Apr 24

Wrong to Focus on Reputation? Really? The Economist Thinks So

Björn Edlund

The Economist, the global establishment’s weekly dose of instant insights, has fired one of its occasional dirty spoiler shots. This time it is aimed at us who toil in reputation management.

A few years ago, the magazine sent the whole CSR world into fits of righteous indignation when it said corporations should eschew any ambitions for social purpose beyond a focus on decent governance, good products and services, perhaps laced with a dose of philanthropy.

Now, with essentially the same argument, The Economist’s Schumpeter column

http://www.economist.com/node/21553033  says it is wrong for companies to aim at leveraging its reputation – or even to regard reputation as a corporate asset.

So why doesn’t The Economist believe in the “reputation-management industry”? This is what it says:

“(Reputation management) conflates many different things—from the quality of a company’s products to its relationship with NGOs—into a single notion of ‘reputation’. It also seems to be divided between public-relations specialists (who want to put the best possible spin on the news) and corporate-social-responsibility types (who want the company to improve the world and be thanked for it).

“The second objection is that the industry depends on a naive view of the power of reputation: that companies with positive reputations will find it easier to attract customers and survive crises. It is not hard to think of counter-examples. Tobacco companies make vast profits despite their awful reputations. Everybody bashes Ryanair for its dismal service and the Daily Mail for its mean-spirited journalism. But both firms are highly successful.

“The biggest problem with the reputation industry, however, is its central conceit: that the way to deal with potential threats to your reputation is to work harder at managing your reputation.

“The opposite is more likely: the best strategy may be to think less about managing your reputation and concentrate more on producing the best products and services you can. BP’s expensive “beyond petroleum” branding campaign did nothing to deflect the jeers after the oil spill in the Gulf of Mexico. Brit Insurance’s sponsorship of England’s cricket teams has won it brownie points in the short term, but may not really be the best way to build a resilient business. Many successful companies, such as Amazon, Costco, Southwest Airlines and Zappos, have been notable for their intense focus on their core businesses, not for their fancy marketing. If you do your job well, customers will say nice things about you and your products.”

It is a seductive string of arguments. But sadly, or not so sadly perhaps, The Economist misses the point by a mile.

Current best reputation management practices actually work with a similar definition of reputation as The Economist – seeing reputation an outcome.

In fact, an aggregated outcome of

  • performance (as in contribution to innovation, with products and services being fit for purpose, sound supply chain practices, technical prowess, environmental care and good financial returns)
  • behavior (how brand, purpose, values and policies are lived by a corporations leaders as well as its other people)
  • communications (as in how the corporation expresses its purpose and finds its narrative, and how it engages with customers and other stakeholders)

 

In other words, as a formula: Reputation = Performance + Behavior + Communications

What’s naïve about that? How, in this formula, can reputation not be a corporate asset, or not an outcome?

True, if we were to strive for non-authentic, pumped-up reputations with little grounding in reality (The Economist clearly believes this to be the aim of “the reputation management industry”) we would deserve to be ridiculed.

I don’t know any CCO who would suggest taking a corporation down that avenue of action, and many who have cautioned their corporate leadership against such a PR strategy.

The Economist didn’t do a very good job with this analysis, which reminds me of what a renowned expert in macroeconomics recently said to me about the magazine:

“Like many other deep experts who have spent decades in a field, I read The Economist with great admiration until it writes about my subject. Then I cringe at how superficial it really is – albeit perhaps at a higher level than most other publications,” he said.

And, one might add, show us a journalist who has worked closely with people who run corporations in their everyday life when decisions are being made, strategies created, plans carried out, performance measured and tactics adjusted. Few, I would say, or none.

So why don’t they listen to us who have accrued this experience? Perhaps because, as a professional grouping, as CCOs our reputation isn’t all that great.

Learning: we must do a better job of talking about the focus and value of our work. The Page think pieces about the Authentic Enterprise and now the New Model form a good foundation.

Or we must just shrug, and personally deploy The Economist’s 2009 advertising slogan: “Let your mind wander”.

***

By Bjorn Edlund
Chairman Europe, Middle East and Africa, Edelman
Retd EVP Communications, Royal Dutch Shell plc

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  • MEMBER INSIGHT Frank Ovaitt on May 9th, 2012

    Great piece, Bjorn.  It also might be pointed out that some companies are successful despite “awful reptuations” because ”awful” is a judgment applied by natural critics/opponents.  “Success” must mean that such companies are delivering exactly what other stakeholders (surely their customers) expect.  I.e., such companies have a good reputation in that regard.  

    This does not mean anything goes as long as you’re successful.  It does mean that reputation shouldn’t be defined solely by your critics.

  • INSIGHT cyril Juxon-Smith on May 17th, 2012

    Indeed, this is an interesting and realistic formula, which shows that PR to be effective, must take into consideration the wider corporate circumstances, going beyond products and services into the social domain of the environment that is being served. Thanks, Edlund.

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