This article appeared in the first issue of Corporate Reputation magazine. The second issue will be landing on desks this month. For more information email firstname.lastname@example.org
Reputation has been called the main thing that keeps a chief executive awake at night but measuring and managing this valuable asset is easier said than done. ‘The challenge for everyone in the reputation space is that it is fundamentally an amorphous concept. You can’t buy a kilo of it. People intuitively understand it, but quantifying it is more difficult,’ says Nick Andrews, EMEA reputation management lead at FleishmanHillard Fishburn.
A construct of the mind, reputation is seen as the sum total of everything that all people think of you. It can be further defined as ability to meet audience, or stakeholder, expectations. Increasingly, it is recognised for its influence in creating stakeholder support and engagement.
‘It is gaining steam because of the Internet. People are starting to care about how companies operate. There is an increased scrutiny of behaviour,’ says Karen Buerkle, PhD, managing director at APCO Insight, an arm of global communications consultancy APCO. With reputation growing in prominence and importance, a rigorous model or framework Tracey Boles considers the myriad ways in which companies create frameworks to manage reputation should help practitioners and researchers measure and manage reputation. Such a model should also assist with the development of strategies for when the reputation of a corporate comes under threat.
So what exactly constitutes a robust reputation management framework?
The reputation frameworks examined here – those of FleishmanHillard Fishburn, Reputation Institute, Kantar Media, APCO Insight and Teneo Blue Rubicon – come with their own terminology and methodology. However, all are rooted in stakeholder perceptions of a company, its products, services and behaviours.
The first step in compiling a framework is therefore to gather insights on stakeholders’ expectations and experiences. ‘We explore whether what you say is in line with what people think of you and say about you. Also, do people’s expectations and their experience of your organisation marry up?’ says Andrews of FleishmanHillard Fishburn, who calls this reputation yardstick ‘authenticity’.
Among the stakeholder groups commonly surveyed by reputation researchers are politicians, the media, regulators, customers, members of the public who are not customers, future business prospects, employees and suppliers. Sample sizes vary. A questionnaire, bespoke or standardised, is used to elicit responses about the performance indicators selected.
The findings are then measured against actual performance to create a gap analysis; they may also be compared with those of peers. For example, customers will have different expectations of British Airways and Ryanair. When their expectations are examined against experience, it can show a gap, for good or bad. This analysis can then give rise to what Andrews calls ‘actionable insights’.
‘You can do something about what we find,’ says Andrews. ‘Any actions need to be deliberate and set against a plan, in the same way you manage any asset. As well as working out a business strategy, it allows you to differentiate yourself.’
Actions can be simple, such as using new pictures to update the image of an industry. FleishmanHillard Fishburn surveys 1,000 so-called ‘expert consumers’ for each sector using patented methodology from LePere Analytics. These consumers are chosen for attributes such as how likely they are to talk enthusiastically about a subject. They are questioned on the nine drivers of reputation identified by FleishmanHillard Fishburn.
‘Customer benefits are the overriding value in our model as consumers will always be focused on the benefits they get from using products and services. But while this carries 45 per cent of the weighting in our analysis, and typically attracts most of company spend, the other two categories outflank it when combined,’ Andrews explains. He believes that stakeholders are focusing more on the company and the people behind the products and services they are buying. ‘When it comes to reputation, firms need to think about these other areas. If you don’t, you might not be able to cope with the vagaries of the market,’ Andrews warns.
He cites the example of Apple, saying: ‘Now that it is becoming increasingly hard to innovate in the smartphone market, a company like Apple whose reputation is based entirely on this reputation driver is going to become increasingly vulnerable.’
Reputation Institute, known for its reputational scorecards and annual rankings, has developed a complex multi-dimensional framework based on the work of two academics. Its framework is designed to help organisations answer these questions:
1. What is my reputation and how does it compare?
2. How can I improve it?
3. Who is doing well?
The academic work on which this model rests dates back to the Brent Spar controversy in 1995, when Dr Charles Fombrun, former professor of management at New York University’s Stern Business School, and Dr Cees van Riel, professor of Erasmus University Rotterdam, set out to establish why stakeholders follow one company and not another.
They examined Shell, then the world’s largest oil company. (Fombrun and van Riel ultimately founded Reputation Institute.) The research evolved into the RepTrak® framework.
At its centre is an emotional ‘pulse’ which represents the emotional bond between stakeholders and a company or organisation. The pulse is composed of seven ‘dimensions’ of corporate reputation such as products and services and financial performance. Each dimension contains a number of different ‘attributes’. For example, performance includes profitability, good results and growth prospects.
