RepTrak als Verfahren der Reputationsmessung

By: AZ, KK / 25.02.08

Interview mit Fernando Prado zum Unterschied von Reputation Quotient und RepTrak

Communicationcontrolling.de: Mr. Prado, the Reputation Institute formerly worked with the Reputation Quotient (RQ) method to measure and manage reputation. Based on the RQ, could you please introduce the RepTrak methodology? What’s new, what are the advancements to the RQ?

Fernando Prado: After completing extensive qualitative research in various countries, Dr. Charles Fombrun, co-founder of Reputation Institute (RI), discovered that the concept of reputation was very easy to understand among different publics as the extent to which a company is admired and respected. His research in identifying those elements that construct company reputation also gave way for the creation of a model that grouped these principle attributes (numbering more than twenty), on which company reputation is based, in six dimensions: products and services, emotional appeal, workplace environment, vision and leadership, financial results, and social responsibility.

The next step was the development of a company ranking, resulting from scores assigned in each of the attributes by a sample of the general public. The total score obtained by each company was denominated “Reputation Quotient” (RQ), becoming the most-accepted measure for reputation on an international level. The creation of a new paradigm came soon: After carrying out more qualitative research projects in several countries, the Reputation Institute arrived at various interesting conclusions about how companies develop their reputations: Firstly, although the variables that construct reputation are practically the same within an international scope, their importance is not comparable, as they depend in large part on the stakeholder in question, as well as, to a smaller degree, the country.

For example, upon analyzing general population, we discovered that the basis of a company’s reputation is constructed around two fundamental pillars that have to do with the most direct relationship, as well as the day-to-day experience of a consumer with the company, such as “quality of products and services” and “client service”. Secondly, other important elements were decoded such as responsible internal and external practices, and only when suggested to the interviewees, and as concepts less relevant for the general public, other elements appear, such as financial performance. Therefore, we believed the RQ model could be improved, given that this tool did not establish a weighting system among the attributes that construct a company’s reputation.

In 2005, the Reputation Institute and the Corporate Reputation Forum (a group of very relevant Spanish corporations with international presence) began collaborating in the development of a new measurement model for corporate reputation in Spain and Latin America aligned with the RI methodology. This first RepTrak project included the participation of various companies from that Forum. It is still running in 12 countries in Europe and Latina America (including Germany), and it is open to the participation of other companies interested in the management of their corporate reputation. When the RepTrak project was initially proposed, we decided to advance the methodology and make way for a new method of reputation metrics.

What is the progress that RepTrak has made over RQ? There are two fundamental advances: first, we introduced a system of continuous measurement (RQ was based on one-time measurements). Continuous studies, or tracking, have the following advantages:

• Measurement of evolutions and trends;
• Measurement of the effects on the analyzed variables caused by certain actions or concrete events (for example, a reputation crisis, a corporate advertising campaign …);
• Reduction of the errors within the interview sample through the development of moving averages.

Second, we developed an econometric model that establishes a weighting system for the different dimensions and attributes in relation to their importance in the construction of a company’s reputation (in the RQ, all attributes had the same consideration).This permits for:

• an understanding of how a company’s reputation is constructed (knowledge of which elements are important);
• the ability to establish objectives and priorities in the management of reputation.
• the establishment of future scenarios in relation to hypothesis of the evolution of perceived variables.

Communicationcontrolling.de: This sounds quite complicated. How did you develop the new model?

Fernando Prado: The stages of the process that we undertook in order to develop the RepTrak model were as follows:

1. Secondary research to explore new, hypothetical elements of reputation that could complement the RQ model.
2. Qualitative research based on focus groups among the general public and detailed interviews with the heads of key company departments (Corporate Reputation, Communication, Marketing, Finance, and Human Resources). The result of this phase was an expanded list of attributes that contribute to the construction of a company’s reputation.
3. Quantitative pre-test. Once the preliminary list of attributes was finalized, it was essential to obtain data that allowed for the study of relationships between the attributes and reputation, as well as the correlations among them, in order to define a list much more manageable. For this pre-test, we developed a survey using the names of various companies that we intuitively considered had a very positive o very negative reputation. The analysis with the resulting data permitted us to reduce the list of attributes in half.
4. Development of a final model with working data from the definitive fieldwork and broader sample bases. This model develops a weighting system for the variables that influence reputation of a company (among the stakeholder group analysed). The dependent variable is a construct formed by four variables that constitute part of its own definition: “Trust”, “Reputation in general”, “Admiration and respect”, and “Good feeling”.  We call that index “RepTrak Pulse”; it summarizes the emotional appeal of a company among a specific stakeholder group, and it is the way we use in research to define the concept of reputation.

Communicationcontrolling.de: What are the dimensions of corporate reputation in the RepTrak model?

Fernando Prado: We use seven dimensions:

1. Products & Services: includes attributes such as the quality of products and services, value for money, guarantee, etc.
2. Workplace: good place to work, rewarding employees fairly, etc.
3. Leadership: strong and respected leader, future growth potential and good management.
4. Citizenship: support of social causes, environmental conscience and contribution to the development of the society.
5. Governance: usage of its power in a responsible manner, ethical behaviour and transparency.
6. Innovation: launch of innovative products before its competitors, being an innovative company, etc.
7. Performance: positive financial results, etc.

Communicationcontrolling.de: Since when the Reputation Institute has been working with the RepTrak methodology? On how many projects it has been used yet and what are your experiences so far?

