Reputation has become an essential strategic asset for companies. Those businesses that enjoy a good reputation are able to differentiate themselves, thus attracting investments and retaining customers and employees, while at the same time, stakeholders of such companies demonstrate higher levels of satisfaction and loyalty towards the companies’ products and brands.
Currently, corporate reputation is one of the most popular non-financial indicators used by organizations, both in the public and private sectors. is book is an in-depth investigation of the psychosocial nature of corporate reputation, and we invite the reader to join us on a journey of discovery.
When reputation first appeared as a concept, it brought about promises and hopes. It was viewed as a solution capable of reconciling the interests of different stakeholders and making the whole organization stronger. However, this giant soon turned out to have feet of clay, as it was lacking in sufficient theoretical and methodological foundation. Nonetheless, when we step into the terra incognita of corporate intangible assets, we will understand that the vague idea of reputation is gradually acquiring a scientific form thanks to the development of measurement tools and models that lay a foundation for the long sought-after means of managing reputation.
Carreras, Alloza and Carreras explore the scientific evidence behind corporate reputation management. Foreword by Charles Fombrun.
3. ENRIQUE CARRERAS, ÁNGEL ALLOZA
and ANA CARRERAS
Foreword by Charles Fombrun
LONDON NUEVA YORK
MADRID BARCELONA
MEXICO CITY MONTERREY
BOGOTÁ BUENOS AIRES
Corporate reputation.indd 3 29/05/13 18:06
5. To all those companies, institutions, organizations and
professionals who are convinced that the key to future
success and becoming real leaders in their sector lies not in
the company size nor financial variables but in reputation
leadership.
Corporate reputation.indd 5 29/05/13 18:06
7. Contents
Foreword by Charles J. Fombrun .................................. 11
Acknowledgements ....................................................... 13
Introduction ..................................................................... 15
The Economy of Intangibles and Reputation ...... 19
1. Reputation in Organizations .................................... 21
2. Managing Intangibles: Challenges for an
Organization ............................................................... 28
The Origin and Promise of Corporate Reputation. 33
1. The Origin of the Concept ...................................... 34
2. The Value of Reputation .......................................... 39
2.1. The Impact on Market Value ............................ 40
2.2. Impact on Stakeholders’ Behaviour.................. 58
2.3. The Value of Corporate Reputation ............... 64
3. The Need for Clear Terminology ............................ 66
What do we Understand by Corporate
Reputation Today? ......................................................... 71
1. Reputation is a Value-Generating Attitude............. 73
2. The Need for Grand Reputation ............................. 87
2.1. Definition and Classification of Stakeholder . 88
2.2. Various Reputations Versus Grand
Reputation ........................................................... 91
3. Reputation can be Managed ..................................... 113
3.1. Signalling by an Organization ........................... 115
3.2. Perspectives: Who We are, What We Say,
What We do and How We are Seen ................. 119
01
02
03
Corporate reputation.indd 7 29/05/13 18:06
8. 3.3. What we do not Know about Reputation:
Further Research ................................................ 142
4. Strategic Character of Reputation ........................... 144
4.1. Determining the Value of Corporate
Reputation ........................................................... 147
4.2. Reputation as a Resource. The RBV Theory . 149
The Theoretical Foundations of Reputation ........ 153
1. Social Legitimisation of an Organisation ............... 157
1.1. The Sources of Legitimacy ............................... 162
1.2. The Role of Legitimisation in Corporate
Reputation ........................................................... 171
1.3. The Distance between Legitimacy and
Reputation ........................................................... 182
2. The Theory of Planned Behaviour ......................... 187
2.1. From Attitude to Behaviour ............................. 188
2.2. The Model of Planned Behaviour ................... 195
2.3. New Ideas: Identity, Emotion and Desire....... 211
Modelling and Managing Corporate Reputation . 237
1. The Customer Loyalty Model .................................. 238
1.1. A Brief Historical Overview ............................ 239
1.2. Components of the Customer Loyalty Model. 245
2. Development of the Intentional Customer
Loyalty Model ............................................................. 274
2.1. Loyalty Based on the Perceived Value of
the Service ........................................................... 275
2.2. Satisfaction-Based Loyalty ................................. 279
2.3. Trust-Based Loyalty ........................................... 281
2.4. Loyalty Based on Calculative Commitment ... 285
3. Reputation-Based Loyalty of Stakeholders ............ 288
3.1. Rational Reputation vs. General Reputation ... 290
3.2. The Model of Stakeholder Loyalty .................. 297
4. Overall Reputation as Management’s
Strategic Focus ........................................................... 321
4.1. Automatic Attitude Activation ......................... 323
5. Eventual Reputation Status ...................................... 327
04
05
