Reputation in China: Facing the Challenges of a Low-Trust Society

By Par Uhlin, MD, MSLGROUP in Hong Kong and Vice Chair, MSLGROUP China

The State of Trust in China

Chinese society is suffering from a trust crisis. This is partly due to recurring scandals over the last decades, where companies, government and even the media themselves have tried to cover up the truth.

The best known examples include the SARS epidemic and the melamine milk scandal, where farmers, dairy companies and local officials all tried to avoid taking responsibility for their part in a tragedy which caused the death or hospitalization of hundreds of infants. Numerous food safety and healthcare incidents have involved everything from water to pharmaceuticals to international fast food chains.

The central government faces a general trust crisis both because of its role in censoring media reports on these issues, and the general perception of vested interests and widespread corruption. Even the crackdown on corruption initiated in the beginning of 2013 is often seen as “only touching the tip of the iceberg”. Chinese people seem to be asking themselves: “is there anyone left to trust, apart from my family and closest friends?”

At the same time, Chinese citizens have become better informed, and tend to be more critical and questioning than they were just ten years ago.

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This is partly thanks to increased openness and transparency from the government itself, but also due to the emergence of social media and the consequent access to information and forums for debate that simply did not exist previously in China. The paradox is that social media has also brought a high level of misguidance and false information.

Rumours are being spread and believed, as people do not trust official sources of information the way they used to.

Against this background, building a strong corporate reputation in China is more important than ever.

Corporate Image is crucial to stakeholder relations

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> Corporate brand is seen by Chinese consumers as a guarantee for quality and honesty.

Consumers in China are extremely concerned about getting value for money and to buy products that are safe to use. Much time and effort is spent to find products and services that actually deliver what has been promised, and a strong corporate brand and reputation that backs up specific product claims is a huge asset. This has been confirmed by a number of research projects conducted in the past few years. The importance of corporate brand is also clear from the unique branding strategy for China applied by leading multinationals starting with P&G.

> The corporate brand has a strong presence on product packaging and is used in communication as a guarantee of quality and trustworthiness.

This way of highlighting the corporate brand for consumer marketing is very different from communication in other parts of the world.

The days when Chinese authorities welcomed any kind of foreign investment with open arms are long gone. 

With overcapacity in many areas of the economy, a rapidly increasing cost level and an higher environmental awareness, the Chinese government is trying to transform the economy from labour intensive manufacturing to knowledge and technology intense areas.

The approval of permits and licenses needed for entry or expansion of the business in China will of course be based on the business case presented. But corporate reputation is also playing an increasingly important role, with priority given to organizations with a reputation for sustainable investments in R&D and innovation, ethical business conduct and social contribution.

 >The competition for talent is one of the most crucial challenges facing any company in China. 

Compensation and career opportunities remain important factors when people in China evaluate a job opportunity. Other factors like job safety, company values and the overall corporate reputation are also becoming increasingly important.

People want to work for reputable large companies that have clearly articulated values, and companies making a contribution to Chinese society.

Companies are waking up to this challenge, but often launch initiatives before being clear on objectives and expectations

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Today, most large international companies in China have systems and capabilities to protect their reputation and handle communications issues and crisis. Chinese media mainly target foreign companies when writing negative articles. Sometimes the scrutiny and criticism is well deserved, sometimes not. Seeing the way industry peers are treated in the press, or sometimes learning first hand, has made the necessity of investing in these capabilities obvious.

When it comes to proactively building a corporate reputation, the situation is somewhat different.

Compared to a decade ago, the time and effort invested in building up corporate reputation has increased immensely. In the past, companies were not expected to contribute to society, and there was a low awareness of environmental damage and product safety. This has changed, and today both politicians and the general public expect companies to give back to society.

Many companies are implementing some form of corporate citizen program, but many of the programs are put in place “because we are expected to”, without a long-term strategy and clearly defined objectives. Other programs conducted are modelled based on global initiatives, with little relevance to China.

There is a need to become more aware of the purpose behind these initiatives, to anchor the purpose and direction within the organization, and to develop and execute programs for a Chinese context.

Three China specifics one must have in mind when building corporate reputation in China

Of course, every market is different, but some aspects of Chinas past, present and future direction make the challenge of building corporate reputation in China unique.

1) The speed of development in China is sometimes overwhelming – build long-term platforms, frequently activated to stay relevant.

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The transformation of China has taken place at a pace never before seen in history. Hundreds of millions of people have been taken out of poverty, and the country has gone from isolation to being a truly global society in areas ranging from business to fashion.

Life in China is extremely fast, and this has strong implications on how a reputation can be built over time. With all this change, it is of course important to have a long term strategy and direction that can guide company activities and communication. That said, activities must be carried out at a much higher frequency to stay relevant and to be remembered.

What was done six months ago is easily flushed away in the constant stream of news and developments.

You have to earn your reputation every day and every week, and you cannot put much reliance on a foundation built up in the past.

With a limited number of long-term platforms and programs that can be activated frequently, one can ensure that the communication is consistent and clear but also conducted with the intensity needed to stay relevant.

2)  Manage shared values despite high staff turnover – Create strong systems for knowledge management and internal knowledge sharing.

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An organization’s character is reflected by the people within, and the values and vision behind corporate reputation must be anchored internally. With an average staff turnover at around 20% for private companies in China, this becomes complicated.

It is important to work systematically to keep employees informed, involved and believing. If at any given time, one out of four employees are new to the company, an internal knowledge management and sharing program needs to be strictly enforced.

A reputation is built on actions. How the company acts in critical situations as well as in day-to-day operations. Actions are decided by policies and habits, and these are decided by the values the company embraces.

Creating a system to clearly articulate, document, share and inseminate these values will decide if the organization can act as one unified entity or just a group of individuals working together. This will have a large impact on the degree of success the organization will have in creating a coherent, well-founded reputation.

 3) Keep it personal, and use media that allow for this.

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In a low trust environment in constant change, people trust other people, not faceless “media” or “authorities.” Taking into consideration the increasing scepticism towards government controlled media in recent years, it becomes even more important that communication can be traced back to a credible sender – preferably a person that people can relate to.

Alternatives to traditional media including company owned media platforms and social media channels become more important.

Having a strong presence in mainstream media is necessary to support awareness and a wide exposure of company activities. But taken the credibility issues facing Chinese media, a strong presence on social media and other “owned” media channels like web based magazines, internal and external newsletters will increase the credibility of the communication, and allow for more complex and in-depth messages.

Word of mouth with own employees as ambassadors is a convincing way to build corporate reputation in a low-trust society like China.

Regardless of whether the objective is sales, recruitment or crisis management, testimonials and endorsement from company employees is highly trusted, while the opposite situation where employees are confused about company values and actions can be extremely damaging to reputation.

This post is part of the People’s Insights magazine “The Future of Reputation

MSLGROUP People's Lab

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