Why company reputation matters and why it should be measured

Good management needs regular monitoring and that calls for ‘measuring’ the reputation of companies.

Why company reputation matters and why it should be measured

Tuesday April 27, 2021,

4 min Read

What’s the essence of corporate reputation? For companies, a favourable brand reputation signifies winning customers’ trust, employees’ loyalty, suppliers’ commitment, investors’ expectations, and communities’ credence. With such responsibilities come risks. And with the risk landscape changing in the corporate world, reputation risk management is finding mention in boardroom discussions.

Great business empires built over the years come crashing down if there’s one reputational mishap. Especially in this 24x7, ‘always on’ world, the negative impact multiplies rapidly.

Thus, it’s imperative to monitor reputational risk factors and reputation scores periodically. But how do we monitor something we can’t measure? There are so many tangibles and intangibles involved in reputation management. What should we prioritise?

To answer these questions, Eminence did an extensive, exploratory study followed by external validation through a survey. It involved 100-plus CEOs and CXOs, eminent personalities from academic streams, acclaimed media professionals, and renowned leadership and business coaches.

Significantly, brand perception and consumer experiences, responsible business practices, workplace character, and financial performance ranked as the top factors that impact reputation.

Now let’s dive deep to understand why these factors matter.

There’s an umbilical cord of faith that binds consumers with companies that care deeply about how their brand is perceived. Companies steadfastly ensure that their customers remain delighted and loyal, not only while purchasing the product or service but all through the journey of association.

Thus, companies who go that extra mile to make certain that they not only sell best-in-class products or services, but also offer memorable customer experiences, enjoy lasting relationships, and trust. This holds true for both a company’s long-term and short-term responses. It all culminates into organisations not only having delighted customers but enjoying meaningful business outcomes too.

2020 presented many such examples. Ferns & Petals, one of the largest flower retailers and gifting companies, tops my recall. From selling bouquets, cakes, and chocolates, FNP revamped its business model during the pandemic to become a complete gifting and services retailer, adding digital greetings and online funeral services to its suite of offerings.

Contrast Ferns & Petals’ moving story to the Theranos scandal. The company had been betraying consumers’ trust for over 10 years with false product promises. It claimed to perform scores of tests ranging from cholesterol levels to thyroid using a small blood sample, something it was never equipped to deliver. When the truth came out, the brand just collapsed in a jiffy. The entire set of accomplished members of investors, board, and regulators missed seeing the baselessness of their claims. 

This brings responsible business practices into sharp focus. The dark episode of Ranbaxy, a pharmaceutical major that fabricated test results, thereby endangering the lives of millions of patients, is a case in point. Eventually, it took an ex-employee to expose the company's colossal fraud. All efforts of remediation couldn't salvage Ranbaxy's image built over years of toil, development, and application.

The demise of Ranbaxy is not only an outcome of fraudulent practices, or the betrayal of customers' trust, but also establishes the fact that the workplace character must be valued as well. A company is but the people joining hands to deliver a promised business outcome.

If the gold standard for culture and values, work-life balance, and career opportunities is not maintained, the organisation's ability to live up to its promise gets compromised.

The adage goes: If we can create a culture and win our people, then the people will work towards winning customers by executing the company's strategies. Thus, establishing that workplace character does contribute substantially to its reputation.

Finally, the financial performance. It’s a given that organisations exist to do business, which is their non-negotiable core competency. Stakeholders will be wary of engaging with companies that deliver sub-optimal financial performance consistently. There are numerous cases of companies getting lost in oblivion as they didn't demonstrate financial prudence. Merely ensuring that a company is growing profitably is not sufficient; a robust balance sheet is equally critical.

To summarise, reputation is much like a car that thrives on a collective force. Each part of the car should function at optimum efficiency for it to move smoothly. In the same vein, companies can build an immaculate reputation only when each aspect of their functionality is managed responsibly. 

Edited by Kanishk Singh

(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)