We've seen all too clearly in recent years how having a negative reputation can cost companies millions...or worse, can destroy them entirely (think Union Carbide, Enron, Arthur Andersen and Cendant). But for most companies, the effects of a negative reputation to their bottom line are much more subtle and 'under the radar' -- perhaps even creating a perception of weakness rather than negativity. These are the worse kind, however, because they go unnoticed and unmeasured for long periods of time, yet can create as much damage against a company's shareholder value and bottom-line profits as a single catastrophic event.
A well thought out and planned reputation management strategy, with clear metrics, should be part of every company's overall business plan. However, until such an internal plan is put in place, there are a number of tools at companies' disposal that can be implemented immediately or almost immediately. They include:
1. Public Rankings. Many best-practice leaders consider public annual rankings such as Fortune’s “Best Companies to Work For” and “Most Admired Companies” critical measures of how they are perceived in the marketplace. Rankings such as these directly affect a company's ability to draw in the best employees, generate positive analyst ratings and secure favorable financing terms.2. Reputation Indexes. One public dashboard used to track and measure reputation is the annual Reputation Quotient(SM) by Harris Interactive. Reputation Quotient metrics fall into six categories, each with 20 attributes rated on a 7-point scale. The study culminates in a list of the top 100 companies ranked by revenue. The ranking is based on up to 8,000 general public interviews identifying the companies with the most visible (best and worst) reputations. Then, approximately 20,000 people are each given about six company names from the list and asked if they are familiar with the companies. If they are familiar, they are asked to rate up to two companies on each of the 20 attributes. Each company is rated by approximately 650 people. Out of this ranking comes the Reputation Quotient score.
Other organizations providing similar tools with different methodologies include the Reputation Institute’s RepTrack®, CoreBrand, Millward Brown, and Young & Rubicam.
3. Media Content Analysis. MCA tools have advanced greatly from the days of manually cutting out articles with a scissor. Today, vendors in this space such as Biz360 and Delahaye provide robust analysis of what media mentions actually mean. For instance, Delahaye gathers news from major news sources, then scores and ranks the top 100 U.S. companies by measuring how many positive and negative reputation-driving attributes are found within each story. The attributes are classified into five dimensions: stakeholder relations, financial management, products and services, organizational integrity, and organizational strength. Delahaye looks at such things as tone, whether key messages or graphics were used, whether the company name was in the title, and where it appeared in the publication. Each component carries a different weight. The summary measure, called the Net Effect, provides an all-inclusive bottom-line figure of news measurement. The firm publishes a quarterly index. Clients also get customized reports that show how they compare against industry leaders in the index.
4. Reputation Mix Models. Like the now commonplace media mix models, some companies are beginning to develop reputation mix models that feed detailed attitudinal scores from multiple constituent groups into regression algorithms along with sales, margin, and share-price data to see where the correlations are. Simulation tools can then be developed to “forecast” the impact on one or all of the economic output variables if the reputational attributes could be enhanced by various degrees. These models provide a basis for attempting to assess the utility of investment in developing specific reputation components amongst key constituent groups.
Regardless of which tools you use, every company should have a clear, well constructed reputation management measurement system that ties back to a board-level dashboard. A negative or weak reputation can have significant financial ramifications. Conversely, a well-structured program will provide companies with benefits tied to improved shareholder value.