Managing Internal and External
Reputation: Implications for HR
DECEMBER 2014
MEL STARK AND MARK ROYAL
Agenda
01
Methodology and results
02
Reputation and the World’s Most Admired Companies
03
Managing reputation
04
Implications
© 2014 Hay Group. All rights reserved
1
01
Methodology and results
FORTUNE survey of
World’s Most Admired Companies
What is it?

Annual rankings of reputation conducted by FORTUNE magazine and Hay Group

Candidate companies:
FORTUNE 1,000
Non-US Global 500
companies
companies with revenues of
$10 billion or more

Companies rated both overall and relative to their industry peers by executives,
directors and analysts
Approximately 700 companies
from 30 countries were surveyed
© 2014 Hay Group. All rights reserved
Industry rankings generated for
57 industries
3
Determination of industry rankings
Raters are asked to assess each eligible company in their industry on
each of nine attributes:
01 Ability to attract and retain talented people
02 Quality of management
03 Quality of products or services
HR Focus
Areas
04 Innovativeness
05 Long-term investment value
06 Financial soundness
07 Wise use of corporate assets
08 Social responsibility
09 Effectiveness in conducting business globally
© 2014 Hay Group. All rights reserved
4
Determination of overall ‘All Stars’
Raters are also asked to identify
the 10 companies they admire
most (regardless of industry) from
a list of the highest scoring
companies from the previous year
© 2014 Hay Group. All rights reserved
5
‘All Stars’ for 2014
INCLUDES RANKING FROM 2013
01
Apple (1)
11
American Express (13)
02
Amazon.com (3)
12
Costco Wholesale (23)
03
Google (2)
13
Nike (18)
04
Berkshire Hathaway (8)
14
BMW (14)
05
Starbucks (5)
15
Procter & Gamble (15)
06
Coca-Cola (4)
16
IBM (6)
07
Walt Disney (9)
17
Nordstrom (16)
08
FedEx (10)
18
Singapore Airlines (31)
09
Southwest Airlines (7)
19
Johnson & Johnson (23)
10
General Electric (11)
20
Whole Foods Market (19)
© 2014 Hay Group. All rights reserved
6
Most Admired for HR:
Top 20 across HR focus areas
INCLUDES RANKING FROM 2013
01
Apple (1)
11
Caterpillar (14)
02
Walt Disney (11)
12
Comcast (not ranked)
03
Google (6)
13
Alcoa (not ranked)
04
Amazon.com (5)
14
BMW (not ranked)
05
Whole Foods Market (7)
15
Goldman Sachs Group (not ranked)
06
Starbucks (10)
16
BlackRock (41)
07
Accenture (48)
17
Deere (16)
08
Qualcomm (2)
18
salesforce.com (33)
09
Nestlé (12)
19
Ralph Lauren (38)
10
Nordstrom (8)
20
L'Oréal (43)
© 2014 Hay Group. All rights reserved
7
The value of reputation
The World’s Most Admired Companies outperform industry peers and
the market as a whole*
Total shareholder returns
WMAC
S&P 500
One year
34%
32%
Three years
17%
16%
Five years
23%
18%
Ten years
10%
7%
* Note: Average total shareholder returns for the WMAC global top 50 All Stars versus the S&P 500
© 2014 Hay Group. All rights reserved
8
Key differentiators of
World’s Most Admired Companies
Focus of past research
 Board governance and
human capital management
 Strategy implementation
 Organizational design and
operating model effectiveness
 Culture
 Leadership
 Execution
What distinguishes
the ‘best’
 Ability to attract and
retain talent
 Employee engagement
and enablement
 Performance management
 Reward program effectiveness
© 2014 Hay Group. All rights reserved
from the rest?
 Effectiveness in
conducting business globally
 Managing through
economic uncertainty
 Innovation
9
This year’s topic
Managing reputation
© 2014 Hay Group. All rights reserved
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02
Reputation and the World’s
Most Admired Companies
Polling question

