Although reputation is a fairly intangible concept, research shows that a good reputation increases corporate worth and provides a sustained competitive advantage. A US survey by Burson-Marsteller found that 95% of chief executives surveyed believed that corporate reputation plays an important or very important role in the achievement of business objectives. But only 19% had a formal system in place to measure the value of their corporate reputation.
A US study showed that there are ten main components of corporate reputation used in reputation measurement systems such as “the most admired companies in America”:
- Ethical: the organisation behaves ethically, is admirable, is worthy of respect, is trustworthy.
- Employees/workplace: the organisation has talented employees, treats its people well, is an appealing workplace.
- Financial performance: the organisation is financially strong, has a record of profitability, has growth prospects.
- Leadership: the organisation is a leader rather than a follower, is innovative.
- Management: the organisation is well managed, has high-quality management, has a clear vision for the future.
- Social responsibility: the organisation recognises social responsibilities, supports good causes.
- Customer focus: the organisation cares about customers, is strongly committed to customers.
- Quality: the organisation offers high-quality products and services.
- Reliability: the organisation stands behind its products & services, provides consistent service.
- Emotional appeal: It is an organisation I feel good about, is kind, is fun.
The Tata reputation may have been affected on the following parameters although it is difficult to quantify the effect except for their performance on the stock market. Tata companies lost Rs 21,000 crores ( $3070 m) in market capitalisation 2 days after Mr Mistry was ousted. ( 1 crore = 10 million )
Ethical behaviour : People largely believe that Cyrus Mistry was removed from the organisation without fair notice and in spite of an outstanding evaluation from his boards.
Financial performance : While the incident may not have an effect on financial performance, the Tata stocks seem to have taken a beating on the courses.
Leadership : People are questioning the bad succession management practices and therefore the leadership of the company. Since the Mistry ouster has divided the boards of the Tata companies, it shows the leadership as brittle and disunited.
Reliability : The honest, straight, upright image of the Tatas seem to have taken a fairly severe beating.
Emotional Appeal : Certainly it is losing its values of kindness, straight-forwardness and honesty that it has held for over a century
The famous Warren Buffet once said "It takes 20 years to build a reputation and 5 minutes to ruin it. If you think about that you will do things differently". In the case of the Tatas unfortunately, it took over a 100 years to build that impeccable reputation.
Obviously Tata Sons were unprepared for the kind of backlash that the Cyrus Mistry ouster would create. They seem to have not looked at the consequences; not predicted all the possible scenarios and outcomes in the aftermath, and the moves that they would need to make to protect their interests. It does seem like a pity to see such an old trusted brand lose its sheen in a fairly dirty corporate battle.
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About the Author:
Prabhakar Mundkur is an ad veteran with over 35 years of experience in Advertising and Marketing. He works as an independent consultant and is also Chief Mentor with Percept H. All previous posts of Prabhakar can be found here.
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