May 2017

Why is corporate reputation management important?

The Benefits of a Good Corporate Reputation

Everyone agrees that a good corporate reputation is desirable, but few appreciate just how valuable it can be.

When weighing up decisions, companies will calculate the tangible costs and benefits to ensure their actions leave them in profit. However, it’s only by also including the impacts on the intangible asset of your reputation, through effective reputation management, that the true gains or losses can be seen.  

There is a growing appreciation that corporate reputation is an asset amongst business leaders with an international study from Deloitte placing reputation and corporate reputation management at the top of the strategic agenda for the world’s business leaders.

The markets too understand the value of a good corporate reputation.  In her book CEO Capital, Leslie Gaines-Ross reveals that some listed firms derive as much as 75% of their net worth from reputation rather than the tangible assets that they hold.  

As well as market value, there is also an everyday ‘reputation dividend’ which helps reduce the costs of doing business. This comes in a number of forms.  For example:

  • A lower cost of equity capital.
  • Corpotate reputation is quoted as the 2nd most important factor when selecting suppliers or partners.
  • Greater loyalty and less ‘wage sensitivity’ amongst employees.
  • Improved staff recruitment – better quality staff and reduced recruitment costs.
  • Improved customer acquisition – leading to greater ROI on marketing expenditure.

All of these add up to a sizeable financial benefit (or liability depending on the state of your corporate reputation).  This may be the difference between a profit or loss. This is certainly a factor in determining long-term competitiveness against other brands in your market.

This is why we work with companies to help them determine whether their current corporate reputation is an asset or a liability, using reputation tracking and reputation measurement tools.  We then help them to strengthen the value of this asset (through reputation coaching and reputation leadership). Managing corporate reputation as an asset is a vital part of growing sustainable success and profitability.