding regarding what reputation is, or how it is measured, and how it can be positively influenced in the interest of an organisation. What are the reasons for this discrepancy?
A fundamental reason can be found in the traditional silo mentality, in science as well as in business practice. One controversially discussed issue is, for example the distinction between reputation and image. Some consider the two concepts to be identical, some do not. The majority holds the opinion that image, as opposed to reputation, is more fleeting and volatile; hence easier and quicker to be positively or negatively influenced.
Reputation ‘belongs’ to the stakeholders
In order to identify potential events that may affect corporate reputation, we need to consider first that the reputation of an organisation is dependent on its multiple stakeholder groups. Accordingly, reputation is the collective perception of a a company by its stakeholders. It is the result of the exchange of personal and conveyed experiences between the organisation, its stakeholders and third parties over time. In this context, stakeholders are defined as any groups who, with their actions, influence the current or future success of an organisation – directly or indirectly.
These stakeholders have differentiated perceptions and divergent expectations with regard to a variety of aspects of a company, for example its innovative strength, its responsible behaviour, or its quality of products and services. Due to the multidimensionality of reputation such aspects are also referred to as reputation dimensions.
Reputation is not an end in itself but helps to achieve goals
A central challenge in managing reputation opportunities and risks is to approach stakeholders’ expectations in an appropriate way. Overlaying the corporate reputation with the corporate brand is a crucial step in doing so. Why? The corporate brand defines what an organisation wants to stand for, how it wants to be seen by its stakeholders, thus contributing in setting stakeholder expectations. The brand itself tends to be considered as a self image, whereas reputation is regarded as the sum of public, external images expressing actual perceptions and experiences. A favourable reputation helps moving the needle with regard to ‘higher’ targets (such as supportive stakeholder behaviour or the license to operate) with the help of so called reputation drivers. These drivers are distinct facets of individual reputation dimensions which cause a change in attitude or behaviour of business-critical stakeholders. An example of a reputation driver: the credible communication of product safety.
On this basis, the purpose of reputation management can be determined: It aims at influencing the perceptions and expectations of stakeholders in a way that makes them realise common interests with the organisation, leading them to act in unison with the entrepreneurial goals – by doing or not doing certain things. So, how can the reputation of a business be managed?
In practice, the following questions need to be answered:
- Which stakeholders can influence the successful implementation of corporate strategy?
- Which behaviour of this group is essential for reaching business goals?
- What kind of perception of the organisation promotes such target behaviour?
- What do actual behaviours and attitudes look like? How do stakeholders currently perceive the company?
- What does the organisation have to convey in order to close gaps between actual and desired reputation?
- Via which channels and platforms and by what means can this be delivered?
Reputation is not only a matter of communication
Often, there are issues that surface in stakeholder dialogues which cannot be tackled by Corporate Communication in the first instance. When stakeholders raise expectations that a company does not (yet) meet reputation management becomes the subject of operative or strategic management. If business practice and stakeholders’ interests collide, management has to decide what is in the best interest of the business in the long run: to fulfil stakeholders’ expectations, to seek a compromise, or to continue along the current course of action.
This highlights: the reputation of a company cannot be managed by the Corporate Communication function alone. In order to manage the dialogue with all stakeholders, they have to seek collaboration with other communication disciplines and business functions: With Public Affairs and the Sustainability department for the dialogue with NGOs and politicians; with internal communication and HR for the dialogue with employees and graduates, et cetera. Some of these collaborations have already been initiated, as demonstrated by collaborative projects on the subject of sustainability communication and employer branding.
Creating shared interest by breaking down the silos
Back to the discrepancy in terminology – should this be resolved? Most definitely! At least within an organisation itself. Establishing a common language is the basis for identifying responsibilities as well as setting goals, standards and unison for measuring and managing reputation: Do our stakeholders’ expectations and experiences match? Where do we create a relative advantage for our stakeholders? What do we want to achieve within a specific time frame in order to remain economically successful and ensure socio-economical acceptance?
To summarise, successful reputation management requires mainly one thing: patience. But it is worth it!
Published in Pressesprecher, Magazin fuer Kommunikation, 2014