Our company actively monitors and manages corporate reputation.
1. Strongly Agree
2. Agree
3. Neither Agree Nor Disagree
4. Disagree
5. Strongly Disagree
© 2014 Hay Group. All rights reserved
12
What is reputation?
Corporate reputation can be seen as a function of:

The experiences stakeholders have with the organization (e.g., reliability in
delivering on commitments, consistency between how the company operates
and the image it projects, company presence within communities,
stakeholders’ emotional connections to the company)

The mission and values of the organization (e.g., company purpose,
trustworthiness, ethics, social responsibility, focus on customers and
employees)
© 2014 Hay Group. All rights reserved
13
Thoughts on
reputation from
the experts…
“Regard your good
name as the richest
jewel you can
possibly be
possessed of.”
– Socrates
“I repeat: Today we’re in an
all-out war for reputation.
Our companies are battling
– to an unprecedented
extent – for our most vital
assets: our own identities.”
– Miles D. White,
Abbott chairman and CEO
“A brand for a company is
like a reputation for a
person. You earn
reputation by trying to do
hard things well.”
– Jeff Bezos,
Amazon CEO
Reputation as a
priority
Reputation as a major focus
The World’s Most Admired Companies actively monitor and manage
reputation
We regularly monitor and track our company's
reputation
91
We actively manage our company's
reputation
92
Company reputation is a priority for our board
of directors
93
Our CEO proactively manages his or her
reputation within our industry
90
Senior executives proactively manage their
reputations within our industry
85
0
20
40
60
80
100
% Strongly Agree/Agree
© 2014 Hay Group. All rights reserved
19
Why reputation matters: External
stakeholders
Reputation is important in managing external stakeholders

I believe our company’s reputation has influenced our success in:
Retaining customers
92
Maintaining stakeholder support amid
controversy
91
Winning business/attracting new customers
93
Managing legal and regulatory risks
83
Dealing effectively with suppliers
80
Our ability to charge premium prices for
products/services
72
0
20
40
60
80
100
% Strongly Agree/Agree
© 2014 Hay Group. All rights reserved
20
Why reputation matters: Talent and
engagement
Reputation attracts and engages talent – although The World’s Most
Admired Companies find it harder to use reputation to connect with
younger employees

I believe our company’s reputation has influenced our success in:
Attracting talent
97
Attracting younger employees
77
Engaging employees
95
Engaging younger employees
77
0
20
40
60
80
100
% Strongly Agree/Agree
© 2014 Hay Group. All rights reserved
21
Why reputation matters: Market value
Reputation is viewed as a critical corporate asset

What percentage of your company’s market value would you attribute to corporate
reputation?
1% to 9%
9%
40% or More
19%
10% to 19%
28%
30% to 39%
17%
20% to 29%
27%
© 2014 Hay Group. All rights reserved
22
Where reputations are best defined
The World’s Most Admired Companies generally see reputation as
strongest within the industry
Our company has a well defined identity within
our industry
96
Our company has a well defined identity with the
general public
69
0
20
40
60
80
100
% Strongly Agree/Agree
© 2014 Hay Group. All rights reserved
23
03
Managing reputation
Polling question

In your company, which group is most responsible for managing
corporate reputation?
1.
CEO / Senior Leaders
2.
Employees
3.
Board of Directors
4.
Public Relations / Corporate Communications
5.
Marketing
6.
Investor Relations
7.
Human Resources
8.
Research and Development
9.
Finance
10. Audit / Compliance / Regulatory Affairs
© 2014 Hay Group. All rights reserved
25
Who owns reputation?
Leaders and employees are seen to have the greatest accountability

Identify the three groups most responsible for managing experiences
#1
#2
#3
Not ranked
CEO / Senior Leaders
Employees
Board of Directors
Public Relations / Corporate Communications
Marketing
Investor Relations
Human Resources
Research and Development
Finance
Audit / Compliance / Regulatory Affairs
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
© 2014 Hay Group. All rights reserved
26
Who owns reputation?
Leaders, board and employees are seen to have primary accountability

