The 18 Immutable Laws of Corporate Reputation: Creating, Protecting, and Repairing Your Most Valuable Asset

The 18 Immutable Laws of Corporate Reputation Creating, Protecting, and Repairing Your Most Valuable Asset

Author: Ronald J. Alsop Publisher: Wall Street Journal Books Date of Publication: 2004 ISBN: 074323670X Number of Pages: 320 pages

About the Author

Ronald J. Alsop Ronald J. Alsop is a news editor and Senior Writer of The Wall Street Journal. He is the author the new book, The 18 Immutable Laws of Corporate Reputation: Creating, Protecting, and Repairing Your Most Valuable Asset. He is also the editor of the annual Wall Street Journal Guide to the Top Business Schools and writes the MBA Track column on CollegeJournal.com as well as articles about business education, corporate reputation and marketing for the Journal. He previously served as the Journal's marketing columnist and as editor of its Marketplace page, and he has written several other books, including The Wall Street Journal on Marketing and The Wall Street Journal Almanac. A graduate of the Indiana University School of Journalism, he lives with his wife and son in Summit, New Jersey.

The Big Idea Everything an individual or company does or produces contributes to its reputation. Reputation is an intangible asset, but a very important one. In some ways it is even better than having money in the bank, but not as easily quantified. A good reputation is its own advertising and quality seal. It can engender loyalty in customers that can cross several generations and time zones. A good reputation can bring in more customers in the good times, and be a protective buffer in the bad times. The author has delineated what he calls the, “18 Immutable Laws of Corporate Reputation.” This book holistically deals with the topic of reputation management in three parts: establishing a good reputation, keeping that good reputation and repairing a damaged reputation

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The 18 Immutable Laws of Corporate Reputation by Ronald J. Alsop

Part One: Establishing A Good Reputation Law One: Maximize Your Most Powerful Asset Reputation 101 In the course of an individual's or company's or organization's life, each activity or action or product perceived by the public is counted for or against on the reputation scorecard. It takes a lifetime to build a good reputation and an instant to ruin it. Reputation is an intangible asset yet it is arguably the most valuable asset to manage and maximize. A good reputation can attract and keep customers, investors, and employees. Because of this, a good reputation is like a reservoir of good will (towards the company) to help it weather bear markets, scandals, or natural crises. Conversely, a lost or damaged name can scar a company and provoke boycotts or drive off new capital. Fostering a Reputation-Conscious Culture Because factors affecting reputation are so pervasive, it is necessary to have a concerted company effort to nurture and guard it. Reputation management can be handled by single managers or by whole departments. Their goal is to indoctrinate employees and, in some cases, suppliers, on the company's image, goals, philosophy etc. The Payoffs From A Positive Reputation Though reputation is an intangible asset some of its effects are not: · · · · ·

A study of 216 companies related higher stock values for companies with reputations for strong social responsibility. A study of 10 portfolios attributed higher prices to investor confidence that these were less risky. Customers will buy products known for good service and/or good quality (In the case of Microsoft, their reputation helped them compete in new markets like game consoles). Boosts employee morale and performance. Attracts top talent (as managers, new graduates, etc.).

Law Two: Know Thyself - Manage Your Reputation Keep score Before you can manage your reputation you must first measure it and keep score. Measuring reputation is easily done through standard public opinion or market studies; but as each corporation has different stakeholders (target markets, shareholders, etc.) it is necessary to customize. Less than half of corporations have custom research programs. There are no clear methodologies so it is important to identify the stakeholders (from local to global) and the relevant attributes or quantities to be measured: the same company may rank differently in different surveys/studies.

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The 18 Immutable Laws of Corporate Reputation by Ronald J. Alsop

Three popular examples of reputation surveys and what they measure: The Reputation Quotient by Harris Interactive · o Measures overall American sentiment not limited to opinions of corporate executives and investment analysis. o Identifies subgroups like investors, employees, and customers. o Rates emotional appeal, products, services, financial performance, social responsibility, workplace environment, and leadership. ·

Fortune (Magazine)'s Most Admired Companies o Based on opinions of 10,000 executives, directors, and securities analysts surveyed by the Hay Group, a HR consulting firm. o Identifies “Top Ten” per industry. o Rates social responsibility, innovation, investment value, corporate asset management, employees, financial well being, quality of products and services, and quality of management.

