When communications executives talk about "reputation management" it centers for the most part on how to positively influence the perceptions and attitudes among key
stakeholders. Companies and their PR agencies like to think that their stakeholders, well, like them. Yet important opportunities can be seized when communications programs link
reputation management to desired business outcomes.
"Corporations and PR agencies don't take the time to sit down and do a rigorous business analysis of what their objectives are for each stakeholder audience," says David
Geddes, senior VP and partner with Fleishman-Hillard Knowledge Solutions division. Geddes, who has worked with several top-shelf clients such as SBC Communications, Wal-Mart,
Nortel Networks and J.D. Edwards, has developed a four-step process for corporations to understand the key forces driving reputation in important stakeholder audiences. "Business
success depends on the decisions of others and the performance of the firm is directly tied to understating your stakeholders' attitudes and actions," Geddes adds. Of course, as
is the case with any effective communications plan, taking reputation management to the next level begins at home. "Enhancing reputation among employees and prospective employees
can facilitate recruits, reduce turnover and save money," Geddes says. It could also document important outcomes such as customer acquisition and customer loyalty. For the nitty-
gritty, following is a breakdown of the four-step process that ties reputation management to business outcomes.
Step 1: Identifying attitudes, behaviors, business benefits
The first step is a strategic business analysis to determine key stakeholders and desired attitudes, behaviors, and business benefits. Frame discussion in terms of identifying
the key points of pain or constraints on company growth.
Step 2: Reputation measurement
Gain a research-based understanding of company reputation among key audiences, and identify key drivers of reputation that lead to desired business outcomes.
Step 3: Taking action
The third step is to take action based on the reputation measurement research. Successful companies form cross-functional teams -- including not only communications, but also
representatives from marketing, operations, and human resources --to address specific issues. At this stage, specific outcome measurements must be designed into the planned PR
programs or into the operational changes that the company is undertaking.
Step 4: Measurement
The final step is reputation tracking, and validation of the drivers and their links to attitudes and behaviors.
Does it all pay off? There is a long-standing interest in the relationship between corporate reputation and stock price. An emerging body of academic research is beginning to
demonstrate that corporate reputation for intangible characteristics such as management quality, R&D, innovation, and human resource development does indeed have an impact on
financial performance and stock price.
Ernst & Young's Measures that Matter program offers rigorous quantification of the role of intangible, reputational factors in driving financial performance. Reputational
criteria weigh very heavily in investment decisions made by financial analysts, and an increase in perception on non-financial attributes is statistically associated with higher
stock valuation.
Three Federal Reserve Bank economists studied the relationship between Fortune's "Most Admired Companies" rankings and stock performance over a subsequent five-year period,
making statistical adjustments to account for forward momentum. Companies with strong reputations show above-average market returns over the time period. Cumulative returns to the
most admired firms are 125% while returns to the least-admired firms are just in the 80% range.