A Paradox in Shaping Corporate Reputation
There have been a number of reputation ranking studies and reports issued in the past several weeks. They are all a little different and the reported rankings not necessarily consistent from study to study. So why are some companies regularly recognized as the nation’s most admired even when their across-the-board performance is inconsistent? Why are other companies that demonstrate solid, consistent performance often ignored? In two words, the answer is awareness and performance.
So how can a major corporation rank at the top of a number of corporate reputation lists, yet be dogged by one of many crises companies endure like the discovery of undocumented workers or leadership turnover? How does a company succeed in light of such news?
Corporate reputation rankings are derived from an amalgam of company characteristics such as leadership and financial performance. Fortune’s America’s Most Admired Companies ranking features nine key attributes, The Reputation Institute’s RQ tracks seven factors and The PRIME Top Companies and Top CEOs studies track six reputation drivers with multiple overall subcategories.
Good corporate reputations are critical because of their potential for value creation, but also because their intangible character makes replication by competing firms considerably more difficult. Existing research confirms that there is a positive relationship between reputation and financial performance. It has been proven that firms with relatively good reputations are better able to sustain superior profit outcomes over time.
As such, a particular company may perform relatively poorly on a particular measure, such as “Employer of Choice,” while excelling on another, such as “Financial Performance” or “Quality and Value of Products and Services.” In other words, companies have many opportunities to succeed and fail, but if they can generate more visibility and awareness for the measures on which they perform well than they do on those measures upon which they perform less successfully, they can emerge victorious.
For more information about PRIME’s Top Companies and Top CEOs studies, visit www.prime-research.com
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Part of the difficulty is definitional. Neither academics nor those working in the field have come up with an agreed-upon definition of reputation. Different reputational scales lead to different results. Reputation is a term many believe they fully understand — but do not. At this stage, perhaps no one person, organization, or firm has a firm grip on exactly what repuation means or how it is to be measured.
Dr. Wise,
Thanks for your comments.
To your point about definitions, I couldn’t agree more. One of the great challenges among communicators is the creation and adoption of clear and concise language by which we can measure and manage reputation. Until that time, companies have to settle for being “approximately right” which is still better than being “totally wrong.” The companies that can effectively manage those reputational elements which can be quantified will enjoy great advantages in the marketplace. Those who ignore reputation entirely are inviting risk and catastrophic cost.
Best,
Mark