EMPLOYEES- THE KEY LINK TO REPUTATION MANAGEMENT

1. A VALUABLE RESOURCE

Abstract Employees and corporate reputation are unique resources that generate
positive financial performance and ultimately create sustainable competitive
advantage. Corporate reputation is vital to the organization, and employees are the key
link to managing it. Reputation does not result by fiat; rather, it is the output of
management leadership and concerted efforts by everyone in the corporation. 

2. CORPORATE REPUTATION IN PERSPECTIVE

In conjunction with a growing awareness of employees as key intangible assets,
corporate strategists are confronted with an increasing realization of the need to
measure and manage corporate reputation. Corporate reputation is much more
than corporate image, it is a collective assessment of a firm’s past behavior and
outcomes that depicts the firm’s ability to render valued results to multiple
stakeholders

Employees are the first step in the process to manage

corporate reputation; after all, it is not possible to create a
quality product or provide a quality service without the efforts
of employees. It is the balanced scorecard and the incentives
associated with it that form a management control system that
facilitates employee assistance in the management of
corporate reputation.  Corporate reputation is an enduring
asset that can be managed through employees’ efforts,
commitment, and unique capabilities. Employees are the first
step in the sequence of managing corporate reputation to lead
to superior financial performance and, finally, to sustained
competitive advantage.

Managing corporate reputation can yield three major strategic benefits (Greyser,
1999). First, firms prefer doing business with a company that has a strong
reputation over similar competitors. Second, a strong reputation can sustain the
company in times of crisis. A final benefit is the financial returns to the company
in the market place.

3. THE DANGER OF DAMAGE

Although studies investigating the relationship between corporate reputation and
financial performance have produced conflicting results, there is no question that the
failure to manage reputation can be disastrous for a firm. When Johnson and
 Johnson’s Tylenol product was apparently tampered with in 1982, the company’s
quick response and proactive recall efforts helped prevent any lasting negative effects
to its reputation. In contrast, Audi’s denial of unexplained acceleration in their
vehicles generated enough reputational dam age that it took the automaker almost a
decade to recover. 
Employees are not only central to the creation of corporate reputation; they are
essential in pre venting a reduction in or loss of reputation.

WHY WORRY ABOUT REPUTATION?

When perceived as having a good reputation, corporations enjoy a wide array of

benefits: it is easier to attract and retain valuable employees, suppliers are less likely
to demand payment in advance, contracting costs are lower, regulatory scrutiny may
be reduced, and customers may attribute a high level of quality to the company’s
products or services. Corporate reputation becomes even more critical when
customers contemplate the purchase of a product or service that is perceived to be of
high risk (i.e., the product may not deliver as the customer expects). This relationship
can be particularly important for firms that sell technology or services related to the
output of intellectual capital.

4. MEASURING AND MANAGING CORPORATE REPUTATION

If the management control system is to be effective in providing incentives and
feedback for employ ees, specific metrics must be developed to measure success
in managing corporate reputation. Al though several metrics have been suggested
for measuring reputation the inherent difficulty in quantifying any intangible
makes it likely that it will receive less funding and attention within the
organization.

BALANCED SCORECARD APPROACH

The most critical aspect of any feedback system involves the selection of appropriate
measures on which to evaluate employees. The balanced scorecard is a popular
management control system that facilitates the selection of non-financial metrics as
incentives that help accomplish the goals of the firm while generating positive
financial returns. Kaplan and Norton (1996) developed the balanced scorecard to
provide a measurement and management control system that gives the employee
more specific signals as to which actions implement the goals and strategies of the
business unit.
Given the widespread use and familiarity of the balanced scorecard, an opportunity
seems to exist to integrate measures related to corporate reputation within the score
card format. If creating, maintaining, or increasing corporate reputation is determined
to be a strategic priority, measures must be fashioned to 
monitor the achievement of this goal.

5. CREATING A SUPPORTIVE CULTURE

 If decision makers recognize the creation and support of corporate reputation as
a strategic priority, employees will be the key means by which this objective is
accomplished. Strategies are implemented through the organization’s man
agement control system, of which both employees and organizational culture are
components. In sum, employees must be educated about the benefits that
emanate from a positive and enduring corporate reputation, be made aware of
the dangers associated with a negative reputation, and understand both their role
in and the importance of acquiring and maintaining a good corporate reputation.

TO THINE OWN STAFF AGREEABLE

If you invest in improving your employees’ views of your firm’s corporate character,
those positive attitudes will rub off and boost customers’ opinions of the company. That
will drive growth. It sounds simple, but too many organizations focus on what
customers think—to the exclusion of what employees think.

HOW EMPLOYEE AND CUSTOMER VIEWS RELATE

Our research shows two things: Employee and customer views strongly correlate,
indicating that the former influences the latter; and year-on-year sales growth positively
and significantly correlates with the size of the gaps between employee and customer
views. The more the staff’s view outshines the customers’, the greater the sales growth,
because, we believe, employee views tend to transfer to customers through the aptly
termed process of emotional contagion.  In field interviews with 4,700 customers and
employees of 63 businesses, we discovered that service companies (or business units
within them) are on average more likely to be growing (in terms of sales) if employees’
opinions of the company are better than customers’.

Our research focuses on service businesses, but other types of companies should take
heed, too. Internet sites where disaffected employees and annoyed customers gripe
about corporations have become vectors for spreading ill will. Moreover, reports of
corporate crises leak quickly into the media, often revealing a company’s true character
and giving the lie to years of slick marketing and corporate communications. 

So how do you create a corporate character that employees will respond to positively?
Our recent study of people working for four companies shows that employee ratings of a
firm’s agreeableness are influenced by the perceived quality of both training and
management and by how much autonomy workers have.