Birmingham City University Business School hosted an event on Britain’s Most Admired Companies – annually featured in Management Today.
The study of corporate reputation is led by Prof D Michael Brown and this year’s keynote speaker was Sir Terry Leahy, previous CEO of Tesco. He’s grown the turnover to £62.5bn and £3.5bn profit, 48,000 stores and 472,000 staff – in other words a guy who knows a thing or two about getting people facing in the same direction.
Leahy finds reputation, “the most unsettling aspect of management” because you can spend a lifetime hoping to build a reputation and you can lose it in a single day. He sees most managers as control freaks so “it’s an uncomfortable thought”.
“You can’t buy, own or possess a reputation. It’s given to you by other people” – with these few words he shows his understanding of reputation. A reflection of ‘everything you say, everything you do and everything others say about you’ (source: CIPR).
He explained how far they’d come in that a tobacco company had considered acquiring Tesco in the 1980s but turned down the deal because it “might drag down their reputation”.
Regarding managing reputation, “you can’t set out to manage your reputation. You just have to ensure you manage your company and ensure you manage a good company.”
He said at the heart of it, a company needs to be built on a clear common purpose of what it exists to do and do it well based on values.
The Tesco vision is to ‘create benefit for customers in order to earn their lifetime loyalty’. Their values are: ‘service – no one should try harder for customers than Tesco’ and ‘respect – treat others as we’d like to be treated ourselves’.
Simple! And that’s why it’s worked so well.
He said you can manage 100 people but you can’t hope to manage hundreds of thousands of people. You have to ensure they share the sense of common purpose, follow the right strategy, with the right values and we don’t over control the business.
Another great tip he gave any would-be-top-CEO. “You mustn’t overreact when crisis strikes. The key is to run with it and come out the other side. A good company, built on solid foundations will come through the other side. It’s knowing when to use the sword and the shield.”
He says the power of reputation can be measured in the percentage of ‘intangibles’ of a company’s market capitalisation. The higher the number, the higher the esteem in which that organisation is held. So you have Mitchells and Butler at 25%, Sainsbury’s at 30%, Tesco at 60%, M&S at 64%, Severn Trent at 65%, GSK at 83% and Diageo at 86%. So, measure for measure, Diageo’s reputation is three times more powerful than M&B’s.
Apart from market cap, across all sectors, there are clear links between strong corporate reputation and performance:
· Quality products
· Quality marketing/brands
· Ability to attract, recruit and retain their teams
· Strong quality management
· Financial solutions
· Value as a long-term investment
· Capacity to innovate
· Community and environmental responsibility.
But love Leahy for his parting shot: “reputation is internally managed and externally assessed.” That’s the best shot in the arm for the owner of an integrated communications consultancy since Bill Gates’ “if I was down to my last dollar, I’d spend it on PR.”
