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An important but often overlooked aspect of executive leadership is the creation of a good corporate reputation and the use of this asset to enhance organizational performance. There is accumulating evidence that a company’s reputation influences both its operational and financial performance.1 Because corporate reputations reside in the heads of people rather than as tangible assets, one of the key factors determining the various reputations of a company is the coverage it receives in the media.2 The power of the media comes from its reach and prominence, its role in certifying some companies as legitimate and important players in the market and people’s beliefs that it has superior access to information and expertise in evaluating companies. In this way, what the media says has a real impact on the business fortunes of companies.
Over time, media coverage defines what is important for people to believe about companies and what aspects of their character and performance should be used to evaluate them. These parameters form the basis of a company’s reputation presented by the media. However, the sheer volume of media information circulating about so many companies makes it difficult to summarize this coverage and present a meaningful profile of an organization’s media reputation. To help with this task, a corporate ratings industry has emerged that produces public scorecards of business performance. More than 50 different scorecards of corporate reputations are published in print media around the world.3 Many companies track the overall tone of their media coverage, but relatively few analyze the basis of the coverage to inform executives about the drivers of their company’s media reputation. More typically, executives simply accept the factors used in corporate scorecards as the key aspects of their reputation profile. The ratings agencies that compile scorecards also select a set of peer companies for evaluation. More often than not, these are a disparate collection of well-known companies rather than a set of industry competitors. Thus, it is not surprising that many executives consider scorecard rankings of corporate reputation to be little more than beauty contests.
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1. For an overview of how corporate reputation influences operational performance, see G.R. Dowling, “How Good Corporate Reputations Create Corporate Value,” Corporate Reputation Review 9, no. 2 (2006): 134-143; and for an example of how good reputations influence financial performance, see P.W. Roberts and G.R. Dowling, “Corporate Reputation and Sustained Superior Financial Performance,” Strategic Management Journal 23 (2002): 1077-1093.
2. S. Lewis, “Measuring Corporate Reputation,” Corporate Communications 6, no. 1 (2001): 31-35; S.L. Wartick, “The Relationship Between Intense Media Exposure and Change in Corporate Reputation,” Business & Society 31 (June 1992): 33-49; C.J. Fombrun and C.B.M. van Riel, “Fame & Fortune” (Upper Saddle River, New Jersey: Pearson Education, 2004); T. Wry, D.L. Deephouse and G. McNamara, “Substantive and Evaluative Media Reputations Among and Within Cognitive Strategic Groups,” Corporate Reputation Review 9, no. 4 (2006): 225-242; R.G. Eccles, S.C. Newquist and R. Schatz, “Reputation and Its Risks,” Harvard Business Review 85, no. 2 (February 2007): 104-114.
3. Reputation Institute, “List of Lists: A Compilation of International Corporate Ratings,” fall 2007, www.reputationinstitute.com.
4. Fortune magazine’s evaluation for its “Most Admired Companies” list is based on scores concerning eight corporate attributes: asset use, community and environmental friendliness, ability to develop and keep key people, financial soundness, degree of innovativeness, investment value, management quality and product quality. The people who rate the companies are financial analysts, senior executives and outside directors of Fortune 1000 companies (other than their own).
5. J. Berg, J. Matthews and C. O’Hare, “Measuring Brand Health to Improve Top-Line Growth,” MIT Sloan Management Review 49, no.1 (fall 2007): 61-68.
6. Lewis, “Corporate Reputation.”
7. D. Porritt, “The Reputational Failure of Financial Success: The ‘Bottom Line Backlash’ Effect,” Corporate Reputation Review 8, no. 3 (October 2005): 198-213.
8. An alternate method of analyzing media coverage is counting media stories and assessing whether the coverage was essentially positive or negative. See Eccles, Newquist and Schatz, “Reputation.”
9. While message themes can vary depending on the particular circumstances facing the company, the typical themes are those shown in “Media Salience.”
10. L. Lee and P. Burrows, “A Bruise or Two on Apple’s Reputation,” BusinessWeek, Oct. 22, 2007, 81-83.
11. G.R. Dowling, “Corporate Reputation Stories,” California Management Review 49, no. 1 (2006): 82-100.
12. S. Denning, “The Leader’s Guide to Storytelling” (San Francisco: Jossey-Bass, 2005).
13. L. Wedlin, “The Role of Rankings in Codifying a Business School Template: Classifications, Diffusion and Mediated Isomorphism in Organizational Fields,” European Management Review 4 (2007): 24-39.
14. Another early warning signal of reputation trouble is when employees dislike the companies they work for. Employee “engagement” surveys often are used to calibrate these effects.
15. A. Ries and L. Ries, “The Fall of Advertising and the Rise of PR” (New York: HarperBusiness, 2002).
16. J.R. Rossiter and S. Bellman, “Marketing Communications: Theory and Practice” (Frenchs Forest, New South Wales, Australia: Pearson Prentice Hall, 2005).
17. General Electric’s “ecomagination” communication campaign is an example of a program designed to foster leverage effects.
18. T.M. Devinney, P. Auger, G. Eckhardt and T. Birtchnell, “The Other CSR,” Stanford Social Innovation Review (fall 2006): 30-37.