Gary Davies | Managing the reputation of corporations, nations and leaders

'Reputation correlates with financial performance and in both directions. The more successful the organisation, the stronger its reputation, and the stronger the reputation, the better will be its future financial performance'.

Reputation is one of the most valuable assets an organisation has, but you won't find a valuation for it in any annual report and accounts. We are told that what gets measured gets managed. So turning that old saying around, if organisations don't measure their reputation or at least its key aspects, how can they be managing it to maximum effect? Measuring and managing reputation is also critical in today's international business reality for nations and leaders alike.

As customers, employees, investors or as members of the public, we evaluate all organisations on three issues - how sincere or trustworthy they are, how competent they seem to be, and their status in our society. If management do not communicate how they wish to be seen, each of these stakeholder groups will use whatever information they can to form a picture, one that can be wildly inaccurate if they have to rely upon hearsay and stereotyping.

Reputation correlates with financial performance and in both directions. The more successful the organisation, the stronger its reputation, and the stronger the reputation, the better will be its future financial performance. But even the most senior managers see the links quite negatively. They are afraid of losing reputation because they know intuitively that this is damaging, and they often lack the insights to manage reputation to improve their organisation's performance. Worse, they can be tempted into using traditional marketing thinking and exaggerate reality, leading to disappointed customers and employees when they find that the organisation cannot live up to the hype.

Reputation managers have to deal with a number of stereotypes. For example, if you export, there is the country of origin effect, if you run a service business where your employees interact face to face with customers, customers will stereotype the business from the age of the employees they meet; sometimes positively, sometimes negatively. As human beings, we use stereotyping to make sense of our environment, we make instantaneous judgements, because we have to. Managers need to be sensitive to how they can help customers in particular make the most appropriate judgements about their organisation. The same applies to both the public and private sectors. For example, there is strong evidence that if patients trust a hospital, their treatment is more likely to be successful.

There is compelling evidence that how employees see their organisation will spill over on to customers. The effects are quite subtle. Previous claims that 'happy employees mean happy customers' are misleading. The quickest way to make employees happy is to pay them more and that will not necessarily lead to happier customers! The reality is that employees who believe that their organisation is trustworthy and competent will transmit such feelings to their customers. Customer attitudes improve and so do outcomes such as satisfaction and sales.

CORPORATE SOCIAL RESPONSIBILITY

Employee recruitment, training and how both are communicated to are key aspects of reputation management, yet those responsible for reputation management are rarely able to influence the first two. Reputation management is still a relatively new role in our society; it needs to evolve and to attract the very best, who, in turn, need to be properly developed and remunerated.

In the past, the first question a graduate used to ask at an interview was about opportunities for promotion. Now the first question is about the company's approach to CSR. Views differ on the social role of a for-profit organisation. Should it be concerned with doing other than maximising the returns to the owners, who then decide whether to support good causes? Some companies are quite cynical about their corporate giving, advertising their generosity. Those who see a benefit in involving employees in social responsibility initiatives argue that, well handled, it is the beneficial effect on employees that can matter most, promoting pride in the workforce. Such positive feelings will spill over on to external stakeholders quickly enough.

Sometimes things go wrong. The company is involved in a crisis. There is strong evidence that a reputation for being a responsible organisation can insulate against the negative effects of a crisis. The crisis can still be damaging and there are competing views on how crisis should be managed - bluff it out, push the blame on to others ... or accept responsibility, apologise and convince stakeholders that the chances of a repeat have been reduced or eliminated. The second approach can cost money, but a damaged reputation can be very costly and negatively impactful on the corporate bottomline.

Nation branding is a phenomenon that has emerged dramatically over the past decade. The governments of most nations in the world now recognise the need to manage their country's reputation in order to achieve specific objectives, including boosting tourism, increasing inward investment, promoting exports, and gaining international influence.

- Gary Davies is professor of business strategy at the University of Chester and an emeritus professor at Alliance Manchester Business School. He holds doctorates from both London and Manchester universities. He has held three sponsored chairs, one funded by Asda (part of Walmart), another by the British Post Office and most recently one funded by Tesco. He has also worked as a consultant to a number of companies. He has published 12 books and over 100 papers, including in the Harvard Business Review, the Strategic Management Journal, the Journal of the Academy of Marketing Science and the Journal of International Business. Gary Davies can be contacted on +447780 522392; 1868 740-0168, or email: gary.davies@chester.ac.uk or govstrat@cwjamaica.com.

Reputation management workshops

I am privileged to be asked by GovStrat Limited, through its brilliant and progressively-thinking founder, Professor Vindel Kerr, to deliver a series of reputation management workshops across the Caribbean (June 22, Barbados; June 25, Jamaica; and June 29, Trinidad and Tobago). Visit: www.caribbeangovernanceadvisors.com).

In those presentations, I shall be providing key concepts in nation branding, supported by several examples of successful nation branding campaigns conducted by different countries around the world and how Caribbean islands could leverage my thoughts and apply various branding strategies to mitigate against fallout from some of the inherent, albeit downside, risks emanating from how many foreign investors, tourists and potential skills view the region.