PR and Reputation Management
Public Relations (PR) is evolving into a multi-disciplinary subject that is best termed “Reputation Management”. We believe that reputation is a vital determinant of sustainability in the modern business environment. We take the view that PR, as a single discipline, is no longer able to adequately shape a firm’s reputation, which by its complex nature requires a strategic, holistic and organic approach.
Reputation Management is a capability, not a function per se, and this approach is reflected in our training. Reputation is becoming a core business function that influences strategic decisions about the direction of a business and how it should be communicating with stakeholders. Reputation is an outcome of the collective opinion of others and it can only be “managed” by ensuring that what is promised is delivered and that brands keep themselves innovative and agile.
No organization, irrespective of its size or operation, is now immune from economic or other global threats. The view that the conventional approach to managing reputation should be broadened to include a basic geopolitical understanding of threats.
What is the purpose of a business? According to Peter Drucker, “the purpose of a business is to create a customer.” Such a statement makes good sense as without customers there can be no functional business. Essentially if the purpose of any business is to fulfill some human need within society, then that business, whatever its nature, should take an active interest in its own reputation as a way of securing its future prospects. Central to building and defending a sound organizational reputation is the capability to be proactive and to recognize and evaluate potential and ongoing risks (issues). Legitimacy and transparency are at the heart of issues management and whether the messages developed and delivered through corporate communications are credible to stakeholders. If reputation can be viewed as a form of assessment of a corporation’s behavior and performance, then understanding and identifying risks and issues that may at a later stage damage this value asset, must be an active part of any reputation management structure and process.
“Reputations have to be continually earned and reviewed, and as such, need continuous monitoring and attention.”
The economic advantage of reputation is well established, but the issue of correlations and causation are not always as clear. Evidence does exist to show a link between good reputation and financial performance, but the issue is replete with complexities and variables. What is not in doubt is that as an asset, reputation is vital to the sustainability and growth potential of most brands. Within a market economy signalling a good reputation is important for customers as they have incomplete information and must make valued judgements when considering brands and comparing them against competitors. Those companies that have consistent behavior and communicate their values are more likely to be trusted, making them less of a risk for customers’ decision making.
We are witnessing the era of a reputation economy, whereby economic sustainability is based less on what you claim (typically through mass media) and more on what you actually do i.e. your accountability and consistent delivery of brand promise.
As previously mentioned, reputations count at both the individual and organizational level, and the evidence mounts to show the correlation between reputation and financial performance. Furthermore, business surveys constantly show that organizations list erosion or loss of their reputation as one of their most worrying risks. Like change, reputation cannot really be “managed” per se, just guided and directed. So the term “Reputation Management” is a little misleading in so far as a reputation does not actually reside within the organization but lies outside in the collective opinions and judgements of others.
What Is Reputation?
In a word, trust. However, given its amorphous nature, it is hardly surprising that no universally accepted definition exists. Professor Fombrun, CEO of the Reputation Institute, defines reputation as a “collective assessment of an organization’s past actions and results that describes the organization’s ability to deliver valued outcomes to multiple stakeholders.” In its various perspectives and interpretations, reputation centers on the following common elements:
- A collective representation based on stakeholders’ opinions;
- An aggregate evaluation that stakeholders make about how well an organization meets its customer needs based on current and past actions;
- A holistic impression of a person or company based over time; it can be negative, neutral or positive;
- A form of assessment, whereby an organization’s performance is judged in the context of its past and current behavior.
As a critical intangible, reputation is rather like modern medicine – it is increasingly evidence-based and focuses on prevention and understanding of root causes and changing vital behaviors.
Basic Rules for Sound Reputation
- Have reliable and credible products/services: Even with the most sophisticated social marketing and influence, people expect some basic quality and consistency in their brand experiences.
- Understand your values and mission: Establish core values and a clear mission and make sure all employees understand them. Brands are increasingly focusing on their values and higher order purpose. It is not enough just to sell a product/service; many brands, such as Dove, do better if they also project their values. Linked to values and a clear mission, is having the right ethical environment and the appropriate supporting culture.
- Be prepared to admit faults and correct them: Transparency is now expected from brands and organizations. Past public relations practice would try to cover up or re-frame a problem in the hope of mitigating negative outcomes. Today, companies are realizing the value of openly acknowledging mistakes and making public attempts to rectify them. Although one cannot be too naive about such an approach, remedying a fault can generate good reputational equity so long as it does not become too frequent an occurrence!
