By: Stephen Goss Posted: Jul 27th, 2016

Think about a corporate brand for a moment--let’s say a car brand. When you think about BMW, what comes to mind? Prestige? Luxury? Maybe high cost? Think of a different car brand now, like Volvo. You might think reliability or safety.

Now think about your own brand. How do you think it is perceived by your employees? Do this think this perception is shared by your customers?

What if you were asked to think about Volkswagen? What comes to mind? If you have been paying attention to the news over the past year, you might think about the emissions scandal that has rocked the company, forcing the resignations of countless senior executives. Now, this is reputation. You didn’t think reliability or luxury. Instead, you thought about VW’s corporate reputation—in this case, a negative perception based on headlines. Corporate reputation has the power to trump what customers and potential customers initially think of your product.

With this in mind, how then can corporate reputation be measured? “Companies with a strong reputation are typically more responsible and those with a focus on responsibility tend to have a stronger reputation,” says Paul Argenti, Tuck Professor of Corporate Communication, in a 2012 Ethisphere article. Argenti explains that companies who fall into the Deceptive Follower category, which is both weak and highly untenable, are “pretending to care about their responsibility to society, but secretly getting involved in activities that would eventually show them to be negligent risk takers. Enron at the turn of the century is a good example here.”

It can sometimes be easy to spot the companies that don’t manage corporate reputation well. But what about a company with a positive reputation? One such company is Starbucks.

Remember the late 1990s-early 2000s when Starbucks was regarded, by many, as a giant corporate coffee bully—that company that stormed into unsuspecting neighborhoods, putting small, independently owned coffee shops out of business? Starbucks heard that critique, and embarked on an ambitious branding campaign to get back to the basics of serving good coffee and a good coffee experience. A decade later, according to a survey by PR Week, “44 per cent [of respondents] said Starbucks served the best-tasting coffee and 41 per cent said it was the chain of which they had the highest overall opinion.” Not only that, “46 per cent chose it as the... chain that acted in the most socially responsible way.” Through focusing on its core identity, Starbucks has not only established itself as a provider of high-quality coffee, but has seized the opportunity to contribute positively to its employees, their families, and their communities.

If you don’t think that reputation management contributes to success, consider again the Volkswagen example. In the week the emissions scandal came to light, shares of Volkswagen dropped about 35% to $106. That’s a loss of nearly $30 billion in market capitalization—in less than week. Since then, despite the Dow Jones Industrial Average being in record-high territory, shares of Volkswagen still have not returned to their pre-scandal price of $167.80. Even more shocking was U.S. sales of Volkswagen fell almost 25% in November of 2015 compared to November of 2014.

Think again about your own brand and your own corporate reputation. Where would you rate on the chart above? Is your current reputation trajectory viable or untenable? Reputation management does not have to happen just when something negative comes out about your company in the news. It should be seen as complementary to brand management. As Argenti states, “More time focusing on authenticity can only help corporations do the right thing and lead to a stronger reputation for your company in the long run”.

Reputation management is one of the many subjects taught within Tuck's Brand and Reputation program. To learn more about the program, visit the program overview page or download the brochure.

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