The Scope of Corporate Reputation
Corporate reputation is a significant predictor of a company’s performance in other aspects. Corporate reputation must stem from the firm’s intrinsic concept of corporate identity, which encompasses a company’s uniqueness and the behaviors and norms it has cultivated and internalized over time (Albert & Whetten, 1985). The corporate identity is crucial to developing a corporate image, which encompasses the firm’s ideas, perceptions, and projections in the minds of both internal and external stakeholders. Corporate reputation is the culmination of a company’s corporate identity and image (Chun, 2005). In some cases, corporate identity and corporate image may be disconnected, especially if the workforce does not embody the ideals the company seeks to portray.
Stakeholders have a vested interest in an organization’s actions. Lloyd (2015, p. 221) defines a stakeholder as the “rater entity” that appraises a company’s reputation. Thus, stakeholders place expectations on the organization and expect them to be met as a determinant of reputation. Roper and Fill’s(2012) examples of stakeholders include the media, employees, and the government. Employees play a unique role as stakeholders, as they both maintain and appraise a company’s reputation.
Building a positive corporate reputation should be a preoccupation and priority for all firms. Weigelt and Camerer (1988) argue that corporate reputation is an asset for firms, as a good reputation can facilitate the generation of future income. Brammer and Pavelin (2004) note that corporate social responsibility (CSR) is a significant enhancer of corporate reputation. Specifically, CSR initiatives, such as donation drives and environmental projects, enable a firm to project its identity directly to the public as a socially conscious entity, thereby building its public image.
Corporate Culture and Reputation
Corporate culture entails the values, norms, and patterns of behavior that a firm has integrated into its fabric over time. Schein (1999) compares corporate culture to an iceberg with tiers above and below the waterline. In the first, and most visible, tier are artifacts and behaviors, which are the observable aspects of corporate culture, such as the dress code. Just beneath the waterline are the espoused values, which are the advertised standards. At the deeper levels of the iceberg are the assumptions, which are the behaviors that have become routine to stakeholders.
There are four principal types of organizational culture depending on the nature of the firm. Rashid et al. (2004) describe them as communal, fragmented, networked, and mercenary cultures. The particular type is dependent on the combination of sociability and solidarity functions within the organization.
Cravens and Oliver (2006) note that reputation management is primarily the responsibility of an organization’s employees, who embody its identity and help project its desired image to the public. For employees to uphold the desired corporate reputation, there must be an appropriate and supportive corporate culture (Graham et al., 2022). In particular, the firm must demonstrate and communicate to its employees that its reputation is one of its values.
When fostering reputation management as a key value, a company must also strengthen its people management. The perceptions and attitudes that employees, past, current, and future, have of the employer create the concept of the employer as a brand. Samson and Terviovski (1999) argue that people management is a crucial variable for organizational success. Thus, employers must manage their existing employees diligently to ensure they fully buy into the corporate culture and contribute to maintaining the desired corporate reputation.
Measuring Corporate Reputation
Although not as quantifiable as other metrics of company performance, corporate reputation still needs to be measured. Fombrun (1996) discusses the importance of the reputation audit in determining a company’s current and future image, identity, and reputation. Furthermore, the audit enables the company to outline the steps needed to transition from its current state to the desired future. Moreover, the reputation audit compares the company’s performance against stakeholders’ expectations and evaluates significant sources of risk to the organization as they arise (Dowling, 2006). The corporate audit uses several key metrics to provide the company’s chief executive officer with reliable, actionable information.
When evaluating a company’s reputation, there are several metrics and tools to consider. For instance, the Return on Investment (ROI) is a “non-specific” measure of corporate reputation (Roper & Fill, 2012, p. 78). Several dedicated tools have been developed to periodically evaluate and rank organizations according to their corporate reputation.
A case in point is the Fortune Index, discussed by Caruana (1997), which considers eight parameters to measure a company’s reputation. Roper and Fill (2012) give another example in their study of Britain’s Most Admired Companies. One of the metrics in the Fortune Index is CSR, which is arguably given too much weight in relation to financial parameters such as long-term investment value (Caruana, 1997). As such, there is a growing need to develop tools that measure corporate reputation distinctly.
