According to Firestein (2006: 25), reputation is an important risk to consider as it serves as a determinant of a company perception. Larkin (2003:5) believes that managing reputation risk is important as it can in its own right affect performance, creating branding, brand loyalty and provide a source of competitive advantage for a company. However, if reputation is not managed well by a company, it could serve as a risk to a company and its performance (Firestein, 2006:2).
Managing reputational risk in construction companies has become an important part of managing risk in companies as it may have a direct implication to the bottom line results (Rayner, 2003).The 2010 world cup in South Africa scandal that impacted the reputation of the top five construction companies in South Africa based on corruption and mismanagement of tenders.
In recent times the tender risks in the construction sector and perceived corruption for anti-competitive behaviour including collusive tendering relating to projects concluded between 2006 until 2011 has led to reputational damage to some of South African top construction companies after being fined and charged by competition commission to an estimated amount of R 1.46 Billion collectively by the guilty companies. The company’s reputational risk is measured in accordance to stakeholders’ perceptions of the best and worst companies (Oriesek, 2004). Statistics indicate that construction sector comes third in the indicative of vulnerability to risk after banking and communication sectors (Schultz 2009)
Effective risk managers identify the different circumstances and factors that may impact on the reputation of a construction companies are different to other companies due to it being project based and their unique procurement processes. Proactive reputation management in construction companies is essential as statistics shows high vulnerability in this sector (Schultz 2009). In this research report we will also focus on the differences in managing reputational risks in construction companies and other companies.
It has become vital for construction companies to be aware of what the public opinions of their companies are through managing their reputation; not to do so would expose the companies to the media such as newspapers, television and radio, that have the power to project any issue into the limelight. This could badly affect the organisation’s reputation (Forstmoser & Herger, 2006).
This research report will explain in detail the following: reputational risk and breaks down reputation and risk for further comprehension, starting with the term reputation.
There are different authors who define reputation in different ways; the following authors define reputation as follows:
‘ ” Reputation is fundamentally about perceptions and beliefs of the individual or organisation’ (Rayner, 2003:1).
‘ ” reputation is defined as a perceptual representation of an organisation’s past actions and future prospects that describes the firm’s overall appeal to all of its key constituents when compared with other leading rivals’ (Fombrun, 2006).
These perceptions and thoughts are often built over a period of many years; every contact, every media mention, every rumour, every leak, every piece of gossip will play its part in forming an overall impression of an organisation’s standing (Rayner, 2003:1).
A positive reputation is an internal culture of an organisation that forges a positive opinion of the company by successfully coping with both the expected and unexpected challenges (Firestein, 2006:2). Oriesek (2004:1) argues that a positive reputation may have several positive effects on an organisation, for example:
‘ increased willingness to buy the company’s trusted products,
‘ the desire for good job seekers to work for the company,
‘ a higher stock price,
‘ higher returns, and
‘ Favourable relations with the media and public interest groups.
Companies with positive reputations attract better talent and are perceived as providing more value allowing them to charge their products at a premium price (Eccles, Newquist & Schatz, 2007:1).
The above illustrates why every organisation needs a positive reputation so as to reap the benefits of higher sales of products, higher margins, higher returns, a higher stock price and premium prices.
Risk on the other hand is a rather difficult term to describe. Renn in Scott and Walsham (2005:310) remarks that despite 30 years’ study there is no commonly accepted definition for risk, either scientific or general. Risk is defined differently in different disciplines (Scott & Walsham, 2005:310). In the discipline of economics and finance, risk is defined as a measurable uncertainty (Scott & Walsham, 2005:310). This study will be based on the risk defined in the discipline of economics and finance.
Larkin (2003:87) however, defines risk in general as the likelihood of something unpleasant happening. Risk is not always negative and can sometimes add rewards to an organisation. Neef (2003:137) believes that risk is not always bad and should not always be avoided, but should always be managed, evaluated and dealt with. According to Larkin (2003:3), risks to reputation are many and diverse and can be either physical or intangible.
When combining the words reputation and risk, one arrives at the construct reputation risk which is part of the main focus of this dissertation. The holistic focus of the dissertation is managing reputation risk in organisations.
Scott and Walsham (2005:309) refer to the term reputation risk as potential threats or actual damage to the position of an organisation. Reputation is perceived by actions of the behaviour of members, especially at an executive level (Dowling, 2006:1). The collective behaviour of an organisation is influenced by its leadership (Oriesek, 2005:20). Managing and protecting an organisation’s reputation is primarily the responsibility of the CEO shared with other executive managers (Dowling, 2006:2).
