Corporate Reputation Management: Vital Areas & Blind Spots
An organization’s corporate reputation is arguably its most important asset, which determines its success in all other areas. Yet many a company, preoccupied with boosting its sales curve, meeting its bottom-line or even marketing its product brands, has not understood or given due attention to what it takes to build and nurture its vital corporate brand. Building and protecting the corporate reputation is the primary function of the professional discipline of Public Relations. Yet “PR” and its scope and methodologies remain highly misunderstood and underutilized by most companies. While many corporate people readily hire advertising agencies and spend millions advertising its product brands, and even confuse advertising agencies and PR consultancies to be the same, they have so far given little attention or investment to the management of their corporate reputations. Attacks on the corporate reputation by the media, activists, competitors, consumers and citizens, its vulnerability in competitive jousts, product and business failures, organizational change situations and unforeseen adversity and more positively, the ability to build the corporate reputation and brand through strategic, sustained public relations activity in the areas of issues and crisis management, advocacy, CSR, and internal communications are beginning to make enlightened companies focus on the management of its corporate reputation using the skills and experience of PR professionals and consultancies.
The Most Vital Asset?
The meagre attention given to management of the corporate reputation by most Sri Lankan companies raises many a question. Is it that this is not acknowledged as the company’s most important asset? Or is there little appreciation of what it takes to safeguard and nurture the reputation? Or are company decision-makers resorting to a seat-of-the-pants or do-it-yourself approach in looking after their reputation? Or perhaps the intangibility of this vital asset and its non-inclusion in financial statements is precluding due consideration being given to this aspect.
The vitality and equity value of the corporate reputation suggests to me that this should get top billing in mission statements and corporate strategies and plans. However, many nice-to-say statements like “Our people are our most vital asset” seem distort recognition of what I would argue as the real most vital corporate asset – Reputation. People, of course, are the important living assets that help build an organization and its reputation. SriLankan Airlines’ inflight crews are living proof, widely recognized for genuine Sri Lankan warmth and hospitality. People, however, could just as easily destroy the organization’s reputation. The Abu Ghraib prison scandals hurt the standing of the US Army and its mission and the image of the USA itself, just as the July ’83 riots hurt the image of Sri Lanka and Sri Lankans. People can be replaced and have to be replaced from time to time. A harmed reputation cannot, as the Enron saga showed Arthur Anderson. A good reputation in fact helps to draw better quality employees who can further the reputation.
Marketing practice has traditionally emphasized product brands, which have received the most investment. But with the development of the service economy, corporate brands came to the fore. Now, corporate brands are gaining in importance even with manufacturing companies. The strongest product brand marketer in Sri Lanka, Unilever, recently began giving prominence to its corporate brand, not only through a new logo and corporate campaign but also by tagging it at the end of every TV ad. As the famed strategist at JWT UK prophesied “Corporate brands will be the only successful area of new brand building in the future…as technology increasingly functions as the great leveller, consumers increasingly depend much less on their evaluation of a single product.” A glance at Interbrand’s listing of the world’s most valuable brands confirms the ascendance of the corporate brand. Of Interbrand’s Top Ten, nine are corporate brands including product brands that became corporate brands. Similarly, “Siddhalepa” has effectively replaced the company’s name as “…from the Siddhalepa Vedamahattaya” supersedes any reference to Hettigoda Industries. Yet, many companies still spend lots of money on product brands and a pittance on the corporate brand.
The Rising Importance of Reputation
The importance of a good corporate reputation is highlighted by PR guru Joe Marconi, when he says: “Presenting a good public face has always been important and business has always recognized the value of a good reputation. But the 1990s and the period beyond suggest an era where image takes on an additional, critical importance, as Disney, Apple, IBM, Sony, Playboy, Time Warner, American Express, Rupert Murdoch and Donald Trump will find their image – how it looks and how it sells – of as much concern to their banks as their marketing plans and their business plans.”
An ongoing tracking study done in the UK since1989 by the reputed MORI Reputation Centre shows the ascendance of Corporate Reputation over other criteria when making an assessment about a company. Rising from 14% to 48% over the last 14 years, this was cited by Captains of Industry as the most important factor over Quality of Management, which declined in importance from 54% to 30%. Honesty & Integrity, strongly linked to reputation, also rose in importance from 9% to 29%.