Corporate reputation has both tangible and intangible aspects, which must be appropriately mapped and measured. Roper and Fill (2012) note that tangible aspects of reputation are often used as performance metrics, making it challenging to separate corporate reputation from financial success. Intangible aspects are primarily conceptual attributes that make firms attractive to stakeholders and customers. For instance, the attractiveness of new technology is an intangible aspect of reputation that can woo investors (Roper & Fill, 2012). Some theoretical models aim to strike a balance between the two facets of corporate reputation, with varying degrees of applicability.
The Brand-Reputation Dilemma and Risk Management Crisis
Branding is the differentiation of a firm within its industry, giving it a distinct identity that sets it apart from competitors. Roper and Fill (2012) note that a strong brand is seen as adding value to the firm, whereas a weak brand will not be missed if it leaves the market. Depending on the industry, there are several types of brands, including product, line, umbrella, company, designer, corporate, licensed names, retailers, and griffes (Randall, 2000).
Roper and Fill (2012) argue that corporate bands should have harmonized input and output. In particular, the firm’s operations (inputs) should align with the consumer’s expectations (outputs) as essential components of the brand construct. Moreover, brands have tremendous emotional power and can occupy central roles that governments have historically occupied.
Brands should strive to earn the trust of their stakeholders, particularly customers and employees. A brand is trusted if it comes across as competent, transparent, and likable (Keller & Aeker, 1998). Consumers easily select a trusted brand with a positive reputation from the hundreds available (Fournier, 1998). The brand is the store of a corporate reputation, insofar as one product’s popular appeal can be transferred to another if they share a brand name. Nike has a strong brand but a poor public reputation after several high-profile scandals (Roper & Fill, 2012). This is evidence that corporate reputation and branding can be at odds with one another.
Firms can use CSR engagements to boost their corporate reputation. Porter and Kramer (2006) note that firms that engage in CSR appear ethical and responsible to consumers, thereby increasing their reputational capital. The triple bottom line combines the three Ps of people, profit, and planet to create a wholesome dimension to a company’s operations (Norman & MacDonald, 2004). Firms that observe the triple bottom line experience reputational enhancement, which translates into improved financial returns, as evidenced by The Co-operative Bank (Roper & Fill, 2012). The triple bottom line cannot be ignored by firms in today’s society.
Issues Management, Risk Management, and Crisis
Typically, issues arise when a stakeholder and the firm disagree over a specific matter that requires resolution. Roper and Fill (2012) note that once the media highlighted the link between fast foods and obesity, it became an issue for fast food retailers. Additionally, issues typically evolve from dormant to intense and may become full-blown crises.
For a firm, risks are potential events that can result in financial losses and damage to its reputation. For instance, firms are often at risk of consumer animosity if they are using raw materials from a hostile country (Coombs & Laufer, 2018). Similar to issues, risks must be managed before they become full-blown crises. Risk management involves taking measures to reduce the probability of the risk occurring and creating safeguards to mitigate its adverse effects. Firms must act proactively against both risks and issues before they morph into costly crises that are more difficult to manage.
Crisis management centers on quality and timely communication with the affected parties. In the case of Merck, an emergency crisis management plan involved compiling a list of stakeholders to be contacted and preparing an appropriate communication (Roper & Fill, 2012). Crisis communications can include apologies, clarifications, and withdrawals, which must be well-worded and presented to the affected parties, such as through emails and press conferences. Importantly, the firm must be proactive to prevent a fallout with its stakeholders.
After a crisis, the company must rebuild its reputation to regain its market position. One way a firm can rebuild its corporate image is by engaging in CSR drives. Wang et al. (2021) note that CSR builds brand credibility and brand equity, which are often adversely affected by crises. Once brand credibility is established, customers’ perceptions of the firm improve, and they are more likely to purchase its products.
Corporate Branding, Measurement, and Crisis
The line between corporate brands and product brands exists, albeit not well recognized. Balmer & Gray (2003) note that while the responsibility for a product brand falls on the brand manager, the corporate brand is the remit of the chief executive officer. Additionally, product branding focuses on consumers, while corporate branding targets all stakeholders. Within the firm, product brands are handled by the marketing team, whereas the maintenance of the corporate brand is the responsibility of all employees. As such, corporate brands are concerned with the overall appearance of the entire firm to all stakeholders, unlike product brands, which aim to enhance a product’s appeal to consumers.
