Reputation: Managing a Core Asset

This article describes how a company's investment in reputation management will contribute to its success, especially in today's volatile business climate. Companies that have successfully negotiated extreme change or other emergencies invariably credit their good reputation, coupled with good communication, as key factors in their successful transitions. And let's not forget that managing a company's reputation well, and communicating it, also plays a key role in growing shareholder value, a basic fiduciary obligation of senior management.

The importance of a good reputation has been described in this way: a company will succeed only for so long as it enjoys public consent. The point is, in today's globally competitive business environment, public consent, i.e., a good reputation, can no longer be assumed; it must be earned, and earned continuously.

Public consent, and the good reputation it helps build, are formed in numerous ways. At the outer reaches of an organization it is formed by the quality of accumulated customer contact experiences, that is, by each 'buying' experience (each 'moment of truth') and by all other public contacts. At the core of the organization, it is formed by the daily business decisions, which immediately or ultimately, will affect customers and the larger public.

Company decisions in harmony with public consent contribute to the success of a company and enhance shareholder value. Alternatively, decision-making that does not take into account public imperatives will lack depth, and will almost certainly conflict with public consent.
A simple, albeit limited, barometer of reputation is the coverage a company receives in the news media. Those familiar with the media know coverage is influenced by perceptions of a company's commitment to issues of public interest. When the media senses decisions have ignored the public interest, that is, lack public consent directly or indirectly; the company should expect vigorous media scrutiny.

When pondering the reasons for negative publicity, wise corporate leaders look inwards at the quality of their decisions and whether all relevant issues have been factored into those decisions. It is naive to criticize the media for negative publicity, or to blame the company's media relations personnel.

And any attempt to avoid coverage is almost certain to court disaster. Even a suspicion of attempted concealment is enough to attract aggressive media scrutiny. No amount of so-called "media management" by the company (which is a myth inspired by Grade B movies) will change the coverage. A company's actions will.

Few will disagree that every customer contact must focus on the customer's expectations. Similarly, every decision at the core of an organization that does not take public expectations into account, and therefore its customers' interests, has the potential to erode the ability of the company to manage itself to the benefit of its shareholders, and thus also its employees, other investors and suppliers.

Thinking Strategically

At the strategic level, reputation management begins with highly qualified input to the most senior decision-making levels, and a receptive environment at those levels. The primary responsibility is to provide a thorough grasp of public sentiment, to bring an understanding of broader issues that can or will affect a company's image and reputation, and how these will influence the organization's success. Quite simply, it involves strategically focused and systematic intelligence gathering, processed against a company's business imperatives.

Many companies in the midst of significant change, some on the brink of collapse, came to realize they had to radically alter their behaviour. They began listening more intently to their stakeholders--and hearing them. And they began taking that input far more seriously, incorporating it more directly into senior-level decision making.

Such companies include Chrysler, General Electric, Federal Express and 3M, among many others. Another company with a long history of listening, and hearing, is John Hancock Mutual Life Insurance Company. David F. D'Alessandro, then president of their corporate sector, had this to say in a speech about why companies fail to listen:

They (senior executives) are the very best at running businesses and making money, but . . . despite all the education, experience and compensation, too few executives really know much about image building and its importance to the organization's success.

Most of us are insulated . . . We have spent half our lives in institutions that have a particular culture, a way of looking at the world and a belief that, because the company has been good to us, the way it sees the world is the way everyone should, and the way we perceive our company is the way everyone must already perceive it.

Frankly, we are spoiled. Many of us . . . are virtually surrounded by cringing "yes men" and sycophants who, in their quest to get ahead, usually tell us only what they think we want to hear. Is it any wonder that coddled business executives, who live in great isolation, are shocked when their companies are attacked by the press or when the press does not print our every all-important word?

Cashing In

Perhaps the most compelling occasion to demonstrate the relationship, and the importance, of a good reputation to a company's success, it is in a major emergency. We all recognize a good reputation can give a company important initial time to take control of a threat or emergency. It's a luxury denied companies with poor reputations.

Not surprising, most emergencies evoke corporate defensiveness. It's understandable the first instinct of leadership is to defend the company. But those experienced with emergency management, particularly with managing communications in an emergency, will think strategically beyond the immediacy of the event to the opportunities presented. The extensive media coverage almost certain to accompany an emergency very often can be turned to the advantage of the company.

Among the better-known examples is the long-famous Tylenol case, which Johnson & Johnson handled with extraordinary skill. Their top executive and the marketing people all recognized the danger, and the opportunities. Public interest was kept central throughout. This led directly not only to rescuing a profitable product, but the positive media coverage was advertising for the company agencies can only dream about. It was not without major risks, but the intelligence and strategic thinking behind the handling of the case was pivotal to the happy outcome, and produced an enduring, positive reputation for Tylenol and the company.

Copyright © 2001 THE OSBORNE GROUP Inc. All Rights Reserved

This article is prepared as a client service by The Osborne Group Inc. Permission is granted to reproduce it in any format provided credit is given and the content remains unchanged in any way