Does Corporate Reputation Matter?

corporate reputation

Last week, Harris Interactive released their annual study of the most visible and reputable companies in the country. Based on a poll of almost 30,000 people, companies were ranked on a "reputation quotient," calculated by a variety of public perceptions, including vision and leadership, financial performance, social responsibility, and perceptions of work place environments. I spoke with Robert Fronk, SVP of reputation management at Harris Interactive, to find out the impact of corporate reputation, and whether or not it even matters.

Fast Company: First off, could you briefly describe how the study was conducted?
Robert Fronk: We asked the general public to identify over the past 12 months which companies were most visible when they think about corporate image. We don't ask them anything about reputation first—just which are most visible—Harris then adds in another 60-75 companies. We then ask the general public overall questions about corporate America, and then we ask a smaller subset to rate their specific reputation.

SC Johnson is a very old company, yet they have never been on the list. Why did they shoot up to #5 suddenly this year?
Quite frankly, they have been running over the past 18 months a corporate image campaign. In the past, a lot of their advertising had always focused on products. Someone maybe with great foresight at SC Johnson may have realized that notion that corporate perceptions rather than product perceptions were becoming more and more valuable. They have been running a values and image campaign, and there has been some effectiveness to that campaign.

We released our annual list of the Most Innovative Companies recently. Some of them show up on Harris's list—what is working for companies like Google in terms of reputation?
For a company like Google, there are three dimensions that are really driving their reputation. Those are vision and leadership, financial performance, and perceptions of work place. Google is #1 in work place in environment, and #2 in the other categories I mentioned.

Apple is ranked #12, but I was surprised it wasn't closer to the top, say, right next to Google. Why is that?
This is actually as high as Apple has been. They've been climbing from a relatively moderate reputation position, but Apple is a perfect example of brand and reputation. No question that Apple is the uber-brand, but over the past few years, it's less a product focus, and more things like social responsibility, consistent financial performance, and vision and leadership that create corporate image—and we break this down into a culture of leadership. Interestingly, Apple has done poorly in categories you wouldn't expect, because in vision and leadership there was often this sense that it all resides with Steve Jobs. The company wasn't sharing the equity that Steve Jobs had himself, being a visionary leader. This year we saw some of that equity begin to transfer.

For Microsoft, do you think they're ranked so high (#7) because the public's perception of their social responsibility mixes with the Gates Foundation?
There's no doubt. We saw that two years ago when Bill Gates left the company and went full-time at the foundation, and when Warren Buffet announced he would transfer his wealth to the foundation (Berkshire Hathaway is #1). So we know there's a halo-effect. But Microsoft is thought of highly because social responsibility, believe it or not, also includes how you treat your employees, and Microsoft does extremely well there. Social responsibility is not just things like sustainability.

For companies at the bottom like Goldman Sachs (#56) and JP Morgan (#53), who actually fared the financial crisis relatively well, isn't it odd that they are almost tied with Citigroup (#57), which performed terribly? Does public perception actually matter in this case?
For the behaviors of "want" that impact their business—like willingness to purchase products—there is nearly a direct correlation between those behaviors and reputation. Again, this study measures only the general public, but reputation has just as much impact on stakeholder groups that companies have to manage. We were actually a little bit surprised to see JP Morgan lumped in there, because we've seen that more informed audiences distinguish the company from Bank of America and Citibank. Here they were probably getting the negative perceptions on the whole industry. In our general population study, we were also able to segment out the 15% to 18% that would be considered opinion leaders or influentials, and JP Morgan actually has a better reputation with that segment, and Citigroup has actually a much lower perception.

But even for a shareholder, isn't reputation a lagging indicator? Wachovia's reputation in 2008 was very high, but that couldn't indicate how they would perform down the road.
That's where the opinion leaders come in. They are more of a forward indicator. Ford (#37), for example, which has struggled with poor reputation overall in the past years, we actually saw two years ago a good-size uptick in how opinion leaders were looking at them, so this year the general public caught up with that more informed opinion.

Are there any big surprises on the list?
The company that surprised us for being in the bottom was Sprint (#47). There's no scandal associated with Sprint; their business is not in any fundamentally poor condition; we've even evaluated their media coverage. There's usually one or two surprises on the list like that.

How do companies move up these rankings? For HP (#25), which has been in the middle for some time, how do they improve their reputation? They just released their first corporate ad-campaign in five years—is this the way to move up? Or should companies focus more on visible products, like Apple's iPad?
The fact that they are #25 is meaningless because we've asked about corporate visibility, which stretches the two ends. We say that a reputation quota of 75 or above is considered very good to excellent. HP has been right in that range, so I would argue that they're doing fine—moving up on the list by focusing on the ratings and perceptions, rather than rankings. We did learn though for corporate America as a whole this year, the three main drivers of reputation were in the categories of accountability, vision, and leadership.

Is it easier though for tech companies to be higher on the list though? The tech industry has the highest positive ratings (72%) of any other industry in the country, rising 5% this year and beating the closet industry (travel and tourism) by nearly 20%. They get to put out really cool products—I mean, won't that make it easier to gain a better reputation?
Each industry has a built in advantage or disadvantage. If you're a consumer goods company that has products that are purchased and enjoyed on a frequent basis, that is a built-in equity. If you're a tech company, you indeed have that coolness and innovation advantage. But that's why we try to dimension-alize reputation because that might be an advantage you have, but if it's an advantage shared by every company in your industry, then it's not differentiating or discriminating.

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