Broad surveys of the general population provide a context for the decline in trust and the increase in reputational risk for business, but these findings are replicated in company stakeholder results as well. Surveys of customers, employees, investors, lenders, alliance partners and suppliers all show an increased focus on reinforcing the importance of ethics, values and other traditional characteristics of business reputation.

The following surveys from two US companies conducted in late 2008 or early 2009 illustrate this point. They reflect stakeholder attitudes about the most important components of company reputation for each organization:

Construction/Real Estate Development
• Ethics
• Trustworthiness
• Performance
• Collaboration
• Service/The client experience

Healthcare:
• Services
• Staff
• Quality of care
• Outcomes
• Facilities/technology

In each case, the industry in which the company competes has been negatively impacted by the recession. The overarching message from these results appears to bind the otherwise disparate nature of the business benefits these companies provide. Outward-facing factors that reinforce positive connections with those who pay for the companies’ offerings have achieved primacy.

Client service is explicit in both cases, but “performance,” “collaboration,” “quality of care” and “outcomes” suggest that perception of value delivered is required for survival in the present and sustainable growth in the future. There is also an implicit realization that the power in the complex dance between server and served has returned to the consumer or other relationship provider.

This message is reinforced by broader results from Reputation Inc. The leading factors are remarkably similar to those above:

Emerging Factors in Post-Recession Corporate Reputation
Quality
Treatment of Employees
Trust
Transparency
Financial Prospects

Respondents to all of these surveys—and to those mentioned earlier—reflect a loss of confidence in institutions, in experts and in the blind acceptance of expertise. From the loss of belief in CEOs and advertising to the recognition that customers’ or investors’ perceptions have an impact on business survival and job security, it is apparent that businesses must commit to regaining stakeholders’ trust if they are to recover. The helplessness felt by stakeholders in the face of the financial collapse has created a perception that business has treated its stakeholders unfairly and that there is a need for those outside the corporate boundary to regain some greater measure of control in whatever transaction they may be contemplating; a mortgage, a new car, a knee replacement or a bag of groceries.

The distrust in executives or experts of any kind who are promoting products or services, coupled with shaken faith in financial statements generally and projections in particular has led to a ‘down-sizing’ of the circle from which individuals are willing to trust advice. There is a greater reliance on family, close friends and oneself. This is beneficial in some respects, as it promotes greater awareness and attention to detail (“an informed consumer is our best customer,” as one ad used to say), ultimately strengthening each link of the business value chain, but it also weakens a company’s ability to frame the purchase decision.

Transparency and Dialogue: New Imperatives for Corporate Disclosure

The loss of trust and increase in reputational risk for corporations contributes to a trend that began during the dotcom boom and accelerated after its collapse. There is demand for greater transparency about many aspects of corporate decision-making, including strategy development, executive compensation and investment in new technologies. Complementing that trend is the increasing assertiveness of NGOs, investment professionals and others outside the corporate boundary who are demanding both greater ‘permeability’ and more of a dialogue-driven rather than management-driven discussion of corporate issues.

The chart below illustrates salient aspects of this development.

The comparison between the two columns highlights the contrast between the traditional “out-bound” form of communication and the emerging demand for stakeholder input regarding what information is deemed sufficient by those outside the corporation. Similarly, the historic approach to standards, in which corporations decided to which standards they would adhere based on their own perception of what was in their best interest, is giving way to a new model through which customers, investors and others are asserting their interest in comparable metrics on a grander, often global, scale.

Many corporations will view these trends as an intrusion on their free market decision-making rights or a diminution of their prerogatives. A more enlightened view might be that corporations now have the opportunity to engage with stakeholders on a broader set of principles. Recent experience suggests that returns to transparency outweigh returns to secrecy. Better information leads to more informed decision-making, more committed customers and investors, more satisfied employees and more reliable business partners.

As we have seen, the near-death experience of the financial collapse and its aftermath has left many stakeholders’ embittered and mistrustful. The opportunity to re-engage through fuller disclosure may well contribute significantly to future growth.

Part 4 of this series will discuss social media’s impact on reputation. Parts 1 and 2 addressed business’ global deficit of trust and the evolving standards of reputation, respectively.

Jon Low is a partner in Predictiv, a consulting firm that measures the financial impact of reputation, brand, communications, intellectual capital, sustainability and other intangibles. He can be reached at jon.low@predictiv.net.