Building and Protecting Your Reputation Capital

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Building and Protecting Your Reputation Capital
BC TRANSIT 2012 WORKSHOP

• Dr. Terence (Terry) Flynn, APR, FCPRS
• April 3, 2012

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Todays Game Plan

• What is Corporate Reputation
• Group Exercise
• CR as your ICA
• Conditions and Attributes
• Safeguarding your Reputation

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At Your Table

• Five things that are important to you when you
  think about an organizations CR
• Three (3) organizations that have a good
  reputation
• Three (3) organizations that have a bad reputation

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Some of The Drivers/Attributes of Reputation Are
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What Philosophers Think

• The way to gain a good reputation is to endeavor
  to be what you desire to appear.
• Socrates
• It is easier to cope with a bad conscience than
  with a bad reputation.
• Nietzsche

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What Business Leaders Think

• You cant build a reputation on what you are
  going to do.
• Henry Ford
• If you lose dollars for the firm, I will be
  understanding. If you lose reputation for the
  firm, I will be ruthless.
• Warren Buffett

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A Conceptualization of Reputation

• Identity
• The internal traits of the firm that are critical
  to its distinctiveness and longevity
• Image
• The perceptions and associations that are
  constructed by the purchaser of the
  product/service
• Brand
• The constructed visualization of the companys
  value proposition
• Reputation
• The holistic viewpoint in which an organization
  is internalized by its stakeholders

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Putting Reputation Into Perspective

• A concept held in the minds or cognitions of
  stakeholders.
• A set of attributes ascribed to a firm, inferred
  from past actions.
• Perceptions, attitudes and/or beliefs of
  stakeholders
• A corporate reputation is a perceptual
  representation of a companys past actions and
  future prospects that describe the firms overall
  appeal to all of its key constituents when
  compared with other leading rivals (Fombrun,
  1996).

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Creating the Business Case for Reputation
Management
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The Competitive Context of the 21st Century

• An intensely competitive, global marketplace
• 24/7 media and internet environments
• The drive for Inimitable advantages
• commoditization
• Vocal consumerism/stakeholder centric
• Increased focus on corporate governance
• The rise of intangible assets

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RM as ICA

• A strategic management process should result in a
  distinct competitive advantage
• Strategy how to gain competitive advantages
• SMP sequential set of analyses and choices that
  can increase the likelihood that a firm will
  choose a good strategy that is, a strategy that
  generates competitive advantages

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The Growing Importance of Intangible Assets
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The Reputation Capital Pipeline
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Why Reputations Matter

• Reputation
• A resilient asset to some companies in a
  difficult marketplace
• Stakeholders perceptions of reality
• Customers, employees, investors, media, financial
  analysts
• Influence investment decisions (herd mentality),
  prospective
• A good one acts like a magnet
• Create differentiation and competitive advantage
• Affect strategic positioning
• Mirror that reflects company success

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What Are Reputations Worth?

• Reputation and financial value are related in
  three ways
• Operating performance
• Profitability affects market perceptions of
  future prospects
• Operating activities themselves contribute to
  building reputation capital a shadow asset
• Reputation Affects Operating Performance
• Stimulates employee productivity
• Creates reservoir of goodwill
• Reputation Creates Financial Value That Builds
  Reputation
• Receive favorable endorsements from stakeholders
  and the media
• Fortunes most admired
• Reputation Has Financial Value as a Corporate
  Asset
• Branding and reputation-building help build a
  companys visibility, familiarity, and fame
  investments in creating reputational assets
• Crisis costs include loss of reputation capital

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Value of Corporate Reputation

• Operational Value
• Increasing employee satisfaction
• Ability to recruit retain talent
• Help customers to choose between products (when
  little functional difference exists)
• Supports new product introductions
• Provides a second chance during crises
• Arguably, the internal benefits are the most
  valuable, especially for companies that rely on
  employees to support external positioning

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Value of Corporate Reputation

• Financial Value
• Based on work Dowling conducted in conjunction
  with the Fortune 500 Most Admired Companies
• Good Corporate Reputations increase the length of
  time that firms spend earning superior financial
  returns (a carry-over effect)
• Good Corporate Reputations may reduce the length
  of time that firms spend earning below-average
  financial returns (a lead indicator effect)

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Worth In Progress

• 26 Companies from 2006 Leger Top 100 Reputation
  Companies (Canadian Tire, Tim Hortons, MLF, SDM)
• Canadian owned and publicly traded
• Beta 0.783
• Difference with Market Beta -0.217
• Rate of Return (1 year) 25.09
• Total Expected Rate of Return 10.7
• Reputational Difference 15.02
• 5 year rate of return (annualized) 16.31
• DOES Reputation Matteryou bet!

