Reputation is About Competitive Advantage, Not Being Liked

I have attended a number of conferences lately at which the term reputation was bantered about. For the most part, the term was used to denote an organization "doing good things", or "building up the trust fund so that there are friends when times are bad". These definitions fall far short of something anyone could or should take to a CEO for action. It's little wonder that there are so many companies doing so many things poorly, but investing in community activities and philanthropy believing that they are building themselves a good reputation.

A good reputation should build a relationship with key stakeholders and have them behave toward your organization in desirable ways. That is, a good reputation should help you attract and keep the best talent, it should lower your cost of capital, it should attract investors, and it should make it safe for government officials to support your actions. But, let's recognize that organizations do not operate in a vacuum. Everyone has competition. A good reputation, then, should help differentiate you from your competitors in the eyes of your key stakeholders.

So, let's stop all the talk about about doing "good things" so that people like us more. Having people like us is great, but companies don't exist to have people like them. They exist to make money. Companies with higher reputations tend to do better financially, but the financial success comes because a company meets the needs and interests of its stakeholders better than do others in the competitive set. Certainly, companies that desire a good reputation also need to be concerned with how they are viewed by their communities and others, and social responsibility is an important part of a reputation program. But, social responsibility of CRM, as is is often called, is not, I repeat is not, a reputation program. It is just part of it.

Let's put the focus where it should be when we talk about reputation with CEOs and others--on helping the organization to create value and beat the competition. That's what marketing and communications executives get paid to do.