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Creating a new multistakeholder methodology for measuring reputation

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Tesis Corporate Excellence …

Tesis Corporate Excellence

The concept of corporate image has had critical influence in the evolution of methodologies for measuring reputation. More than 40% of dimensions and attributes are directly linked to this concept, leading to an underestimation of the impact of corporate identity on the reputation.

The doctoral thesis titled Creating a New Multistakeholder Methodology for Measuring Corporate Reputation analyses dimensions and attributes, or variables that constitute the main existing methodologies: Fortune AMAC, Fortune WMAC, Merco, Corporate Reputation Quotient (CRQ) and RepTrak, in an attempt to create a new methodology and determine the weight of both concepts – identity and image

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  • 1. ThesisStrategy DocumentsT04 / 2011Marta Carrió i SalaMetricsCreating a NewMultistakeholderMethodology for MeasuringCorporate Reputation The concept of corporate image has had critical influence in the evolution of methodologies for measuring reputation. More than 40% of dimensions and attributes are directly linked to this concept, leading to an underestimation of the impact of corporate identity on the reputation. The doctoral thesis titled Creating a New According to this research, there are four Multistakeholder Methodology for Measuring major dimensions around which all attributes Corporate Reputation analyses dimensions of reputation are structured: and attributes, or variables that constitute the main existing methodologies: Fortune AMAC, 1. Quality FortuneWMAC, Merco, Corporate Reputation 2. Productivity (performance, profit) Quotient (CRQ) and RepTrak, in an attempt to 3. Responsibility create a new methodology and determine the weight 4. Appeal of both concepts – identity and image. In this context, and in order to develop an updated Analysis of these dimensions and attributes as theoretical framework, three key concepts have well as their comparison is valid at the time of been identified: evaluating the impact of identity and image on corporate reputation. 1. Corporate Identity: this is a subjective concept that represents the forms in which a company In 2004, Professor Manfred Schwaiger views itself compared to other companies and (Germany) published a text analyzing which manifests itself through its actions, the components and parameters used for studying way they are performed and the way they are and evaluating reputation around the world. explained. It incorporates culture, beliefs, values,The document is prepared by Corporate Excellence-Centre for Reputation Leadership and is based on the thesis of Marta Carriói Sala(Doctor of Communication at the Pompeu Fabra University, Barcelona), supervised by Dr. Josep Fernández Cavia and the CommunicationDepartment of the University in 2011.
  • 2. Creating a New relations between internal stakeholders as well turnover (10 companies per sector).Multistakeholder as experiences and prospects.Methodology for The sample includes executives, managers andMeasuring CorporateReputation 2. Corporate Image: this concept brings together all financial analysts of each sector who are familiar meanings, beliefs and feelings that an individual with the companies that are being evaluated. associates with an organization, the ideas used Interviews are held by phone or by e-mail and are to explore and record it, including visual aspects structured in the following way: and external signs that visualize its personality, perception of all this by different individuals. 1. Companies of the sector that you admire most That’s why we do not speak about one universal 2. Evaluation by eight attributes on a scale from 1 corporate image. Instead, there are different (low) to 10 (high): corporate images, stemming from the multitude a. Innovation of perceptions, impressions and experiences of b. Quality of management different persons. c. Long-term investment d. Social responsibility 3. Corporate Reputation: there are three major e. People management approaches that define reputation from different f. Quality of products/services perspectives or angles: g. Financial soundness h. Use of corporate assets a. Evaluation school: reputation as evaluation of the organization’s productivity. Key stakeholders Therefore, global reputation rating is based on are finance professionals (analysts, investors objective measurements obtained through valuation and shareholders) and top managers. Ranking is by attributes made by the respondents. based exclusively on these stakeholders’ views. The focus is on finance. Criticisms of this methodology point to the fact that the dimensions were not defined empirically, b. Impression school: reputation as the consider only some stakeholders, valuations may impression made by the organization. Key not correspond to the reality (there are important stakeholders are individuals (usually clients discrepancies between the evaluation results and and/or employees). Ranking is based on the data on profitability or corporate responsibility these stakeholders’ views. The focus is on provided by the companies themselves) and do not marketing, HR and communication. incorporate multistakeholder vision, which takes into account relations between different groups c. Relational school: reputation as a gap between of stakeholders, their emotions, thus articulating the views held by internal stakeholders and aligning behaviour and communication - an (identity) and external stakeholders (image) important point at the heart of the doctoral thesis. who are seen as the key group. Ranking is based on the views of multiple stakeholders. Fortune WMAC The focus is on the link between the identity Developed by Fortune in 1997 to extend AMAC and the image, and between the image and (America’s Most Admired Companies) to the rest the reputation. of the world, and carried out in cooperation with the world’s leading HR consultant Hay Group, On the basis of these concepts and after analyzing the rating attempts to identify best practices and existing models, the author develops a new determines which ones are reputation drivers and methodology. Five models are analysed: useful tools. 