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9. 06 Measuring Corporate Reputation ............................. 331
1. Objective Reputation Measurement Tools ............ 337
1.1. Corporate Reputation Rankings ....................... 337
1.2. The Cravens Reputation Index ........................ 345
1.3. The MERCO Index ........................................... 347
1.4. An Overview of Auditing Tools Used
by Experts ............................................................ 352
2. Reputation Measurement Tools by
Stakeholder Groups ................................................... 353
2.1. Rational Reputation Scales ................................ 355
2.2. Global Reputation Measurement Tools .......... 394
Conclusion........................................................................ 413
1. Reputation is an Attitude .......................................... 414
2. What are the Rational and Emotional Processes
that Translate Reputation into Favourable or
Unfavourable Behaviours? ........................................ 415
3. How does Reputation Generate Loyalty and
Value? Our Model ...................................................... 416
4. What is an Appropriate Organizational Model
for Reputation Management? ................................... 417
5. How does Reputation Help to Establish a
Balance between Legitimacy and Differentiation?. 418
6. Are there Multiple Reputations or can we
Speak about an Overall Reputation? ....................... 419
7. Is it Possible to Develop a Balanced Scorecard
with Indicators for Each Dimension of
Reputation and an Indicator of overall
Reputation? ................................................................. 420
8. What is the Future of Reputation? ......................... 422
Notes ................................................................................ 425
Bibliography ................................................................... 465
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11. 11
Foreword
“You cannot open a book without learning something.”
—Confucius
Opening a new book is always a joy: there’s the anticipation created
by the book’s title, the expectation of benefiting from its authors’
experiences, the very real possibility of being challenged by new ideas,
and the learning it will create.
And so it is with this book whose title Corporate Reputation compels
me from the start. After all, I am pretty sure that my own 1996 book
on that topic must have inspired and influenced it! Hard as it is to
believe, it’s been 18 years since my own book was written and helped
to launch a concerted effort to understand and stimulate research and
analysis of corporate reputations. I had set out to examine the academic
underpinnings of the reputation construct, and I concluded with a
hopeful message that we could learn much better and faster by forging
an alliance between academics and practitioners.
Time has proven me somewhat visionary, I suppose. I’ve organized
conferences, built a company, served clients, developed ideas, and
written a lot. But nothing thrills me more than to see a new book
being published that promises to invigorate us thanks to a rich dialogue
across the stakeholder ecosystem of thinkers and doers with which we
are all involved.
The authors of Corporate Reputation are a judicious mix of academia
and practice. Together they seek to create learning from that mix. The
Carreras duo bring their academic credentials to bear by examining
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12. 12
the large body of research and writing carried out on intangible assets
and corporate reputations over the last two decades. This they juxtapose
against the experiences of some of the prestigious Spanish companies
that have joined forces via Corporate Excellence – Centre for Reputation
Leadership (established in 2011), itself the result of a re-combination
of two prior Spanish associations, The Corporate Reputation Forum
and The Institute for Analysis of Intangibles. The guiding force behind
all three is the book’s co-author Ángel Alloza, formerly Global Director
of Corporate Communications Strategy, Reputation, Brand and non-
financial metrics at BBVA Group.With those credentials, there can be
no doubt that this book is a happy marriage of theory and practice.
It fuses current thinking about corporate reputations and their role
in creating intangible value with best practices from some of Spain’s
leading companies and practitioners. In this sense the authors fulfill
my basic requirements for any new book: that it have a good topic and
great experiences to cull from.
My third requirement for a good book is that it challenges us with new
ideas. I don’t expect the authors of Corporate Reputation will disappoint
us on that count either! Just as Spain itself was at the vanguard of
global exploration in the 1400’s, so too are its largest companies today
committed to exploring the world of ideas, familiar names such as
BBVA, CaixaBank, Iberdrola, Repsol, Santander, Telefónica, Adif,
Agbar, Bankinter, Correos, Danone, El Corte Inglés, Gas Natural
Fenosa, Mapfre, Meliá Hotels International and Renfe. They are the
founding members and associated companies of Corporate Excellence
– Centre for Reputation Leadership, and together represent 65% of
the IBEX-35 and more than 750,000 employees in 80 countries. As
a seasoned observer and occasional contributor to many of their
measurement programs, strategic thinking, and stakeholder initiatives,
I know that Spain’s practitioners have a visionary view of the role that
intangible assets can play in creating value for companies.
And so, like you, I look forward to reading this book. And cannot wait
to learn from its pages!