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CoreBrand o Focused on opinions of senior executives of large corporations o Rates familiarity and how favorable a company is, its quality of management, and investment potential. o Innovated a “Brand Equity Methodology” that quantifies corporate brand and calculates it as part of the company's market capitalization.

New players in reputation measurement · Rating Research o Rates a company's reputation based on its ability to weather controversies, scandals, etc. o Examines two dozen attributes plus specifics per industry. Corporate Opinion, Reputation and Equity (CORE) Index by NFO World Group. o Examines twenty factors like customer satisfaction, fair and ethical business practices, quality of products and services, etc. Though less structured and regular than the aforementioned; the media is also a powerful influencer and gauge of reputation.

Law Three: Learn to Play to Many Audiences The Balancing Act No company is an island. Everyone has opinion on everything. You can never please everybody. Stakeholders are everybody involved with the corporation. The group is as diverse as: customers, employees, investors, market analysts, shareholders, government, special interest groups, local communities, retirees, etc. Know who are important and play to them. It is helpful to think of stakeholders in terms of a hierarchy or, graphically, as a pyramid with the most influential at the peak and others following in descending order. However, it is important to keep in mind

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The 18 Immutable Laws of Corporate Reputation by Ronald J. Alsop

that stakeholder influence is a dynamic relationship and the same model or model is not necessarily applicable to other markets/locales. Getting To Know You Some companies, like Proctor & Gamble, General Electric, or DuPont, manufacture products sold under different names or different groups and are not easily identified with their parent company. This may weaken the product's reputation and affect sales or acceptance. This becomes a problem especially with products sold internationally. In fact, many companies are unaware they have weak reputations with foreign stakeholders.

Law Four: Live Your Values and Ethics Creating A Culture Of Morality Studies of America's largest companies show that a strong reputation for moral and ethical conduct performed better financially in terms of their returns on investment and equity, and their sales and profit growth. One study cites that on average the excess value beyond shareholders' investments comes up to $10.6 billion more than companies without a clear code of ethics and supporting behavior. Some practices for indoctrinating employees are: · Forming an ethics program with an ethics officer. · Annual refresher courses on ethics. · Posted values statements and ethics codes at the workplace. · Ethics and values indicators integrated into performance appraisals and compensation packages. Three R's for building your culture of morality: · Reaffirm · Reinforce · Revise As a final note, ethics can be a very boring subject. Some companies like General Electric and Altria Group (formerly Philip Morris) produce programs and entertaining skits to keep employees engaged.

Law Five: Be a Model Citizen Heart and soul At Timberland, social responsibility is an integral part of the company's identity and is a significant component of its reputation. Aside from activities like monitoring their contractor's overseas facilities, improving energy efficiency at facilities, and minimizing chemical wastes; they encourage volunteering for community service by considering it as paid leave.

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The 18 Immutable Laws of Corporate Reputation by Ronald J. Alsop

Own The Cause Other companies build their reputation for social responsibility by heavily supporting their “favorite” causes, to the point that their company becomes synonymous with it. An example is the cosmetics company, Avon, and their support of breast cancer research. Actions Speak Louder Than Money Get involved. At Ground Zero in the aftermath of the September 11, 2001 terrorist attacks; McDonald's supplied burgers and chicken nuggets round the clock to rescue and medical workers. The company's action at a time of crisis carried more weight than just writing out a check. The Perils Of Promoting Philanthropy Many people tend to be cynical about corporate philanthropy. An altruistic gesture may be seen as just another fancy marketing or publicity ploy. On the other hand, if there is little or no awareness of the brand and the company's good deeds; stakeholders and the public may see the corporation as apathetic. Today's consumers are attracted to companies that promote and support environmental or social causes.

Law Six: Convey a Compelling Corporate Vision Vision And Leadership What is this corporation trying to do? That is the question answered by the Corporate Vision and the guiding principle of its leaders and personified by the CEO. The vision and the leaders motivate the stakeholders, who in turn have enormous impact on reputation. Practical and Poetic The corporate vision cannot be something as mundane as “We strive to maximize profits.” It should be ambitious, challenging, and yet emotional. As a corporation grows it also evolves. Sometimes, the corporation loses sight of its mission and its reputation weakens; but change is not essentially bad. Careful consideration must be made if it is necessary to: return to the original vision OR refocus the vision.