Brand personality is the list of traits attributable to a company if it were a person. Brand personality can be measured using the Corporate Character Scale advanced by Aaker (1997). It assesses consumers’ perceptions of a particular brand’s personality across five categories. The brand promise is the expectation that the logo and presence of a brand create a certain impression once consumers interact with it. An authentic brand delivers on its promises, thereby building loyalty and enhancing its reputation.
Positive corporate branding gives rise to brand equity, which is the benefits that accrue to a product solely based on its brand name. Roper and Fill (2012) describe four dimensions of brand equity: Awareness, associations, loyalty, and perceived quality. Similar to reputation, corporate brands can be measured and ranked using specific parameters.
An example of a tool used to measure corporate branding is Interbrand, which annually evaluates and ranks the top 100 global brands (Roper & Fill, 2012). Its assessment has three principal criteria: brand strength, the role of the brand in securing purchase intentions, and financial performance. However, Interbrands’ annual rankings often rank firms by financial value, suggesting it places an overt emphasis on financial performance rather than distinct branding parameters.
Corporate Communications
Corporate communication enables the firm to put across its vision, mission, and values to its stakeholders. Roper and Fill (2012) note that the chief role of corporate communication is to manage stakeholder perceptions of the entity. According to Cornelissen (2020), the scope of corporate communication encompasses the framing, targets, and purpose of a message, making it a management function.
Corporate communication primarily aims at maintaining a positive reputation with stakeholders and shareholders. Seiffert-Brockmann et al. (2021) recommend establishing a centralized communication system to convey a unified message that reflects the firm’s identity. Integrative corporate communication is impactful to stakeholders and helps the company’s image reflect its identity.
Corporate communication encompasses a wide range of activities undertaken by a firm to disseminate its message. Karaosmanoglu and Melewar (2006) note that a company’s logo, manager’s communique, and CSR engagements are examples of corporate communication to stakeholders. CSR engagements demonstrate the company’s commitment to advancing other significant aspects beyond profits. Thus, the company’s CSR engagements must be communicated through press releases, website narratives, and photographs to ensure stakeholders are aware of this facet of the corporate identity.
A company’s branding campaigns can yield different outcomes. McDonald and de Chernatony (2001) note that a successful brand has four salient features: a symbol that uniquely identifies it, superior market performance, a competitive advantage, and depreciating value over time if not adequately maintained. Corporate communication is a significant factor in determining a corporate brand’s success. In this regard, CSR offers a brand an opportunity to be associated with significant social causes in customers’ minds.
Stakeholder Relations
Firms are entangled in a symbiotic relationship with their stakeholders, particularly employees, investors, and the government. Roper and Fill (2012) note that stakeholder communication is inherently linked to stakeholder relationships and, as such, can build or destroy the firm’s reputation. Moreover, Roper and Fill (2012) argue that frequent and predictable communication with stakeholders enhances trust. Moreover, communications must demonstrate how the organization’s strategies align with stakeholders’ interests.
Crucially, stakeholders have particular interests that the firm must meet. Harrison and Wicks’3) understand stakeholder theory to mean that all stakeholder groups should cooperate to benefit from the firm over time. Fill (2012) points out that numerous social groups can be considered stakeholders for a given firm.
CSR engagements allow firms to meet the expectations of specific stakeholder groups whose interests stretch beyond the economic. For instance, by engaging in environmental initiatives that reduce greenhouse gas emissions, a firm advances the government’s agenda to address global warming. Similarly, donating to charitable causes meets the expectations of investors who want to be associated with a socially conscious entity.
Meeting the expectations of the government and investors through CSR confers certain benefits to the firm and boosts its reputation. Roper and Fill (2012) note that a positive reputation is crucial for a company’s relations with the government, as it reduces friction between the two entities. Moreover, a positive reputation often increases the firm’s market value, making it a more attractive investment opportunity for potential investors. However, Kuhn’s (2008) Communicative Theory of the Firm notes that corporate communication is the primary means by which a firm can convey its intentions to stakeholders. As such, the firm must have proper corporate communication that highlights its CSR engagements to relevant stakeholders.
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