Toward the See-Through Corporation

New research reveals the underpinnings of a good corporate reputation-and the pharma companies that earned them.
Nov 01, 2002

Consumer outrage at daily reports of new financial scandals creates a dangerous environment for corporate reputations, but pharma companies can turn the public's low opinion-and questions about rising drug prices-to their advantage if they work systematically to build long-term trust.

Building Blocks
There is no magic formula-just a combination of strategic and operational initiatives that maintain and reinforce a company's good standing. (See "Building Blocks,") This article identifies those components and suggests activities that foster the delicate alignment of strategy, communication, and leadership that drives positive reputation in both good times and bad.

A recent study, "Securing Your Corporate Reputation," published by Cutting Edge Information, reveals that consistently profitable and reputable companies such as Johnson & Johnson, Pfizer, Coca-Cola, FedEx, and Southwest Airlines protect their corporate images by maintaining high standards of practice no matter what the circumstance. For those organizations and others like them, reputation management has paid off. It's no coincidence that Fortune's Most Admired companies realized double-digit annual returns between 1983 and 1997, while the "least admired" had negative returns.

Recent media accounts have focused on pharma companies' shrinking pipe-lines and unstable stock prices. But following the example of the best reputation managers can result in front-page coverage that pharmaceutical executives look forward to rather than dread.

The study reviewed 35 companies from 17 industries, with particular emphasis on pharmaceuticals and healthcare. The results reveal that the most admired companies use a combination of transparency, strong ethics, and a commitment to quality products and services to build and maintain their reputations.

Ready or not?
Although nearly all companies give some lip service to those concepts, the scandals that have marked 2002 prove that many executives-and the companies they represent-are still making the cardinal mistake of paying more attention to short-term damage control than to long-term reputation. (See "Ready or Not?")

Crisis management, of course, plays an important role in corporate reputations. Top companies provide crystal-clear roadmaps for handling crises-a stark contrast to the confusing reactions played out last summer. Those companies, which marry sound crisis planning with execution, make tough decisions quickly and calmly. Such organizations survive when short-term focus drives others to failure.

A "Caring Company" After 20 years, J&J's recovery from the Tylenol poisonings in 1982, when seven people in the Chicago area died after taking cyanide-laced Tylenol capsules, is still widely regarded as one of the best corporate crisis responses in public relations history. Throughout the crisis, J&J clearly and publicly put public safety above all other concerns.

The corporate reputation study found that, although J&J executives knew it would take significant money and time to survive the crisis, they also realized that openness was the best strategy for maintaining corporate image and retaining the public's trust.

J&J warned consumers not to take any Tylenol product until they could determine the extent of the tampering. The company then recalled all Tylenol capsules-approximately 31 million bottles-from the market. The company sacrificed more than $100 million in product sales to warn and protect consumers. It even posted a $100,000 reward for the killer's arrest.

As a result of J&J's socially responsible behavior, the media published articles lauding the company for resisting the temptation to disclaim links to the deaths, pointing out that all the company's actions were in the best interest of public safety. J&J also benefited from another development: positive relations with the Chicago police, the FBI, and FDA. After an extensive public relations campaign, the company was able to put Tylenol back on the shelves within six weeks. Johnson & Johnson regained Tylenol's market share within half a year, and the brand remains strong today.

J&J also spent many years and millions of dollars creating an image as a "caring company" through astute management of its consumer products division, which makes Johnson & Johnson Baby Shampoo and Q-Tips, as well as over-the-counter (OTC) medicines. The company has leveraged the strong brand reputations of those products-which have daily impact on health and create lasting emotional bonds with consumers-to build a strong corporate identity. J&J has spread that reputation to its pharmaceutical subsidiaries while insulating the core brand from reputation challenges connected to the pharma industry.

Yet there is more to being a "caring company" than simple reputation. Imagine, a Canadian program that promotes partnerships between corporations and charitable organizations as well as standards for corporate citizenship and philanthropy, has set forth the following criteria for "caring company" status:

  • Donate at least 1 percent of average, domestic, pre-tax profits to charitable organizations.
  • Encourage and support employee giving and volunteering with financial and nonfinancial resources.
  • Work with suppliers whose businesses are ethically and environmentally sound.
  • Share one's business expertise with the community.

Trust Through Communication Consumers respect companies they trust, and two-way communication builds customer confidence. To encourage interaction with healthcare professionals and patients, pharma companies develop listening posts through service centers, sales efforts, and web-based programs. Along with general media and internet buzz, those posts are touchstones for public perceptions. They show internal stakeholders-sales reps, marketing teams, product developers, senior executives, and others-what people think about their company.

Actively listening to customers enhances a corporation's reputation for accessibility and accountability. Employees at all levels are attuned to feedback and use the information to address problems and secure happy customers. When consumers realize that a company welcomes criticism, they vent their concerns through the corporation's channels rather than the media, chat rooms or, worse, the legal system-all avenues that can damage corporate reputations.

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