Thesis

Strategy Documents T04 / 2011 Marta Carri i Sala

Metrics

Creating a New Multistakeholder Methodology for Measuring Corporate Reputation

The concept of corporate image has had critical influence in the evolution of methodologies for measuring reputation. More than 40% of dimensions and attributes are directly linked to this concept, leading to an underestimation of the impact of corporate identity on the reputation.
The doctoral thesis titled Creating a New Multistakeholder Methodology for Measuring Corporate Reputation analyses dimensions and attributes, or variables that constitute the main existing methodologies: Fortune AMAC, FortuneWMAC, Merco, Corporate Reputation Quotient (CRQ) and RepTrak, in an attempt to create a new methodology and determine the weight of both concepts identity and image. Analysis of these dimensions and attributes as well as their comparison is valid at the time of evaluating the impact of identity and image on corporate reputation. In 2004, Professor Manfred Schwaiger (Germany) published a text analyzing components and parameters used for studying and evaluating reputation around the world. According to this research, there are four major dimensions around which all attributes of reputation are structured: 1. Quality 2. Productivity (performance, profit) 3. Responsibility 4. Appeal In this context, and in order to develop an updated theoretical framework, three key concepts have been identified: 1. Corporate Identity: this is a subjective concept that represents the forms in which a company views itself compared to other companies and which manifests itself through its actions, the way they are performed and the way they are explained. It incorporates culture, beliefs, values,

The document is prepared by Corporate Excellence Centre for Reputation Leadership and is based on the thesis of Marta Carrii Sala (Doctor of Communication at the Pompeu Fabra University, Barcelona), supervised by Dr. Josep Fernndez Cavia and the Communication Department of the University in 2011.

Creating a New Multistakeholder Methodology for Measuring Corporate Reputation

relations between internal stakeholders as well as experiences and prospects. 2. Corporate Image: this concept brings together all meanings, beliefs and feelings that an individual associates with an organization, the ideas used to explore and record it, including visual aspects and external signs that visualize its personality, perception of all this by different individuals. Thats why we do not speak about one universal corporate image. Instead, there are different corporate images, stemming from the multitude of perceptions, impressions and experiences of different persons. 3. Corporate Reputation: there are three major approaches that define reputation from different perspectives or angles: a. Evaluation school: reputation as evaluation of the organizations productivity. Key stakeholders are finance professionals (analysts, investors and shareholders) and top managers. Ranking is based exclusively on these stakeholders views. The focus is on finance. b. Impression school: reputation as the impression made by the organization. Key stakeholders are individuals (usually clients and/or employees). Ranking is based on these stakeholders views. The focus is on marketing, HR and communication. c. Relational school: reputation as a gap between the views held by internal stakeholders (identity) and external stakeholders (image) who are seen as the key group. Ranking is based on the views of multiple stakeholders. The focus is on the link between the identity and the image, and between the image and the reputation. On the basis of these concepts and after analyzing existing models, the author develops a new methodology. Five models are analysed: 1. Fortune AMAC (Americas Most Admired Companies). 2. Fortune WMAC (Worlds Most Admired Companies). 3. Merco (Monitor Empresarial de Reputacin Corporativa, Business Monitor of Corporate Reputation) 4. Corporate Reputation Quotient (CRQ). 5. RepTrak.

turnover (10 companies per sector). The sample includes executives, managers and financial analysts of each sector who are familiar with the companies that are being evaluated. Interviews are held by phone or by e-mail and are structured in the following way: 1. Companies of the sector that you admire most 2. Evaluation by eight attributes on a scale from 1 (low) to 10 (high): a. Innovation b. Quality of management c. Long-term investment d. Social responsibility e. People management f. Quality of products/services g. Financial soundness h. Use of corporate assets Therefore, global reputation rating is based on objective measurements obtained through valuation by attributes made by the respondents. Criticisms of this methodology point to the fact that the dimensions were not defined empirically, consider only some stakeholders, valuations may not correspond to the reality (there are important discrepancies between the evaluation results and the data on profitability or corporate responsibility provided by the companies themselves) and do not incorporate multistakeholder vision, which takes into account relations between different groups of stakeholders, their emotions, thus articulating and aligning behaviour and communication - an important point at the heart of the doctoral thesis.