Law Seven: Create Emotional Appeal Igniting The Emotional Spark Emotional appeal is difficult to quantify or define; but it is what engenders passionate customer loyalty and strengthens reputations. It is mostly shaped by the sum of people's long-term interactions with the company's employees, products, services, and even advertisements. Establishing emotional appeal is more than just satisfying customers. It is also about

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The 18 Immutable Laws of Corporate Reputation by Ronald J. Alsop

getting the customer to identify happiness or contentment with the product. In the fast paced electronic world it is also helped by a personal touch or special treatment.

Part Two: Keeping That Good Reputation Law Eight: Recognize Your Shortcomings Facing Your Follies Examine your reputation and assess if your current business practices still build that reputation. Only by first recognizing discrepancies and problems can you take steps to fix them. The sooner you come clean, the sooner you can fix them and do “damage control” before it reaches a crisis situation. Sometimes lapses in communication or alienation from customers are the causes of problems. For more serious faults, a public apology is almost essential to strengthening your reputation.

Law Nine: Stay Vigilant Damages to reputation can happen suddenly and over time. Managers must be vigilant and act quickly on either instance because both can be equally damaging and have long-term effects. Someone should always be watching… and thinking. In the age of the Internet even local news can be known globally in minutes. But not all news is true news. A sudden or instinctive and unconsidered response (like an inadvertent admission of guilt with an apology) is just as potentially damaging as doing nothing in the hope a situation will abate.

Law Ten: Make Your Employees Your Reputation Champions Corporate Ambassadors Employees are the first direct contact between a corporation and its customers. Naturally, employee behavior has a large impact on the company's reputation both on and off the job, from how they service the customer to how they talk about the corporation with friends, relatives, etc. Culture is important to shaping employee behavior but more so is frank, frequent, and sincere dialogue with upper management. It is up to managers to indoctrinate, encourage, and empower the employees about the corporation. The employee's attitude is an intangible that customers will recognize and act on. Corporate ambassadors can work both ways. Just as an enthusiastic worker is a reputation builder, so is a disgruntled employee a reputation wrecker.

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The 18 Immutable Laws of Corporate Reputation by Ronald J. Alsop

Law Eleven: Control the Internet Before It Controls You Caution: Entering Hostile Territory The World Wide Web is an extraordinary tool and can be a boon or bane to your reputation. The World Wide Web has no regulatory body to separate the truth from the lies. It is estimated over 730 million people are able to interact with each other by 2006 it could be over 1 billion. Surprisingly, a survey by Hill & Knowlton and Chief Executive Magazine found 16% of companies monitor the Internet closely, 39% check it periodically, and 43% don't bother. Plan Your Internet Strategy There is no guaranteed strategy for dealing with the Internet based attacks on reputation. Because of the large volume of information from the Internet some companies resort to hiring independent groups to act as watchdogs for their company or products. Actual response to Internet attacks varies; but some response is necessary. Not all written on the Internet about your corporation is bad. Among the disgruntled and the malicious, there are also the loyal enthusiasts who trumpet the virtues of the product and company: free advertising and worth many times more than company sponsored ads. The unregulated Internet also provides a venue for corporations to put positive spin on many issues: for instance, Nike, has videos of its factories in Asia and talks about their social programs for their workers like schooling, etc.

Law Twelve: Speak with a Single Voice Consistency and Clarity Corporations allocate major funding towards building their brand. As a corporation grows and diversifies its products, there is a tendency to stray from the corporate brand. The result of this is weakening of the corporate brand and weakening of their reputation. A startling example comes from IBM, which in 1993 had more than 800 different logos! Consistency does not mean that the corporate brand never changes, sometimes a fresh look is necessary to adapt to changing times or refocusing of its vision. It is important to distinguish between following short-lived trends and evolving long-term goals. Customers identify with a strong corporate brand. When customers enter Starbucks in a new region, they expect the same experience as the Starbucks back home. The same is true for products and services. The corporate brand becomes an assurance of quality and is backed by their reputation.

