Reputation Is Critical To Business Success

A company’’s fortune can rise meteorically or be obliterated with its reputation among stakeholders.


If you have any doubt about just how critical reputation is, think for a moment about the horrendous mistakes made by Enron, Lehman Brothers and WorldComm, and what those errors did to the reputations of these giant firms.

When awareness of their wrongdoings reached critical mass, it sent their reputations tumbling. Don’’t look for these names among stable, progressive businesses–they’re gone. The companies demonstrate how the six Rs intersect and affect each other–with the certainty of dominoes falling: once one is set off, it is not long before the others follow.

This is particularly evident with our next R—eputation. Its impact is formidable: a company’’s fortune can rise meteorically or be obliterated. This may sound extreme but these scenarios always remain possibilities for any company that takes its eye off the ball. It is understandable how this situation can happen.

Day-to-day, reputation management is one activity among many, and it can be easy to overlook just how much reputation contributes to your organization and how what you do, each moment, every day, affects your company’s image, brand and share price.

This is never more important than in these first decades of the 21st century, when news of your company can travel worldwide in a matter of moments.

Internal and External Stakeholders

Reputation is an issue that applies both internally and externally. What employees think of the company influences their level of motivation, engagement and commitment. Externally, your reputation among customers, suppliers, retailers, the media, government and public bodies will all affect both short- and long-term profitability.

Factors that come into play include: people’s perception of your products and services, the company’s perceived trajectory (whether it is felt to be going in the right direction), word-of-mouth, as well as other sources of influence and information.

An excellent reputation provides the organization with considerable competitive advantage as it strongly influences customers’ preferences. In addition, a strong reputation increases the value of shares and the firm’s appeal to investors.

Although a reputation is fairly consistent, an organization can have different reputations with four different segments or groups.

These include:

1. Employees

The reputation or “employer brand” that the company has with its own people greatly influences their productivity. In addition, employees with a positive view of the company have much greater confidence in the future, which in turn improves employee retention. Of course the conditions of work, compensation and recognition are all important in this regard, but other factors matter to such as the desire to work for a company that is valued by others outside the organization and, increasingly, that it has a sound reputation for corporate social responsibility.

2. Clients

If clients value a company, it increases the likelihood of retaining them as customers for existing products, and it gives the opportunity to sell further products. Also, satisfied customers are more likely to recommend your company to others. Reputation is particularly important in the service industry.

Next: #2, #4 and Five tips can help you navigate your online reputation

Luis Gallardo
Luis Gallardo
Luis Gallardo is a global brand and marketing leader and expert in the areas of strategic brand management, brand engagement, brand expression, marketing, communications, business development, and reputation management. Former managing director of global brand & marketing at Deloitte, Luis provided leadership to Deloitte's member firm network of more than three thousand marketing and communications professionals. Author of the book: Brands & Rousers, The Holistic System to Foster High-Performing Businesses, Brands and Careers. Luis is the founder of Thap Group, a multinational consultancy focused on brand, marketing and communications strategy, and he sits on the advisory board of several high-growth organizations.

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