Wednesday, January 31, 2007

Measuring Reputation

I am often asked how best to measure reputation, since there often confusion which measure is best. Many companies rely on Fortune magazine’s “Most Admired American Companies” list that is published each spring. Others commission their own studies, using a number of different companies that offer research.

First, one needs to understand that reputation depends on who is asked; that is, it exists in the minds of stakeholders and not all stakeholders think alike. Employees may be concerned about the quality of their work-life, compensation and prospects for future growth; customers may be concerned about the quality and price of products and services; while analysts may be focused on the ability of the management team to meet its objectives, past financial results and future prospects for return on investment. So the answer about how to best measure reputation is this: use a measure of reputation that designed to best assess your reputation with the stakeholder in question.

There are a variety of “off-the-shelf” reputation studies that many companies use. Fortune magazine’s rankings are excellent, but they are designed to assess reputation with investors, analysts and executives of competitor companies. The attributes that Fortune uses to measure reputation are heavily skewed toward the needs and interests of these stakeholders. Forbes also has a ranking, but its measure is purely focused on return on assets. In Canada, Report on Business has a yearly study, using attributes similar to those used by Fortune, but with a few "tweaks" for Canadian interests. Similarly, in Germany, Manager Magazin publishes a study of reputation with attributes of interest to that country.

A number of human resources consulting firms have their own measures that assess employee satisfaction and engagement. These are related to reputation, but they usually do not ask employees and potential employees how they feel about the reputation of their company. This would be an important question since research has found that employees, particularly the best employees, are more motivated when they feel that their company has a good reputation, and high quality talent is more likely to be attracted to a company with a good reputation.

There are other measures of reputation by other groups that are not sanctioned by companies. Many of these assessments come from activist groups or non-governmental organizations (NGOs). While the company may not agree with the attributes used or the results, the studies are valid to the extent that they accurately reflect the perceptions of these groups.

For many companies, reputation studies are done by a variety of functional and business groups, such as marketing, sales, HR, corporate communications, government relations, and others. Here are some suggestions for companies to enhance their perspective on their reputations:

1. Adopt a common model of reputation that everyone can agree on. From this model, questionnaires can be developed to assess the perspectives of all stakeholders, and in a way that provides common rather than disparate data.
2. Seek a research instrument that provides linear data. Opinion research gives one a direction, but it does not provide information on the intensity of feelings and perceptions. Only linear data can give this. This allows a good researcher to find the drivers of reputation, how these drivers are linked and what moves behaviors, which is the ultimate goal of reputation management (to buy, invest, join the company, support the company, etc).
3. Only conduct research if it is actionable. Companies have lots of information, much of which they have no idea how to use. Reputation research should not be done simply to see if people like or dislike the company, but rather to set in place, monitor or adapt of program on influence.

Wednesday, January 24, 2007

Why Some CEOs Don't Get It

Robert Nardelli, former CEO of Home Depot, is a case in point of a CEO who didn't understand the complexities required of running a company in A.E. (after Enron). Enron was a wake-up call to companies and to shareholders that the smartests guys in the room are not always the most ethical. Nardelli was quoted in the Wall Street Journal as saying that he just didn't understand why shareholders were upset with him. "I have always believed that if you make your numbers, everything else will fall into place". That didn't happen and Nardelli, confused over what was happening, fell from grace.But, the real story is what happened to Nardelli. He was fired by the board, but with a severance package of about $120 million. Guess that really showed him!! Why should a CEO really care when they can leave with such a hefty sum. They must be feeling such a sense of disgrace as they sit in their island homes sipping Margaritas and telling stories about all the jerks who didn't understand their value.

There certainly are a plethora of outstanding CEOs that do not think like Nardelli. If they are doing well by their employees, customers, shareholders and others, I hope they eventually retire with all the perqs and money owed them. I have always believed that Jack Welsh deserved his large retirement package. Look what he did for GE. But, it seems that there still are too many CEOs who are rewarded for screwing up. Hard to give a message to future CEOs who see gold at the end of the rainbow, regardless of the direction they decide to take.I'd like to see boards let CEOs like Nardelli go with the same severance package given to any other corporate officer. If they have really damaged the company's reputation and ruined the lives of employees, I would hope that the board would make an example of them and help them sit in a far less comfortable retirement thinking about what might have been had they understood their roles more fully.

Product vs. Corporate Brands=--How to Decide

I spent most of my adult life as head of corporate marketing and communications at several global companies. I also studied marketing and communications in graduate school and have taught reputation and brand management at several business schools, as well as consulting to companies in this area. It never ceases to amaze me how many companies continue to attempt to apply product brand concepts to their corporate brand. While the process of brand management is the same, brand decisions must be made quite differently.

The concept of brands and brand management came from consumer product companies. Many business textbooks assert that Wedgewood China was the first know product brand. What this means is that Wedgewood was the first known person to extract greater value for his product with his name on the product than his competitors. Others had china. He had Wedgewood China. The products may have been the same, but he was able to differentiate with his personal reputation for excellence in quality and design. Since those early days, companies have been searching for ways to differentiate their products through branding. Products may be the same from an engineering and manufacturing perspective, but they can be differentiated and personalized through branding.

The mistake that companies make, however, is that they think that the brand is differentiated with a cool name or by making bold claims of difference. In product brands, consumer companies use what is called Unique Selling Proposition (USP) to differentiate what might otherwise be similar products. Toothpaste might all be the same, but some are whiteners, others have mouthwash, some have tarter control, etc. These subtle differences are designed to attract to the product those for whom these USP are important. For non-consumer products companies, differentiation can be found in what can be called Value Proposition. That is, the rationale for buying the product over another in the same competitive set. Let's understand, though, that the marketplace of non-consumer products is very different from that of consumer products. That is, the needs of the customer are different, the competitive marketplace is different, and the sales engagement is different. Despite these differences, many non-consumer products companies follow consumer products principles in their branding activities. How can you make decisions about your brand strategies?

The best way is to look at the product from the outside-in, the way the customer sees it and to understand the needs and interests that determine the buying decision. I would suggest that there are two basic variables driving buying decisions: 1) the amount of fear, uncertainty and doubt (FUD) that the customer has in making the decision to buy; and 2) the complexity of the buying decision. Consumer products elicit little FUD and there is little complexity in the buying decision. If I want a Coke but the restaurant only sells Pepsi, there is little FUD or complexity. In contrast, if I am the CIO of a company buying 20,000 desktop computers for my company, there is a great deal of FUD and complexity. I could jeopardize or lose my job if my decision is wrong, and the decision may need the input of others who are more expert that I am. It helps for a company to draw a 2x2 matrix, with one axis being FUD and the other complexity, and to determine where their products and company value proposition lie. The more FUD and complexity, the greater the interest in corporate brand. The customer wants to know that the company behind the product is viable and strong. Consumer products have less need for corporate brand and focus on product brands.The same matrix can be used to determine the right marketing communications mix to support the branding decisions. Consumer products can be driven by advertising and marketing public relations. Non-consumer products brands need strong relationship management since they often build their brands at the point of sales.

So, for those of you who are working in non-financial products companies, use this matrix the next time a brand manager or researcher comes up with a "new cool way" to brand your products. It will help provide some analytics to an otherwise emotional discussion.