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The 18 Immutable Laws of Corporate Reputation by Ronald J. Alsop

Law Thirteen: Beware the Dangers of Reputation Rub-Off Guilt By Association There is a saying that goes, “Birds of the same feather flock together.” When two or more corporations enter into a partnership or work together; their reputations may be attributed to each other. Sometimes this is desirable and is intentional. It is important to keep in mind the intention doesn't necessarily translate to the desired effect. Ideally the new partnership performs better than the sum of its parts and each one's reputation enhances the other. Sometimes unforeseen actions or events by one or another party drags everyone down. Just like marriage, a partnership is difficult to dissolve and the after effects of the union may extend long after everyone has gone their separate ways. History is replete with examples of both the successful and failed.

Part Three: Repairing A Damaged Reputation Law Fourteen: Manage Crises Reputation Crises are inevitable reputation damage isn't No one and no corporation is immune from crises. Crises can be in due to corporate transgressions, natural calamities, malicious intent, a private remark taken out of context, etc. Crises Can Be Managed, Not Controlled The most critical period to reputation damage control happens in the first few days. It is the tendency of companies to go quiet. This is a mistake because critics will quickly use the time to give their worst-case scenario and put out a negative spin. The corporation should quickly gather all the facts then make a public statement. The first statements must be swift and sure. A mistake at this time will taint all other succeeding statements. Customers and/or the public need to be assured the right and responsible action is being taken. Reassure also your employees because they may be demoralized and you will need their help.

Law Fifteen: Fix It Right The First Time Three Strikes, You're Out! There are many ways a company can try to fix its reputation. Some companies may try put on a fresh image by reinventing themselves with a refocused vision or business restructuring. Other companies will try reworking an old formula. Others still will be working against their successful, dated reputation that actually holds them back from making a more contemporary image.

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The 18 Immutable Laws of Corporate Reputation by Ronald J. Alsop

But it is not enough to want the change. The leader is key. The leader has to be dynamic and focused to guide the company along the new way and against old habits or instincts. Repairing a reputation is difficult enough at best. Every effort must be taken to plan and get it right the first time. Empty promises and unrealized reforms will only further damage the company's credibility and reputation.

Law Sixteen: Never Underestimate the Public’s Cynicism A Cynical New Century People have become more wary of companies. Claims and statements are normally met with skepticism. Debacles like Enron have worsened the loss of confidence. Ingrained cynicism makes it very difficult to repair a negative reputation. This doesn't mean to say that companies should stop trying to change people's attitude. Companies won't be able to convert everybody; but maybe they can lessen the animosity. A Seat At The Table Better communications is key to improving relationships. One company's standard “no comment” response affirmed the public's belief of their guilt. A better relationship could mean winning concessions for the company's interests with favorable legislature or more community support.

Law Seventeen: Remember - Being Defensive Is Offensive The Straight Story People appreciate forthrightness and contrition. Being defensive is more likely to offend them. The public needs to hear an apology and needs to know what is being done to end the crisis. Often the best way to diffuse a crisis is with a timely and sincere apology. Take the Offensive There is a saying that goes, “The best defense is a good offense.” The saying is also applicable to reputation repair. The alert company who predicts a coming crisis can move first and put a favorable spin on it. PepsiCo's unhealthy snacks and sodas are termed, “fun, indulgence food.”

Law Eighteen: If All Else Fails, Change Your Name It's All In The Name Sometimes the best way to get rid of a bad reputation is to build a new one with a new name. But name changes shouldn't be entered into lightly. The large expense

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The 18 Immutable Laws of Corporate Reputation by Ronald J. Alsop

aside, a name change is confusing and causes loss of brand equity. You could lose all the good, and you're not guaranteed to be free of the bad. At the very least, a new name opens the possibility of people willing to hear a new message. The Name Game Is Not An Amateur Sport Choosing a new name should be a carefully considered decision. You will need professional brand strategists and communications experts: PR agencies, lawyers proficient in trademark law, linguists, copywriters, graphic designers, and corporate identity specialists. Finally, be prepared for a long evaluation process and an expensive name launch. Andersen Consulting worked through 5,000 suggestions before they settled on Accenture. They then spent approximately $175 million in advertising to launch the new identity.

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