- Develop an effective social media strategy: Social networks are becoming complex Eco-systems, connected to a variety of platforms, which are increasingly mobile. Social media is generating a need to develop social influencing skills, whereby you talk – not at your customers but by providing them with a chance to participate and engage with your brand. Having a presence on Facebook and YouTube, and communicating and providing a brand voice through Twitter are essential, not optional. Brands such as Coca-Cola, Pepsi, Nike and P&G have all developed successful social media strategies and in the case of P&G, Open Source innovation strategies.
- Ensure that your structures and operations/processes are “fit for purpose”: Structure versus strategy is an established debate in business but nonetheless it is vital that an organization has the correct internal structures, teams and employee engagement mechanisms to deliver the given strategy. Even the best intentions to build a first rate company with an exceptional reputation will soon become just another great idea unless the correct framework is in place to achieve it.
- Have a credible CSR strategy: Corporate sustainability is now becoming mainstream and corporations have to be mindful of their social and environmental accountability and responsibilities.
- Good customer/brand experience: Brands must engage audiences and provide them with an enjoyable and memorable brand experience, thereby converting social influence into brand equity. You only have to look at a commodity, such as the coffee bean and look at brands such as Starbucks and Costa Coffee to see how a commodity can be made into a genuine brand experience.
- Have a strong brand identity and clear positioning: Strong identity and position is the cornerstone of good branding and reputation. Brands such as Coca-Cola, Apple, Target, JCB, and Nike have powerful identities and brand positions.
- Be adaptable and innovative: The brand Apple has a good reputation because they not only produce great products, but because they constantly innovate and adapt their brands to the market. By focusing on second order capabilities such as how best to adapt and change, businesses can be sustained and are less vulnerable to disruptive technologies or market/regulatory forces. All of this requires up-to-date and appropriate business models that will make the business competitive and in-tune with how to generate income streams form a variety of sources. Amazon and Lego are good examples of business models that are highly agile and appropriately exploiting changes in the market.
- Have an effective intelligence or “radar”: To stay ahead of the reputation game, you must have an intelligence or radar system that detects signals. Companies must now try and anticipate strategic directions through effective risk and issue management systems that inform them of threats and opportunities.
- Have a well-developed crisis management plan: A critical part of crisis management is pre-crisis planning, which has direct links to risk and issue analysis. Being well-prepared for a crisis can shorten recovery time and lessen reputational damage.
- Have effective stakeholder engagement and communications strategies: A basic tenet of modern PR and reputation management is that you must not only engage stakeholders, i.e. the ones that are involved in buying and selling your goods/services, but you must also engage with your detractors, regulators and a long trail of stakeholders who can affect your brand. Stakeholder engagement is a management skill that cannot be underestimated or ignored. Shareholder return and investor relations must be given priority so long as one does not lose sight of the very factors that help generate them in the first instance. Shareholder return is not a strategy, it is an outcome, and must be understood in those terms.
- Have a solid brand narrative: The development of a narrative or organizational story is an important and effective reputation tool. Story-telling is an ancient technique of communication that is associated with archetypes. Many brands play on the Jungian notion of archetypes, such as Harry Potter (magician), Harley Davidson (rebel, outlaw), Nike (hero), IBM (ruler).
Reputation Management Is More than Shareholder Return
Most company declines are failures of performance and the origins of most failures lie in small incremental errors that mount up over time without people seeing their potential to cause damage later on.
Arguments have surfaced since the collapse of the capital markets in 2008 that have questioned the primacy of shareholder return as opposed to satisfying customers’ needs. Jack Welsh in the Financial Times in March 2009 said that “On the face of it, shareholder value is the dumbest idea in the world”. He also stated that “Shareholder value is a result, not a strategy.” There is little doubt that shareholder value is over-stated and thinking, post-2008, has focused on areas that help provide shareholder return: brand equity, customer loyalty and satisfaction, good product and service provision, strong risk and issue analysis and regulatory compliance. Many firms, such as Research in Motion (Blackberry) J&J and P&G have all adopted strategies that are primarily customer-focused, which, they argue, is the best way to produce dividends.
Link to shareholder return is the important issue of Socially Responsible Investment (SRI). Social responsibility and community investment are now huge areas of investor relations, with trillions of dollars being traded and invested in ethical funds. Corporations whose businesses involve alcohol, tobacco, gambling, pornography and arms trading are typically screened out from ethical portfolios. The purpose of SRI funds is to promote environmental stewardship, human rights, consumer protection and socially responsible business practices.
The message is simple: corporations can no longer just focus on profits without accountability. With few exceptions, businesses are pushed towards being environmentally and socially responsible and paying more attention to what makes brand equity grow in the first place, on the understanding that shareholder return will increase as a consequence.
