It is important for any business to have a good reputation in order to be trusted by its stakeholders and vice versa. A good reputation enables a business to survive in the short–term and grow in the long-term.
A business’ reputation is the single most important driver of value. If a business’ reputation is tainted, its revenues and market share will undoubtedly be affected negatively.
Benefits of a good reputation
- A good reputation drives long-term value,
- A good reputation drives revenue generation and increases in market share,
- A company with a good reputation may charge higher prices and earn higher margins, resulting in higher profitability and a stronger financial position,
- A company with a good reputation attracts investors with deep pockets, and lenders and suppliers that want to provide funding and credit at low interest rates and prices and reasonable terms and conditions, enabling it to finance its growth strategy,
- A company with a good reputation has a higher valuation that will enable it to be sold at a premium, as would-be buyers perceive the significant benefits that can be extracted from such a business.
- A company with a good reputation also attracts talented and skilled employees that will enable it to boost its capabilities and render improved customer services.
What drives a good reputation?
A company must purposely develop strategies, programs and plans to develop a good reputation. It must also constantly monitor and protect its reputation as a reputation can be damaged by any event or circumstances. The following factors leads to the development of a good reputation:
- Good corporate governance, strong ethical leadership and adherence to high ethical standards,
- Consistently producing and delivering high quality products and services,
- Innovation and creativity that leads to the development of new products and services, continuous improvements to processes and systems, formulation of new business models etc,
- Treating employees with dignity, respect and fairness,
- Competent and skilled employees,
- Organisational culture,
- Compliance with relevant laws and regulations,
- Satisfying and meeting the legitimate needs and expectations of other stakeholders of the business.
Examples of companies with good reputations are Coca Cola, Microsoft, Apple, Samsung, South African Breweries, Capitec, Discovery, Shoprite-Checkers, Toyota, BMW etc.
A good reputation takes many years to build. That is why a business must constantly assess the risks to its reputation. It must also assess its association risk. A tainted reputation damages the business as a trusted brand. Brands can also be easily and quickly damaged in the social media space as the world has become a highly connected place.
Poor and damaged brands lead to high losses of clients, business failure, and ultimately closure of the business and lay-off of staff. The image of Bell Pottinger, a multimillion-pound international PR firm trusted by world leaders and corporates, has been irreparably damaged. Bell Pottinger helped the politically connected Gupta family to fight their dirty battles. The PR firm has been put under administration and the jobs of its staff are on the line. KPMG’s reputation has also been tarnished as a result of its links to Gupta-owned companies and allegations of unethical conduct. It has lost a number of major clients as a result.
In conclusion, businesses must always uphold high levels of ethical standards and conduct, not only because its helps them to create value in the long term, but it is also the right thing to do. Trust and a good reputation are undisputedly the most important characteristics of any business.
