Business Day (South Africa) - How to put a value on a good reputation.

By Gillian Cribbs.
590 words
25 November 2003
Business Day (South Africa)
13
English
The Financial Times Limited. Asia Africa Intelligence Wire. All material subject to copyright. Business Day (South Africa) © 2003 All rights reserved.

How to put a value on a good reputation RALPH Mancini, chairman of Mancini Duffy, a New York architectural and design firm, knows the value of reputation. "Reputation is your lifeblood. Without it you cannot survive," he says.

Mancini speaks from experience. Reputation was all that was left when his 21-year-old firm was devastated by the terrorist attacks on the World Trade Centre in September 2001.

Fortunately, all the staff survived, but Mancini Duffy's offices, housed in tower two, were demolished.

However, in the following days clients, friends and even competitors came forward to help on the strength of the firm's good name, says Mancini. They donated office space, furniture, computers and technical assistance. Two years on, the firm has reclaimed its place as one of the US's leading design and architectural practices. "If we had not had a good reputation, we could not have come back from that," says Mancini. While Mancini Duffy's case is an extreme test of corporate goodwill, it sheds light on the value of reputation and how it can help build success in good times and help firms survive in bad times. Corporate scandals such as those of Enron and WorldCom have raised the profile of reputation for companies.

But, while few doubt its importance it remains difficult to define, assess and measure, unless it is damaged or lost. What exactly constitutes reputation? Who controls it and how can it be measured? Approaches range from the purely intuitive - whether the company "feels" trustworthy - to surveys of stakeholder groups and sophisticated instruments that measure every aspect of reputation, including financial performance, vision and leadership and corporate social responsibility. John Low, author of The Invisible Advantage, says one way to measure reputation is by classifying it as an "intangible" asset, like goodwill. Steven Wartick, professor of management and policy at the University of Northern Iowa, suggests that most attempts to measure reputation are misguided because they do not start with a clear definition. Charles Fombrun, professor emeritus of the Stern School of Business, New York University, defines reputation as "a perceptual representation of a company's past actions and future prospects that describes the firm's overall appeal to all of its key constituents when compared with other leading rivals". While this definition may sound academic, it holds all the elements of a reputation: perception, past record, future expectations, appeal to constituents and comparison with rivals. As for measurement, the best-known, most popular methods are surveys or interviews. These can be as informal as canvassing individuals or interest groups about an organisation, or a more structured survey, such as Fortune's Most Admired Corporations (MAC), which asks respondents (generally senior executives, directors and financial analysts) to grade firms on specific criteria and offers a ranking for companies.

While the MAC survey has yielded valuable data on reputation, it has drawn criticism for not taking account of subtler measures of reputation, such as "trust", and for having a purely business-focused set of respondents. A more sophisticated measure of reputation was developed for Fortune by Leslie Gaines-Ross, now chief knowledge and research officer at Burson Marsteller, the global communications consultancy, and Yankelovich Partners, a US research firm. Called Leveraging Corporate Equity, the study, which has been published regularly since 1993, relies less on financial performance than the MAC and includes factors such as trust, doing business in a caring way, innovation and exemplary behaviour.