As with other reputation consultancies, Reputation Institute’s research involves pinpointing the gaps between internal perspectives and external ones in each category, and establishing why they do or do not exist.
‘It is all about perceptions of stakeholders,’ says director Ed Coke. He explains: ‘We get asked Why are there seven dimensions? It is because reputation is not just about trust. You need to establish whether stakeholders trust an organisation, but also whether they hold it in high esteem, have an overall good feeling about it and see it as having an overall good reputation. It is about what people think, feel, know and what others feel.’
The research typically focuses on the general public, customers and new business targets in a sample size of at least 300 per audience. The client being assessed – be that a firm, industry, city or country – is then given a score out of 100. On this scale, 80-plus is seen as ‘excellent’ while below 40 is regarded as weak. Most clients score from 60 to 69. In Reputation Institute’s 2016 rankings, the top scoring firm, at 84.4, was Lego for the ‘trust, admiration and good feeling’ it generated. The toy-maker dominated in the dimensions for governance, citizenship and workplace.
Ikea also made the top ten, leading in innovation; BMW ranked highly for financial performance.
Luxury watch brand Rolex achieved the highest score in the products and services category.
The worst rating went to telecoms firm TalkTalk, which had suffered a cyber attack shortly before the research period. Scandal-hit VW saw the biggest reversal of fortune, crashing from number eight in the 2015 rankings to number 267 in 2016. Using the RepTrak® system, corporate communications can attempt to align stakeholder support with the goals of the organisation, be that engaged employees, favourable media coverage or recommendations from customers.
Coke says: ‘Clients use our model to build a communications roadmap. It is not just a diagnosis. It shapes hearts and minds and has an impact on brand. We quantify something intangible. It is also a smoke alarm that gives you an early warning system so you can take responsibility.’ In contrast to Reputation Institute’s elaborate framework, the Kantar Media philosophy is to keep reputation simple and not overly engineered.
‘With boards, if it gets too complex you lose them early on, and then they do not listen to the data,’ explains managing director, Insight, Marcus Gault. Kantar offers a reputation measurement, insight and tracking service designed to give non-executives an overview of stakeholder perceptions. ‘It is about delivering insight. They just want to know what happens and why.’
Data is collected from a range of stakeholder groups: customers, members of the public who are not customers, financial analysts, politicians, media, regulators and employees. The methodology used may be straightforward but it aims to be empirical, with 15 or 16 different sources of existing data analysed for each stakeholder group including customer satisfaction data, brand tracking, buy/ hold/sell ratings.
This data is then ‘enriched’ with information from other sources such as social media and financial forums. The findings are aggregated and weighted to give a number or score in an index, presented to the client in the form of a report. A Kantar reputational survey is typically conducted on a monthly basis, unlike some others in the marketplace.
Gault explains: ‘This allows us to track reputational movements as they go up and down, and to show recovery. It is powerful when you see movements unfold this way. It can show the relative position to commentators. Because it is monthly, it is sensitive and identifies quickly and accurately the impact of different events, such as the Brexit referendum.’
The results of Kantar’s research can also give sight of issues six months away and feed into planning. ‘What is good for one group of stakeholders may not be good for another,’ says Gault. ‘They can be in conflict. Companies have to manage that conflict and compromise. They have to find a balance.’
Gault believes reputation has moved up the agenda as boards in sectors such as banking wake up to the fact that it can be vulnerable to a big hit, for example from misconduct issues. They are realising reputation matters to market capitalisation and financial performance, and are an indicator of health. Like Kantar, APCO Insight advocates simplicity. It also believes that bespoke frameworks are best.
Buerkle adds: ‘Our philosophy is simple: a company’s reputation is its ability to meet stakeholder expectations. So we first ask them their expectations and then we measure performance against it. ‘We believe that to be actionable, a framework needs to be customised. Our findings can be used to set a specific communications strategy, or recalibrate it. Therefore, it has to be bespoke.’
For example, in her view there it is difficult to make actionable research that measures sportswear company Nike along the same criteria as oil giant Exxon Mobil, as they operate in radically different industries. APCO’s starting point is to define the business outcomes that want to be achieved, such as retaining talent or an improved licence to operate, and then select research audiences accordingly.
The research explores the fullrange of expectations that these stakeholders have for the company. ‘The result is a full 360 degree view of the company, and we organise these findings in a matrix. This framework helps our clients prioritise and build a strategic focus based on what matters most to the stakeholders they most care about,’ Buerkle explains.
Basil Towers, senior managing director at Teneo Blue Rubicon, agrees that stakeholder insight and market intelligence are critical to taking decisions with which to manage reputations. However, he believes there should not be a separate reputation management framework per se, rather ‘reputation and trust thinking’ should be built into the relevant parts of the company’s business strategy and operating model.
