What's in a Reputation?

By Haapaniemi, Peter | Chief Executive (U.S.), March 2000 | Go to article overview
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What's in a Reputation?

Haapaniemi, Peter, Chief Executive (U.S.)

Elusive, yet essential to a company's business success, a good reputation is hard to come by and-judging from the results of Chief Executive's second annual corporate reputation surveyeven harder to keep.

A company's good reputation is intangible; it can be quick to change, hard to develop and easy to ruin. And, according to 94 percent of CEOs, it is "very important" to achieving a company's strategic busness objectives.

That's one of the key findings of the second annual Chief Executive/Hill and Knowlton Corporate Reputation Watch survey. Conducted in late 1999 by Yankelovich Partners, the survey examined CEOs' attitudes and actions in relation to reputation. The survey drew responses from nearly 600 CEOs, representing companies from more than 10 industries.

That percentage of respondents who see corporate reputation as very important was virtually the same as last year's, when 96 percent of CEOs agreed with that view. But at least one remarkable change has taken place over the last 12 months: In this year's survey, nearly twice as many respondents said that they are formally measuring corporate reputation (37 percent, as opposed to 1998's 19 percent). Such measuring procedures are most prevalent in the healthcare and consumer service industries, and least common among financial services firms and energy utilities.

Presumably, a number of things have made CEOs sit up and take notice, including increased media coverage of "best-liked" companies and, especially, the inescapable focus on electronic commerce. In the world of on-line business, intangibles such as image and perception drive stock prices sky high, and information about companies-good or bad, true or false-flows freely. All of which "brings reputation front and center," says Thomas Hoog, president and chief executive officer of Hill and Knowlton USA in New York. "This is all being played out right in front of CEOs, so they are taking it more seriously every day."

How are companies measuring their reputations? Among those that are keeping track, there is an increasing reliance on custom research-- which was the most commonly cited technique-as well as financial reports and media monitoring. Many corporations are recognizing the importance of measuring a variety of factors, says Hoog. "There's a host of issues that play into reputation. How is product moving? How is the stock price doing? What kind of employees are you able to get-are you getting them from the top of the stack? Are you able to keep employees? So there are some pretty tangible measurements you can make, and I think that the CEO who is on top of things and truly honest with himself or herself, can know where his or her company's reputation is."

In last year's survey, CEOs said that corporate reputation had grown more important in the preceding five years-and they apparently expect that trend to continue. The latest survey found that protecting and enhancing the company's reputation is not a specific part of the compensation plan for most CEOs (66 percent responded "no"); when it is tied to pay, it's most likely to be considered for executives in the consumer services, business services, and telecom/IS industries. But today's CEOs expect to see strong reputation-management abilities in tomorrow's corporate leaders, with 92 percent saying such an ability would be an important factor in their choice of a successor. Here, answers varied greatly by industry, with energy-utility CEOs being the most likely to give such abilities significant consideration (with an eye, perhaps, toward increasing deregulation and competition), followed by consumer services and technology companies.

The discrepancy between what is expected of today's and tomorrow's CEOs is a natural consequence of the speed with which the issue of corporate reputation has come to the fore, says Hoog. I think there's a growing awareness that reputation is really what it's all about. It's gaining importance on a daily basis and people are realizing that it's really what you have to hang your hat on.

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What's in a Reputation?


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