Does Reputation Really Matter?
For the past 15 years I have been speaking and training that it does.
Well it does! My views are now more and more vindicated by on-going international research such as the interesting findings from the Global Corporate Reputation Index study conducted by Burston-Marsteller amongst 6000 companies worldwide and the 2011 Lloyds Risk Index.
Burston- Marsteller’s studies show that Corporate Reputation is underpinned by 2 main drivers namely Performance (Putting your money where your mouth is) and Corporate Citizenship. View the findings on – http://www.slideshare.net/BMGlobalNews/global-corporate-reputation-index
(I find it still interesting that this terminology is used as there is a drive worldwide to just call it Corporate Responsibility)
They found that the average age of the top 25 companies had an average age of 87 years in business with the oldest company having been around for a 147 years. This reminded me of the story about Agatha Christie’s famous play – The Mousetrap that ran at London’s West End Theatre for more than 35 years. Over the years, directors and actors were changed but the standards never wavered. Most certainly a lesson for compliance and adherence to standards of commitment.
What stood out for me is that the world’s most reputable brands set high corporate responsibility standards for themselves and their partners and deliver consistently over time.
These are also the companies that invest heavily in corporate responsibility practices and adherences to codes of standards and conduct like ISO and ensure compliance with these codes of governance and best practice.
These companies also view potential Reputation Risk in a serious light and understand how dangerous it can be in a interconnected world. According to the world’s largest reinsurer Lloyds Reputational risk rose to No. 3, up from No. 9 in 2009, according to the 2011 Lloyd’s Risk Index. View the report – http://goo.gl/NlQRb.
In fact, A 2010 study of the world’s 1,000 largest companies found that 80 percent lose more than a fifth of their value every five-year period because of a major reputational event.
Studies also show that the role of Social Media can no longer be ignored and that these companies have to have a dedicated function to deal with its Digital Reputation and the flow of messages in nano-seconds.
Late last year a new white paper by Deloitte developed in collaboration with RiiЯ Ltd entitled ‘A Risk Intelligent view of reputation – An outside-in perspective” once again highlighted the strategic importance of reputational risk. The report highlighted the fact that Reputational Risk is now regarded globally as a “meta risk, “standing at the forefront of key strategic and operations concerns, right alongside new competition, technology failures, talent issues, and changing regulations.
As executives in the study recognized, reputation, quite simply, can make — or break — a company. Reputation is an important factor across all four major risk areas of the Risk Intelligent Enterprise — strategic, operational, financial, and compliance — particularly of the former two, strategy and operations, because it is a constantly evolving and fully embedded part of why and how the company achieves its objectives.
This catapults reputational risk to what the writers call a meta risk, or a potential menace to fundamental business strategy, and possibly an even greater hazard to organizational survival than a financial restatement or problematical findings in a compliance report.
Read the Report – http://bit.ly/ph6omX
Can you define this Meta Risk in 4 different ways as well as describe the mitigation & prevention strategies required to prevent & respond to the risk that has been called the most dangerous and difficult to manage? I can help.
On the 5th – 6th March I will facilitate an intensive 2- day workshop on how to Manage and Mitigate Reputation Risk for those interested – More information available at http://goo.gl/6WM8M
Many people have asked me why I help companies to protect themselves against Reputation Risk. Why? Well this quote says it all – “If someone is going down the wrong road, he doesn’t need motivation to speed him up. What he needs is education to turn him around.” – Jim Rohn.
My presentations and trainings are dedicated to create the necessary awareness and know-how to help companies to safeguard their fragile reputations.
Reputation does matter, and not only too companies. It is valid for us all. Read my blog post – http://deonbinneman.wordpress.com/2012/01/10/your-name-is-a-precious-commodity why your name is a precious jewel.
Corporate reputations impact brand and product sales performance. That’s one of the key findings from a recent global study by Weber Shandwick called The Company Behind the Brand: In Reputation We Trust.
As the survey report states, “As consumers around the world have greater online access to a brand’s lineage, the influence of the brand parent, or company behind the brand, matters even more.”
The study identified Six New Realities of Corporate Reputation, which the PR firm says serves as reminders that business leaders cannot view their company’s reputation and their product brands as separately as they once did.
These six “new realities” are:
1. The corporate brand is as important as the product brand(s). For instance seventy percent of the respondents said they avoided buying a product if they dislike the company behind it.
2. Corporate reputation provides product quality assurance.
3. Any disconnect between corporate and product reputation triggers sharp consumer reaction.
4. Products drive customer discussions, with reputation close behind.
5. Consumers shape corporate reputations instantly.
6. Corporate reputation contributes to company market value.
In actuality, none of these are truly “new” realities, other than perhaps the ability of consumers to now shape corporate reputations instantly via social media.
What is also very clear from the survey is that Crises like product recalls or any incident involving the company can cause irreparable damage to the brand and reputation.
In reading the report, the value of minimising potential reputation risk became apparent. For instance, if a Reputation Manager paid attention to the top 5 talking points that the research revealed, he or she could develop strategies to minimise the risk before it occurred.
These five talking points are customer service, how employees are treated, company scandals or wrong-doing, and their feelings about the company as a whole (its reputation).
Understanding Reputation Risk and what could destroy value is now a vital competency for any Reputation Manager.
The report also clearly shows that Reputation Matters now even more than ever, with more than 60% of a company’s market value attributed to it.
The report which makes for excellent reading, is available online here