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Features

What Really Influences Corporate Reputation

This piece was originally published in the Journal of Business Strategy, Vol. 38 Issue: 6, pp: 54-58.

“The louder he talked of his honor, the faster I counted my spoons”, wrote Emerson, describing a dinner guest in his essay “Worship”. It is a sentiment many of us can share at a time when trust and reputation are seen as both increasingly important and increasingly vulnerable to subversion. Now, more than ever, it is important to identify the true drivers of reputation and what companies should be doing to achieve the long-term goal of sustained strategic credibility, the reward of a good reputation.

Opinion polls have shown consistent declines in the public’s trust in institutions such as government, the professions and corporations for more than 50 years. Opinions about the US Congress, the European Union and many other governing bodies have fallen particularly low, but the reputation of corporations has not fared much better. In spite of this, or perhaps because of it, most corporate leaders pay close attention to the reputation score of their individual companies and its many proxies – diversity in the workplace, innovation, entrepreneurship, best places to work and best sustainability practices. A cynic might suggest that the proliferation of these “reputation” scores has very little to do with the importance attached to reputation and everything to do with the needs of media to attract advertisers and readers and of consultancies and professional associations – the other sectors that publish rankings – to build awareness and favorability. This has led to an extraordinary proliferation of awards and recognitions of every conceivable kind. We have yet to see a ranking of best places to work in the equestrian saddle industry, but it is probably only a matter of time.

Notwithstanding the conventional pieties about a good reputation and its alleged contribution to corporate success, there remains significant ambiguity about the role reputation actually plays. The first and most obvious issue is one of causation/correlation: are companies with a good reputation more successful because of it or do they have good reputations because they are successful companies with popular, well-priced, innovative products or services? Conversely, one would expect that companies with a poor reputation would incur a concrete penalty in the form of reduced sales, stock price or other metrics. The evidence here is also highly inconclusive. The failure of Volkswagen’s sales to reflect its emissions-testing scandal long term is only one of the most recent to demonstrate that the relationship between reputation and business success is much more complex than it might seem. In fact, while individual corporate executives have been sacrificed when corporations have suffered reputation declines, there are surprisingly few examples of companies that have been driven under principally by a loss of good reputation. Takata, the Japanese automotive airbag manufacturer, which declared bankruptcy in 2017, did so not because of its alleged cover up of dangerous defects in its airbag inflation technology but because of the mounting cost of lawsuits relating to the problem. Perhaps the best-known “reputational” crisis with real impact was the self-inflicted wound caused by British jewelry retailer Gerald Ratner in 1991. When it became known that he had called his company’s products “crap” during a speech to the British Institute of Directors, the market value of the company fell by £500 million within weeks. The company almost went bankrupt and renamed itself a year later. There are very few examples, however, of similar long-term reputational impact.

Another confounding factor in determining the real importance of reputation is the role played by corporate marketing initiatives and expenditures in influencing stakeholder perception of a company. According to the well-established principle that favorability is strongly correlated to familiarity, it would make sense that such investments would produce a positive return. As one executive vice president for corporate affairs stated in a press release basking in the sunshine of a positive reputation ranking, “Since the company’s inception less than five years ago, we have worked to raise a better understanding [of it] among our key stakeholders.” [. . .] “We are pleased that these efforts have resonated with our global audience and driven greater understanding of who we are and what we stand for as a company”. While it would be a huge stretch to suggest that reputation is only as good as the amount spent on it, it is not altogether surprising that senior business executives are confused and sometimes wearied by the whole subject.

Alert to these challenges and conscious of the principle that what gets measured gets managed (and invested in), consultants offer a wide range of reputation scores and metrics. Some of these measure sentiment, such as the Reputation Institute’s RepTrak system which not only measures positive and negative attitudes but seeks to identify the most important reputation drivers for specific companies. Others, such as Oxford Metrica’s “Value Reaction” scores, seek to measure behaviors in response to reputation assessments. Their system is based on the thesis that shareholders build their own assessments of how other stakeholders view a company into their buy/sell decisions, thereby acting as a proxy for all other sentiment. Some might argue that shareholders could feel positive about corporate actions not viewed as benignly by labor unions or regulators, but the system does have the virtue of measuring outcomes rather than opinion.

