Corporate reputation-the cumulative perceptions of a company by its key audiences-has traditionally been seen as a "soft" concept: nice to have, but difficult to measure. But in today's interlinked world, corporate reputation is increasingly recognized for its bottom-line impact. In fact, a large body of research shows that corporations with good reputations achieve higher-than-average profitability compared with their peer groups. Good reputations earn firms stock-market premiums and provide an edge in recruiting and retaining the best employees. Strong corporate brands also win customers and encourage the development of business partnerships. A recent survey shows that U.S. company senior executives understand the importance of corporate reputation: 95% of the energy CEOs surveyed ranked it as "very important" in achieving their strategic business objectives. This number tracks with results during the last three years of the Corporate Reputation Watch survey, conducted among 600 executives by Yankelovich Partners on behalf of Hill and Knowlton Inc. and Chief Executive magazine. The survey also found that 77% of CEOs believe good reputation helps sell products and services, 61% believe it helps attract employees and 53% believe a good name increases credibility in times of crisis. The leadership group also credits customers, employees and a CEO's own reputation as the key drivers of corporate reputation, ranking other influencers, including industry and financial analysts, media and shareholders further down the list. The value of differentiation among corporate reputations in the energy industry was underscored early this year by Marathon Oil president Clarence Cazalot in an address at a petroleum industry luncheon in Houston. Cazalot observed that valuations of publicly traded oil and gas companies had increased most during the past decade among the newly emerged class of integrated megamajor companies-Exxon Mobil, BP and the like-in part because of their sheer size. In addition, securities data indicated that valuation rates had been lower for "undifferentiated" major integrated companies-the first group of companies below megamajors-than for majors that had managed to find positive ways of standing out from the rest of their crowd. In fact, Cazalot reported that the greatest rate of valuation growth among major integrated firms and large independents had occurred among companies that most clearly differentiated themselves, such as Enron, Dynegy, El Paso, Anadarko Petroleum and Apache. On the flip side, a poor reputation can cost a company dearly, often in terms of lost opportunities and higher regulatory and policy hurdles-effects that can be hard to quantify. However, the lackluster stock-market performance of companies ranked low on Fortune's "most admired" does provide one indication of the negative effect of a poor company image. And a recent survey by Harris Interactive Inc. and the Reputation Institute found that once a reputation has been tarnished, it is extremely difficult to restore. Given the lingering negative affects of a bad image and the positive contributions of a good name, today's CEOs are beginning to recognize the importance of managing their "perceptual" assets-corporate reputation, company and product brands-with the same vigor they give to overseeing such tangible assets as plants and equipment or oil and gas reserves. Increasingly, companies and their CEOs are looking for better ways to quantify and nurture their good name. Reputation and the Internet As players in the world's largest industry-and with new concerns about supply availability, energy prices and environmental impact-energy companies increasingly are finding themselves in the international spotlight. Activists and other groups often target energy firms to make points on social and environmental issues. And the Internet is providing the communications technology that these constituencies need to coordinate their activities and spread their views almost instantaneously to influential audiences around the world. Not surprisingly, more than three of four energy respondents to the 2000 Corporate Reputation Watch survey acknowledged being "somewhat concerned" or "very concerned" about negative information about their companies on the Internet. But only one energy respondent in two reported having a strategy in place for managing his or her company's reputation on the web. Sixty-three percent of energy respondents said they monitored the Internet to track what others were saying about their companies, but only 7% were monitoring the Internet "very closely." Given the CEOs' belief that customers are the primary drivers of reputation, it's not surprising that the source of criticism on the Internet they are most worried about is customers. Almost half the chief executives (48%) responded "yes" to the statement that they are worried about "unhappy customers criticizing the company on the Internet." Many energy companies are realizing that for every threat the Internet poses to its good name, there is an even more compelling opportunity to harness the power of the Internet to proactively build positive relationships with key audiences. The Internet provides an unprecedented means of instantaneously tracking what people are thinking and saying about a given company, by monitoring chat rooms, online bulletin boards, Internet news services and other Web sites, through e-surveys or by establishing home pages addressing issues of concern to companies and their key stakeholders. This new forum allows interactive, two-way communications, providing a formidable tool to strengthen a company's relationships with key audiences. Best practices More than three-fourths (77%) of the chief executives surveyed for Corporate Reputation Watch last fall considered themselves largely responsible for reputation management. In essence, these respondents consider themselves "chief reputation officers," getting staff support from their chief communications officers, but ultimately believing themselves to be responsible for managing corporate reputation. An increasing number of companies-48% in energy-are investing dollars in customized research to measure and track the effectiveness of management efforts. This is up significantly from 37% last year and a meager 19% two years ago. So what are the best practices for building and nurturing a strong corporate reputation? CEO as standard bearer. Ken Lay at Enron, John Browne at BP, Raymond Plank at Apache-these CEOs have helped define their