Not managing reputation risk can lead to a reputational fall which can result in an organisation suffering massive losses. Managing reputation risk can provide a competitive advantage to organisations. We note the fall of reputation in the companies below:
‘ According to Rayner (2003:19), the French company, Perrier, suffered severe reputational damage because of the benzene contamination of water in 1990; the source of risk was a product quality problem which impacted on the organisation’s corporate reputation, and as a result, the organisation suffered massive losses and was eventually taken over by Nestle in 1992.
‘ Merck suffered from a fall in reputation due to the lack of managing reputation risk resulting in extended lawsuits and a loss of $15 billion (Firestein, 2006:2). The management of reputation risk in organisations such as Merck will be discussed briefly in the literature review section.
‘ In South Africa, two actuaries employed by Alexander Forbes appeared in court following a four’year investigation into pension fund fraud, totalling R213 million (Cameron, 2006:1). The scandal led to Alexander Forbes’s damage of reputation and an estimated R500 million in payment for damages (Cameron, 2008:1).
A survey conducted in 2001 by the insurance company AON, polled the UK’s top 2000 private and public organisations. The poll showed that loss of reputation was seen as the greatest risk to an organisation, followed by its failure to accept change (Rayner, 2003:21). In South Africa, an updated version of the 1994 King I Report of Corporate Governance, now called the King III Code of Governance was published in 2009. A part of the King III Code of Governance focuses on the subject of reputational risk (King III, 2009). But the King III Code of Governance alone cannot manage reputation risk. The techniques of managing reputation risk will be discussed further in the literature review section of the study.
The existence or absence of an organisation’s reputation leads to a competitive advantage or disadvantage (Fombrun, 1996:4). The better the reputation, the more opportunities an organisation might be exposed to (Firestein, 2006:4). Reputation has become the most valuable intangible asset of the company (Resnick, 2004:2). The rise of managing reputation risk in organisation is due to certain key developments which will be discussed below.
Due to changes in the business environment, reputation has now become the most valuable intangible asset of an organisation (Resnick, 2004:2). According to Fombrun (1996:5), intangible assets are now gaining increased importance. An intangible asset is described as a non-physical asset which may add value to or remove value from the organisation, such as reputation (Oriesek, 2004:7). As the intangible asset is non-physical, it is difficult to measure (Oriesek, 2004:7). Reputation has become important because when a company does well, it creates reputational capital which is a form of intangible wealth closely related to what accountants call goodwill or what marketers term brand equity (Fombrun, 1996:11). An intangible asset such as reputation can affect the financial performance and provide a source of competitive advantage for an organisation (Wang, 2005:2).
Managing reputation risk has been intensified due to globalisation (Scott & Walsham, 2005:308). Globalisation has contributed to how stakeholders might react when an organisation is exposed to reputation risk. According to Griffin (2008:35), individuals, consumers and communities are becoming aware of their powers and their abilities to effect change where it is needed. The combination of the internet, new satellite and cable television technology has made the distribution of information instant from anywhere in the world including developing countries (Neef, 2003:22). Due to globalisation, the spread of knowledge and information foster conditions that intensify the role and value of reputation risk to organisations (Scott & Walsham, 2005:308).
Stakeholder imperative is on the rise. Stakeholders have taken an imperative in commanding presence in organisations and have an influence on an organisation’s reputation (Rayner, 2003:4). The influences can be through perceptions, media scrutiny and tougher regulations. Where organisations have failed to manage their reputation risk, the consequences of negative public perception, media scrutiny and tougher regulations can cause the degree of financial losses to be greater, longer and sometimes irrecoverable (Larkin, 2003:6).
Organisations need to manage reputation risk in their organisations. The lack of managing reputation risk serves as a threat to many organisations (Resnick, 2004:2). If organisations do not manage their reputation risk well, they could see their organisations collapse (Resnick, 2004:2). Reputational collapses can rock the entire corporate structure and send the share price spiralling downwards as people have seen with the likes of WorldCom and Enron (Firestein, 2006:2). According to Dowling (2006:3), the loss of reputation can result in the following:
‘ increased scrutiny by regulators, insurers, society and the media,
‘ reduced backing by customers and investors,
‘ lower employee morale and
‘ Weakening share price.
