Q&A with Robert Luttrell on corporate reputation

1. What are the secrets to a good corporate reputation?
Your corporate reputation is the result of what you do, how you do it, and how you communicate. It is the sum of the perceptions of all stakeholder groups and involves striking a balance between competing demands so as to create a virtuous circle. The companies that have got it right have a positive ethos instilled by strong leadership, provide consumers with a product or service that they really value, treat their employees and others with whom they deal well, and reward their investors.

2. Why do so many companies seem to come unstuck?
Many companies have an unbalanced reputation as a result of focusing on one group of stakeholders to the detriment of others. This is a recipe for resentment and conflict. Banks, utilities and telecommunications have a difficult job because they provide essential services and a great number of people have direct experience of dealing with them, often in stressful situations. Companies that have dominant market positions or exert undue influence can also appear exploitative. Telstra’s stoushes with the Australian Government under its former CEO made regular headlines and made it come across as belligerent and overbearing. It will be interesting to see how this changes with a more conciliatory approach signalled by the new CEO.

3. Who should organisations compare themselves against?
Most will benchmark against their immediate domestic competitors. However, this may lead to a narrow focus. Moreover, It is not always easy to compare like with like. For instance, a competitor that is publicly listed may be more closely scrutinized especially in the business pages than a private company or subsidiary of a multinational. From a shareholder perspective, it can be useful to consider a broader universe, eg companies with a similar market capitalization or income yield. Companies that aspire to world’s best practice should broaden their horizons and look overseas.

4. What do you think of the model developed by Charles Formbrun at the Reputation Institute?
The model identifies six dimensions – emotional appeal, products & services, financial performance, social responsibility, workplace environment, and vision & leadership. Clearly some measures will be more relevant than others to particular companies and in particular markets. There are also some potential areas of overlap. For instance, a company like Apple would score well on emotional appeal based on its products (although it is sometimes criticised for service). Lend Lease was a pioneer in social responsibility based on its workplace environment, but in recent years has suffered in terms of financial performance. It is probably best for companies to develop their own frameworks tailored to their specific needs and circumstances.

5. How important is awareness?
There is an established link between familiarity and favourability. So, all things being equal, a company that is well-known is more likely to be well-regarded than a company that is an unknown quantity.

6. Does this mean that ‘all publicity is good publicity’?
Not at all. A company that has been under the media spotlight and found wanting (eg James Hardie), may take many years to recover, as people make a judgment and that becomes an entrenched view.

7. Do companies with well-known brands have an advantage?
In the case of monolithic brands, if we have a positive perception of the product brand, eg BMW, we may well have a positive perception of BMW, the company. By contrast, branded companies like Proctor & Gamble deliberately separate the corporate brand from their portfolio of different product brands.

8. How important are macro-factors like industry sector and country of origin?
These can be very important as they help frame perceptions and expectations. Tobacco companies and arms suppliers are likely to be less favourably regarded than companies in the healthcare, food and beverages and FMCG sectors. Even if we have no experience of a particular company, we may well have a view based on our perceptions of others in the sector. Country of origin can reinforce an industry sector (eg Swiss watches, Turkish carpets) or detract from it (eg Turkish watches, Swiss carpets).

9. How important is the personal reputation of the CEO?
Much depends upon the role of the CEO. If they founded the company, there may be a very strong link, eg Sir Richard Branson and Virgin. However, most CEOs are stewards and increasingly have a relatively short tenure. It generally helps if they have a positive personal reputation, but to be sustainable the corporate reputation must be built on sturdier foundations than a single person. That said, strong leadership is crucial to the ethos and direction of a company.

10. What effect will the global economic crisis have on companies’ reputations?
In the short term companies may face challenges in implementing unpopular measures like downsizing. How do they do it will be remembered as much as what they did. In the longer term those that act smartly and nimbly will enhance their reputations. As well as risks, crises also present opportunities.

11. What advice do you give to companies looking to enhance their reputation?
Identify how you are viewed by your stakeholders, understand your strengths and weaknesses, and develop a plan of action to close the gap between where you are and where you would like to be. Balance the interests of your stakeholders and strive to develop a reputation that is sustainable. Recognise that reputations have to be earned, not conjured out of thin air. Enlist the support of the senior management team to ensure that all aspects of the organisation are aligned.

12. What can smaller businesses do to compete with larger ones with greater resources?
Be single minded and focused. Smaller businesses can be simpler to understand and more agile than larger more complex organizations so they should use their size as an advantage.