Corporate Reputation and its Importance for Business Success
- The European Perspective and its Implications for Public Relations Consultancies -

by

Riccarda Dümke

Dissertation submitted to Oxford Brookes University 
for the partial fulfilment of the requirements of the degree of 
Master of Business Administration

October, 2002

Acknowledgements

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ABSTRACT

Ignored for a long time, intangible assets are now gaining increased attention. In the last decade, especially in the United States, company managers recognized that intangible assets may provide companies with a more stable basis for competitive advantage than patents and technologies. Hence, companies started to invest in corporate Public Relations (PR) activities to communicate good corporate behaviour, gain good will and to improve the public perception of their corporate reputation.

The main aim of this dissertation research project is to develop an understanding of the European perspective of corporate reputation and its management and importance for business success.

Based on a literature review on the topic of marketing communications and PR, which comprises the first part of the dissertation, a questionnaire has been developed in order to examine expert opinions. The discussion on research methods can be found in the third chapter.

Hosted by the PR consultancy Weber Shandwick Worldwide, the questionnaire has been sent to 700 of Europe′s leading companies. Communication managers were asked for their opinions on the topic of corporate reputation and its importance for business success. The fourth chapter discusses and evaluates the results of the pan-European survey.

The last part of the dissertation actually discusses the implications of findings for Weber Shandwick and its reputation management practice.

CONTENT TABLE

1. Introduction
1.1 The dissertation topic
1.2 Weber Shandwick Worldwide
1.3 Structure of the dissertation

2. Literature Review
2.1 The relationship between the marketing communications function, corporate communications and Public Relations
2.2 Principles of Public Relations 
2.2.1 Public Relation practices promoting the corporate brand 
Public Affairs 
Investor Relations 
Media Relations 
Employee Relations 
2.2.2 The changing environment of Public Relations
Public Relations in the global context 
Public Relations in the digital age 
2.3 The concept of corporate reputation and the role of Public Relations 
2.3.1 Corporate reputation defined 
Factors that are shaping the corporate reputation 
The role of the CEO as the personified company reputation 
Corporate social responsibility 
2.3.2 The role of the PR consultancy in corporate reputation management 
2.4 Evaluation of Public Relations effectiveness 
2.4.1 Current approaches of measuring Public Relations effectiveness 
Ketchum’s effectiveness yardstick (KEY)
The IPR’s PR Toolkit 
Advertising Value Equivalents (AVE) 
Media Content Analysis 
2.5 Conclusion 

3. Methodology
Objectives 
3.1 Defining the research methodology and strategy 
3.1.1 The research philosophy 
3.1.2 The research approach 
3.2 Corporate reputation investigated 
3.2.1 Basic requirements 
3.2.2 Company selection criteria 
3.2.3 Method of data gathering 
Questionnaire survey 
3.2.4 Method of data evaluation and presentation 
Statistical analysis 
Data presentation 
3.2.5 Reflection 

4. Analysis
4.1 Importance of enough data points for valid statistical analysis 
4.2 Corporate PR as an important marketing communications tool 
4.2.1 Who handles the PR of Europe’s leading companies 
4.2.2 Companies use corporate PR more often than corporate advertising 
4.3 Corporate reputation investigated 
4.3.1 Communication managers’ definition of corporate reputation 
4.3.2 Factors shaping the corporate reputation 
4.3.3 Reputational drivers that can be influenced by corporate PR 
Companies with in-house PR department 
Companies with external PR consultancy
4.3.4 Impact of corporate reputation on financial performance 
4.4 Importance of corporate reputation management 
4.4.1 Maintenance of corporate reputation 
4.4.2 Market research on perceived corporate reputation 
Possible reasons for differences between expected and perceived reputation
4.4.3 Key factors for choosing a PR consultancy 
4.5 Measuring Public Relations effectiveness 
4.5.1 Importance of measuring PR in clear financial terms 
4.5.2 PR objectives – financial or non-financial 
4.5.3 Majority of companies measures if PR objectives have been reached 
Methods of measuring PR effectiveness 

5. Conclusion and implications of findings for Weber Shandwick
Implications of findings for Weber Shandwick .

6. Appendices

7. References

8. Bibliography

List of Figures

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1. Introduction

1.1 The dissertation topic

"In today′s world where ideas are increasingly displacing the physical in the production of economic value, competition for reputation becomes a significant driving force" 
Alan Greenspan, Chairman US Federal Reserve

Ignored for a long time, intangible assets are now gaining increased attention. In the last decade, especially in the United States, company managers to a greater extent recognized that intangible assets may provide companies with an even more stable basis for competitive advantage than developed patents and technologies. Hence, companies started to invest in corporate Public Relations (PR) activities to communicate good corporate behaviour, gain good will and to improve the public perception of their corporate reputation.

