Can you define ‘reputation’?• broad measure of intangible assets or

standalone element?• can you get your definition agreed internally?

Can you define ‘economic contribution’?• cash amount or other KPIs?

Can you validly and reliably measure it?• opinion research• share price• econometrics

Now you can prove the value...

“On average, corporate reputation is now accounting for around 33% of the value of a FTSE100 company.” Falls to 20% among FTSE250 firms.“5% improvement in strength of current reputation could be expected to add close to 2.1% of shareholder value.”

Reputation Dividend, 2012 Dividend Study

Oxford Metrica

“…there is an 80% chance of a [global top 1,000] company losing at least 20% of its value (over and above the market) in any single month, in a given five-year period.”Impact of crisis: Winners – gain 10%, Losers – lose 15% of shareholder value.“It is the first few days following an event that the market makes its judgement…”

Jonathan M Karpoff (Prof of Finance, Washington Univ)

“I define reputation as the present value of cash flows earned when an individual or firm eschews opportunism and performs as promised on explicit and implicit contracts.”

The value of doing ‘the right thing’ comes in improved net cash flow and lower cost of capital.

“Reputational losses occur when a firm’s counterparties – that is, its customers, suppliers, employees, and investors – change the terms by which they are willing to do business with the firm. Counterparties make such changes when they believe that the chance of being harmed by a firm’s opportunistic behaviour increases…by guarding their interests against the possibility of being cheated, [counterparties] offer a firm less attractive terms of trade.”

• YouGov partnered with PRCA to interview 13 leading in-house communication directors about the role and importance of reputation

• Across public/private sector including charities, membership organisations, financial services, technology sectors

• Separately, 33 in-house communication managers/ directors were interviewed quantitatively

Delivering what is expected...

For reputation to be true and pure it has to be authentic

(Membership org.)

We do not have a set definition but we want our company to be trusted and be seen as good performers, match our rhetoric and deliver

(Public service provider)

Reputation…• Without it the business is nothing

• Gives you a licence to operate, it is hard to earn but it pays great dividends

• Gives you a voice and allows you to sit at the political table

• With reputation comes trust and integrity – with a weak reputation you don’t have it

Everything we do is a reputation issue

Base: 33 Caution: results from bases <50 should be treated as directional onlyQ: Which of the following best represents the approach taken to corporate reputation by your Board of Directors?

• Most agree it is their remit to plan both strategic and tactical reputation management

• Reputation is increasingly higher on the agenda of the board and management team than in the past – even more so in the future

• Communications teams are trusted to manage reputation more proactively, particularly as the landscape is increasingly complex due to social media

It has changed over my career to boards trusting the PR person, working in house more. When a crisis happens they tend to want to take control but when they see it is a competent team they are more confident to let them deal with it (Charity)

Reputation is top of mind as it impacts the bottom line. I have monthly meetings with the chief exec. On reputation (Professional service)

We have total confidence from the board in how the communications team manages reputation

• Social media has impacted upon the speed that reputation issues can spread, the reach and also the level of interaction with customers and stakeholders

• This brings both fears and opportunities – managing it well can reap reputation rewards, but in a crisis situation news travels faster than ever

• There was no consistent way of managing social media activity, but an overall tendency to hold in-house due to required speed of response and intimate knowledge of the business – keeping reputation close

• This has impacted on the relationship with external agencies, as more tasks are managed internally

• Some are concerned/cautious around social media and steer clear from communicating about company values and CSR activities as this is “too risky”

It can be hard to combat and manage…it can be incredibly dangerous. To manage it well you need to invest a lot into it and have dedicated staff.

Reputation

Influence

Performance

People

As a charity people choose to support us due to our reputation. If our reputation is damaged it has a massive financial impact on our operation. (Charity)

We have examples of where a commissioner has told us that they have chosen to work with us because of our reputation and you have done a good job here, here and here. (Public Services)

Reputation is very important for people to listen, it brings credibility – when we are lobbying people are not going to listen to us if we don’t have a good reputation. (Membership Organisation)

Attract and maintain the best staff. Staff want to feel proud of their organisation and thrive in organisations with a healthy reputation.

24% believe there to be an extremely strong link

48% believe there to be a reasonably strong link

6% believe there to be a reasonably weak link

9% believe there to be no link at all

12% don’t know

24%

48%

6%

9%

12%

Base: 33 Caution: results from bases <50 should be treated as directional onlyQ: How much do you believe your Board of Directors think corporate reputation is linked to the overall financial performance of your organisation?

Index is an average of 6 measures: • Impression• Quality• Value• Satisfaction• Advocacy • Corporate Reputation

Index is a longer-term measure – it’s great for looking at whether a high impact event (which causes short-term changes in Buzz) affects a brand’s equity in the longer term

What’s Index?

*4 week moving average

13/01 – Horsemeat scandal hit the press

Tesco experienced the biggest hit amongst the retailers in reputation during the crisis – yet to fully recover it’s position by the end of August 2013.

• Majority of organisations have some tools for measuring one or more aspects of reputation

– Sentiment analysis – Staff barometer – Customer satisfaction – Stakeholder surveys – Qualitative research

• BUT most feel that it is a challenge to prove the impact of reputation on the bottom line. Most examples are ‘anecdotal’ rather than using data to support

Data is an indicative, but it cannot be prescriptive – you cannot make conclusions from it, you can use the data to understand perceptions of the organisation, to inform strategy, understand priorities

Expertise Support

You need experts to hold up the mirror and help us understand and improve

External agencies are excellent in the time of reputational crisis. They can ground you and understand how it will play out. They can hold your hand when the internal team is in a hail storm

External agencies are at a disadvantage

Trust is something you earn, so if they don’t know the agency that well it is difficult to have that trust. They want someone in house on top of this.

The industry itself has a questionable reputation and is bad at communicating about itself

We are precious about our reputation – they (external agencies) don’t have the same passion or investment in the business

They won’t know as much as an insider, they are not as close to the decision making process

Reputation has enormous value: it is a board level concern and 72% say the board believes it has a strong link to financial performance.Metrics must be in place to value your effort and prove the industry’s worth.

A hard economic value will always be difficult to isolate but ‘loss’ is a good place to start.Non-economic KPIs may be sufficient if have management buy-in (e.g. Barcelona Principles). Think about Performance, People & Influence. Aim high.

Agencies can have a role in this process, helping clients to set measureable, economic objectives and then quantify them.