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Reputation is a Differentiator of Value

• Employees
• Attracts and keeps talent
• Builds pride
• Makes jobs more attractive and motivates
  employees
• Customers
• Attracts new customers
• Encourages repeat purchases
• Builds market share
• Opens new market opportunities
• Investors
• Lowers cost of capital
• Attracts new investments

• Media
• Generates more positive coverage
• Government
• Enhances support
• Minimizes chance of enhanced scrutiny
• Communities
• Builds support
• Minimizes concerns

The key is to develop mutually beneficial
relationships with these stakeholder groups
resulting in continued supportive behavior!
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Determinants of Reputation

• Visibility
• Authenticity
• Transparency
• Consistency
• Distinctive
• Effective
• Resilent

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Determinants of Reputation
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Relationship Intelligence
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Stakeholder Engagement Index

• Identify priority stakeholders
• Influence/power
• Interest/involvement
• Measuring relationship variables
• Trust, commitment, satisfaction, transparency,
  mutuality
• Create scorecard metric
• Track the delta (change over time)

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Analyze and engage stakeholders
Interest High Low Keep informed Key Player
Interest High Low Minimal efforts Keep satisfied
Interest Low High Low High
Power Power Power
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Components of Relationship Management

• Trust
• Satisfaction
• Commitment
• Transparency (Honesty/Openness)
• Control Mutuality
• Exchange Relationship
• Communal Relationship

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Its All About Relationships

• When thinking about the company or organization
  that you like a lot (on a 7-point scale)
  Leger/McMaster March 2010 (N1500)
• To what extent do you trust this company (M6.0)
• To what extent do you believe that they are
  honest/transparent (M5.8)
• To what extent do you believe they are committed
  to meeting your expectations (M5.9)
• To what extent are you satisfied with this
  company (M6.1)
• To what extent do you believe that you can
  influence the decisions or direction of this
  organization (M3.8)

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When You Dont Have A Relationship

• To what extent do you trust this company (M1.9)
• To what extent do you believe that they are
  honest/transparent (M2.0)
• To what extent do you believe they are committed
  to meeting your expectations (M2.1)
• To what extent are you satisfied with this
  company (M1.9)
• To what extent do you believe that you can
  influence the decisions or direction of this
  organization (M1.7)

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How Important is it that a Company

• Builds trust with people like you (M6.1)
• Be honest and transparent (M6.2)
• Commits to meeting your expectations (M6.0)
• Satisfy people like you (M6.1)
• Allow people like you to influence their
  decisions (M5.2)

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Your Challenge Then Is To

1. Increase Trust
2. Demonstrate Transparency
3. Strengthen Commitment
4. Enhance Satisfaction
5. Give your publics/stakeholders a voice

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Toyotas Accelerated Reputation Decline
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Toyotas Climb to 1
2005 2006 2007 2008 2009
Awareness 66 71 80.8 80.8 83.1
Reputation Score 58 66 76 75 77
Good Opinion 62 69 78.6 77.8 80.2
Bad Opinion 4 3 2.2 3 2.9
Global Sales 2 2 1 (tied with GM) 1 1
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A Reputation Recalled! But
Toyota (Feb 1-3) Toyota (Feb 8-13) Honda GM Ford Nissan Mazda Hyundai Kia Chrysler
Aware 83.5 80.2 79.1 79.9 83.8 62.5 64.9 61.4 48.7 75.8
GO 72.1 59.1 74.1 47.7 57 54.6 57.2 42.5 25.6 38.9
BO 11.4 21.1 5.0 32.2 26.8 7.8 7.8 18.9 23.2 36.9
RS 61 38 69.0 15.5 30.3 46.8 49.4 23.6 2.4 2.0
DKE 11.9 15.5 17.9 16.5 13.8 31.7 29.1 32.2 41.7 20.1
Aware Awareness (G0B0) GO Good Opinion BO
Bad Opinion RS Reputation Score (GO BO) DKE
Dont know this company enough to have an opinion
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90 Days Later
Toyota (Feb 8-13) Toyota (May 1-6) Honda GM Ford Nissan Mazda Hyundai Kia Chrysler
Aware 80.2 84 82.5 78.7 83.5 67.5 68.7 63 51.6 75.6
GO 59.1 61.4 77.3 48.8 60.7 59.5 62.9 45.6 28.7 42.1
BO 21.1 22.6 5.2 29.9 22.8 8 5.8 17.4 22.9 33.5
RS 38 38.8 (.8) 72.1 (3) 18.9 (3.4) 37.9 (7.6) 51.4 (4.6) 57.2 (4.6) 28.2 (4.6) 5.9 (3.5) 8.6 (6.6)
DKE 15.5 12 14.3 17 13.5 27.5 24.5 31.3 39.6 20.2
Aware Awareness (G0B0) GO Good Opinion BO
Bad Opinion RS Reputation Score (GO BO) DKE
Dont know this company enough to have an opinion
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But its a different relationship story
Relationship Factors Canadians (n1273) Toyota Owners (n204) Benchmark (n1506)
To what extent do you trust Toyota 4.2 5.3 6.1
To what extent do you believe Toyota is honest/transparent 4.0 4.8 6.2
To what extent do you believe Toyota is committed to meeting their customers expectations 4.6 5.5 6.0
To what extent are you satisfied with Toyotas response to the recalls 4.2 4.9 6.1
To what extent do you believe that customers can influence the decisions or direction of Toyota 4.9 3.7 5.2
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SR OR RR MR ICA

• Relationships
• Your role is to develop and strengthen mutually
  beneficial relationship with your priority
  publics
• Reputation
• Your role is to enhance and leverage reputation
  to strengthen priority relationships
• Risks
• Your role is to identify, assess and mitigate
  (where possible) risks to corporate reputation
• Results
• Your role is to measure how your contributions
  strengthen relationships and enhance the overall
  reputation.

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Questions/Comments?

• Contact Information
• Dr. Terence (Terry) Flynn, APR, FCPRS
• Assistant Professor
• Department of Communication Studies Multimedia
• McMaster University
• Hamilton, ON L8S 4M2
• [phone] ext. 26977
• Email tflynn_at_mcmaster.ca
• Twitter terryflynn
• Blog terryflynn.ca
• Linkedin
• www.mcm.mcmaster.ca