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Why Confidence Matters More Than Reputation For Businesses

Can confidence in a company predict how successful it will be?

Why Confidence Matters More Than Reputation For Businesses
[Photo: Flickr user Jes]

The essential measure of business communications is the extent to which it affects stakeholder behaviors. After all, a company wants customers to purchase its products or services, investors to purchase and hold its stock, governmental leaders and influential members of the public to advocate for its policy positions, and, just as importantly, talented and hardworking employees to work for it.

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The communications industry, namely PR and advertising, has long placed a premium on a company’s reputation and that of its products and services. Indeed, a good reputation has long constituted the universal standard by which a company should strive to measure, enhance, and protect.

The better a company’s reputation, conventional wisdom dictates, the more successful the company. Not so fast.

Breaking With Conventional Wisdom

FTI Consulting recently conducted its 2014 Enterprise Value Study to understand which attributes best predict business stakeholder behaviors.

To do so, we surveyed an array of U.S.-based stakeholders–from employees and business-to-business customers with decision making authority to investors and the most influential swath of the general public–regarding their attitudes about specific companies and their likelihood to engage in specific behavior.

Confidence in a company, it turns out, is a significantly stronger predictor of stakeholder behavior than the strength of its reputation.

On average the study found that companies have a 30% better chance of achieving the desired behaviors if stakeholders are confident than if they say the company has a good reputation.

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The study also found that once achieved, stakeholder confidence affords companies a greater likelihood of achieving desired behaviors like:

  • Recommending goods and services to others
  • Increasing the business relationship with the company
  • Recommending the company as an employer
  • Supporting the company operating in the community
  • Investing in the company

A Good Reputation Is Still Important

It’s clear from the study’s findings that confidence in a company cannot be achieved unless and until it enjoys a good reputation among its key stakeholders.

These are not nuanced semantic distinctions we’re making. Cultivating stakeholder confidence in a company requires it to manifest–and be communicative about–specific behaviors.

Each of the four stakeholder groups we surveyed indicate that strong leadership, being a good employer, belief that a company can execute its strategy, and their agreement that the company’s past decisions were correct ones are prerequisites for confidence.

Equally Practical Are The Benefits Caused By Confidence

The study finds confident stakeholders act as advocates for a company. It also reveals the existence of a ‘moveable middle’ group of stakeholders–those who may be on the fence about a company but can be persuaded to not only move, but move to become passionate advocates for a company. And the key to transitioning a stakeholder from fence sitter to advocate is building confidence.

Given confidence’s surpassing correlation with stakeholder behavior, it stands to reason that the study finds it to be a higher-order behavior than reputation; stakeholder confidence was found to be on average 27% more difficult to achieve than a good reputation.

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Moreover, the data finds that stakeholders view a company’s reputation to be a function of its past actions, whereas confidence is a forward-looking attribute that reflects stakeholders’ belief in the integrity of its future actions.

Of course, confidence in a company, like confidence in the financial markets, transcends communications or any other business discipline. However, since every company needs to influence stakeholder behaviors to be successful, those who emphasize confidence as the foremost standard in their business communications will have a leg up over their competitors.

Robert C. Knott and Brent McGoldrick lead the corporate communications and strategy consulting and research practices in the Americas, respectively, for FTI Consulting.

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