Dr. Charles J. Fombrun
Chairman, Reputation Institute
www.reputationinstitute.com
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13. 13
Acknowledgements
At first glance, co-authorship seems to be a more difficult task than
writing a book on one’s own, but in our case we were lucky enough to
work as a close-knit team of friends that complemented each other.
Our shared vision and critical evaluation of each other’s work during
innumerable discussion sessions helped us to take advantage of the
academic knowledge, business experience and creativity demonstrated
by a sociologist, a psychologist and an economist with a wide range of
interests in research, teaching and corporate reputation management.
The three authors appreciate all the support, cooperation, patience and
determination of other people who were passionate about this project
and generously contributed their knowledge and expertise.
We offer our gratitude to Macarena Estévez, one of the most brilliant
and creative mathematicians who helped many companies and
institutions transform vast volumes of data provided by our complex
everyday reality into models that allow us to understand and predict
attitudes and behaviours. Macarena joined this project from its first
working session and has been a source of inspiration ever since.
We are thankful to the great team of professionals of Corporate
Excellence – Centre for Reputation Leadership, without whose
patience, enthusiasm and good judgement we would have been unable
to realize this project, namely to Augusto Leiva, Juan Cardona, Saida
García, Beatriz Magro, and especially to two team members — Clara
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14. 14
Fontán for guiding text development and improving it immensely, and
Anna Ramzina for the excellent job of translating the text into English.
We would also like to thank Antonio Franco, Professor of Statistics and
Director of the Applied Mathematics and Statistics Department at the
CEU San Pablo University for his vision and unconditional support of
the project from its very start.
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15. 15
Introduction
Reputation has become a strategic asset for organizations. Businesses
with a good reputation are able to differentiate themselves and thus lure
investments and retain customers and employees, and at the same time
achieve higher levels of satisfaction and loyalty towards their products
and brands.
Currently, corporate reputation is one of the two most popular non-
financial indicators in the business world, including both private and
public organizations.1
This book presents an in-depth analysis of the
psychosocial phenomenon of corporate reputation.
We invite the reader to join us on the adventurous path towards a good
reputation. Here, adventure should be understood in the broader sense
of the word –– our journey has quite a few surprises in store. The
appearance of reputation as a concept brought about promises and
hopes; it was viewed as the corner-stone capable of reconciling the
different interests of stakeholders to make the whole organization
stronger. However, the giant turned out to have feet of clay, lacking
sufficient theoretical and methodological foundations. We will see
how the initial excitement was followed by disenchantment with
what appeared to be the Tower of Babel built on numerous concepts
and perspectives that conflicted with each other –– a disturbing
picture for our traveller. However, once we step on the terra incognita
of corporate intangibles, we will understand that the vague idea of
reputation is gradually acquiring scientific weight via the development
of measurement tools and models that lay the foundation for the long
sought-for technology to manage reputation. The order of the book’s
chapters follows the footsteps of the concept’s evolution.
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16. 16
In the first chapter, The Economy of Intangibles and Reputation, we
attempt to explain what the management of intangible assets means to
organizations. We are entering a new economic cycle that we can call
the economy of intangible assets and corporate reputation. In this new
context, the roles of companies and the traditional balance of power
are changing. This means that power is shifting over to stakeholders’
hands (public opinion, customers, employees, regulators, shareholders,
suppliers, etc.), and the new role of companies and institutions is to be
at the service of the stakeholders. Thus, business success should
be defined as the capacity to understand the social context better than
one’s competitors, achieve sustainable differentiation over time and
strengthen one’s relationship with key stakeholders.
The company’s ability to develop this new model depends on the
degree of trust society has about its companies and institutions. Brand
and reputation are management tools that can be used to recover trust.
The basis of trust is commitment to the issues relevant for citizens
(as a response to stakeholders’ expectations of the organization) and
the ability to meet these commitments. The first chapter discusses key
characteristics of this new economic cycle based on generating trust
and fulfilling promises.
The second chapter, The Origin and Promise of Corporate Reputation, is
an overview of the concept of corporate reputation and its evolution
until the present day. Over the last three decades we have observed a
growing interest in the concept that gave rise to many academic and
business publications in the field. One of the recent scientific reviews
realized in 2010 by Kent Walker found 1,559 publications related to
corporate reputation and associated concepts such as organizational
identity, corporate image, brand equity or corporate branding.2
In fact, corporate reputation is not a new field of study in the area
of corporate management. On the contrary, its origins go back to the
1950s, and more specifically, to the article penned by Pierre Martineau3
in 1958 on the benefits of extending the concept of brand image
to corporate image. This creates a broader concept that integrates
the perspectives of all stakeholders whose behaviour is critical for
Corporate reputation.indd 16 29/05/13 18:06
17. 17
the company’s continuity, such as shareholders, consumers, potential
consumers and employees.
