Stakeholders, more often than not, rely on the corporate reputation of a company when they make investment, career, product and other decisions. Reputation is a value signal in the case of incomplete information, says reputation expert Dr Marietjie Theron-Wepener.
She adds: “The reputation of organisations is built more on emotional factors such as trust, pride, admiration, liking and a good feeling than on rational factors such as corporate performance or quality of products or services.”
This is one of the foremost conclusions that Dr Theron-Wepener came to in her research for her doctorate at the University of Stellenbosch Business School (USB). “Over the last decades, the business world has been characterised by financial disruption, unethical and fraudulent practices, negative publicity and cracks in the foundations of capitalism, to name a few. People have lost their trust in organisations and a climate of anti-business activism, scepticism, pessimism, blame and cynicism has emerged.”
In her research on corporate reputation, Dr Theron-Wepener comments that the reputation of organisations and governments is under pressure, a situation that is fuelled by the mainstream media, social media and the behaviour of NGOs and pressure groups.
“To add to this pressure, clients (customers) are increasingly interested in the way large companies behave and call for transparency, accountability and social responsiveness. Ethics, values and stakeholder rights are buzzwords in boardrooms and business schools as clients watch a company’s behaviour before they buy products and services from it. Previous research showed that 61% of buying decisions is influenced by how companies are perceived and 39% by the perceptions of the companies’ products or services.
“Executives now recognise the importance of a strong and favourable corporate reputation as a critical strategic asset, which translates into a source of competitive advantage.”
“Because services are intangible (such as those offered by banks, airlines and others), a favourable reputation is even more important for organisations providing services than for those marketing tangible products. A service – unlike a physical product – is difficult to evaluate. Therefore, a client’s evaluation of the reputation of the organisation would be valid for all its service offerings under the organisation’s umbrella.
Five key factors that play an important role when clients evaluate the reputation of organisations emerged from Dr Theron-Wepener’s study, which was conducted in the banking and airline sectors.
These factors are: 1. Emotional appeal
The statistical analysis proved that emotional appeal forms the ‘main pillar’ of any service organisation’s corporate reputation with its clients. Dr Theron-Wepener says: “If you are not being liked by your clients and if you have not earned their admiration and trust and if clients don’t have a good feeling about your organisation and aren’t proud of it, the possibility of achieving a positive reputation score is slim indeed. Managers responsible for an organisation’s reputation will thus have to ensure that a strong emotional bond is established with clients.” 2. Corporate performance
This factor deals with the assessment of the financial soundness of the organisation and the regard in which its management is held. “Although clients do not have as much information as other stakeholders such as investors and employees about the management and financial aspects of an organisation, they do have access to broad indicators of good management and financial soundness via the media and through other indirect sources.” 3. Social engagement
The social engagement factor refers to whether the organisation supports good causes and reaches out to its social environment. Says Dr Theron-Wepener: “The days of merely performing corporate social responsibility by pledging donations is long gone. A deeper social engagement addressing social issues within the organisation and the community it serves is required.” 4. Good employer
The good employer factor is the organisation’s ability to pay attention to the needs and well-being of its employees. “Sound employee relations have indeed become important when an organisation is assessed by its clients and play a defining role to make an organisation attractive.” 5. Service points
The fifth factor, service points, refers to the functionality of an organisation’s online service delivery in terms of effectiveness, user-friendliness and ease of use. “Clients expect modern technologies such as online booking facilities (in the case of airlines) and online banking facilities to be functioning smoothly,” according to Dr Theron-Wepener. “Fully functional and up-to-date point-of-service information and communication technologies are therefore important differentiators in the case of large service organisations.”
Dr Theron-Wepener states that although many may believe so, reputation is not the result of an organisation’s communication and corporate branding efforts. “People form impressions and act based on limited information or the opinions of others without ever having had direct contact with the organisation. It is not factual information alone that makes clients think that they know an organisation. The media plays an important role in spreading the word about an organisation’s reputation. That is why a good reputation in the media is critical for any organisation.
“By focussing on these five factors, organisations can seek to improve their reputation, and by doing so, become attractive options for clients and other stakeholders,” she says.