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Chapter 1 Reputation Management

Based on information from Doorley, J., & Garcia, H. F. (2015). Reputation management:

The key to successful public relations and corporate communications (3rd edn.).

New York: Routledge. © Taylor & Francis 2015

Reputation

Warren Buffett: “If you lose dollars for the firm by bad decisions I will be very understanding. If you lose reputation for the firm, I will be ruthless.”

Warren Buffett: “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.”

Benjamin Franklin – Architect of American: It takes good deeds to build a good reputation, and only one to lose it.”

Many CEO and other leaders have echoed a similar mantra that “Reputation is our most important asset.” But why do so many of them let the asset be trashed? GM-Ignition switch defect;

An unmanaged asset will decline in value over time, inevitably moving to the liability column, and this is one reason for the decline in corporate reputation. - Corporations have risk and crisis management framework in place but few have a process in place to management the reputation asset.

Reputation

Reputation is a corporate of substantial and measurable value. The view that it is an intangible asset is not a constructive perspective. (i.e., derived by inference; implied by operation of law; not obvious or explicit.

"constructive liability"

Companies with better reputations attract more and better employees, pay less for goods and services, accrue competitive advantages and can charge more for their own products (i.e., Apple). Settled – Reputation is a tangible asset.

World’s most admired companies http ://fortune.com/worlds-most-admired-companies /

2015 Reputation Dividend Report – indicated that the reputations of the Standard and Poor’s (S&P) 500 companies accounted for higher percentage of the combined market cap of those companies.

http://www.reputationdividend.com/files/1514/3515/4447/US_2015_Reputation_Dividend_Report_-_Final.pdf

Reputation

Reputation can be managed. Companies that have a process in place rank higher.

Some companies are undervalued on certain drivers of reputation (i.e., long term investment value or corporate social responsibility - addressed through targeted communication strategy. Other companies are overvalued on such drivers, which represents a performance or a behavior challenge.

To manage the components of reputation – performance, behavior, communication and intrinsic identity (what the organization stands for) is to manage the whole.

By Managing relationships with groups and individuals that have a stake in the company is to manage the sum of those relationships – something called reputation.

If in place GM – no problems

Conference Board – CEO – For driving enterprise growth & performance, reputation among their top five strategies.

Reputation

“The sum of the images the various constituencies have of an organization”—Charles Fombrun

Reputation = Sum of Images = Performance + Behavior + Communication

People – social capital (networking) helps them build relationships and careers, Corporations and other organizations develop reputational capital that helps them build relationships and grow their organizations.

An Equation for Reputation

Reputation

Behavior

Performance

Communication

Benefits of Reputation

Image=stakeholders-customers, employees, consumer, feel good about a company – make it through good & bad times. Reputation adds value to a company. Market capitalization (# outstanding shares x price per share) is often greater than just the book value or liquidation value of assets. Market capitializaion/repuational capital – concept related to goodwill.

Tangible

Intangible - Soft

Historic view – Soft

Like all assets – a building or a product – reputation has its liability side.

You must measure, monitor, and establish a plan for managing both the reputation assets and vulnerabilities/ liabilities.

Most important thing is to have a plan.

“If you don’t know where you’re going, any road will take you there.”

Reputation

Few companies take a rigorous, quantifiable approach to reputation management – measuring, monitoring and managing reputation assets and liabilities – (i.e. should be a part of asset management). W/O opportunities missed and problems become magnified.

Proactive behavior and communications consist of measurement, acknowledgement and planning – builds reputational capital. Formula - R=P+B+C – (individuals and organizations) – reputation is cumulative.

Corporate Character

The Arthur W. Page Society – Corporate Communication Model

General Electric’s corporate character

Defining corporate character—advocacy at scale

Keys to success

Define your company’s corporate character

Engage internal stakeholders as authentic advocates

Determine how you communicate your corporate character externally and micro target your audiences

Activate the appropriate elements of engagement that reach your core audiences in an authentic way.

Remain open, transparent and true to your corporate character through all your communication.

A company must define and know itself. Corporate Character must be at the center. – Unique purpose, beliefs, mission and values that are at the center. Page 8

Intrinsic Identity

Definition

What the organization stands for, above all else

Examples

Johnson & Johnson

General Electric

Starbucks

Lehman Brothers 2008

Catholic Church 2002

The New York Times

GE/Starbucks – True to dominant identity; develop & market consumer and technology products of the highest quality, best people. Starbucks proclaim the ideals of mutually beneficial and profitable relationships w employees and communities. CEO – quality product vs. sales dominant identity is sales quote – exists a prescription for disaster.

Measuring Reputation: Harris–Fombrun Reputation Quotient

Evaluates reputation among “multiple audiences,” according to twenty attributes

Grouped into what are referred to as “dimensions of reputation”

Products and services

Financial performance

Workplace environment

Social responsibility

Vision and leadership

Emotional appeal

Can Reputation Be Managed?

Scholars – defined reputational capital as the difference, averaged over time, between market capitalization and the liquidation value of assets.

Market Capitalization “refers the total dollar market value of a company's outstanding shares. Commonly referred to as "market cap," it is calculated by multiplying a company's shares outstanding by the current market price of one share” - Liquidation value of assets “is the total worth of a company's physical assets when it goes out of business or if it were to go out of business. Liquidation value is determined by assets such as the real estate, fixtures, equipment and inventory a company owns.

