Is Corporate Reputation Important?

According to Tamara Gillis, author of the  IABC  Handbook of Organizational Communication, the term corporate reputation refers to how positively, or negatively, a company or similar institution is perceived by its key stakeholders. Corporate reputation, which is considered a soft or intrinsic concept, is important because it affects the efficiency and effectiveness of the way a company operates. Additionally, a good organizational reputation can increase competitive advantage because customers will be more loyal and may influence other potential customers by word of mouth. While some organizations place this intrinsic concept on the back burner to more critical matters, other businesses consider organizational reputation to be of great importance. This is especially true if their business is in the financial, legal, or medical arenas. These sectors proactively try and build their image and goodwill.

All organizations have the responsibility to operate in accordance with all applicable laws and regulations. Organizations must also have an economic and ethical responsibility. To enhance organizational reputation, a company’s level of corporate social responsibility can increase competitive advantage and attract customers.

Having a good organizational reputation has many benefits. Some of these benefits include but are not limited to: being able to attract and retain talent, being able to charge premium prices for products and services, being able to weather bad times, being able to attract investors, increasing market share, and gaining more favorable media coverage.

One thing is for sure, there is a high cost to pay for an organization losing their reputation, the good standing among stakeholders. Past experience has shown that a badly handled crisis can taint or potentially ruin a company such as the Exxon Valdez, BP, Arthur Andersen, and Enron incidents. A smaller organization could be devastated by a loss of reputation. Conversely, the skillful handling of a major issue or crisis can maintain a good reputation. As history has shown, rebuilding a reputation is not easy and takes a lot of time. It is my belief that repairing a reputation is often harder than building a reputation.

There are several measures that organizations can do to safeguard their reputation. Media and reputation perception audits should be conducted regularly. In addition, organizations need to frequently monitor the Internet for what is being said about them, their competitors, and industry.

One of the most effective strategies for protecting corporate reputation is creating an early warning system that detects and tracks potential threats and provides response-related policies and procedures before the threat matures into a full-blown crisis. Giving in to the natural tendency to believe that a potential problem will dissipate over time has proven to be a fatal mistake for far too many companies. As the Internet has shown us, company crises live forever and are nearly impossible to erase.

Regularly and consistently communicating internally the importance of corporate reputation, and the company’s commitment to protecting it is also important in ensuring that a positive reputation remains a priority for all employees and a core feature of the corporate culture.