Amidst all of these contradictory signals, it is not surprising that the guardians of corporate reputation have embraced an ever-widening array of tools to assess changing stakeholder sentiment. An increasingly sophisticated set of social media data analytics not only track sentiment through keyword analysis but can provide a vivid picture (literally, through data visualization) of the minute by minute shifts in the parameters of online reputation – links, likes, ratings, retweets, page views, time on site, unsubscribe requests, downloads, search frequency and blog mentions. The integration of these diverse data points into a reputation dashboard can provide important insights into changing consumer sentiment and give companies early warning signals of issues of concern to their customers and other stakeholders.

Yet these micro snapshots, valuable as they are for tactical purposes, seem to provide fewer tangible insights at the macro level of corporate reputation with its longer time horizons and broader stakeholder ecosystems. While measuring consumer sentiment by whatever means is clearly a critical marketing and sales exercise to determine why they do or do not value a company’s products, we believe that a much more important determinant of reputation is a company’s influencer landscape. When it comes to where people choose to work, whether regulators approve and communities support a company’s initiatives, the contours of the influencer landscape play a much more significant role. While mapping that landscape was once a truly daunting task requiring significant investment, the transparency of today’s internet-based conversations enables a much leaner, more real-time approach to identifying the influencer topography for an individual company and monitoring changes in it. Once that landscape is well understood, it is a short step to creating an influencer engagement strategy that is the critical driver of long-term reputational growth.

Effective influencer engagement frameworks will vary from industry to industry and company to company but share common elements. They are composed of groups such as follows:

  •  Authors of the most commonly cited books and academic papers relevant to a company’s industry;
  • Most influential financial analysts in a given sector;
  • Most highly regarded and cited reporters and other commentators (consultants and leading industry executives) on the sector;
  • Prominent industry boosters and critics;
  • In some industries, highly followed citizen bloggers; and
  • Celebrities with a significant online presence and an interest in an industry and its issues.

The ability to harness data about the opinions and activities of these critical influencers has been immensely enhanced by the public nature of the online conversation, enabling the creation of highly detailed influencer maps showing where ideas about a particular company or industry start, who picks them up and how they are shared and developed. For example, when Nosta, a health tech blogger with 39,000 Twitter followers, cites NorthShore University HealthSystem in Chicago for innovations in genetic testing in a retweet, the reputation impact is exponentially greater than the system’s own Tweets or a local newspaper article. For a health technology company or delivery system wanting to promote the use of innovative technologies, engaging with Nosta and his peers could create significant value.

The quality and quantity of the data now available to help fuel an influencer engagement strategy is impressive but will prove of little utility without answers to these critical questions:

  • How and with which stakeholders do I wish to improve or change the reputation of my organization?
  • What is their current state of belief about my organization?
  • What concrete evidence can I show that will be credible to these particular stakeholders?
  • What changes in opinion or behavior will I measure as evidence the strategy is effective?

Once these questions have been answered or agreed upon, an influencer engagement strategy can be developed across many forms of engagement:

  • Support of academic research and other projects;
  • Early access to non-proprietary information about a company’s activities;
  • Individual access to senior company executives;
  • Invitations to speak at company or industry thought-leadership events; and
  • Active engagement with that influencer’s social media/online presence.

It should, but perhaps doesn’t, go without saying that any support that involves financial or in kind support must be transparently disclosed and any engagement that suggests a conflict of interest should be avoided. The very transparency that makes influencer engagement at scale possible also ensures that any opaque dealings will quickly be discovered.

It is also important to note that these influencer engagement strategies need not be monolithic, but can be created to address any number of criteria that are often associated with strong reputation. This includes not just innovation in a company’s products or services but sustainability, diversity and philanthropy. In short, influencer engagement strategies can be devised for any theme of importance to a particular company’s reputation. As with so many of the innovations made possible by the internet and social media, engaging in public conversations with influencers requires a high degree of consistency across a company’s activities. Attempts to engage with influencers on diversity, for example, will quickly backfire for organizations doing business in countries whose criminal codes make homosexuality a crime. Companies with a history of environmental pollution will need to tread carefully in trying to engage with influencers in sustainability. A test and refine model is required to assess the desire for engagement in areas of potential sensitivity.

Influencer engagement is also not for companies with short attention spans or who are unable or unwilling to devote the people time to maintain long-term relationships with influencers. Corporate image campaigns come and go, but influencer engagement must be a continuous commitment to be effective.

Reputation metrics will undoubtedly continue to evolve, and there will always be a place for industry benchmarks that can capture shifts in corporate reputation with a big “R”. With well-crafted and executed influencer engagement strategies, however, companies can go beyond rankings to make a real difference in how their stakeholders see them, with real-world impact. With a bit of luck that will help today’s Emersons forget about their spoons and just enjoy the dessert.

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