The third chapter, What Do We Understand by Corporate Reputation Today?
is an in-depth discussion of the nature of the concept. We examine the
characteristics that came to be associated with the term and conclude
by suggesting a scientific definition that brings together all the desirable
properties: reputation as a shared social evaluation and having the ability
to lead to value-generating behaviours. We will then be prepared to
understand the possibilities associated with Charles Fombrun’s famous
thesis presented in 1996 on the existence of a grand reputation –– a
unique measurement tool able to integrate all perceptions of reputation
held by all stakeholders.
The fourth chapter, The Theoretical Foundations of Reputation explores
this aspect further. Once we are familiar with reputation’s potential for
creating value, we face its dilemmas: Is there one or are there several
reputations? Is their nature rational or emotional? Is it an intangible
asset or an invisible resource? Is it an objective reality or a socially
developed construct? What is the role of the numerous available
measurement tools? How do we choose among them? and, more
importantly, How should they be used? It seems that the concept,
instead of offering solutions, raises more questions. That is why
this chapter attempts to understand the theoretical frameworks that
explain the phenomenon of corporate reputation and its implications.
Two major theories attempt to explain the origins of reputation and
approach the concept via different dimensions. The first theory, the
theory of legitimisation, looks at the general level and explains the basic
mechanisms that sustain stakeholders’ value-generating behaviours
and for that reason, is strategic in nature. The second theory, that of
planned behaviour or action, targets a more tactical and specific level
and explains specific behaviours. Thus it is useful for making more
effective diagnoses for reputation policy management. The chapter
concludes by suggesting a new concept of global emotional reputation
and describes the theoretical foundations and advantages it has in store
for reputation managers.
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18. 18
The fifth chapter, Modelling and Managing Corporate Reputation,
steps away from general theory and enters the terrain of practical
application of explanatory models that translate reputation into
value-generating behaviours. Previous chapters defined corporate
reputation as stakeholders’ general attitude towards a company able
to result in stakeholders’ support for the company. We investigated
the theoretical foundations of this premise. This area of study is
relatively new and researchers have been more preoccupied with the
theoretical structure and development of reputation measurement
tools than with developing causal models that might shed light on the
drivers of stakeholders’ value-generating behaviours –– an issue that
has special importance for companies and organizations.
The last chapter, Measuring Corporate Reputation presents different
measurement tools developed over the last two decades. The great
variety of indices and scales that have recently appeared are evidence
of the scientific and professional communities’ interest in reputation.
However, the proliferation of tools may also lead to uncertainty and
confusion. That is why the last chapter offers a detailed guide for
reputation measurement that can be used for managing reputation and
creating value for companies and institutions.
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19. 19
01The Economy of Intangibles
and Reputation
We are entering a new economic cycle that can be labelled “the economy
of intangibles and corporate reputation”. Over the past 30 years, a
steady increase in the value of intangible assets has been observed (the
value of intangible assets held by S&P 500 companies tripled over this
period, with 62 per cent of the total value of all listed companies in the
world now reported to be intangible1
). This trend intensified further
with the crisis that began in 2008.2
Intangible assets are more important than ever before. They account
for an increasingly greater share of companies’ business value, so much
so that financial results and profitability are more deeply affected by
the exchange and management of ideas, information, knowledge and
services rather than by control of physical and tangible assets.
Intangible assets include patents, strategic alliances, client databases,
employee profiles and other non-physical assets. However, for many
companies their most valuable asset is their brand, which may account
for as much as 70 per cent of their total market capitalization.
Although intangible assets and resources are key factors that drive the
modern economy, the competence of senior executives and investors
in this area leaves much to be desired. This lack of awareness leads to
management failure and a significant bias in risk evaluation and the
identification of opportunities and adequate evaluation by investors.
Given that management tends to limit itself to what can be measured,
traditional accounting focuses almost exclusively on tangible assets. At
Corporate reputation.indd 19 29/05/13 18:06
20. 20
the same time, measurements are applicable only to concepts that are
well understood.
Reputation is the best example of an intangible asset characterised by
great strategic value as well as by insufficient awareness, measurement
and management techniques. The term reputation economy was
coined during the 15th International Conference on Corporate Reputation,
Brand, Identity and Competitiveness held by the Reputation Institute in
2011 in New Orleans, LA, USA. It attempts to reflect the new context
where the role of companies and the traditional balance of powers are
changing; it implies that today, power has shifted to stakeholders (public
opinion, clients, employees, regulators, shareholders, suppliers, etc.).3
The new role of companies and institutions is to be at the service of
their stakeholders. Today, success in business must be defined as the
capacity to initiate and reinforce the relationship with these groups
before it is done by one’s competitors — and in a more efficient
manner. The success of this new business model depends on the level
of trust that society places with its companies and institutions.