As a consequence, there are reputational surveys that have been built over the years to keep watch over the reputations of organisations in the USA. Reputation surveys have been mostly based on organisations situated in developed markets and not on organisations situated in developing markets, including South Africa (Oriesek, 2004:9). Reputational rankings in surveys crystallise the statuses of organisations within a social system (Shrum & Wuthnow in Fombrun, 1990:233). As a result, organisations do their outmost to be at the top end of reputation surveys (Resnick, 2004:3). This makes reputation surveys an important contributor in managing reputation risk in organisations.
A widely used survey methodology, the Harris’Fombrun Reputation Quotient (Oriesek, 2004:8), was developed to ensure that perceptions of organisations could be measured. Another reputation survey is Fortune Magazine which publishes the most admired companies in the world, based on attributes of the organisation (Rayner, 2003:11).
1.2 PROBLEM STATEMENT
As indicated above, managing reputation risk in organisations is vital as it serves as a determinant of an organisation’s perception to key stakeholders compared to its rivals. In recent years, key developments such as the rise of intangible assets, globalisation and stakeholder imperative have emphasised the importance of managing reputation risk in organisations. Not managing reputation risk in organisations can lead to financial loss and provide as a source of competitive disadvantage for an organisation (Larkin, 2003:2). As a result, managing reputation in organisations should be treated as a priority. The research problem can thus be formulated as follows: Organisations are not managing reputation risk.
As clearly indicated in the introduction section, not managing reputation risk in an organisation can lead to reputational falls which could be detrimental to an organisation.
1.3 RESEARCH OBJECTIVES
Based on the introduction and problem statement discussed above, the objective of the study can be viewed as follows:
‘ Analysis of managing of reputational risk in construction companies.
‘ To conduct a survey that will determine the reputation status of the top five construction companies in South Africa based on recent misconducts.
1.4 RESEARCH QUESTIONS
In the process of determining the research objectives and obtaining desired results, the following questions have to be addressed:
a. Does the company appeal to its clients?
b. Does the organisation construct quality products?
c. Does the organisation have profitability growth prospects?
d. Does the company have good ethical behaviour in procurement processes.
e. Does the organisation have quality leadership?
f. Does the organisation employ and maintain good employees?
g. Does the organisation have social responsibility programmes?
1.5 IMPORTANCE AND BENEFITS OF THE PROPOSED STUDY
Managing reputation risk in organisations is important and should be treated as a priority by organisations. The study will look at the current knowledge of and research that has been done so far on managing reputation risk in organisations. The study will also explore key developments which have led to reputation becoming the most valuable intangible asset of an organisation.
According to Shedden (2006:30), a move away from a reactive, defensive approach towards managing reputation risk is not required, and instead a proactive approach in managing reputation risk is required. The important benefit of researching this topic is that it will serve to plant a seed for further research and further academic debates about managing reputation risk in organisations in the field of financial management sciences. Such a seed should lead towards a patronage of more improved implementation strategies for managing reputation risk in organisations.
The rest of the document is written as follows:
Section two: Delimitations and assumptions.
Section three: Definitions of key terms.
Section four: Literature review which includes a definition of the construct reputation risk, followed by a discussion of reputation risk in organisations; the final section in the literature review is a discussion on executive management and reputation risk.
Section five: Research and design methods and an outline of the dissertation sections.
Section six: Results of the research methodology.
Section seven: Conclusion.
2 DELIMITATIONS AND ASSUMPTIONS
2.1 DELIMITATIONS
The proposed study has several delimitations related to the context, relationships, the target populations and theoretical perspectives of the study. The delimitations are as follows:
‘ The study will be limited to the context of profit producing organisations, as such, the study will not be considering non profit organisations, individuals, governments and parastatals.
‘ The study will only be examining one aspect of reputational risk namely the lack of reputation management, and not other aspects such as corporate governance.
‘ The study’s literature review will primarily be limited to literature from the disciplines of economics and management sciences and not other disciplines such as engineering and natural sciences.
2.2 ASSUMPTIONS
Several basic assumptions underlie the proposed research study. Leedy and Ormrod (2005:5), define an assumption as a situation that is taken for granted as the research project will be pointless without it. The assumptions are as follows:
‘ All organisations are striving to make a profit, to be the best in terms of reputation.
‘ The research sample is based on the upper class population. It is assumed the target upper class is well informed about the organisations in South Africa.
