By Paulo Andreoli, Chairman, Latin America, MSLGROUP
Origins of Corporate Image
At the dawn of capitalism half a millennium ago, a business’s reputation depended on the skill of its owner to display himself in mansions designed by the foremost architects, where he received people in Faustian style under the gaze of family portraits, preferably signed by great masters.
Corporate image in the mid-16th century changed in direct proportion to luxury, in an figurative attempt to use abundance as a means of facing down any economic catastrophe. And the method made sense, because high risk businesses – trade, banking or manufacturing – could keel over at a moment’s notice as they suffered the side effect of long-running and inconclusive wars, plagues, piracy or the planned bankruptcy of monarchs who underwrote bills of exchange with no backing in order to patch up their royal coffers.
Sumptuous pomp as a seal of legitimacy was the driving idea that had developed through the Middle Ages and had its roots as far back as the Greek and Roman empires. Ostentatious symbolism was so deeply rooted that Europe embraced it, setting aside the modesty and charity it preached.
Human intuition has always defined social hierarchy through material possessions. With the triumph of capitalism, respect also became a major factor and rapidly grew in importance as trade expanded and the Industrial Revolution and globalization came about.
From healthy balance-sheets to “Doing the Right Thing”
However, a sudden and important change recently occurred; this change became increasingly clear during the last decade of the past century when competition broke out of national boundaries and gave consumers an increasing number of choices – and when faced with products or services presenting similar attributes, these consumers are showing a growing disposition to select the supplier who “does the right thing.”
The result of this outpouring of citizenship is the profusion of vegetables grown without pesticides, organic wines, veal from cattle slaughtered painlessly, lead-free lipstick, the launch of hybrid cars, green banks, delivery systems which pay fines if deliveries are delayed as well as investment funds which only purchase stock in companies that do not use child labor – among many other examples of the imaginative methods used to tug on a customer’s heartstrings.
In the wake of this crusade, the number of executives responsible for Sustainability has multiplied. These executives report directly to the CEO and their actions are specifically targeted at increasing the company’s reputation (and bottom-line) by giving their full attention to a wide variety of interests intertwined with their everyday business activities. Initiatives and other measures along these lines have inspired corporate communications, which have sought to nurture empathy and engagement.
In the 21st century, modesty and good behavior now rival healthy balance sheets as a means of developing a strong reputation, part of an attempt to draw a dualistic and implausible contrast with direct competitors who hesitate to adopt the same approach.
Challenges of this new approach
Companies that decide to take this approach face at least two challenges.
- A commonplace one is that every prosperous and long-lasting company must adopt best practices, pay its bills on time, comply with regulations, be ethical, respect their employees, provide their shareholders with adequate returns and take their customers opinion seriously – basically, doing the right thing, just without the quotation marks. For a company like this, a flashy Sustainability Department is simply redundancy; or rather, a modern variation on the luxury that primitive capitalism used to communicate solidity.
- The second problem is a subtler one. It is born out of the investment needed to confirm the Sustainability area has an important and powerful role to play in crucial company decisions. We used to have just Social Responsibility, now we also have Sustainability. Company executives are finding themselves increasingly compelled to incorporate new practices, which are actually nothing more than simply doing the right thing – an inherent value for all successful companies.
The speed with which information spreads over social infrastructure has made companies vulnerable and managers need to be constantly aware of what their companies are doing and how the public perceives their products and services. They need to realize that online interaction will be a benefit but also that public exposure – from which they will not be able to hide – will make them more vulnerable. Being present is no longer a choice but a reality.
Reputation has become an asset which is at the same time essential for success and also the greatest threat to that success – one more challenge for managers who, until recently, needed only to concentrate on producing healthy financial performance indicators.
Today, an attitude or a gesture by an irritable employee can undermine several years of positive reputation and can have a direct effect on the company’s results and the way it is perceived. Crisis management processes are now online and a component of strategic business management.
Like marketing, corporate communications will increasingly depend on more accurate information and analysis. This means that the challenge is to anticipate trends based on “Big Data” and depends on our ability to interpret the “collective unconscious” and provide companies with guidance when taking decisions.
Walk the talk: The need for Rational and Long-lasting action
The era of institutional hypocrisy has ended. There is little point sponsoring a film, a winning team, spending millions on advertising if, for example, social media challenges the poorly managed acquisition of a foreign oil refinery. The worst type of problem for a company’s reputation is caused by incorrectly defining its objectives and the way in which this message will be translated into a language capable of expressing it to non-specialists.
For example, if oil begins its life as a pollutant, anyone who works with oil runs an inordinate risk if they try and present themselves as a producer of clean energy. Companies that make statements in an attempt to change the facts are only creating problems for themselves. It is surprising to see so many capable people being tripped up by this approach, because 500 years of experience should by now have taught business managers how to build value and generate results through rational and long-lasting action.
These experiences clearly showed that a company’s reputation has intrinsic weaknesses tied to its business, it can be affected by natural disasters, by a poorly concluded transaction, by a gesture, an attitude and when hypocritical and/or prideful statements are laid bare, often at great cost.
This does not mean that corporate image only comes in two colors: black or white, without any gray. Legitimacy is a long-lasting asset, it can stand up to abuse and can be restored provided that every negative experience is treated transparently, openly, intelligently and with great professionalism.
This post is part of the People’s Insights magazine “The Future of Reputation“