However, today’s business reality is characterised by a loss of trust that
has affected businesses and governments. Recovering this trust is a
prerequisite for overcoming the economic crisis. Good management
of brands and one’s reputation is a tool for recovering this trust, and
businesses find themselves in a better position for promoting the
management of these strategic intangible assets.4
An important step towards the effective management of these resources
and intangible assets is to develop a rigorous definition of the concept
of reputation and to design reputation measurement tools that enable
one to gauge improvements and provide a tangible economic return.
The goal is to persuade top managers to include these reputation
measurement tools in their balanced scorecards, in addition to using
traditional financial indicators.
InthelasttenyearsinSpain,variousprojectswereinitiatedtoassistprivate
companies and the public sector to advance their search for corporate
Corporate reputation.indd 20 29/05/13 18:06
21. 21
reputation measurement tools and to improve their management
of intangible assets (reputation, brand and communication). These
include The Corporate Reputation Forum (2002) and The Institute
for Analysis of Intangibles (2004), which recently merged to form
Corporate Excellence – Centre for Reputation Leadership, a think
tank. Driven by the current context, all of these initiatives originated
from the business sector.
1. Reputation in Organizations
Brand and reputation are instrumental for managing the recovery of
trust. “The foundation of trust lies in commitment to the topics and
tasks that are relevant for citizens (as a response to the expectations
of stakeholders) and to living up to this commitment.”5
Corporate brand is the balance that a company, an institution or
a country manages to establish between the perceptions that it
communicates, ie. the expectations that it creates, and the reality or
experiences that it delivers to its stakeholders, both internal and external
(Alloza, 2010). That’s why an organization must live up to the message
that it communicates. And this can be applied to persons, professionals,
companies, institutions or countries.6
Corporate brand is an action platform for expressing and communicating
the commitments and promises that the organization has then to
fulfil.7
A brand is strong, credible, characterised by good reputation
and capable of gaining trust for the company that owns it as long as
there is no mismatch between the perceptions or expectations that it
generates and the experience and reality that it delivers. In other words,
the brand “says what it does, and does what it says”.
Reputation is the ultimate result of this process when maintained over
time. Good reputation enables one to gain and maintain the trust of
the stakeholders. In this sense, reputation is a management tool for
strengthening trust.8
Reputation is a positive sentiment towards a person or an institution
that integrates three vectors: admiration, esteem and trust. Reputation
Corporate reputation.indd 21 29/05/13 18:06
22. 22
is the heart of trust. “It is a sentiment of great importance as it drives
attitudes and favourable behaviours towards a company, an institution
or a country”.9
A good reputation is rooted in good deeds and is the fulfilment of the
promise made by an organization in response to the expectations of
its stakeholders.10
In the last decade, reputation has been gradually admitted onto the
business agenda:
a) The first argument for including it was in recognizing the danger that
reputational risks pose for the continuity of companies.
Businesses started to take interest in corporate reputation at the
beginning of this century in the wake of reputational crisis cases
such as Enron, Tyco, Ahold, Parmalat and Arthur Andersen, which
demonstrated the scale of devastation that can be brought about by said
reputational risk. These cases made companies around the world realize
that a poorly managed reputation could threaten the very continuity of
the entire business.11
b) The second argument that propelled reputation to corporate
agendas was the internationalization process. Companies from different
countries compete in an increasingly globalised market. Even those
companies whose strategies focus on local markets will have to face
competition on the part of international companies and brands.
c) Reputation is becoming a key element in the search for sustainable
differentiation. In the context of accelerating globalisation, companies
can no longer compete solely on price, and, in the long run, not even
on the quality of their products.12
Products and services have become
increasingly more similar while their quality, although necessary, is
insufficient. True differentiation leading to competitive advantage
is achieved through branding (Oroval, 2012; Alloza, 2001).
d) The process of economic internationalization and globalisation also
emphasises the link between companies and brands and their countries
Corporate reputation.indd 22 29/05/13 18:06
23. 23
of origin. A product or service’s country of origin represents an
important part of its strength or weakness in the global marketplace.
The country brand acts as a pillar that supports trust in the product
or service originating from this country. Attributes associated with the
country are projected onto its product brands and companies.13
This projection may have both positive and negative implications.