‘ The Harris-Fombrun Reputation Quotient survey is applicable to organisations in South Africa.
3 LITERATURE REVIEW
This literature review is structured as follows:
‘ Definition of the construct reputation risk, and the terms reputation and risk and organisation.
‘ Discussion of cases of reputational scandals caused by lack of managing reputation risks in organisations.
‘ Organisations managing reputation risks in organisations.
‘ Managing reputation and executives.
4.1.1 REPUTATION
Reputation is a difficult term to define. Reputation is fundamentally the perceptions and beliefs about the individual or organisation and not necessarily an accurate reflection of reality (Rayner, 2003:1). According to Griffin (2008:11), reputation in an organisation is more difficult to define as it may be based on the popular view of the stakeholder and not the long term view of the organisation. Organisations and stakeholders do not see issues or actions in the same light. (Crable & Vibbert in Dolphin, 2004:79). An organisation may view itself as a champion in environmental issues while stakeholders may at the same time perceive it as a polluter (Coombs in Dolphin, 2004:79).
The concept of managing reputation risk impacted on organisations as early as 1961 (Scott & Walsham, 2005:308) when Perrow in Scott and Walsham (2005:308), made the following comment about reputation ‘… if an organisation and its product are well regarded, it may more easily attract personnel, influence relevant legislation, wield informal power in the community, and ensure an adequate number of clients, customers, donors or investors’. The concept of the importance of reputation started domineering in the late 1990’s when globalisation, the rise of intangible assets and stakeholder imperative started emerging and has not stopped (Neef, 2003:18).
Thus, more and more organisations should regard managing reputation in organisations as a priority.
Measuring reputation can be rather difficult (Oriesek, 2004:7). This is because reputation has the following characteristics:
‘ Reputation can’t be quantified, compared against a hard benchmark or analysed in the same way as financial or other numerical data, its management requires softer skills such as sound judgement, an ability to anticipate in future trends, understanding stakeholder concerns and responding constructively (Rayner, 2003:1).
‘ The value of a company’s reputation often goes unrecorded as an asset because it is seen as being simply too complex as it forms part of goodwill in accounting terms (Fombrun, 1996:85).
‘ Reputation has no weight (Quah in Scott & Walsham, 2005:309).
‘ Reputation is not formational and abstract (Scott & Walsham, 2005:309).
‘ Reputation is representative of the kind of resource that executive managers have to learn to work with (Scott & Walsham, 2005:309).
‘ Reputation fluctuates based on the demand and supply of the product produced by the organisation (Fombrun 1996:92).
Reputation is an intangible asset that directly affects the market value of any company (Siano, Kitchen, Confetto, 2010:69). This makes reputation an important asset for organisations to understand in terms of overall value. For an organisation to understand its reputation as an intangible asset and component of its overall firm value, it is possible to quantify its value by dissecting a corporation’s market value into its liquidation value (Oriesek, 2004:7).
The table below lists a review of the definitions of reputation by different authors.
Table 2 : Definitions of Reputation
Author Meaning
Rayner (2003:1) Reputation is a collection of perceptions and beliefs, both past and present, which reside in the consciousness of the organisation’s stakeholders, this is built with every contact, every rumour, media attention, leak and piece of gossip.
Oriesek (2004:3) Reputation is regarded as a corporation’s standing within a business context.
Scott & Walsham (2005: 308) Reputation refers to the standing of a person or collective and in its broadest sense reflects what is generally thought or said.
Zboron (2006:504) Reputation refers to perceptions and opinions of interested parties and stakeholders.
Resnick (2004:4) An external evidence of the organisation’s people, internal practices, culture, management talent and overall competitiveness.
Dowling (2006:3) An overall view based on estimation that people have of the organisation.
Bromley in Dolphin (2004:79) ‘… reputation can be defined as a distribution of opinions (the overt expressions of a collective image) about an entity.’
Khan and Shaikh (2009:913) ‘… reputation is a form of collective opinion about a subject by the community.’
Larkin (2003:1) Reputation is based on perceptions of the characteristics, performance and behaviour of an organisation.
4.1.2 RISK
Despite 30 years’ of intensive study, there is no commonly accepted definition of risk in either lay or scientific understanding (Renn in Scott & Walsham, 2005:310). Risk is defined differently in each of the disciplines (Scott & Walsham, 2005:310) as follows:
Table 3: Disciplinary Differences in the Definitions of Risk
Disciplinary area Definition
Engineering and physical science Probability times consequence.
