Corporate Reputation: Hire a Consultant or Fire the Board?

Hear it out – Corporate reputation is very critical. In the society which we all live in today where intangible assets dominate the economic value of brands, organizations and countries; where each brand pops up in a matter of mili-seconds; where there is brand war in every corner; where there in increased concerns of societal and environmental issues, where there is increased demand and regulations for corporate governance; where there are multiple psycho-graphic changes happening, and where there are loads of things to say about, one thing comes to our minds that kindles our thought – shouldn’t we take reputation seriously?

As said by Warren Buffet, “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently”. Reputation is one of the world’s underestimated powers though it is only now that only many of the top global brands practice it on a continuous basis whilst many other brands mostly being Sri Lankan are not even considering this strategic aspect. On the other hand, die to increasing virtual environments and open-user ended internet, the reputation of what’s been spoken on those platforms are critical.

Research of FTSE350 companies on Corporate Reputation value

According to a study recently conducted by Echo Research and Bestra Brand Consultants on the FTSE 350 companies, a combination of the FTSE 100 Index of the largest 100 companies and the FTSE 250 Index of the next largest 250 primarily listed in the London Stock Exchange, it revealed that Corporate reputation is worth a total of £480bn a year to the UK’s 350 biggest companies. ‘‘The economic contribution of the corporate reputations of FTSE 350 companies account for 30% of all shareholder value – how scary is that? – That is almost a rise of three percentage points over the past 12 months.’’

Echo Research and Bestra Brand Consultants used a range of factors to value the reputation of all FTSE 350 companies which included quality of management, quality of marketing and environmental responsibility. The study further added that the reputations of the top 10 companies contribute an average of 48% to shareholder value. Interestingly, Retail brands performed well in the Reputation Institute’s UK Pulse Report, which ranked companies by factors including trust and admiration, with last year’s winner Alliance Boots, Mothercare, Next, John Lewis, Marks & Spencer and Matalan all featuring in the top 10.

Simon Cole, Managing Partner of Bestra Brand Consultants UK, says corporate reputation is becoming increasingly important as a company’s market value could be affected by the actions of the companies behind the brands which consumers are more aware of than ever before.

The study surprisingly found that Royal Dutch Shell’s corporate brand reputation contributes the most to the total value of the company’s market capitalization with 52.1% despite many predicting that rival BP’s Gulf of Mexico disaster, as we all know, would hit the oil sector’s reputation hard. Unilever followed up the second place with its corporate brand reputation contributing the total value of the company’s market capitalization with 52%.

Miss managed reputation on organizations

1. It obviously will take many years to repair.
2. It leads to loss of employees & talent. People like to work for good companies with strong brands.
3. It reflects badly on them and you will lose your best staff as a result.
4. All of this leads to lower sales and revenues and then reduced profits.
5. Significant costs of hiring lawyers, consultants and staff time to mitigate the damage caused by the mis-management– for the worst, even the corporate identity may have to change

Well managed reputation on organizations

1. Having a formal reputational management process and plan results in enhanced name recognition for the company that result in a larger market share.
2. Managing a crisis well enhances a company reputation.
3. Everybody knows that things can go wrong. Problems are not the issue: its way you handle it.
4. A good reputation practice can lead to improved relationships &stronger bonds with all key stakeholders.

Think seriously

‘‘It’s pretty sad to say this but yet we need to face the truth – Most of the Sri Lankan brands and organizations are in their comfort zone. They are happy with what they serve at present, and have built boundaries and thinking limitations to their potential abilities. It’s most obvious and fair to criticize that just as corporate executives (who think that they are it; and start underestimating any potential idea or strategy from a person who spent twenty years in a corporate or even a 10 year old kid!) living in those boardrooms are pretty much internal oriented and don’t want to take any type of risk, and feel fully satisfied driven by their personal ego and greed, similarly, brands and organizations in Sri Lanka who in turn are handled by these so called executives obviously ends up being what we can call as a stubborn kid on the block.’’

Marketers in today’s world need to be everything – not only from the arena of traditional sales, marketing, communications, and business development – but from turnaround executives through to leaders in ethics and governance. We need to sell out reputation – think hard, map, realize, and act – it’s a simple process which needs to be carried out continuously and not one-off. Why is this so hard for organizations if they can spend millions of dollars on R&D, communication and promotional campaigns or internal appraisals? All of these starts with questioning yourself being a big corporate – wouldn’t you go that extra mile to save your corporate brand?

‘‘So, do you prefer hiring a PR, Reputation, Image consultant maybe an individual or an agency, or simply fire your board room for not doing the homework?’’

[This is an article from the July / August  Issue of the Marketer Pulse Magazine]