Wednesday, February 7, 2001

Newer, Younger Tech Firms Take Hit in Reputation

During this year of tumultuous and unpredictable stock market behavior, older, more established firms were best able to survive the chaos and hold on to – or even improve -- their reputations. These are the results of the second annual Reputation Quotientsm (RQ) study of the best corporate reputations in the U.S carried out by Harris Interactive (Nasdaq: HPOL) and The Reputation Institute. The survey results were announced today in The Wall Street Journal.

Topping the survey for the 2nd year in a row is New-Jersey-based pharmaceutical company Johnson & Johnson, with an RQ of 81.6 out of a possible 100 points, followed closely by appliance manufacturer, Maytag, with an RQ of 80.6 and consumer electronics company, Sony, with an RQ of 80.5. Troubled tire-maker Bridgestone/Firestone earned the lowest RQ with a 44.5. Despite the passage of time and a merger, the Exxon-Mobil combination retains its low RQ of 63.3, and Philip Morris’s reputation (RQ of 59.0) remains in the doldrums, despite a massive corporate ad campaign throughout 2000.

The results point to traditional strengths that come from age and familiarity. According to Charles Fombrun, executive director of the Reputation Institute and a professor of management at the Stern School of Business of New York University: "The average age of all firms we measured was 67 years. But the average age for firms with an increase in their RQ from the previous year was 87 years, whereas the average age of firms that experienced RQ decreases was 47 years. In other words, older firms did better than their younger counterparts in hanging onto to their reputations, suggesting that age does contribute to resilience in reputation."

"Uncovering the link between market value and the RQ is just one step in understanding the relationship between overall corporate performance and reputation," says Gordon S. Black, chairman and CEO of Harris Interactive. "We know that reputation matters, and now our work with The Reputation Institute is proving it."

Fombrun also pointed out that; "A change in RQ was positively associated with a change in market value. Firms that increased from 1999 to 2000 experienced an average 8% increase in market value, while firms with RQ declines experienced a 28% decrease in market value. For gainers, then, one RQ point equated to an average gain of $667 million in market value, while for decliners, one RQ point loss equated to an average loss of $11.6 billion in market value."

Only four companies held on to their top 10 spots: J&J, in 1st place in both years; Home Depot, which moved up from 8th place to 4th; Intel – the only computer company to hold on to a top 10 spot – moved down to 5th place from 4th; and Disney, which moved up to 8th place from 10th.

The six companies dropping out of the top 10 include three technology/computer companies – Gateway (6.8 drop), Hewlett-Packard (5.7 drop), and Xerox (4.4 drop). Also falling out of the top 10 were Wal-Mart, Coca-Cola, and Ben & Jerry’s.

These decreases in reputation opened the door for six newcomers to leap into the top 10: Maytag, Sony, Anheuser-Busch, IBM, Microsoft, and Procter & Gamble. Maytag not only received enough nominations to earn its inclusion in the RQ 2000 survey in this latest year, but it landed in second place in terms of overall reputation with the general public.

The largest decrease in corporate reputation was for ice-cream maker Ben & Jerry’s –falling from 5th place to 31st place due to an RQ decline of 9 points (81.0 to 72.0). "It’s clear from the comments of our survey respondents’ that the public has not forgiven the company for linking up with Unilever and seemingly abandoning its social mission," said Joy Sever, senior vice president at Harris Interactive.

Not surprisingly, the widely discussed product safety problems Bridgestone/Firestone faced put them in last place on the survey with an RQ of 44.5 –the lowest RQ score ever recorded. But it doesn’t look as though Firestone took Ford down with it. The automaker retained its reputation despite losing ground to GM, Daimler-Chrysler, and Toyota whose RQs increased substantially from the previous survey.

The Reputation Quotientsm is a standardized instrument jointly developed by Harris Interactive with Professor Charles Fombrun. Drawing on Harris Interactive’s global panel of more than 7 million cooperative respondents, the Harris Interactive-Fombrun Reputation Quotientsm measures corporate reputation by examining how key stakeholder groups – the public, consumers, general investors, corporate employees, and boycotters – perceive companies based on 20 attributes classified into six dimensions of reputation:

- emotional appeal
- products & services
- vision & leadership
- financial performance
- workplace environment
- social responsibility

The RQ 2000 marks the second year of measuring the reputations of the most visible companies in the U.S. Each of the 45 companies measured was rated by at least 490 U.S. adults (18+ years). The study was carried out in two phases: a nominations phase that took place between August 10 and September 11, 2000 and a ratings phase that was conducted from September 27 to October 17, 2000. In the nominations phase, interviews with 4,651 online respondents from Harris Interactive’s panel of over 7 million people, and 1,010 telephone interviews were conducted among U.S. respondents as part of the Harris Poll. A total of 26,011 online respondents participated in the RQ ratings phase.

SLM Market Will Triple to $849 Million in 2004
The service-level management market (SLM) is thriving. According to IDC, IP-service management and a growing reliance on service-level agreement (SLA) reconciliation for managed and hosted services will propel revenues in this market from $278 million in 1999 to $849 million in 2004.

"Initially, the managed services and hosting demand for service-level agreement conformance will combine with growth in ebusiness accounts to propel a surging service-level management market," said Paul Bugala, analyst for IDC's Network and Service Management program. "Then, the widespread availability of IP services caused by the transition from the deployment to the monitoring/assurance phase of the next-generation operational support system (OSS) will drive demand of SLM products that bridge the enterprise/service provider gap."

According to IDC's eBusiness Service-Level Management Survey, external service-level agreements have made their way into all organizations, regardless of their size. In enterprises with 2,500 or more PCs, nearly 97% of respondents said they would require an SLA for overall network availability in the next 12 months. In smaller businesses, 89% of respondents reported that overall network availability SLAs were expected of their network service providers.

IDC believes SLM software vendors' responsiveness to the challenges presented by the rollout of the next-generation OSS and opportunities created by managed services will directly correlate to their success.

News Tidbits (appears every day on the front page)
- Are you ready for Disney's Yahoo? Disney head Michael Eisner has publicly stated this week that he would be willing to possibly purchase Yahoo "if the price was right". Disney recently announced the discontinuation of its Go.com portal.

Return to February 2001 News Archive