Reputation management hurdles

Why did I suggest in my last post that reputation management may have peaked? Not because it fails to deliver corporate value; companies with a disciplined and sustained approach to managing reputation typically enjoy higher share prices, revenues and profitability over time.

But the inconvenient truth is that reputation management initiatives are extremely difficult to start and sustain. They require years of unflinching CEO sponsorship. They are built upon ongoing investment in reputation research. Companies must organize and work in a more joined-up manner to manage reputation. And often, companies must make big changes in how they operate and reward their people to achieve reputation goals. These are high hurdles, and most companies trip up somewhere along the line. Consider these challenges:

  • CEO support – Unless a company has a severe reputation problem, it’s difficult to persuade the CEO to initially champion a reputation management initiative. It’s even harder to hold the CEO’s interest and visible support for a reputation management initiative over several years, the time it takes most companies to see material reputation improvements. In the interim, CEOs change, markets shift and strategic priorities evolve.
  • Research – Reputation research is indispensable because it provides insight into key stakeholder perceptions and reputation drivers, while establishing essential benchmarks on which progress can be measured and rewarded. Done right, this research isn’t cheap, though. Large multinational companies can expect to spend US$500,000 or more annually for quantitative research of the general public in 10 of their top countries. Research involving other stakeholder groups – employees, government officials, etc. – paints a fuller picture but adds to the research tab. Given brand tracking and other research they may already be conducting, some companies eventually wonder whether the benefits of reputation research match the costs. Quite a few companies that get over the first annual research hurdle pull back in the third or fourth year.
  • Joined-up approach – With research findings in hand, companies need to develop and implement plans to repair, protect and build reputation. This is best handled by a cross-functional global team with representatives from corporate departments that are in the best position to shape stakeholder experiences and perceptions. Enter delicate office politics. For example, who should be on the team – department heads or their lieutenants? If the former, can they accommodate reputation team duties in the short-term while still doing their day jobs? If the latter, will the initiative be seen internally as a lower priority? Moreover, who should lead the team? For example, if the CMO is put in charge, then her/his peers from other functions may see this as the CMO’s baby to raise and effectively check out of the process. And finally, who serves as referee in cross-functional disputes about reputation plans and budgets? Taking a more joined-up approach is another tall hurdle for companies.
  • Tough problems – Most corporate reputation issues are the result of serious cultural, business and/or operating problems. Product quality issues; customer service shortcomings; R&D and supply chain interruptions; ethical and legal problems; management miscues; governance breakdowns and financial underperformance are just a few notable examples. Often, the solutions to these issues involve hard choices that boards, CEOs and senior leadership teams would rather defer, especially if immediate action will hurt profits in the short-term. Even when the solutions are obvious, it takes courage, leadership and continuous effort to change problems that are damaging corporate reputation. How many companies really have the willpower and staying power to deal with their toughest issues?
  • Reputation rewards – I once thought “what gets measured gets done.” Now I know that “what gets rewarded gets done.” To improve reputation, it’s essential for companies to reward management not only for hitting revenue, profit and market share targets but also for achieving measurable reputation goals. This, too, takes time; most companies won’t change their performance management criteria in a year or two. Assuming a company even gets this far down the track, reputation rewards probably won’t kick in until the third year at the soonest.

Corporate reputation management is much easier said than done. It’s a straightforward concept to understand and embrace because it is so damn sensible. But for the real-world reasons noted above, corporate reputation management initiatives are extremely difficult to initiate and sustain. Most companies stumble at the first few hurdles, if they ever get out of the starting blocks.

Again, I hope I’m wrong. And if I’m right, I hope this will change. But at this point, implementation is the Achilles heel of corporate reputation management.

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