The benefits of a good reputation are succinctly put across by Jim Taylor and Watts Wacker in their book The 500 Year Delta: “Corporate trust goes beyond advertising and the reliability of advertising messages. To the extent that a corporation is seen as a good community player, an honourable employer, an innovator…who adds value to its products, with a leadership team that is outstanding…the company gains equity. It becomes intrinsically valuable…because people are more willing to deal with the company, tell the best young people they know to go to work there. If all those things happen, the cost of capital diminishes because the company is better able to negotiate…the public at all levels is more ready to believe whatever messages the company broadcasts about its own political problems.” Brouillard Communications’ James Foster further reinforces this in the marketing context when he says: “We’ve been preaching since the 1960s that the reputation of a company can be the tie-breaker in the marketplace when there is perceived product parity. Now we’ve seen big consumer brand companies realize the validity of the premise.”
The disadvantages of a lack of reputation is vividly stated in the classic McGraw Hill ad shown here.
Is your Corporate Reputation Managed?
The most telling statement on the predicament is brought home by Steven Howard in his book Corporate Image Management: “The corporate image needs to be planned, monitored and managed, just like any other strategic activity of the organization. Unfortunately, in many cases the corporate image is rarely planned and almost never managed.”
Whether companies give due regard to the task of managing corporate reputation can be ascertained by asking a few simple questions. We need to ask whether, in our own companies:
- The subject is discussed at Board Level?
- It has the involvement of the CEO?
- The attainment of corporate objectives is linked to corporate reputation dimensions?
- There is a strategic plan for assessing corporate image and pursuing its consolidation and protection?
- There is a Corporate Affairs Director and Team?
- There is a PR consultancy appointed on an ongoing basis?
- Sufficient money is spent on this vs. product ad budgets?
Corporate Blind Spots
In this regard, I see some significant corporate Blind Spots that are telling in the Sri Lankan scenario.
Blind Spot 1: D-I-Y Syndrome
Traditionally, Sri Lankan CEOs have believed corporate reputation was always fixed by him on-the-go….just like all other “problems”. These CEOs and companies do not see the need for planned approach, corporate affairs function, specialist consultancy, or specific investment in this regard. (Yes, lately some companies have started putting money into CSR as they jump on the bandwagon, but in embracing CSR as an ad hoc activity, they miss out on the bigger picture.) Many companies have failed to recognize that the world has changed and companies are increasingly under scrutiny by the media, regulators, consumer lobbies and social activists, and that public relations counsel is required from experienced and skilled specialists to protect and build the reputation.
Blind Spot 2: Ad Agency or PR Consultancy?
Even when they realize that something needs to be done in this area, they often have no idea what resources are needed and whom to turn to. Often they turn to their ad agency, which is easily on call. They perceive no difference between an ad agency and a PR consultancy. This of course is like seeking an electrical engineer for a civil construction task. Part of the problem is of course that there are very few fully-fledged public relations consultancies around. The other side is the lack of understanding, even at the highest corporate levels, about Public Relations, its scope and methodology, and its intrinsic relationship to corporate reputation management.
Blind Spot 3: Fixing crises vs. sustained relationship building
Corporate reputation management and building relations with a company’s stakeholders or “public” requires sustained management efforts…but, often PR assistance is sought when the “shit hits the fan”. Yes, the need of public relations often dawns on companies and CEOs after a crisis has occurred. By then the task has gotten harder and what is needed is damage control and recovery. Prevention is of course better than cure, and the more enlightened companies chose to hire their PR agencies as an essential ongoing resource, just as they have ad agencies, without waiting for the bad times.
Why the time has come in Sri Lanka
Many recent developments in the business environment in Sri Lanka have created conditions that pose critical challenges to companies and their reputations. Among these are:
- The development of the “Business Media” – with sharp business and investigative journalists putting companies under their microscope. They may file negative reports about a company in the press as much as they do positive stories. They are today less influenced by the company’s advertising clout, and threats to withhold advertising don’t work anymore. Here’s where good media relations can ensure that bad news is not overplayed and good news gets a positive spin.
- The increased competitive context – which increases the probability of competitive disputes getting reported in the media. Also poorly handled business moves can draw flak. Competitive disputes, legal battles, hostile take overs, alleged insider dealings, disputes with government and regulators are regularly featured in the business news today.
- Formation of consumer & environment protection lobbies – which will take to task any companies that are seen to be impinging on environmental standards, consumer rights. These activists will use the media to “expose” the company and its “wrong-doings”.