companies. These men have taken leadership stances on key issues of broad public and social relevance as they relate to their businesses, enhancing overall reputation and fostering support in public policy circles. By identifying themselves with issues of key concern to their businesses, and then communicating regularly and consistently their positions on those issues, they have helped define their reputations and that of their companies. Employees as ambassadors. Employees can be articulate emissaries for a company if they are motivated to support the company and are armed with the right informational tools to help them do the job. Successful companies with strong reputations use employees as a means of "humanizing" the corporation and fostering public trust. Employee behavior also must match what the company is promising to deliver to the marketplace-particularly important when CEOs tap customers as the biggest drivers of corporate reputation. Strong internal communications programs that build understanding and buy-in of the company's position are critical in best-practice companies. Wal-Mart is a well-known example of a company that creates a distinct and well-understood culture of service and friendliness-one in which its employees are immersed and which is then reinforced and enhanced by their daily interactions with customers. In energy, most of the large, and even many of the smaller companies, boast long track records of solid employee communications programs and strong internal cultures that have helped drive corporate reputation and business success. But in today's era of prolific mergers, acquisitions and spin-offs, it becomes even more critical to align all employees with the company's brand so they can serve as effective corporate ambassadors. Linking philanthropy to corporate position. There is no better opportunity to say good things about yourself-and reflect your desire to operate in the public good-than when you are giving away money or volunteering employee time to a worthy cause. Best-practice companies go one better-they make sure their community relations and giving programs are linked to their business strategy. McDonald's is one of the leaders of this approach, tying all its philanthropic activities, including its network of Ronald McDonald houses, to its key customer group: children and their families. Chevron, with its long-standing "People Do" campaign, projects a corporate image of a caring, concerned company that resonates well with employees, customers and other stakeholders. This image is reinforced through its corporate giving and employee volunteerism. Nationally, corporate giving now includes 28% of gifts in-kind, representing products and services as well as employee volunteer efforts. Increasingly, while energy companies have long taken a lead in this area, they are focusing their philanthropic efforts and volunteer activities in more defined areas-such as education-that can have direct relevance to their business. Message consistency. A company's message strategy should reflect its corporate position as well as the position it is taking on the issues. Companies that have strong reputations generally have three or four key messages they recite over and over in all media and to all key stakeholders. For BP, its new "going beyond" positioning captures its commitment to energy development, renewable resources, and social and environmental issues. That same message is driven through internal and external communications, and through its community activities. Shell underscores its customer focus and commitment to safety and reliability with its "Count on Shell" campaign. Advertising, point-of-purchase materials at retail gas stations, company announcements all work together to deliver this consistent theme. To create and reinforce a memorable image, companies must boil their stories down to three or four key messages, supplemented by "proof points" that drive home the messages and "sound bites" that quickly and memorably capture their essence. Measurement and accountability. One of the things CEO Jack Welch at General Electric has on his wall in his office is GE's "corporate equity score," a measurement of the company's corporate reputation. (The other is GE's stock price.) GE continually measures its reputation to determine how it is doing relative to its competition. This relentless focus has paid off in both the financial and public-opinion marketplaces. The trend toward quantifying and measuring the value of reputation is particularly true of best-practice companies. While third-party measurement tools-magazine rankings, quality awards and the like-can be useful yardsticks, the best measures are tailored to the company's specific business objectives. Surveying key constituents' perceptions of the company's corporate reputation can provide a benchmark against which to measure progress towards building and strengthening its brand. Progress in achieving key corporate objectives in sales, employee recruitment and retention, and customer satisfaction also provide valuable insights. Other measurement tools include periodic content analyses of media coverage, to determine how well the company's key messages are communicated through the media-a key conduit for driving communications to stakeholders. Course of action It is clear from the Corporate Reputation Watch survey that today's chief executive is concerned about company reputation and is determined to do more than pay lip service to its importance, as might have been the case in the past. We're seeing a greater willingness among the CEO population to: • Invest real dollars in measuring and assessing the effect of reputation-management programs and initiatives, • Implement Internet monitoring and management programs that can help companies quickly respond to negative customer, employee and shareholder commentary, • Hit the pavement in an effort to meet key customers and assure them of their companies' commitment to deliver, and • Take personal responsibility for corporate reputation management and integrate this management discipline into an assessment of the next generation of chief executive leadership. All of this bodes well for companies committed to building and maintaining strong corporate reputations-and for the CEOs who take ownership of their company brands as they steer confidently through the challenges and opportunities that lie ahead. M Megan L. Mastal is senior managing director, energy, for public relations and public affairs firm Hill and Knowlton Inc. in Houston.