Why corporate reputation is critical?

 Importance of corporate reputation

Corporate reputation is very critical. As I recall my article I wrote on Daily Financial Times titling ‘Organisation Reputing – Where is it heading?’ stating ‘In the era where intangible assets and properties dominate the economy; where the world is thrown out with millions of brands;

where there is intense competition in every corner of the border; where there is an ever increasing need for transparency and corporate governance; where there are many demo-psychographic changes occurring, and where there are much more things to say about, it’s obviously critical for organisations to halt and think about its reputation’

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 locals 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 because sales, and therefore 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.

Shell tops Number One despite negative reputation on global oil sector.

The study surprisingly found that Royal Dutch Shell’s corporate brand reputation contributes the most to the total value of the company’s market capitalisation 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 capitalisation with 52%.

In my articles I also quoted one of my favorite icons Oscar Wilde who stated ‘‘One can survive everything, nowadays, except death, and live down everything except a good reputation’’. Organisations cannot risk this in today’s world. Just like an individual’s reputation, organisations are also living organisms in this planet. When there is successful reputation management, organisations no matter what the industry they serve, whether big or small, will enjoy higher longer term profits, positive media feedback, enhanced brand value, positive brand personality, appealing corporate values, higher sales and market share, increasing levels in employee and customer satisfaction levels, effective stakeholder engagement, and a promising long term sustainability and competitiveness in the marketplace overall.

Miss managed reputation on organisations

A significantly damaged reputation can take many years to repair – 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”.  It leads to loss of employees & talent. People like to work for good companies with strong brands. A damaged reputation reflects badly on them and you will lose your best staff as a result.

All of this leads to lower sales and revenues and then reduced profits. Significant costs of hiring lawyers, consultants and staff time to mitigate the damage caused by the mismanagement — for the worst, even the corporate identity may have to change.

Well managed reputation on organisations

A well-managed reputation that is by having a formal reputational management process and plan results in enhanced name recognition for the company that results in a larger market share. Managing a crisis well enhances a company reputation. Everybody knows that things can go wrong. Problems are not the issue: it’s the way you handle it. A good reputation practice can lead to improved relationships & stronger bonds with all key stakeholders.

Whose hands does it fall onto?

Remember, everything in this world is integrated somewhere, somehow, and by any means. This is the 21st century, and it’s a battle for the big corporates to win reputation or die themselves.

In most companies, corporate reputational management is handled by the Business Continuity and Improvement division, wondered why it’s not in the hand of marketers. From my eyes and thoughts, I could conclude that this strategic aspect needs to be given to marketers of the 21st century to handle it – my big brothers who understand the criticality of reputation management in the corporate world knows what I’m talking about.

Marketers in today’s world need to be everything – not only from the 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, realise, and act – it’s a simple process which needs to be carried out continuously and not one-off. Why is this so hard for organisations 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?

(The writer is an evolving marketer and strategist, and is the world’s youngest ACIM, and provides practices and knowledge on industry, marketing, strategy, communications, digital and social media, and strategic reputation. You can reach him on [email protected] for feedback and services. Browse through his articles on www.thanzyl.com.)