Psychology and cognitive science A function of subjectively perceived utilities and probabilities of their occurrence
Economics and finance Measurable uncertainty.
Health and safety A chance or possibility of hazard, danger, loss or other adverse consequences
Sociological perspective Danger that is socially defined.
Integrated disciplinary approach The possibility that human actions or events will lead to consequences that affect aspects that humans value.
Source: Scott & Walsham 2005:310
In this thesis, we are going to focus on the discipline of economics and finance. According to Power (2004:2), there are two types of risks in the discipline of economics and finance:
‘ Primary risk, which is the risk that financial statements may be materially misstated.
‘ Secondary risk, which is the risk of financial and reputational losses for many organisations.
The focus of this thesis is mainly on the latter. Primary risk has been the main focus for many auditors since the mid 90’s and frameworks such as Sarbanes’Oxley in the USA, Turnbull in the UK and King I and II in South Africa have been written based on risk management (Power, 2004:2). An updated version of King II, now called King III was subsequently published in 2009.
Traditionally, executive management of organisation has identified with the following risks as a five part problem for the organisation (Dowling, 2006:3):
‘ Operational risks: These are risks tied to the operation of a company and internal controls and working protocols are used to manage the risks involved.
‘ Capital risks: Risks that are precipitated by strategic investment decisions such as entering a new market, building more capacity, taking over a company and investing in a new technology.
‘ Financial risks: These are risks that involve new and complex financial instruments, the use of financial engineering, strategies to minimise corporate tax payments and issues involving executive pay and share value.
‘ Social risks: These are risks that involve services and products that may hurt people. Products sold by organisations have risks attached to the product such as food leading to obesity, financial services and providing poor advice and pharmaceuticals companies developing unsafe drugs.
‘ Intangible risks: These risks cannot be touched or felt and are often associated with human capital. These risks apply to intellectual property and trademark.
Reputation risk is an intangible risk that is emerging in many organisations. Until recently, in the 1990’s, reputation did not serve as an important risk to organisations (Dowling, 2006:3). Today, when most business people are asked about which is of most concern to them, they often mention reputation risk (Power, 2004:6). Reputation risk has now come to the fore and needs attention as an intangible risk just like any of the above mentioned risks.
3. CONSTRUCTION COMPANIES
4 RESEARCH DESIGN AND METHODS
After a review of the current literature above, the research will seek to conduct a survey that will determine the reputation status of the top ten organisations according to the JSE All Share Index in South Africa.
Based on the objective of this study, a descriptive research method is used. The objective of a descriptive research method is to reveal an accurate profile of events or situations (Saunders, Lewis & Thornhill, 2007:135). One should however, not use a descriptive research method as a means to an end but as an end to a means (Saunders et al., 2007:135). Due to time constraints, the study is cross sectional based on the information taken at a particular point in time (Saunders et al., 2007:148).
To avoid high costs in conducting the experimental strategy, the survey is based on a sample which represents a specific population. According to Saunders et al. (2007:139), a sample should be representative of the target population to achieve its goal. The data is collected from individuals based in the area of Gauteng. The individuals are upper class and will be discussed in detail below.
According to Rogers in Saunders et al. (2007:149), scientific methodology needs to be seen as a way of preventing the researcher from deceiving himself with regard to the created premonitions which have developed out of the relationship between the researcher and his material. To make sure that this does not happen, the researcher needs to place emphasis on reliability and validity (Saunders et al., 2007:149). The integrity of the research will be discussed in detail in the section below.
4.1 SAMPLING
The data for the research is collected from a sample as it is rather impractical to conduct a survey using the entire South African upper class population. According to Saunders et al. (2007:206), the researcher need not sample the entire population if the sample will be impractical for the researcher to collect. The sample is based on primary data. The respondents are from a working upper class based in Gauteng. According to the South African Institute of Race Relations, communities in South Africa are classified as follows:
‘ Working class ‘ a community earning between R1,00 and R1,500.00 per month.
‘ Middle class ‘ a community earning between R 1,501.00 and R4,500.00 per month.
‘ Upper class ‘ a community earning above R4,501.00 per month.