1. Fortune AMAC (America’s Most The rating is based on 1,000 leading North Admired Companies). American companies, complemented with 500 2. Fortune WMAC (World’s Most international companies, which are not based in Admired Companies). the USA or foreign companies present in the USA. 3. Merco (Monitor Empresarial de 55 sectors and 33 countries are analysed with the Reputación Corporativa, Business final sample of 670 companies. The poll is held Monitor of Corporate Reputation) via phone interviews or e-mail, and respondents 4. Corporate Reputation Quotient (CRQ). include managers, executives and analysts, who 5. RepTrak. evaluate the companies by eight listed attributes and one more attribute: effectiveness of business at Fortune AMAC o Fortune 500 the international level. This rating is published by a renowned North American magazine, Fortune, and is the result of an Criticisms of this model are similar to the ones of the internal contest of ideas held in the 80s. The rating previous model, with an addition that correlation is based on evaluation of 500 largest U.S. companies between some of the attributes is high, which may in terms of financial results, best performance and mean that they are not sufficiently operational: it is Thesis 2
  • 3. Creating a New hard to differentiate between them, since all of them It is based on surveying general population and aimsMultistakeholder are strongly dependent on the financial result. to find out which companies are liked and respectedMethodology for by individuals, and for what reasons. Its 20 attributesMeasuring CorporateReputation Merco are grouped into 6 dimensions: Developed in Spain in 1999, by Professor Justo Villafañe from the University Complutense de 1. Emotional appeal. Madrid, in cooperation with his consultancy 2. Products and services. Villafañe & Asociados, Análisis e Investigación and 3. Financial result. Grupo mediático Prisa later renamed Vocento. 4. Vision and leadership. 5. Working environment. The methodology is based on six dimensions: 6. Social responsibility. 1. Quality of products and services The sampling is performed in two stages: 2. Innovation identification of important companies via phone or 3. Internal reputation e-mail interviews with general population and an 4. Ethics and CSR online questionnaire on the scale from 1 to 7 by 20 5. Global dimension and international presence. attributes. 6. Economic and financial performance. RepTrak The weight of the dimensions depends on the value Developed by the Reputation Institute, this method that managers (used as the base in the same way emerged in 2006 as a replacement for its predecessor as stakeholders by Fortune) attach to them in their (Corporate Reputation Quotient), and is the result own ranking, as they are the first to be contacted of an international research aimed to analyse the in the course of the poll via post. They evaluate evolution of the reputation knowledge over the companies (excluding their own company) that last decade around the world. It contains new they consider the most reputed and decide which dimensions and new attributes. Seven dimensions two attributes (out of six that are broken down into of this model are presented below: 18 subcategories) are the most relevant. 1. Governance. Then two most reputed companies are identified 2. Products and services. and experts step in (analysts, trade union activists 3. Leadership. and journalists), who evaluate the companies that 4. Performance. have been included in the preliminary list (only 5. Innovation. evaluating an attribute which they have expertise 6. Workplace. in, with criteria based on their experience). Finally, 7. Citizenship. they draw up a questionnaire on merits, based on specific data about the results of the policies applied The evaluation is held in the form of a poll in by the companies. Then this is compared to a sample different countries, with respondents looking at of consumers, thus yielding an overall ranking of one, two or three companies that they are familiar the best companies to work for (Merco Personas) of with, continuously throughout the year, grading it the previous year, which in its turn is based on the on a Likert scale from 1 to 7. results of Merco Empresas of the previous year. Critics of the two models developed by the Criticisms of this methodology are similar to the Reputation Institute point out that general public criticisms of Fortune ratings given the fact that the does not have sufficient information in order to have Fortune methodology was used as the basis. The an informed opinion. Besides, for many companies attributes are seen as too focused on behaviour and sectors, consumers are not the most important and business competence and overlook appeal and stakeholders. That’s why it is important to adjust identification. It may also overlook the opinion reputation measurements to the size and the sector. of other stakeholders due to high emphasis on top management, leaving beyond its scope such Comparison of the five models important groups are regulators and suppliers, According to the author of the thesis, comparison who play a key role in some sectors. It is also of dimensions and attributes leads one to suggest questionable that trade unions are representative of that the evaluation in fact refers to the image and is the employees’ opinion as well as associations are based on external perception ignoring the appraisal representative of the consumers’ opinion. by internal stakeholders (and paying more attention to the identity). Other groups of stakeholders, such Corporate Reputation Quotient (CRQ) as suppliers and regulators, are marginalised, as, for Developed by the Reputation Institute jointly with example, in the case of Monitor Merco. Harris Interactive in 1998, it aimed to overcome the shortcomings of the Fortune methodology in terms Similarly, we observe lack of attention to emotional of inadequate representation of all stakeholders. aspects, which play an important role in evaluation Thesis 3
