New media channels, the disproportionate political impact of small groups and the need to maintain public trust all affect corporate image, which makes up some 63% of the value of most corporations. This makes the soft practice of building and maintaining a company’s reputation a major executive concern.
When a company is in trouble, it affects a company’s entire corporate culture and the public wants a steady flow of information about the crisis. When a corporation’s reputation breaks down, overcoming the negative impact takes almost four years and earning back high public regard can take seven years. Reputation affects how key stakeholders—customers, employees, financial analysts, suppliers or even the electorate—view your organization. No institution, large or small, is immune to developing a bad reputation and suffering subsequent financial losses. Corporations that attract bad press for paying low wages or providing inadequate health care to their employees can suffer serious brand damage.
Not only do major corporations have to worry about building their reputations, they also have to be concerned about managing potential public image threats. The three main threats to a firm’s reputation stem from changes in communications technology, the disproportionate impact of small groups and the critical need for public trust. The 2001 plunge in Xerox’s stock revealed a company $17 billion (about Rs79,730 crore) in debt and with only $155 million in cash. To turn Xerox around, CEO Anne Mulcahy sold unprofitable business units, accelerated retirements and cut costs. She acted honestly, asked for help, practised direct communication, set priorities and listened. Within five years, the company was on a more solid financial footing and had begun the long process of restoring its reputation.
CEOs are ultimately responsible for managing a company’s reputation. Today, CEOs take a strategic role in reputation management because of its future impact. On the downside, when an organization’s reputation falters, the fall- out often truncates the CEO’s career. Any company’s reputation is vulnerable to getting tarnished, so leaders must protect their organizations’ public images. Ever-present consumer activists expect more from corporations in all areas of their business and civic activities. Even companies that regularly appear on “most admired” lists face declines in their reputations from one year to the next. In many cases, companies suffer at their own hands due to financial problems, unethical activities and executive misbehaviour.
Looking ahead, your company’s leaders should remain alert to reputation problems that can arise from environmental issues, product recalls, regulatory violations and failure to protect confidential data. Corporations should scan all kinds of media for accusations or warning signs that involve their industries, operations, personnel and products. For example, Factiva, an information provider, follows online media channels to report to firms when they come up for discussion and what issues are involved.
Since reputation is closely related to corporate responsibility, recognize that your social, economic and political agendas all contribute to your organization’s overall reputation. Research has also found that companies which rank high in social responsibility fare better during difficult financial periods. Thus, a positive reputation will be even more important in the years ahead.
Author Leslie Gaines-Ross provides a solid education about strategies for developing, sustaining and repairing corporate reputations. While she does not significantly advance the field with sharp new insights, she does offer pertinent research with useful case studies. GetAbstract recommends this solid overview of an important topic to marketing and public relations students and specialists.
Rolf Dobelli is the chairman of getAbstract.