A brand or a company originating from a country perceived as
sophisticated is likely to be perceived as sophisticated too. However,
for the same reason, a brand originating from a country perceived
as irresponsible will have many obstacles to overcome in order to be
perceived as being serious.14
Similarly, successful brands and companies
with good reputations contribute to the improved perceptions and
reputations of their country’s brand. This is especially true of large
corporations characterised by greater visibility. The effect that large
companies have helps to improve the reputation of less visible brands
and companies originating from the same country.
e) From management’s point of view, reputation helps companies and
organizations adopt a long-term action plan and a multi-stakeholder
vision.
Managing a country’s brand and reputation means creating value for
the long run. Companies assume this new role by serving the interests
of stakeholders, where creating shared and balanced values enables
sustainable growth and generates the possibility of social cohesion.15
We have summarized the interest in reputation in these points to clarify
the concept of reputation and inspire the development of rigorous
measurement tools for reputation to be incorporated into the strategic
management of organizations.
Over the last two decades, communications departments performed
reputation management functions. These management areas developed
from press departments. Now, as they develop and redefine the role of
communication and strategic intangible assets, their activity becomes
increasingly important for companies (The Arthur Page W. Society,
2012).
Corporate reputation.indd 23 29/05/13 18:06
24. 24
Communications departments assume new functions as they develop.
In the future, their success will depend on six key areas: reputation,
corporate brand, communication, public affairs, social responsibility
and measurement tools (Zerfass et al., 2012). These functions may
become the drivers of transformation that organizations will need to
implement to become successful in the new competitive environment
of intangibles and reputation.16
However, the prevailing approach in most companies today is that top
management defines business strategy, which then trickles down to
inspire strategies for business areas that may include communication.
This position is common business practice. Only a few large companies
have communications directors who participate in management
committees.
The conceptual framework that this text suggests is an attempt
to overcome this linear one-way relationship between business
and communication strategies and look at communication systems and
strategic intangibles management (reputation and brand) as key tools
for developing and executing corporate strategy.17
A communications director in charge of all stakeholders’18
communications is aware of their aspirations, demands and expectations
and may contribute to corporate strategy development, implementation
and communication.
The role of communication director needs strengthening through
access to information, management tools and functions necessary
for participating in the decision-making process at the top level. They
need to have the power to inform the board about implications that
decisions may have for the stakeholders. This limitation also exists
within the academic community. In many universities and business
schools, courses on communication strategy or corporate reputation are
delivered by marketing departments and, in some cases, by specialized
departments, and rarely related to the area of business management.
Much needs to be done to consolidate these functions and establish
measurement tools and management models that will be accepted by the
Corporate reputation.indd 24 29/05/13 18:06
25. 25
academic and business worlds. In this context, reputation measurement
tools become indispensable for demonstrating economic and financial
returns on good management performed by the communications
director.
As follows from this statement, reputation metrics should be included
in balanced scorecards at the top management level. These balanced
scorecards should combine conventional financial indicators with
new non-financial indicators — such as reputation, brand, customer
satisfaction, commitment of employees and level of recommendations.
These non-financial indicators will allow companies and institutions
to go beyond the short-term vision offered by financial indicators and
introduce long-term perspectives and multi-stakeholder focus that lead
to in-depth changes in strategy. These changes aim at consolidating a
new sustainable business model or source of sustained differentiation
that will enable business strategy to align with internal and external
stakeholders.
Clarifications of definitions are as important as the development of
measurement tools that will follow rigorous conceptualization. This is
the only way to respond to the growing demand expressed by companies
and institutions wanting access to better techniques of managing their
intangible assets.
In the last few years, much work was done to meet these challenges
and unleash the potentials contained in the concept of reputation. The
most important developments thus far are:
• Action lines based on academic research.
• Empirical action lines based on business practice and applied research.
The first group did research and made advances in defining the
concepts of communication and corporate reputation as well as in their
measurement and organizational implications.
The second group led to the forming of associations, foundations,
think tanks and other institutions that brought together different
Corporate reputation.indd 25 29/05/13 18:06
26. 26
enterprises willing to join forces. The contribution that large companies
made to innovation in reputation management, corporate brand,
communication and measurements has been extremely important
because of their pragmatic and empirical approach.
Some very innovative initiatives emerged in Spain ten years ago with
the creation of groups of companies that worked together to apply
the models of coopetition (cooperation among direct competitors),
involving cooperation between public and private companies and
alliances with prominent scholars and scientists.19
Some of the
most important examples involve large companies that form part
of the stock market index as well as some public companies. In
Spain, the three following business initiatives had a major impact on
development:
• The Corporate Reputation Forum (2002-2011).
• The Institute for Analysis of Intangibles (2004-2011).
• Corporate Excellence – Centre for Reputation Leadership (2011-
present).
