Building and Protecting Your Reputation Capital

1. Building and Protecting Your Reputation Capital BC TRANSIT 2012 WORKSHOP Dr. Terence (Terry) Flynn, APR, FCPRS April 3, 2012

2. Today’s Game Plan • What is Corporate Reputation • Group Exercise • CR as your ICA • Conditions and Attributes • Safeguarding your Reputation

3. At Your Table… • Five things that are important to you when you think about an organization’s CR • Three (3) organizations that have a good reputation • Three (3) organizations that have a bad reputation

4. Some of The Drivers/Attributes of Reputation Are…

5. What Philosophers Think… • “The way to gain a good reputation is to endeavor to be what you desire to appear.” Socrates • “It is easier to cope with a bad conscience than with a bad reputation.” Nietzsche

6. What Business Leaders Think… • “You can’t build a reputation on what you are going to do.” Henry Ford • “If you lose dollars for the firm, I will be understanding. If you lose reputation for the firm, I will be ruthless.” Warren Buffett

7. A Conceptualization of Reputation • Identity • The internal traits of the firm that are critical to its distinctiveness and longevity • Image • The perceptions and associations that are constructed by the purchaser of the product/service • Brand • The constructed visualization of the company’s value proposition • Reputation • The holistic viewpoint in which an organization is internalized by its stakeholders

8. Putting Reputation Into Perspective • A concept held in the minds or cognitions of stakeholders. • A set of attributes ascribed to a firm, inferred from past actions. • Perceptions, attitudes and/or beliefs of stakeholders • “A corporate reputation is a perceptual representation of a company’s past actions and future prospects that describe the firm’s overall appeal to all of its key constituents when compared with other leading rivals” (Fombrun, 1996).

9. Creating the Business Case for Reputation Management

10. The Competitive Context of the 21st Century • An intensely competitive, global marketplace • 24/7 media and internet environments • The drive for Inimitable advantages • commoditization • Vocal consumerism/stakeholder centric • Increased focus on corporate governance • The rise of intangible assets

11. RM as ICA • A strategic management process should result in a distinct competitive advantage • Strategy = how to gain competitive advantages • SMP = sequential set of analyses and choices that can increase the likelihood that a firm will choose a good strategy: that is, a strategy that generates competitive advantages

12. The Growing Importance of Intangible Assets

13. The Reputation Capital Pipeline

14. Why Reputations Matter • Reputation: • “A resilient asset to some companies in a difficult marketplace” • Stakeholders’ perceptions of reality • Customers, employees, investors, media, financial analysts • Influence investment decisions (herd mentality), prospective • A good one acts like a magnet • Create differentiation and competitive advantage • Affect strategic positioning • Mirror that reflects company success

15. What Are Reputations Worth? • Reputation and financial value are related in three ways: • Operating performance • Profitability affects market perceptions of future prospects • Operating activities themselves contribute to building “reputation capital” – a shadow asset • Reputation Affects Operating Performance • Stimulates employee productivity • Creates reservoir of goodwill • Reputation Creates Financial Value That Builds Reputation • Receive favorable endorsements from stakeholders and the media • Fortune’s most admired • Reputation Has Financial Value as a Corporate Asset • Branding and reputation-building help build a company’s visibility, familiarity, and fame – investments in creating reputational assets • Crisis costs include loss of reputation capital

16. Value of Corporate Reputation • Operational Value • Increasing employee satisfaction • Ability to recruit & retain talent • Help customers to choose between products (when little functional difference exists) • Supports new product introductions • Provides a second chance during crises • Arguably, the internal benefits are the most valuable, especially for companies that rely on employees to support external positioning

17. Value of Corporate Reputation • Financial Value • Based on work Dowling conducted in conjunction with the Fortune 500 “Most Admired Companies” • Good Corporate Reputations increase the length of time that firms spend earning superior financial returns (a carry-over effect) • Good Corporate Reputations may reduce the length of time that firms spend earning below-average financial returns (a lead indicator effect)

18. Worth In Progress • 26 Companies from 2006 Leger Top 100 Reputation Companies (Canadian Tire, Tim Hortons, MLF, SDM) • Canadian owned and publicly traded • Beta = 0.783 • Difference with Market Beta = -0.217 • Rate of Return (1 year) = 25.09 • Total Expected Rate of Return = 10.7 • Reputational Difference = 15.02% • 5 year rate of return (annualized) = 16.31 DOES Reputation Matter…you bet!