Towers explains: ‘Having a framework treats reputation as if it is separate to a business: it is not. Instead, you need to view it as an approach. It should be embedded in what you are doing and not seen as a separate entity or activity. Reputation strategy is part of corporate strategy and informs a series of activities, some of which are owned by corporate affairs.
‘If you fundamentally believe this as we do, then managing it is the responsibility of everyone in the business, including leadership and managers. If you get it right, you can execute your business strategy and plans much more effectively and efficiently.’
For Teneo Blue Rubicon’s clients, the structure comes from risk assessment, planning and accountability. Towers says: ‘Reputation risk assessment should be embedded throughout the planning process. A plan should not go to the next stage without it.’
Integrating reputation into the operating model, thereby making employees responsible for it, requires a number of factors including: a definition that makes reputation real for people and clear as to how it impacts their ability to do their job; clear accountabilities and responsibilities from top to bottom; governance that holds people to account; and alignment between the leadership, the board and corporate affairs.
The client for a reputation management framework is usually a corporate affairs function. What kind of reputation frameworks do corporate communications professionals prefer, and how do they use them?
Matt Young, group corporate affairs director of Lloyds Banking Group, says: ‘A good reputation management framework is not something to be dusted off when a crisis looms large. Reputation management is an effective strategic tool and a core part of business planning. It should be used for both evaluative and forward-looking purposes.
‘For instance, at Lloyds we take accumulated historical data to develop stakeholder profiles which, in combination with anticipated future events, are used to forecast likely reputational impact and identify mitigating actions. Management will regard it as a critical part of the decision-making process providing them with a broader perspective and helping to ensure actions are taken on a more informed basis.’
‘Although there are also some core tenets that will feature in all reputation frameworks, one size does not fit all. At best, an organisation’s framework should be bespoke and dynamic.’
Dominic Redfearn, global brand and communications director at drinks giant Diageo, which uses a bespoke product, believes having a framework makes sense operationally. He says: ‘Using data and analysis allows us to course correct plans. We can get a clear picture of stakeholder expectations locally and globally, and work out what we need to do to build trust ‘We explore whether what you say is in line with what people think of you and say about you’ and respect. A robust framework is core to strategy delivery; it helps us to understand how effective and efficient we are with our campaigns and across all our activity.’
Having a reputation framework paves the way for corporate communications to have a greater, more strategic role according to the Reputation Institute. But FleishmanHillard Fishburn’s Andrews sees room for improvement in the way many companies manage their reputations.
‘A lot of reputation work is retrospective, or people pay lip service to it. Reputation needs to be marbled throughout the business,’ he says. ‘The corporate communications function should be on the board so their findings in this area are heard and acted upon. After all, share price is a reputation driven metric. The board need to be held to account. They should look at the scores so that a chief executive can work out what is robust and what is not so that they can fix it.’
The stakes from neglecting reputation can be high. Andrews says companies can no longer expect to succeed if they fail to understand the gaps between the expectations and the experiences of their stakeholders.
APCO Insight concurs that there is a heavy cost associated with neglecting reputation. Buerkle says: ‘You could end up on the front page of a newspaper, but in a bad way.’ As Towers puts it: ‘Value is at risk.’ In the Internet age, companies are waking up to the importance of reputation. Reputation management frameworks are a way of measuring and managing this key but intangible asset. They come in many different forms, be that simple or elaborate, bespoke or off-the shelf. However, they all involve assessing stakeholders’ expectations and experiences, and forming strategies to close, or even exploit, any gaps identified.
How to strategically manage corporate reputation A greater knowledge of stakeholder perceptions about an organisation helps to define a reputational platform that takes into account what its wants, can and must do, according to new academic research*.
But to understand and evaluate stakeholder perceptions requires four steps:
1) Identify the areas of reputational risk to which the organisation is exposed
2) Identify relevant stakeholders and link each group with relevant areas of reputational risk
3) Establish systems that evaluate the relative position of each stakeholder group, from informal discussions to in-depth surveys. Consider competitive and internal benchmarks to identify ‘better practices’, which helps locate reputational flaws
4) Prioritise weak reputational areas: develop action plans to treat them, schedule continuous re-evaluations In identifying sources of influence, both direct and indirect, that may affect shareholder perceptions, organisations can establish a consistent approach for measuring reputation through internal alignment and integration of the different areas that interact with different stakeholder groups.
After conducting this analysis, an organisation can determine whether it needs to reinforce its current position (if it already has a strong reputation) or to work on aligning its vision, culture (capabilities) and image (expectations). This should define the organisation’s strategic intent, and allow for the development and implementation of a reputational strategy.