Since its inception in 2011, Corporate Excellence – Centre for
Reputation Leadership has been integrating these activities and
bringing together companies that founded The Corporate Reputation
Forum and The Institute for Analysis of Intangibles, with their own
networks and alliances including experts and academic institutions —
the Corporate Reputation Forum and the Institute for Analysis of
Intangibles have merged to form Corporate Excellence.
Corporate Excellence – Centre for Reputation Leadership is a think tank
and a non-profit organization. It was established by BBVA, CaixaBank,
Iberdrola, Repsol, Santander and Telefónica (who act as founding
trustees) and brings together some of the largest Spanish private and
public companies, such as Adif, Agbar, Bankinter, Correos, Danone, El
Corte Inglés, Gas Natural Fenosa, Mapfre, Meliá Hotels International
and Renfe. Together, these companies employ more than 750,000 people,
are present in 80 countries and their aggregate capitalization amounts to
more than 50 per cent of the stock market index.
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27. 27
The think tank’s name expresses the idea of innovation implied by
reputation management. This centre for reputation leadership attempts
to transform companies into excellent organizations through reputation
management. In line with this vision, companies that belong to this
organization state their position by using the corporate tagline Leading
by Reputation, which reflects the competitive challenges of the new
economy of intangibles and reputation.
Reaching this objective requires a preliminary step: clarifying the
concept of reputation and revising its key definitions suggested by
academics and professionals. Without a clear definition, it is impossible
to develop rigorous measurement tools accepted by all involved social
actors: academics, managers of intangibles in organizations, regulators
and investors.
Reaching consensus on reputation measurement is especially important
because the goal is to create reputation indicators based on the metrics
approved by the market. This would enable them to be integrated into
organizations’ balanced scorecards. Traditional financial indicators
would be complemented by non-financial indicators that measure an
organization’s reputation. Reputation would become a non-financial
indicator, potentially the most important indicator in the world of
organizations, both private and public, to have an impact on strategy
and contribute to a long-term view and a cohesive multi-stakeholder
vision.
In order to be managed, reputation has to be measured. This
measurement must be focused on decision-making processes that enable
management and ensure protection of or improve an organization’s
reputation.
The underlying idea of this hypothesis is that an organization’s
good reputation depends on its capacity to respond adequately to its
stakeholders’ expectations. This assumption leads to the first step: the
ability to quantify in order to find out what these expectations are.
This means that reputation metrics must measure expectations held by
all stakeholders of different organizations and be flexible enough to
change over time.
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28. 28
To improve or protect reputation, measurement techniques must be
operational in the process. This means measurement must help identify
which management tools will be useful and which dimensions or blocks
reinforce or erode reputation.
Therefore, metrics must deliver the following:
a) A global indicator of the reputation.
b) A set of indicators that point to dimensions or pillars that, when
managed effectively, boost the reputation’s global indicator. Metrics
should enable one to identify each dimension that has a positive or
negative impact on the overall reputation indicator.
Identification of different dimensions and pillars allows an organization
to commission tasks to different departments responsible for functions
that can strengthen or weaken these indicators and thus affect the
organization’s general reputation.
Finally, in order to be useful for management purposes, measurement
tools must monitor the development of global reputation as well as its
dimensions — into the future.
Measurement techniques may be used in the process of reputation
management if they are accepted internally (inside the company,
by other departments and functions) and externally (by major
stakeholders). However, in order to ensure their acceptance, the
concept of reputation as well as the indicators and metrics developed
to measure it, must be recognized among large companies at the
national and international levels.
2. Managing Intangibles: Challenges for
an Organization
Financial and informational globalisation makes it increasingly
complicated for companies to construct and maintain relations with
markets and strategic groups: clients, investors, employees, regulators
and the public opinion.
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29. 29
Because of this, companies and institutions must aim to become
flexible and innovative in managing their corporate affairs (reputation,
communication, brand, public affairs, investor relations, etc.) and in
how they act and communicate, so they can coherently and consistently
present themselves to their stakeholders. This is how they gain credibility
and trust for achieving strategic business objectives.20
In this new environment, the concept of reputation is highly innovative.
First, because it is a milestone in the history of business management, as
noted before, and therefore for it to be included in a company’s agenda
is quite recent. Second, the application of reputation as a psychosocial
concept to business and institutional practice is novel and can become
a source of continual transformation in organizations that use it.
In this sense, reputation management sets the dynamic that furnishes
an organization with research tools and the ability to listen in order to
learn the perceptions, opinions and evaluations held by its stakeholders.
This mechanism allows the organization to identify the gaps between
the organization’s reality, the communicated reality and the reality that
will be perceived eventually by its stakeholders.