The Emergence of Reputation Management as a Discipline
In the author’s opinion, Reputation Management is a holistic discipline, which is a synthesis of a number of largely independent, yet connected, disciplines:
- Strategic risk and issue management
- Corporate social responsibility (CSR)
- Assurance, audit & regulatory compliance
- Crisis management
- Investor relations
- Systems thinking and knowledge management
- Online monitoring and SEO
As an amorphous, inter-disciplinary concept, reputation cannot really be managed, but can be guided in a certain direction by continuous monitoring of its environment (environmental scanning). Good reputations can be sustained more readily if risk and issues are properly analyzed and, where possible, acted upon.
Confusion of Terminology
As a complex construct, reputation must be understood at different levels, which in themselves are not mutually exclusive:
- Brand/product reputation: Reputation of the brand or specific product/service – especially relevant to product brands such as those in the FMCG sector, e.g. shampoo
- Organizational or corporate reputation: The reputation of the whole organization e.g. Timberland. According to Barnett et al in the Corporate Reputation Review1, corporate reputation is defined as “observers’ collective judgements of a corporation based on assessments of the financial, social and environmental impacts attributed to the corporation over time”. The term “corporate reputation” increasingly refers to an organization as a single entity and not as a sub or individual brand. It is the term “corporate reputation” that has gained prominence, most probably because of the increasing use of the term “corporate communications”.
- Industry reputation: Reputation of the general sector or industry as a whole e.g. the financial services industry.
- Reputational capital: The measure of an organization’s reputational value based on the sum of strategic corporate assets: patents, trademarks, processes, trust and integrity etc. Reputational capital focusing on stakeholders’ views of the brand and how these affect shareholders return in particular.
Corporate Reputation Review, Volume 9, Number , 26-36: Corporate Reputation: The Definitive Landscape
Having a Good Reputation Is Not Always Enough
Reputation in its own right is not always enough to save a company from decline: a corporation can have an excellent reputation, but a disruptive technology or swift competitor innovation can damage its market share. Historical examples include Olivetti and Encyclopedia Britannica. Both were highly respected brands and yet neither adapted well to the impact of technology. In Olivetti’s case it was the growing numbers of word processors from the mid-1980s, and in Encyclopedia Britannica’s case, it was failure to exploit the growth of online encyclopedias and new models of creating and editing content, such as Wikipedia. The lesson: failure to adapt and innovate is now a greater threat to a business, even if a sound reputation is in place. Although external, mostly economic factors are some of the greatest risks faced by a corporation, internal failures combined with poor positioning and marketing, cash flow problems, and inability to control costs are typically the key nails in the corporate coffin.
Sources of Online Reputation Risk
- Management decisions; many crises are the result of poor management decisions
- Unacceptable employee behavior or attitude
- Unacceptable environmental or social actions or decisions
- Technology failure or security breaches: loss of data or access being made to data by those who have no authority to do so
- Social media: viral spread of rumors or reporting of real or perceived crisis
- Poor financial performance or poor economic responsibility
- Failures in health and safety
- Failures in product traceability – contamination
- Failure to follow regulatory compliance
- General unacceptable corporate behavior
- Unfair and unreasonable behavior by senior executives
- Disaffected employees
- Rumors, both on and offline
- Consumer opinion site/ complaints sites
- Trade-mark infringement and failure to protect intellectual property
- Sources of products and services that cause environmental or social damage
- YouTube – campaigning adverts and short films
- Non-governmental organizations’ campaigning
- Scandal sites
- Faux pas by employees
How Reputations Are Formed:
Any study of consumer psychology and behavior reveals, in general, how people are influenced. However, the models and theories that pervade much of the marketing literature such as the AIDA (attention, interest, desire, action) and social diffusion models are now less relevant in the age of web communications and social media. That said, there are some basic contributory components that help form reputations:
- Information based on mass media – advertising, features, news and general print media, TV and radio
- Engagement through social media and peer-to-peer referrals, recommendations and endorsements
- Personal experience of the brand or organization – did it deliver on the brand promise? Were the messages credible and consistent?
- Reinforcement of the above through friends and other trusted sources: increasingly this is in the form of forums, opinion sites, blogs, Facebook, Twitter etc.
Personal experience is the most powerful tool and if positive, a satisfied and loyal customer can become a brand advocate, helping to spread the word, resulting in recommendation and referrals. If securing your next customer and retaining existing customers are fundamental to any commercial operation, it makes sense to get customer-engagement right and ensure that customer-facing staff understand the values and messages that the company wishes to convey.