The research above was done in 2001; therefore inflation should be taken into account. An upper class population is defined as a working population that earns a certain salary above R4,501.00 per annum (South African Institute of Race Relations, 2000). The sample source is selected on the basis of an upper class community. Due to the type of data that will need to be answered in the questionnaire; the target population has to be literate and have some knowledge of basic investment terms such as profitability. The target population also needs to be knowledgeable about existing companies in South Africa and current business affairs. The upper class is expected to have access to the internet as the survey will be conducted by means of an email. It is assumed that the upper class answers to all the above requirements.
4.1.1 SAMPLING TECHNIQUE
The sampling technique is based on a probability of samples. A probability of samples technique is created when the chance of each case being selected from the population is unknown and equal with probability samples meaning that it is possible to answer research questions and to achieve estimated objectives (Saunders et al., 2007:207).
In the initial Harris-Fombrun RQ survey that was done, the study was based on a poll online of more than four million people who were asked to choose the most admired companies (Oriesek, 2004:21). A second and more detailed survey was done on a sample of 10800 participants based on the organisations that were chosen in the initial survey (Oriesek, 2004:144). The sample size in this thesis consists of a minimum of 50 respondents due to lack of resources and funding. In South Africa, the upper class only comprises 14% of the population (South African Institute of Race Relations, 2000). A sample of less than 50 respondents is not advised as it will not truly represent the population (Henry in Saunders et al., 2007:208).
4.2 ASSESSING AND DEMONSTRATING THE QUALITY AND RIGOUR OF THE PROPOSED RESEARCH DESIGN
To assess the quality and rigour of the questionnaire, the research dealt with the two contributors discussed in detail below:
Validity
Validity is concerned with whether findings in a research study really are what they appear (Saunders et al., 2007:150). Findings could have measurement bias where data has been deliberately distorted or there might be changes in the way in which data is collected (Saunders et al., 2007:268). The following threats to the validity of the research are considered:
‘ History: The timing of the questionnaire may affect the way in which it is answered, for example, if the questionnaire is taken after the scandal of one of the well known companies.
‘ Mortality: Due to the study being a cross sectional one, there may not be enough respondents to the questionnaire during the collection period.
‘ Ambiguity about causal direction: there may be ambiguity in the causal relationship between the reputation rankings of organisations.
Reliability
Reliability refers to the ‘… extent to which data collection techniques or analysis procedures will yield consistent findings’ (Saunders et al., 2007:149). The threats of reliability in the study were limited as follows:
‘ Subject or participant error: A neutral time is chosen to conduct the survey where all the participants are expected to be more or less in the same mood.
‘ Subject or participant bias: there is privacy of the questionnaire in that it was sent via email.
‘ Observer error: A questionnaire is used in this case to avoid any error on observation.
In order to confirm reliability, the questionnaire should be pilot tested first before it is sent out to collect data (Saunders et al., 2007:386). The questionnaire is pilot tested and the responses provided to the researcher. According to Bell in Saunders et al., (2007: 268), one should always do a trial run no matter how pressed for time. In this research, the questionnaire is conducted in other developed countries such as the USA and proved to be a success (Oriesek 2004:4). The pilot testing is done according to Saunders et al.’s recommendation which suggests the following:
‘ The researcher should check each completed pilot questionnaire to see if the respondent understood the questions.
‘ The respondent followed instructions correctly.
‘ The respondent had no problems in answering the questionnaire.
The following guidelines are used to determine if the questionnaire is reliable and suitable as suggested by Bell in Saunders et al., (2007:387):
‘ time needed to complete the questionnaire,
‘ clarity of instructions,
‘ determination of which questions were unclear or misunderstood,
‘ clarity and appearance of layout and
‘ other comments.
As suggested by Saunders et al., (2007:386), respondents are interviewed to determine results.
4.3 RESEARCH ETHICS
According to Saunders et al. (2007:178), research ethics relate to questions about how the researcher should follow the research process in a moral and responsible way. In this section, ethical issues pertaining to different stages of the research process are considered during the research as suggested by Saunders et al., (2009:182’194):
‘ Ethical issues during design and gaining access: this is the most important stage when considering research ethics of the study as the research should not be designed with the intention of causing harm. Individuals have a right not to feel pressurised into doing something and if the researcher does not respect this, he will cause harm to the participant. The researcher should also not be seen to be causing harm by the nature and timing of the approach used towards the participant. Where a participant has agreed to participate in a particular data collection method, it does not imply consent about the way in which the data provided by the participant will be subsequently published; the researcher should gain permission from the participant first.
