If PR Wants to Manage Reputation, It Needs to Become More Than Messengers

Editor’s Note: The following is a guest post from Elliot S. Schreiber, Ph.D., a leading expert in corporate brand and reputation management. He previously blogged for PRSAY about the changing nature of corporate trust.

Reputation is the most important asset entrusted to a CEO. Not all CEOs recognize that, but a growing number do. In a 2009 global study, AON Insurance asked 551 CEOs to rank the relative importance of 31 risk factors. Reputation was ranked No. 6. In past AON studies before the current financial crisis, reputation was the top-ranked CEO risk factor. But, what is troubling is that two-thirds of the respondents still have no “formal reputation risk plan” in place, and that figure has not changed substantially.

This finding doesn’t surprise me. CEOs recognize that reputation is a derivative of many things and would like to manage it the way other risk factors are managed, i.e., put it into a formal, strategic process. While PR has talked a lot about reputation, most PR people continue to define their role primarily as messengers or crisis managers.

The corporate communications officers who are part of the C-Suite know that they’re being asked to think and act as business executives, not merely as communicators.  They’re being asked to provide the reputation strategy, but my experience is that most chief communications officers (CCO) do not know how to manage reputation as a process, nor do their PR firms.

We need to begin with a definition of reputation. I would suggest that reputation is the expectation of value that a stakeholder has of an organization vis-a-vis its peers and competitors. Most definitions of reputation focus on experiences. To deliver desired experiences, we first must understand and manage expectations.

Stakeholders first judge an organization on whether or not it’s relevant to their value expectations compared to others in the same peer or competitive set. While the critical stakeholders for every organization are its employees, customers and investors, every stakeholder has the potential to create, enhance or destroy value, either directly or in concert with others.

Reputation is the perceived competitive value is the gap between companies in meeting stakeholder expectations. The gap helps determine the ceiling on price, the unexplained market value variations between competitors, the ability of one company to attract and keep the best talent, and better media coverage, etc. Perceived value is competitive and therefore not infinite. The value one organization creates comes from others.

Reputation management, then, is the management of stakeholder expectations in order to maximize the perceived competitive value of the organization. This is a market system called “Stakeholder Capitalism,” in which we see potential value and risk to value in the network effects of all stakeholders. We seek to acquire and retain “stakeholder share” of our key stakeholders to create greater value for an organization, industry, or other entity.

I advocate a process that integrates business strategy, marketing, branding, organizational engagement and communications. Through this integration, the organization creates “a formal reputation risk plan” that allows it to identify where and how it creates perceived value with each stakeholder and where there are gaps. The process manages reputation cross-functionally and at all “touch points.” The research that is done focuses on key reputation metrics.

Considerable success has come from managing the process with a “Stakeholder Relations Council,” which has usually been chaired by a communications professional. The members include those from other “stakeholder relations functions,” e.g., marketing, sales, HR, investor affairs, among others. The Council develops an integrated “reputation scorecard” with specific objectives and metrics for each member. As part of the process, communications not only is “at the table” but it also can find itself at the head of the table.

One company using this process found that it actually gained market share as it managed itself above the “line of expectations” of its industry; yet another found gaps in its sales processes that were undermining its reputation. The process is “ready made” for corporations to learn, adapt and implement, but PR agencies could develop such a strategy service.

Two-thirds of the corporate market is looking for a strategic process to manage reputation. The need is clear. Will the CCOs be up to the challenge, or will companies turn to marketing for leadership?  Will companies find help from their PR firms, or will they need to turn to consulting firms?  Public relations professionals have a choice to make. They can stay with their current approach to reputation that is not meeting the need of the market, or  adopt a new approach and offer a new service. It will require training, new knowledge and a new approach. What will the choice be?

Elliot S. Schreiber, Ph.D. is clinical professor of marketing and executive director of the Center for Corporate Reputation Management, LeBow College of Business, Drexel University, Philadelphia. During his career, he has been in sales, corporate strategy, marketing and communications. He was CCO at Bayer, Pittsburgh, and CMO and CCO at Nortel, Toronto. He later was president of a strategy-consulting firm. He also heads his own consultancy, Brand and Reputation Management LLC. He holds a Ph.D. in Communication (1977) from Penn State.