“Intangible Asset”: The Wrong Perspective

Many organizations view reputation as something “soft”

Reputation does have real, tangible value

Reputation has liabilities, too

Must have a plan for managing both assets and liabilities

Five Strategies for Reputation Building

Target key areas that really matter to your organization

Target the leaders but do not stop there

Identify the emerging players

Use your organizational resources

Always be the first to tell the “news” to your constituency—particularly if it is bad news

Measuring Reputation Value Simon Cole and Sandra Macleod

Data definition and capture

Economic analysis

Individual company outputs

Contribution

Risk profile

Leverage

Market behavior

Comprehensive Reputation Management (CRM)

A long-term strategy for measuring, auditing, and managing an organization’s reputation as an asset - (applied to major areas of an organization – finance, HR, investor relations, manufacturing, marketing & pr.)

Comprehensive Reputation Management is to reputation what risk management is to other assets; brand management (marketing value of product/name); corporate identity (institutional advertising)

Risk management is the process of identifying, quantifying, and managing the risks that an organization faces. As the outcomes of business activities are uncertain, they are said to have some element of risk. These risks include strategic failures, operational failures, financial failures, market disruptions, environmental disasters, and regulatory violations.

Components of Comprehensive Reputation Management

Customized reputation template-measurement tool. Specific to each organization

Reputation audits of internal and external constituencies

Reputational capital goals

Accountability formula

Reputation management plan

Annual follow-up audit and assessment

2) 1st/Audit - employees vs. mgmt – intrinsic value (what company stands for) –gap between two views; 2nd/Audit how external view organization and sum of those constituency images constitutes reputation. Gap between identity and reputation is analyzed, create plan to converge the two. 3) performance against industry or competitor (measure, monitor, manage); 4) making adjustment if slipping; 5) the deliverable – a strategic performance, behavior + communication plan for converging identity and reputation – plan to move images various constituencies hold about the organization closer to intrinsic identity.

Components of Comprehensive Reputation Management

Stakeholder Overview - 2 pages – A key component of the copyrighted CRM list for the organization’s main stakeholders (seven to ten for a large organization) the opportunities, vulnerabilities, goals, and strategies.

Pushmi-Pullyu Metaphor

https:// www.google.com/search?q=pushmi+pullyu+toy&oq=pushmi&aqs=chrome.4.69i57j0l5.7471j0j4&sourceid=chrome&ie=UTF-8

Solution:Pushmi/Pullyu – Entire organization behave and act as one.

Remember Doctor Dolittle’s Pushmi-Pullyu Syndrome? In corporations, we see this mythical creature when there’s a disconnect between the company’s behavior and its communication. Always blames PR/Communication, not performance. “How does it make up its mind.” The performance head is turning saying one thing and they expect the communication head to turn saying something else.

Behavior / Performance

Communication

Edelman Public Engagement Model

Democratic and decentralized

Inform the conversation

Engagement with influencers of all types

Reputation is built on policy and communication

Reputation Mismanagement

Reputation

Performance

Behavior

Communication

Lessons From Financial Crisis

Arcane financial instruments, massive greed Real Estate/Banks collaborated to sell property to people who could be expected to pay for it.

Performance Failure: Property value and other economic indicators fell so did the reputations.

Behavior Failure: Economy down, executives compensation continued to rise. – Occupy Wall Street 2012

Communication Failure: Was Communicators consulted 2008 when CEO’s took their private jets to Washington.

Identity Failure: Bank made loans only to people who could repay; that changed in 1980s.

One bank after another started making loans on the prospect that the properties offered as collateral would appreciate. Often banks sold the dangerous loans to toehr banks, absolving the original lender of vulnerability.

Ten Precepts of Reputation Management

Know and honor your organization’s intrinsic identity – Multiple identities (quality products, competitive, etc.) must be compatible and one must be dominant.

Know and honor your constituents (Red Cross)

Build the safeguards strong and durable, for they are the infrastructure of a strong reputation

Beware the conflict of interest, for it can mortally wound your organization

Beware of the “CEO Disease,” because there is no treatment for it

3) US Federal Reserve Chairman, Alan Greenspan maintains that greed was the root cause of most business scandals and weak safeguards let the greed flourish. Moral: Strong, efficient safeguards, internal/external-company’s best interest;

Ten Precepts of Reputation Management, cont’d

Beware of organizational myopia, for it will obscure the long-term view

Be slow to forgive an action or inaction that hurts reputation

Do not lie

Dance with the one that “brung” you

Reputation is an asset and must be managed like other assets

Best Practices in Reputation Management

Understand and value the components of reputation, including integrity, governance, and communicativeness (transparency)

Establish a formal mechanism to periodically monitor, measure, and manage reputation

Establish a formal mechanism to manage reputation on an ongoing basis

A formal mechanism can help your organization converge brand reputation and the broader corporate reputation with intrinsic identity

Brand Management

Brand is not reputation

Reputation—the sum of perceptions that individuals or groups have of a specific individual or organization

Brand—how an individual or organization wants to be perceived

The Expanded Reputation Formula

Reputation = (Performance + Behavior + Communication) x Authenticity factor

R = (P + B + C) x Af

The Authenticity Factor – The indicator of how well an organization (or person) lives up to its intrinsic identity. When authenticity, the organization is a whole, undiminished. Authur W. Page Society call the “coin of the realm for successful organizations. Grounded: sense of what defines it, why it exists; what it stands for and what differentiates it in the marketplace. To be authentic is to have integrity (a whole). When integrity or authenticity fails, the Authenticity factor is a fraction. The organizations is divided and, and its reputation will decline, because it well be a fraction of the sum. Reputation depends on each of the factors. Reputation can only be managed by managing all the components in the equatikon.

Systems Theory

Communication is the means by which an organization functions, and it is axiomatic that the better the communication the more productive the organization

Remaining Chapters

Discussion of ethics (Chapter 2)

Discussion of approaches to working with the various corporate communication constituencies (Chapters 3–10)

Ways of handling certain major responsibilities (Chapters 11–13)

Challenges facing those who seek to build a career in corporate and organizational communication (Chapter 14)