Fortune WMAC
Developed by Fortune in 1997 to extend AMAC (Americas Most Admired Companies) to the rest of the world, and carried out in cooperation with the worlds leading HR consultant Hay Group, the rating attempts to identify best practices and determines which ones are reputation drivers and useful tools. The rating is based on 1,000 leading North American companies, complemented with 500 international companies, which are not based in the USA or foreign companies present in the USA. 55 sectors and 33 countries are analysed with the final sample of 670 companies. The poll is held via phone interviews or e-mail, and respondents include managers, executives and analysts, who evaluate the companies by eight listed attributes and one more attribute: effectiveness of business at the international level. Criticisms of this model are similar to the ones of the previous model, with an addition that correlation between some of the attributes is high, which may mean that they are not sufficiently operational: it is

Fortune AMAC o Fortune 500

This rating is published by a renowned North American magazine, Fortune, and is the result of an internal contest of ideas held in the 80s. The rating is based on evaluation of 500 largest U.S. companies in terms of financial results, best performance and

Thesis

Creating a New Multistakeholder Methodology for Measuring Corporate Reputation

hard to differentiate between them, since all of them are strongly dependent on the financial result.

Merco
Developed in Spain in 1999, by Professor Justo Villafae from the University Complutense de Madrid, in cooperation with his consultancy Villafae & Asociados, Anlisis e Investigacin and Grupo meditico Prisa later renamed Vocento. The methodology is based on six dimensions: 1. Quality of products and services 2. Innovation 3. Internal reputation 4. Ethics and CSR 5. Global dimension and international presence. 6. Economic and financial performance. The weight of the dimensions depends on the value that managers (used as the base in the same way as stakeholders by Fortune) attach to them in their own ranking, as they are the first to be contacted in the course of the poll via post. They evaluate companies (excluding their own company) that they consider the most reputed and decide which two attributes (out of six that are broken down into 18 subcategories) are the most relevant. Then two most reputed companies are identified and experts step in (analysts, trade union activists and journalists), who evaluate the companies that have been included in the preliminary list (only evaluating an attribute which they have expertise in, with criteria based on their experience). Finally, they draw up a questionnaire on merits, based on specific data about the results of the policies applied by the companies. Then this is compared to a sample of consumers, thus yielding an overall ranking of the best companies to work for (Merco Personas) of the previous year, which in its turn is based on the results of Merco Empresas of the previous year. Criticisms of this methodology are similar to the criticisms of Fortune ratings given the fact that the Fortune methodology was used as the basis. The attributes are seen as too focused on behaviour and business competence and overlook appeal and identification. It may also overlook the opinion of other stakeholders due to high emphasis on top management, leaving beyond its scope such important groups are regulators and suppliers, who play a key role in some sectors. It is also questionable that trade unions are representative of the employees opinion as well as associations are representative of the consumers opinion.

It is based on surveying general population and aims to find out which companies are liked and respected by individuals, and for what reasons. Its 20 attributes are grouped into 6 dimensions: 1. Emotional appeal. 2. Products and services. 3. Financial result. 4. Vision and leadership. 5. Working environment. 6. Social responsibility. The sampling is performed in two stages: identification of important companies via phone or e-mail interviews with general population and an online questionnaire on the scale from 1 to 7 by 20 attributes.

RepTrak
Developed by the Reputation Institute, this method emerged in 2006 as a replacement for its predecessor (Corporate Reputation Quotient), and is the result of an international research aimed to analyse the evolution of the reputation knowledge over the last decade around the world. It contains new dimensions and new attributes. Seven dimensions of this model are presented below: 1. Governance. 2. Products and services. 3. Leadership. 4. Performance. 5. Innovation. 6. Workplace. 7. Citizenship. The evaluation is held in the form of a poll in different countries, with respondents looking at one, two or three companies that they are familiar with, continuously throughout the year, grading it on a Likert scale from 1 to 7. Critics of the two models developed by the Reputation Institute point out that general public does not have sufficient information in order to have an informed opinion. Besides, for many companies and sectors, consumers are not the most important stakeholders. Thats why it is important to adjust reputation measurements to the size and the sector.

Comparison of the five models

According to the author of the thesis, comparison of dimensions and attributes leads one to suggest that the evaluation in fact refers to the image and is based on external perception ignoring the appraisal by internal stakeholders (and paying more attention to the identity). Other groups of stakeholders, such as suppliers and regulators, are marginalised, as, for example, in the case of Monitor Merco. Similarly, we observe lack of attention to emotional aspects, which play an important role in evaluation

Corporate Reputation Quotient (CRQ)

Developed by the Reputation Institute jointly with Harris Interactive in 1998, it aimed to overcome the shortcomings of the Fortune methodology in terms of inadequate representation of all stakeholders.