  • 4. Creating a New of the reputation and are only taken into account what the organisation is, and desired identity, whatMultistakeholder by the Corporate Reputation Quotient. Evaluation it says it is or what its internal stakeholders say it is)Methodology for thus is dominated by cognitive and subjective and the image (what external stakeholders say it is),Measuring CorporateReputation aspects, and overlooks emotional responses. as understood by the relational school described in In conclusion, the thesis groups analysed models by the beginning of this document, the gap between two factors: these two visions and their interaction may be the key to reputation management. 1. Characteristics and variety of stakeholders involved in evaluation: a. Unistakeholder view: Fortune Reputation Elements AMAC and Fortune WMAC. b. Partial multistakeholder view: Merco, CRQ and RepTrak. Identity – what the organisation is 2. Value attached to different dimensions: a. Emphasis on performance: Fortune. b. Emphasis on performance and quality: Merco. Gaps c. Emphasis on quality: CRQ. d. Emphasis on quality and responsibility: RepTrak. Image – what external Desired Identity – what stakeholders say the the organisation says it is organisation is A new multistakeholder methodology All five methodologies share 11 Source: Marta Carrió, 2011. common attributes, which the author grouped into seven dimensions: The connection between the internal and external 1. Products and services. dimensions is a fundamental aspect for reputation 2. Vision and leadership. management (a company can be considered reputed 3. Workplace context. on the global level if its reputation is recognised 4. Social and environmental responsibility. both by its clients, shareholders, suppliers and 5. Economic and financial performance. consumers in terms of purchasing, investing, 6. Transparency. supplying or consuming, and by its employees, in 7. Emotional appeal. terms of working). Using this classification as a starting point, the new This is the aspect suggested by the methodology methodology suggests 4 dimensions subdivided into presented here, which includes both attributes: perspectives and tries to assign different weights to different dimensions and different value to 1. Quality: different groups of stakeholders, which enables a. Employees. one to bring together sufficient elements for b. Management managing corporate reputation, and determine c. Products and services. appropriate actions to improve recognition by d. Focus on customer. each stakeholder. Performance: a. Results. In order to solidify the methodology, in-depth semi- b. Investments. structured and structured interviews have been held c. International expansion. with experts, managers, consultants and professors d. Leadership. (first round) and employees, partners, investors, Appeal: mass media, trade unions and administration a. Admiration. (second round) as well as a structured online poll b. Trust. broken down into 42 items with a scale of 11 c. Attractive for potential employees. categories and offered to respondents during the Responsibility: same two rounds. a. Social and environmental. b. Ethics. It was found that quality, financial result and c. Reliability. responsibility are the three items associated with d. Transparency. reputation. Thus, it was necessary to include nine corresponding attributes that capture evaluation by new Conclusions: the gap between the theory stakeholders that have not been considered before. of reputation and its practical application If reputation is – as suggested by most of the theories The new suggested methodology is structured as in the field –a link between the identity (real identity, shown in the following figure, and includes the Thesis 4
  • 5. Creating a New Dimensions and attributes of the new multi-stakeholder approach to measure corporateMultistakeholder reputationMethodology forMeasuring Corporate Dimension AttributesReputation Quality Quality of managerial staff Quality of employees Meeting the stakeholder commitments Attention to different stakeholders Management based on quality criteria Appeal Admiration Trust Attractive to work for Authentic Attractive for different stakeholders (suppliers, partners, etc.) Offered experience Loyalty of employees Performance Economic and financial results Capacity for investment Growth potential International expansion Leadership on the market Degree of innovation Effect of CSR activities Responsibility Social and environmental responsibility Ethical behaviour Reliability Transparency Behaviour towards internal and external stakeholders and society in general Legitimacy Legality Source: Marta Carrió, 2011. dimension “appeal”, which is the most emotional that more weight is given to the views of employees aspect in evaluation of the reputation. and the identity in evaluating reputation. Finally, according to this thesis, there is a need to The thesis concludes by suggesting further steps: evaluate reputation by sectors rather than in general, the need to analyse whether the new methodology assigning different weights to each dimension contains correlations that enable to reduce the depending on the sector in which the company number of items that it includes and identify specific operates in accordance with the results obtained in values for each stakeholder group in each industry, two rounds and to give different value to the opinions and, finally, whether stakeholders in each sector are of stakeholders depending on the dimension, the different depending on the country and what are sector, the size or the country, thus incorporating a the factors that allow one to compare reputations of truly multistakeholder vision, especially in the sense companies that operate in different countries. Thesis 5
  • 6. ©2011, Corporate Excellence - Centre for Reputation LeadershipBusiness foundation created by large companies to professionalize the management of intangible assets and contribute to the developmentof strong brands, with good reputation and able to compete in the global market. Its mission is to be the driver which leads and consolidatesthe professional management of reputation as a strategic resource that guides and creates value for companies throughout the world.Legal NoticeThis document is property of the Corporate Excellence - Centre for Reputation Leadership and has as its objective to share businessknowledge about Brand, Reputation, Communication and Public Affairs Management.This document is directed exclusively towards its addressee and contains confidential information, subject to professional secrecy, whosedisclosure, copy or non-authorized use is against the Law. If you receive this document by mistake, let us know immediately and erase itwithout keeping a copy.Corporate Excellence - Centre for Reputation Leadership is the owner of all the intellectual property rights of the images, texts, designsand any other content or elements of this product and has the necessary permission for its use, and therefore, its copy, distribution, publicrelease or transformation is prohibited, without express authorization from the owner.