Factors Affecting the Importance of Your Reputation Capital
This is the impact that the marketplace and, more specifically, competitors, have on your own organization’s reputation.
- The visibility of your brand and its risk-exposure: to what extent is your brand organisation in the public domain? Does your brand/company espouse high ethical values and practice social and environmental responsibility? Do you engage in aggressive advertising and promotion?
- The history and story or narrative behind the company or brand – many brands have narratives that they communicate to reinforce their values.
- The sheer complexity and connectivity of your business: if you have a crisis, how many people will be affected and what will the impact be? Clearly, energy companies such as Shell and BP fall into this category, but so do many types of manufacturer and pharmaceutical companies.
- Does your company/brand have a significant environmental or social impact?
- Do you espouse high ethical values? If so, you had better live up to them!
The Benefits of Having a Good Reputation
Evidence available clearly points to a link between a sound reputation and financial return. A good reputation also helps raise loans from banks and acts as a “shield” during times of crisis, thereby allowing a swifter recovery. Therefore, a good reputation is a critical economic asset that helps customer retention and acquisition and reduces information and transaction costs.
Other benefits of securing a good reputation include:
- Helps secure revenue income via competitive advantage and the development of trust
- Makes your brand or company top choice among key target groups
- By growing brand equity it allows premium pricing
- Facilitates brand extensions
- Improves employee retention and talent management, attracting better applicants and retaining vital knowledge workers
- Reinforces relationships with suppliers and other direct stakeholders
- Helps increase the chance of success of new product releases
PR Versus Reputation Management
The practice of traditional Public Relations (PR) has had a significant impact on corporate communications. Reputation Management is really an evolved, more sophisticated corporate discipline that has been shaped by the emergence of the internet in the early 1990s. Both traditional PR and Reputation Management are involved with building and managing relationships and both are involved with influencing perceptions. Arguments around the difference between PR and Reputation Management are somewhat sterile in so far as both terms have considerable overlap, but Reputation Management has gained prominence since the 1990s following a number of high profile corporate scandals and the rise of social media and online reputation management. Despite the overlaps, as an evolved discipline there are some notable differences that have emerged as a consequence.
The classic PR approach emphasized short-term strategies and the manipulation of corporate image and was heavily media relations based. Emphasis was largely tactical rather than strategic, and PR practitioners often had a limited understanding of business models, overall corporate strategy and the financial and regulatory constraints that business operated within. In this regard, management consultants were better suited to advise on a more holistic approach.
Traditional PR was media relations focused, and interested in the “sound bite” as its reproduction within relevant media. Although this is just as relevant today, the approach through Reputation Management is subtly different in that it uses all forms of communications as a platform to engage with stakeholders, however trivial. As a consequence, it assimilates risks and issue analysis into its strategic thinking when identifying and engaging stakeholders.
Reputation is about delivering the brand promise with a view to the long term security and stability of the company. Traditional PR is still focused on brands and on trying to develop sound customer relations based on short-term tactical actions. In contrast, Reputation Management is more strategic, longer-term and attempts to deliver on brand promises. The spotlight for reputation tends to be on the organization rather than individual brands, unless of course the organization is a corporate brand. To develop a sound and sustainable reputation, the following disciplines will need to work together to get across a message to a wide range of stakeholders:
- Risk and issue management
- Investor relations
- Crisis management
- Internal communications
- Brand and customer communications
- Online brand management and SEO
- Organisational and managerial communications
Please note that these are highly interdependent and overlapping.
Social Media and Reputation
Social media have transformed the way in which ideas are propagated and the nature of how reputations are lost and gained. Online Reputation Management dominates much of the reputation literature, focusing on Search Engine Optimization and how to monitor and reduce negative online coverage. Social media has become central to branding and helps generate social authority, virally spreading messages with credibility. Brands generate trust and reputation via peer-to-peer recommendations and by opinions expressed within online communities. Brands such as Coca Cola, Starbucks, McDonalds and Ford have adapted extremely well to social media as have Sony and Microsoft. Coca Cola has millions of fans on Facebook and has a defined social media strategy to engage with people. Their “open happiness” global marketing strategy has been successful as has their YouTube viral “Happiness Machine”, which by the end of 2010 had been seen by over 3 million people.
- Blogs: Open Diary, LiveJournal
- Microblogging: Twitter
- Social networking: Facebook, MySpace and LinkedIn
- Wikis: Wikipedia
- Social bookmarking: Delicious
- Social news: Digg
- Video sharing: Youtube
- Photo sharing: Flickr
- User –generated Wikitrends
Examples of companies and software that can assist with online and social media monitoring include: