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What affects corporate reputation?

What affects corporate reputation?

In order to build a strong corporate reputation, businesses need to understand what corporate reputation means, and how it is established.

To identify what affects corporate reputation, you need to know what is corporate reputation and how it’s accrued over time. An organic, complex construct, the reputation of a given organisation is built on the amalgamated perceptions of its stakeholders. Reputation management – while to some degree a misnomer – to improve or rebuild the reputation, is a long game of influencing stakeholders through authentic actions.

With sustainability and environmental virtue an important and high-profile lens through which to view corporate activity, corporate reputation risks being conflated with corporate social responsibility. Businesses are keen to respond to the principal concerns of our times such as climate change, and – in the wake of the Black Lives Matter protests – diversity and inclusion. All are important considerations for any business, but a no-plastics policy alone won’t ensure your company achieves a good reputation. 

Reputation comes down to behaviours that are authentic to your organisation: your values and how you express and adhere to them. By contrast, reputation risk arises in any gap between what’s said and done. If you purport to hold a principle but undermine it in practice, reputation damage will result. A positive reputation is earned by consistently doing what you say you will, in relation to each and all of your stakeholders.

What moulds corporate reputation?

Building a strong corporate reputation is a process of introspection followed by – if you will – “outrospection”. Examine what you stand for as an organisation, what you want to be famous for doing – and just as key, what you want to be known for not doing. These elements should align with the type of business you are and your heritage. There is little point in dreaming up something theoretical that is divorced from the reality of what you do in the day-to-day. Are you intent on providing high quality goods and services, whatever the cost? Are you a five-star employer? Should fund managers see you as a sure thing? Is consumer satisfaction key to your brand image? 

Reputation lies in the eye of the stakeholder; consequently, your business has multiple reputations. Having identified your idiom, next establish how it aligns with your stakeholders’ differing expectations. To do this, you must understand your different stakeholder groups. These include customers, shareholders, employees, NGOs, and think tanks, government and regulators, the media, and the wider community in which you operate. For each group, you need to recognise what they expect and need from you as a business. 

Next assess whether you’re living up to your principles – are you doing the things you claim to do? It’s near-impossible to please all the stakeholders all of the time, so difficult decisions must be made over what is most important to you as an organisation, and which stakeholders are most closely aligned to your mission. Knowing what affects your reputation means knowing which stakeholders’ expectations you can and want to fulfill based on what you stand for. 

What it means to have a good corporate reputation

Having a good reputation can be quite different from being a ‘good’ organisation – whether or not a corporate can be defined as ‘good’ is largely subjective, based on its purpose, and how well it fulfills its function. Not every company needs to be a leader on sustainability, for example, nor do they need to communicate on the subject. 

It’s tough for a landfill operator to argue its green credentials – but the community needs efficient waste disposal, and its reputation will be based on how well it processes our non-recyclable, non-degradable rubbish. Technology companies might be great at in-office recycling and ride to work schemes, but if the high-demand products they produce consume scarce resources and don’t break down at the end of their life, their balance in the green ledger may be negative. 

Every business should aim to reach certain standards of sustainability, as a societal priority, but there will be other, more important, more authentic, goals for different organisations to achieve. Specific drivers, not hot topics, will build a company’s reputation. It is never a case of one size fits all. 

How a good corporate reputation works 

When a focus on stakeholders is maintained, reputation can be positively influenced. Companies with a consistent alignment to specific stakeholder groups often benefit from a strong corporate reputation.

Historically, shareholders have favoured businesses which operate as a reliable investment, always paying out a regular dividend, and bolstering pension funds. Putting shareholders first has long been a key reputation pillar for insurance companies, oil majors, and tobacco producers. This approach can offset potential reputational damage linked to the nature of their business. Imperial Tobacco, for example, has long built a strong reputation for being a safe investment. Few would necessarily mention a tobacco producer as having a ‘good reputation’ if asked, but this serves to reinforce the point that companies have multiple reputations and each of these reputations is for something with someone. In this case, Imperial Tobacco has a great reputation for being a safe investment with a segment of the investment community. Other stakeholders will be less keen.

But the shareholder-first approach is not the only route to reputational success. Amazon is the most prominent example of a customer-conscious corporate, basing its reputation on always being cheaper, quicker, better stocked than the competition, with easy returns and no quibble refunds. The relentless pursuit of the consumer has meant investors take a backseat, just as profit margins play second fiddle to sales volumes. In the end, shareholders will likely get returns, but the consumer is the primary stakeholder. 

For the government, a strong track record of delivering for the economy underpins a solid reputation. A business that trains apprentices, injects capital into the economy, and is a safe investment, will be popular with politicians. Construction contractors are a good example, and in the wake of Carillion’s demise, the government is placing greater emphasis on financial strength than size.  When Balfour Beatty won 2019’s Heavy Construction category at Management Today’s Most Admired British Company Awards, scoring included financial stability, community and environmental responsibility, and long-term value potential. 

All of this is not to say that there aren’t numerous examples of companies whose reputations are built on a commitment to societal issues. Ben & Jerry’s has had a social mission from the start and is currently being lauded for its strong stance on Black Lives Matter. From recruitment policies to working with civil rights organisations, speaking at rallies, and funding asylum projects, the company is selling equality alongside ice cream. 

The common thread running through all of these very different examples is that building a strong corporate reputation is less about doing the right thing (and even less about just saying the right thing) and much more about doing what you say you are going to do. Consistently. Even when it’s difficult. That is the foundation of stakeholder trust and ultimately corporate reputation.

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