Fernando Prado: As I mentioned in the first question, we launched RepTrak in 2005, and it was presented in our Annual Conference in New York on May 2006. At that time we had already conducted a lot of research, and the project was established as a management tool in many of our clients in Spain.

Since then, we have been implementing the methodology in all the countries where we work, and today RepTrak has become a standard in reputation metrics. Many important corporations around the world are using this tool and integrate its variables as KPIs for their management systems. Some sample companies from a long list of organizations using RepTrak include: Abbott, AstraZeneca, Carlsberg, Fedex, ITT, Johnson & Johnson, MasterCard, Novo Nordisk, Pfizer, SAP, Telefónica, Telkom, TNT, Velux, and more.

Communicationcontrolling.de: The Reputation Quotient and its explanatory power have been seen quite controversial in the professional branch. Why do you think the RepTrak method is more advanced? RQ could not show a direct correlation with EVA and hence with the outflow level of communication - could the RepTrak provide this information?

Fernando Prado: RepTrak is an explanatory and predictive measurement tool of reputation. It takes into account the relevance of every factor on constructing the reputation of a company among each stakeholder group. RQ was a good first approach to reputation analysis, but it did not have the statistical strength of RepTrak, and we have not used RQ since the beginning of 2006.

We have found very relevant correlations between our reputation metrics and financial indicators. Companies with good reputations are able to demonstrate higher value creation levels than those with similar structures but are less admired by their stakeholders.

The hypothesis we follow when we recommend a company to manage its reputation is that it will create more value based on increased supportive behaviours of stakeholders, including: buying its products and services, investing in their stocks, applying for job vacancies, speaking positively about the company and recommending the company to other people. We can already demonstrate a high correlation between those supportive behaviours and the reputation of the company measured with RepTrak, especially the emotional reputation index: RepTrak Pulse.

Our analysts can show a lot of information that relates value creation with reputation, by using our extensive historical series of reputation variables. We have seen links with stock value, revenue creation, and other variables.

Having said that, it is important to understand that a particular company may have a different reputation depending on the stakeholder group analyzed; and the drivers of reputation also vary depending on the stakeholder. If you add this reality to the fact that the value creation of a company depends on the varying behaviours of each stakeholder, it is not an easy job for the analyst to develop a simple model. On top of all this, reputation influences in a different manner the financials of companies from different activity sectors.

Although we know there is a relation, linking reputation data with financial indicators will always be controversial, such as brand valuation. It always relies on the introduction of financial projections, discount rates, analysis of the business itself and other variables that can be debated.

Communicationcontrolling.de: From your insight, which country and/or branches tend to see reputation as most important? Has the current financial crisis and economic downturn raised the importance of the reputation - and especially evaluation of reputation - topic?

Fernando Prado: Reputation management has been a hot topic for the last couple of years among top executives of international corporations. I would not say there are countries where reputation has more relevance than in others. However, it is true that there are countries where you find more coordination and developments among companies, academics and consultants in order to establish platforms for sharing experiences and best practices in reputation management. This is the case of Scandinavia, the Netherlands or Spain.

The current financial crisis has different effects on companies: on the one hand you find companies that cut all their budgets and invest less money on everything, including the development of reputation management systems (still showing the need, but affording less); on the other hand you find companies that see reputation as a way of differentiating themselves in times of crisis and/or see the need of having reputation metrics and reputational risk management systems in order to prevent the damages of a potential crisis. This is the case of the financial sector—many financial institutions are coming to us these days asking for help on how to manage their reputations.

Communicationcontrolling.de: What do you identify as the current challenges in the field of evaluation of reputation? On which topics the Reputation Institute is currently working to deal with future developments?

Fernando Prado: We are now very focused on more than one area of development.  I would mention the following areas in which we have recently developed innovative tools or in which we are achieving new developments:

• Reputation risk management: evaluation of the potential loss of value from a reputational failure and how to develop the systems to prevent and minimize those risks.
• Linkage between reputation metrics and financial variables.
• Reputation of companies as a place to work and development of strategies for recruiting the best talent.
• Alignment of employees with strategic initiatives of companies, from measurement and evaluation of internal communication tools to the actual strategic alignment programs.
• Corporate branding decisions based on reputation effects, such as brand positioning or brand architecture decisions. These decisions are especially important in situations of mergers and acquisitions, which are quite frequent in the current business environment.
• Country reputations.  We have developed a methodology for understanding the reputation of a country, intended to help governments manage the reputation of their countries, and companies to capitalize on the perceptions of their country of origin.

Communicationcontrolling.de: Thank your for the interview!

About Fernando Prado

Fernando Prado is Partner and Managing Director of the Reputation Institute in Spain. Before opening the operation of RI in Spain, Fernando worked for WPP Group for ten years serving in different functions and locations always in positions related to brand strategy development. Fernando was also CEO of Kantya brand strategies, where he conducted corporate positioning projects for many of the biggest Spanish firms across numerous industries. Fernando holds a Bachelor of Arts (Hons.) degree in Business Administration from ICADE (Madrid) and Middlesex University (London), and an MBA from IESE (Barcelona).

About the Reputation Institute

Reputation Institute is a private advisory and research firm specialised in corporate reputation management. Reputation Institute identifies best practices from original research conducted around the world, and shares cutting-edge findings with a wide network of clients and members through engagements, seminars, conferences and publications.

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