Posted by: cindystephenson | May 24, 2009

Measuring Corporate Reputation

Corporate Alphabet

When you think about a company’s reputation – good or bad – what names come to mind and why?

How would you rate some of the companies and brands depicted here?

How many do you recognize?

Six Criteria that Impact a Company’s Reputation:

Charles Fombrun is Chairman and Co-Founder of the Reputation Institute. He has written extensively on this topic, and developed a set of six criteria that a company can use to gauge its reputation and benchmark its competition:

  • Emotional appeal: You simply like, admire and respect, or trust the company

  • Products and Services: You think the company sells products or services that are high quality, innovative, reliable or good value for money
  • Social Responsibility: You think the company is a good citizen – it supports good causes, doesn’t damage the environment, and does right by local communities
  • Workplace Environment: You believe the company is well managed, has topnotch employees, and would be great to work for
  • Vision and Leadership: You feel the company has a clear vision for the future and strong leadership
  • Financial Performance: You’ve been happy with the company’s profitability, believe it has strong future prospects, and isn’t too risky to invest in

The Reputations of the Most Visible Companies in the U.S.:

Fombrun has collaborated with Harris Interactive, and together they have systematically tested these criteria and based on the results, developed an overall reputation scoring system. For the past 10 years they have surveyed 25,000 American consumers to determine the 60 most visible American companies, and then ranked those companies on the six criteria noted above. The results of the latest survey aren’t that surprising:

  • Nine of out ten Americans said the reputation of corporations is either “not good” or “terrible”
  • The auto industry reported the largest decline in reputation ever
  • AIG placed last on the 60 most visible list with a score of 43.78. This was the lowest score since 2005, when Enron had a score of 30.05.
  • Out of the 60 most visible list, the top ten companies were Johnson&Johnson,  Google,  Sony,  Coca-Cola,  Kraft,  Amazon,  Microsoft,  General Mills, 3M, and Toyota. (The top five scored 80 or higher.)

Linking Fame and Fortune:

Does fame lead to fortune?  Yes!  Fombrun estimates that a 10% improvement in reputation is worth between 1% and 5% of a company’s market value. Reputations also have considerable hidden value as a form of insurance, acting like a reservoir of good will.  Finally, there is a strong statistical correlation between a company’s overall reputation and the likelihood that consumers will purchase, recommend or invest in a company or its products and services.

Implications for Small Business:

Since most of us don’t have the resources for such a complex and sophisticated analysis of our reputation, what does this mean for small business?

Out of the six criteria listed that influence reputation, the perception of a company’s products and services is the key factor driving overall reputation.  That means that companies wanting to improve their reputations should strive to emphasize product quality, innovation and value.

More on what this means for small businesses in my next post. In the mean time, if you want to learn more, check out the Reputation Institute’s new blog

Corporate Alphabet info: Armoud van den Heuval and Koert van Mensvoort via the Lovely Language Exhibition at Utrecht Manifest 2005.

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