19. Employees Attracts and keeps talent Builds pride Makes jobs more attractive and motivates employees Customers Attracts new customers Encourages repeat purchases Builds market share Opens new market opportunities Investors Lowers cost of capital Attracts new investments Media Generates more positive coverage Government Enhances support Minimizes chance of enhanced scrutiny Communities Builds support Minimizes concerns Reputation is a Differentiator of Value The key is to develop mutually beneficial relationships with these stakeholder groups resulting in continued supportive behavior!

20. Determinants of Reputation • Visibility • Authenticity • Transparency • Consistency • Distinctive • Effective • Resilent

21. Determinants of Reputation

22. Relationship Intelligence

23. Stakeholder Engagement Index • Identify priority stakeholders • Influence/power • Interest/involvement • Measuring relationship variables • Trust, commitment, satisfaction, transparency, mutuality • Create scorecard metric • Track the delta (change over time)

24. Analyze and engage stakeholders

25. Components of Relationship Management • Trust • Satisfaction • Commitment • Transparency (Honesty/Openness) • Control Mutuality • Exchange Relationship • Communal Relationship

26. It’s All About Relationships • When thinking about the company or organization that you like a lot (on a 7-point scale) – Leger/McMaster March 2010 (N=1500) • To what extent do you trust this company (M=6.0) • To what extent do you believe that they are honest/transparent (M=5.8) • To what extent do you believe they are committed to meeting your expectations (M=5.9) • To what extent are you satisfied with this company (M=6.1) • To what extent do you believe that you can influence the decisions or direction of this organization (M=3.8)

27. When You Don’t Have A Relationship • To what extent do you trust this company (M=1.9) • To what extent do you believe that they are honest/transparent (M=2.0) • To what extent do you believe they are committed to meeting your expectations (M=2.1) • To what extent are you satisfied with this company (M=1.9) • To what extent do you believe that you can influence the decisions or direction of this organization (M=1.7)

28. How Important is it that a Company • Builds trust with people like you (M=6.1) • Be honest and transparent (M=6.2) • Commits to meeting your expectations (M=6.0) • Satisfy people like you (M=6.1) • Allow people like you to influence their decisions (M=5.2)

29. Your Challenge Then Is To… • Increase Trust • Demonstrate Transparency • Strengthen Commitment • Enhance Satisfaction • Give your publics/stakeholders a voice

30. Toyota’s Accelerated Reputation Decline

31. Toyota’s Climb to #1

32. A Reputation Recalled! But… Aware = Awareness (G0+B0) GO = Good Opinion BO = Bad Opinion RS = Reputation Score (GO – BO) DKE = Don’t know this company enough to have an opinion

33. 90 Days Later… Aware = Awareness (G0+B0) GO = Good Opinion BO = Bad Opinion RS = Reputation Score (GO – BO) DKE = Don’t know this company enough to have an opinion

34. But it’s a different relationship story

35. SR + OR + RR + MR = ICA • Relationships • Your role is to develop and strengthen mutually beneficial relationship with your priority publics • Reputation • Your role is to enhance and leverage reputation to strengthen priority relationships • Risks • Your role is to identify, assess and mitigate (where possible) risks to corporate reputation • Results • Your role is to measure how your contributions strengthen relationships and enhance the overall reputation.

36. Contact Information: Dr. Terence (Terry) Flynn, APR, FCPRS Assistant Professor Department of Communication Studies & Multimedia McMaster University Hamilton, ON L8S 4M2 (905) 525-9140 ext. 26977 Email: tflynn@mcmaster.ca Twitter: terryflynn Blog: terryflynn.ca Linkedin www.mcm.mcmaster.ca Questions/Comments?