Thesis

Creating a New Multistakeholder Methodology for Measuring Corporate Reputation

of the reputation and are only taken into account by the Corporate Reputation Quotient. Evaluation thus is dominated by cognitive and subjective aspects, and overlooks emotional responses. In conclusion, the thesis groups analysed models by two factors: 1. Characteristics and variety of stakeholders involved in evaluation: a. Unistakeholder view: Fortune AMAC and Fortune WMAC. b. Partial multistakeholder view: Merco, CRQ and RepTrak. 2. Value attached to different dimensions: a. Emphasis on performance: Fortune. b. Emphasis on performance and quality: Merco. c. Emphasis on quality: CRQ. d. Emphasis on quality and responsibility: RepTrak.

what the organisation is, and desired identity, what it says it is or what its internal stakeholders say it is) and the image (what external stakeholders say it is), as understood by the relational school described in the beginning of this document, the gap between these two visions and their interaction may be the key to reputation management.

Reputation Elements
Identity what the organisation is

Gaps

Desired Identity what the organisation says it is

Image what external stakeholders say the organisation is

A new multistakeholder methodology

All five methodologies share 11 common attributes, which the author grouped into seven dimensions: 1. Products and services. 2. Vision and leadership. 3. Workplace context. 4. Social and environmental responsibility. 5. Economic and financial performance. 6. Transparency. 7. Emotional appeal. Using this classification as a starting point, the new methodology suggests 4 dimensions subdivided into attributes: 1. Quality: a. Employees. b. Management c. Products and services. d. Focus on customer. Performance: a. Results. b. Investments. c. International expansion. d. Leadership. Appeal: a. Admiration. b. Trust. c. Attractive for potential employees. Responsibility: a. Social and environmental. b. Ethics. c. Reliability. d. Transparency.

Source: Marta Carri, 2011.

The connection between the internal and external dimensions is a fundamental aspect for reputation management (a company can be considered reputed on the global level if its reputation is recognised both by its clients, shareholders, suppliers and consumers in terms of purchasing, investing, supplying or consuming, and by its employees, in terms of working). This is the aspect suggested by the methodology presented here, which includes both perspectives and tries to assign different weights to different dimensions and different value to different groups of stakeholders, which enables one to bring together sufficient elements for managing corporate reputation, and determine appropriate actions to improve recognition by each stakeholder. In order to solidify the methodology, in-depth semistructured and structured interviews have been held with experts, managers, consultants and professors (first round) and employees, partners, investors, mass media, trade unions and administration (second round) as well as a structured online poll broken down into 42 items with a scale of 11 categories and offered to respondents during the same two rounds. It was found that quality, financial result and responsibility are the three items associated with reputation. Thus, it was necessary to include nine corresponding attributes that capture evaluation by new stakeholders that have not been considered before. The new suggested methodology is structured as shown in the following figure, and includes the

Conclusions: the gap between the theory of reputation and its practical application
If reputation is as suggested by most of the theories in the field a link between the identity (real identity,

Thesis

Creating a New Multistakeholder Methodology for Measuring Corporate Reputation

Dimensions and attributes of the new multi-stakeholder approach to measure corporate reputation
Dimension Quality Quality of managerial staff Quality of employees Meeting the stakeholder commitments Attention to different stakeholders Management based on quality criteria Appeal Admiration Trust Attractive to work for Authentic Attractive for different stakeholders (suppliers, partners, etc.) Offered experience Loyalty of employees Performance Economic and financial results Capacity for investment Growth potential International expansion Leadership on the market Degree of innovation Effect of CSR activities Responsibility Social and environmental responsibility Ethical behaviour Reliability Transparency Behaviour towards internal and external stakeholders and society in general Legitimacy Legality
Source: Marta Carri, 2011.

Attributes

dimension appeal, which is the most emotional aspect in evaluation of the reputation. Finally, according to this thesis, there is a need to evaluate reputation by sectors rather than in general, assigning different weights to each dimension depending on the sector in which the company operates in accordance with the results obtained in two rounds and to give different value to the opinions of stakeholders depending on the dimension, the sector, the size or the country, thus incorporating a truly multistakeholder vision, especially in the sense

that more weight is given to the views of employees and the identity in evaluating reputation. The thesis concludes by suggesting further steps: the need to analyse whether the new methodology contains correlations that enable to reduce the number of items that it includes and identify specific values for each stakeholder group in each industry, and, finally, whether stakeholders in each sector are different depending on the country and what are the factors that allow one to compare reputations of companies that operate in different countries.

Thesis

Leading by

reputation

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