However, companies′ communication managers still show inconsistent attention to the actions necessary to maintain corporate reputation. PR consultants are often forced to explain and prove the positive contribution of PR expenditures to the company′s financial performance. Therefore, PR consultancies need to both examine clients′ expectations and to develop toolkits that prove the effectiveness of Public Relations in clear financial terms.

In the last years, managing corporate reputation as a valuable asset became a central management issue for European companies as well. The major objective of this dissertation is to identify European communication managers′ expectations and opinions about corporate reputation, its management and contribution to business success.

The Corporate Reputation Practice of Weber Shandwick, the world′s leading PR consultancy, hosted this research to gain a better understanding of clients′ and prospects′ needs. The aim of this research project is to identify strategies that will help Weber Shandwick to further improve its services and to better respond to clients′ expectations. The results for Weber Shandwick as a specific case can then be generalized for the benefit of other PR consultancies.

Why the topic is worth being investigated

In the health-conscious, environmentally aware and social-oriented decade of the 1990′s, and even more in the new century, as Fombrun (1996) emphasises, companies involved in the so-called sinful industries such as tobacco, liquor and gaming; businesses that deliberately pollute the environment or exploit their employees, struggle hard to defend their reputations to investors and creditors as well as prospect employees and customers. A current example of the far-reaching consequence of a damaged reputation is the well-known Enron scandal, especially with regard to its auditor Arthur Andersen.

December 2nd, 2001 - Enron files for bankruptcy in one of the US′s biggest ever corporate failures. In just a little over fifteen years, Enron grew into one of the largest US companies. It embraced new technologies, established new methods of trading in energy and seemed to be a shining example of successful corporate America. But the company′s success was based on artificially inflated profits, dubious accounting practices, and perhaps fraud.

January, 2002 - Enron′s auditor Arthur Andersen admitted that employees had disposed of Enron′s documents. Immediately, Enron fired and blamed Andersen for destroying documents wanted by the government investigators. In the following months, Andersen suffered from a massive loss in clients due to the damage in reputation.

In June 2002, Andersen was found guilty of obstructing justice by shredding evidence relating to the Enron scandal. Andersen agreed to cease auditing public companies by the end of August 2002. The Enron scandal helped to bring one of the world′s leading accounting firms to its knees by irreparably damaging its reputation.

This example illustrates how strategic erroneous decisions and dubious corporate behaviour can damage a reputation and might lead to business death soon. A company′s mission must therefore be to ensure a consistent, desirable and transparent reputation among internal and external key stakeholders such as employees, customers, investors, suppliers and shareholders, regulators, legislators, media, the industry and public.

The research undertaken for this dissertation intends to examine the opinions towards corporate reputation among European communication managers of leading companies. Main objectives of the research are to investigate how communication managers perceive the value of corporate reputation and the importance of building, communicating and enhancing a corporate reputation supported by corporate PR activities. In addition, approaches for measuring PR effectiveness for reputation management will be examined.

1.2 Weber Shandwick Worldwide

This piece of research is hosted by the London office of Weber Shandwick Worldwide, although the analysis is based on a pan-European research.

Weber Shandwick, represented in over 130 major cities in North and Latin America, Europe, Middle East, Africa and Asia Pacific, is the World′s leading full-service PR consultancy that offers expertise in all areas of communication. As a member of the Interpublic Group of Companies, a $7 billion advertising and marketing conglomerate including McCann-Erickson Worldgroup and FCB GROUP, Weber Shandwick has access to a vast array of resources across a multitude of marketing disciplines. Its core services span a dozen practice areas such as: Business-to-Business Services, Consumer, Corporate Branding, Reputation Management, Crisis Management, Energy, Entertainment, Financial and Professional Services, Healthcare, Investor Relations, Public Affairs and Government Relations, Technology, Travel and Lifestyle.

As Weber Shandwick consultants report, requests in corporate reputation management services from European clients have increased rapidly and simultaneously with the need for evaluating PR effectiveness.

This piece of research aims to further investigate the importance of reputation management for the European market. With a pan-European company survey European communication managers′ opinions on the subject of corporate reputation will be analysed. The findings aim to help Weber Shandwick gaining a better understanding of both clients′ and prospects′ opinions on corporate reputation and its importance for business success.

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