- The strengthening of regulatory bodies – which has resulted in the indictment of companies and its directors, with resultant negative press.
- Corporate changes, such as restructuring, downsizing or industrial disputes – which present a point of vulnerability, if these are badly handled.
- Product & service failures – which create serious issues and crises that need to be effectively managed.
PR: The discipline of reputation management
That Public Relations has become the vital means to safeguard and build the most important corporate asset is highlighted in a poignant quote from Bill Gates: “If I was down to my last dollar, I would spend it on PR”.
A definition from the Chartered Institute of Public Relations UK highlights the intrinsic link between Public Relations and reputation management: “Public Relations is about reputation – the result of what you do, what you say and what others say about you. Public Relations Practice is the discipline which looks after reputation with the aim of earning understanding and support, and influencing opinion and behaviour.”
The nexus between PR and reputation is embedded in the above definition, but I would add another line to the above mantra. In addition to “What you say, what you do, what others say about you”, “What you do not do” also affects your reputation. This was driven home forcefully with insurance companies here in the post-tsunami scenario. Failure to meet customer claims adequately left the reputations of several insurance companies tarnished. Even if the failures were not reported in the press, in contrast to the many ads that appeared to say how responsive they were, much negative word-of-mouth was generated from customers who felt that insurers hid behind the fine print and failed to do what they were expected to do.
Crises are often a testing point for corporate reputation. How well the organization handles a crisis and the media that covers it can make or break reputations. Ducking the media in the midst of a crisis does not help, but often happens. Controlling damage and moving swiftly to recovery requires method, know-how and previous experience. Crisis management and managing potentially detrimental organizational issues without bringing them to the boil is an area where the expertise of seasoned PR professionals is most valued.
While word-of-mouth is a powerful force in creating or damaging reputations, advertising is less effective in this task because “what you say” in terms of self-trumpeting ads are taken with a huge pinch of salt or not believed at all. As Relationship Marketing Guru Regis McKenna says: “Advertising and PR perform many of the same functions, but information coming from the press is more credible. Articles in media are perceived as being more objective than ads.” Yet many companies still resort to chest-thumping corporate advertising to build their image.
What you say can be made to work effectively if such corporate ads are devised in the PR idiom, more as advertorials that provide factual information about what the company is doing rather than as ad bombast. This underscores the fact that what you do – “walking the talk” – is really the starting-point.
Due to mistaken assumptions, most companies are surprised when they find out that outside audiences that they wish to talk to know very little about the company. Most outsiders would not care at all about your company unless you give them a good reason to get to know you. This requires attention to building stakeholder relationships on the basis of common interest. There are many useful practices and positive stories that the company can share with their key stakeholders, and this is where the insights, experience and skills of the PR professional comes in – to ferret out great untold corporate stories and to generate ideas that make vital connections and deliver visibility.
It is a no-brainer to figure out that “What others say about you” is the most powerful reputation builder. Third party endorsement and good word-of-mouth is what we most need. This focuses us on two areas that PR professionals work on – media relations and internal communications.
Editorial media coverage done with sensitivity and credibility by PR professionals who work with journalists and understand their needs for interesting stories and angles – rather than as obvious corporate blurbs in the advertising mode – is absorbed with greater interest credibility than the average ad, as even the great adman David Ogilvy admits. In this regard, it is highly questionable as to how many people actually read the “free write-ups” that are given as a quid-pro-quo to supplement advertisers. Media tours that give comprehensive firsthand access to journalists along with well organized conferences, media events, interviews and Q&A formats, backed up by well prepared background materials are among the various means to achieving credible editorial coverage.
Good word-of-mouth depends on good customer experiences and stakeholder perceptions. This is where PR professionals are increasingly teaming up with service trainers to work with the company’s marketing, service and human resource functions and all its people. Sharing an “outside-in” viewpoint can help an organization to recognize and remedy gaps and shortcomings in their service standards. Additionally devising internal communications and motivational programmes to continually inform and rally the organizational team in a creative fashion is an area where PR people can contribute. Stakeholder forums are another increasingly popular method to establish vital rapport and share information with the various stakeholder groups important to a company. In this way, not only the organizational team but also outsiders could be mustered to help build the corporate reputation.
April 10th, 2005 by Nimal Gunewardena | No Comments »
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