Identify the three groups most responsible for managing mission and values
#1
#2
#3
Not ranked
CEO / Senior Leaders
Board of Directors
Employees
Public Relations / Corporate Communications
Human Resources
Research and Development
Marketing
Audit / Compliance / Regulatory Affairs
Finance
Investor Relations
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
© 2014 Hay Group. All rights reserved
27
Managing reputation internally
The World’s Most Admired Companies stress reputation with managers
and employees
The importance of corporate
reputation is regularly communicated
to managers
83
The importance of corporate
reputation is regularly communicated
to employees
79
Our company has developed an
explicit employer brand
78
0
20
40
60
80
100
% Strongly Agree/Agree
© 2014 Hay Group. All rights reserved
28
Technology and control of reputation
New tools mean greater influence

Given new communication technologies and the increased speed of information, how
has the level of control your company has over its reputation changed in the last five
years?
29%
Much Greater / Greater Now
51%
About the Same
Much Less / Less Now
20%
© 2014 Hay Group. All rights reserved
29
04
Implications
Reputation considerations and
compensation decisions
The World’s Most Admired Companies factor reputation implications into
the structuring of executive compensation
Potential implications for corporate
reputation are important considerations in
decisions about executive compensation
in our company
76
0
20
40
60
80
100
% Strongly Agree/Agree
© 2014 Hay Group. All rights reserved
31
Tailoring the message
Different reputational attributes are valued by different stakeholders

Which three attributes of reputation do you feel are most important in determining your
company’s overall reputation with each of the following groups?
Percentage rating attributes of reputation among three
Current
Potential
most important in determining overall reputation with . . . Employees Employees
Other
Customers/
Investors
Industry
Consumers
Companies
General
Public
Quality of management
86
67
73
38
74
31
Ability to attract and retain talented people
53
64
30
27
8
22
Quality of products or services
62
53
71
95
21
80
Innovativeness
23
30
40
55
14
38
Financial soundness
31
39
40
25
64
26
Wise use of corporate assets
3
1
5
4
30
4
Long-term investment value
7
7
17
5
79
17
Social responsibility to the community and environment
28
31
6
37
1
69
Effectiveness in doing business globally
6
9
19
18
9
12
© 2014 Hay Group. All rights reserved
32
Sources of influence
The World’s Most Admired Companies employ different levers to
connect with different stakeholders

Which three sources of influence do you feel are most important in shaping your
company’s overall reputation with each of the following groups?
Percentage rating attributes of reputation among three
most important in shaping overall reputation with . . .
Current
Potential
Employees Employees
Other
Customers/
Investors
Industry
Consumers
Companies
General
Public
Company leaders (conduct or advocacy)
95
49
75
45
94
27
Employees (conduct or advocacy)
82
66
40
64
23
33
Quality of products and services
51
47
70
87
67
44
Corporate philanthropy / community involvement
32
22
7
13
5
26
Media coverage
14
44
44
30
53
61
Company awards
8
9
19
6
10
13
Social media
7
35
11
16
7
33
Public relations
7
14
18
8
33
26
Advertising
5
15
14
31
6
38
© 2014 Hay Group. All rights reserved
33
Implications
HR and corporate reputation

The critical role of leaders, managers and employees in shaping a company’s reputation
should be regularly reinforced in development programs and internal communications

External reputation is important for attracting and engaging talent and should be
considered a key element of total rewards and aligned with an employer value
proposition

With external scrutiny, the reputation implications of executive compensation decisions
should not be overlooked

While social media tools are seen to provide enhanced control over reputation
externally, the fact that organizational reputations can be tarnished with the click of a
mouse makes holding to the highest standards of integrity internally essential
© 2014 Hay Group. All rights reserved
34
Questions?
© 2014 Hay Group. All rights reserved
35
Contact us
Mel Stark
+1.201.557.8466
Mel.Stark@haygroup.com
Mark Royal
+1.312.228.1835
Mark.Royal@haygroup.com