Continuous reputation management means that the company’s “to
do” and “to say” are complemented by this analysis, essentially a
mechanism that generates innovation and drives ongoing company-
wide transformation in response to its stakeholders’ ever-increasing
expectations and demands.
Reputation is a source of innovation that generates value in the sense
that, as suggested by Joan Costa (2009), only social innovation creates
value21
since it strengthens the trust relationship and affinities among
organizations and stakeholders, therefore allowing any organization to
obtain and maintain operating licenses.
Reputation may be perceived as a coin with two sides: it allows the
strengthening of the trust relationship and engenders affinity with
stakeholders. However, we should not forget that the risks of reputation
erosion could lead to the destruction of value.22
This occurs when
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30. 30
the balance of adequate responses to the demands of stakeholders is
broken, despite the fact that they are currently the ones who possess
power (Abril, 2011; Montañés, 2011).
An organization that manages its reputation can respond swiftly
and effectively to protect its value by identifying and mitigating its
reputational risk. It can even increase its value thanks to strengthening
its reputation.
By strengthening its reputation, an organization achieves differentiation
that sustains over time and unleashes the power of favourable behaviour
on the part of its stakeholders, thus creating wealth. Companies that
quickly adapt to changes and can listen and respond will lure major
future cash flows.
In order to achieve sustainable creation and protection of value for
companies and organizations in the long run, the same degree of
importance, excellence and rigour must come from the management
of these intangible assets and resources as is attributed by companies
and organizations to their economic assets and resources. It is especially
important when designing and implementing business strategy —
where the true weight of intangible assets and resources is so frequently
not taken into account (Alloza, 2012).
The strategic importance of reputation and other intangible assets
(brand and communication) contrasts with management limitations that
proceed from a scarcity of theoretical foundation and methodology
developed by academics and professionals early on in their investigations
of this concept.
With time, we see how some of the currently abundant definitions
of reputation become scientifically accepted and give rise to the
development of measurement tools and management models.
It is important to further clarify the concept and development of metrics
that will be derived from the concept. This will enable organizations
to respond to increased demands for better technology concerning
reputation management.
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31. 31
Reputation is a multidisciplinary concept that in the last twenty years
gave rise to multiple working and academic research lines. Some of the
most important ones are:
• Economic perspective defines reputation as a set of features
and signals of a company: what it is, what it does or represents and
whether it is capable of driving the conduct of economic agents
whose behaviour is based on limited information.23
• Strategic perspective views reputation as a source of long-term
differentiation, difficult to imitate because it comes from a company’s
identity.24
This differentiation gives rise to competitive advantages
thanks to favourable stakeholder behaviour and that is increasingly
relevant for value creation in the current competitive context, where
products and services become more homogeneous while their
quality is a necessity, but insufficient. True differentiation leading
to competitive advantage is achieved through brand and reputation
(Oroval, 2012; Alloza, 2000).
• Multi-stakeholder perspectives and long-term vision. Companies
and organizations need to avoid the short-term vision imposed
by financial indicators. A long-term action framework and multi-
stakeholder vision25
need to be adopted.
• Marketing perspective. This is an attempt to construct brand equity
identifiable by name and logos and capable of evoking positive
associations in customers to facilitate marketing activities and sales.26
• Globalisation perspective. Companies can no longer compete solely
on price, and, in the long run, not even on quality.27
The position
of a company and its brand may be largely explained by its link to
the image and reputation of its country of origin. Country branding
begets an additional source of trust for brands and services coming
from this country.
• Organizational perspective. Corporate culture and identity are seen as
factors that determine the conduct of employees and managers. This
conduct creates the basis for the identity of internal groups and for
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32. 32
achieving alignment between stakeholders and the strategic objectives
of organizations.28
• Sociological perspective. Reputation is perceived as a source of social
legitimization for companies. Reputation is a social construct shared
by involved groups and it drives social acceptance or rejection.29
• An accounting perspective looks at measuring and managing
intangible assets derived from collective perceptions and their
incorporation into the accounting statements of the company for
making recommendations with regard to cost and investment
distribution in service of building reputation.30
• An integrated perspective defines reputation as collective judgments
about a company’s credibility and reliability held by different but
related groups. This perspective is still in its nascent stage and may
give rise to more specific research programmes in the future.31
Significant work must be done in order to appreciate the entire potential
of reputation and ensure its excellent management. This implies treating
intangible assets and resources with the same degree of importance —
and applying professional methods and rigour usually associated with
financial assets and tangible assets (Alloza, 2012).
The importance of reputation and other intangible assets contrasts
sharply with certain limitations and challenges that must still be
addressed. Subsequent chapters in this book discuss the historical
development of the concept of reputation.
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