‘ Ethical issues during data collection: Once access has been granted by the participants, the research should remain within the parameters agreed on with the participants (Zikmound in Saunders et al., 2007:187). The participants have the right to withdraw from the participation and may decline to participate in a particular aspect of the research after they have agreed to take part in the research. The researcher should also exercise objectivity when collecting data and should avoid exercising subjective selectivity in the research.
Another possibility of serious ethical issues related to confidentiality and anonymity that should be avoided, is the use of internet and email during data collection as it may lead to the researcher forwarding the data of one participant to another.
‘ Ethical processes relating to analysis and storage: The maintenance of objectivity is important at the stage of collection and reporting to make sure that the data collected is not misrepresented by the researcher and that data is reported honestly. This includes not being selective about which data to report or misrepresenting its statistical accuracy (Zikmound in Saunders et al., 2007:192)
5 DATA COLLECTION AND STORAGE
Following the research methodology and ethical considerations above, the section below discusses how the data was collected and stored.
Due to lack of resources, the researcher collected the data. The survey was put on a website called www.surveygizmo.co.za. According to Saunders et al. (2007:358), using internet as a method of survey has the following advantages and disadvantages:
Advantages:
‘ Confidence that the right person can respond is high when using email.
‘ Likelihood of contamination or error is low.
‘ Sample can be large.
Disadvantage:
‘ Response rate may be as low as 11%.
5.1 ACCESS TO PARTICIPANTS
A researcher needs to consider barriers to gaining access to participants when planning for research and needs to plan accordingly in order to avoid them. According to Saunders et al. (2007:163):
‘ Gaining physical access to participants may be difficult as individuals may be too busy to do additional voluntary work.
‘ Confidentiality of the participant may pose a problem as they may not want their names to be disclosed for confidentiality reasons.
‘ Gatekeepers, such as management, may prevent the researcher from gaining access to the participants.
All of the above barriers have been prevented as the link to the questionnaire was emailed electronically to the participants. A generic email was sent to 97 participants with the link to the surveygizmo website. In the generic email, it was described that the respondent should click on the link to complete the survey. No password was required. For purposes of anonymity and confidentiality the emails were sent as blind copies to the different individuals, meaning the individuals could not see each other’s names.
5.2 RECORDING THE RESPONSES
According to Saunders et al. (2007:358), the time taken to complete a survey electronically ranges from two to six weeks. Based on this finding, the sample was collected over a period of four weeks.
The first completed questionnaire was received four hours after the first email was sent. A week after the first emails were sent out, a reminder was sent out to all outstanding responses. At this stage twenty two completed questionnaires had been received. Two weeks later, a second reminder was sent out to all outstanding responses. At this stage forty seven completed questionnaires had been received. Three weeks later, a third reminder was sent out and the responses were still at forty seven.
Exactly fifty questionnaires were completed by the fourth week, ninety one questionnaires were attempted and forty one questionnaires were partially completed.
6 ANALYSIS AND INTERPRETATION OF DATA
6.1 ANALYSIS OF DATA
While conclusions were drawn from this summary, the Department of Statistics at the University of Pretoria performed the bulk of the initial processing. The findings presented in this chapter were compiled from this research. The purpose of this section is to depict these findings in a factual manner. The analysis shown below is based on the top ten organisations listed on the JSE All Share Index as at 30 April 2010. The list of the top ten organisations is included in Appendix B.
In the process of determining the reputational rankings of the top ten organisations on the JSE, the scores were based on the reputational constructs listed below:
‘ profitability growth prospects,
‘ quality products,
‘ stakeholder appeal,
‘ quality leadership,
‘ good employees, and
‘ social responsibility programmes.
Each of the constructs above had underlying questions ranging from two to four depending on the importance of the construct. The constructs contributed to a total score of twenty.
7 CONCLUSIONS AND RECOMMENDATIONS
The purpose of this section is to draw conclusions and make certain recommendations based on the analysis of the survey and the literature review.
Conclusions
In this study, the research problem is that organisations are not managing their reputation risk. A questionnaire with twenty questions, adapted from the Harris Fombrun Reputational Quotient survey, was distributed to a working upper class sample of 50 respondents based in Gauteng. The main purpose of the survey was to determine the reputation status of the top ten organisations on the JSE All Share Index in South Africa.
In conclusion, the results of the survey clearly indicate that the top ten organisations on the JSE All Share Index in South Africa are managing their reputation risk. However, it was found in the analysis, that organisations are not managing their reputation risk at a 100% ranking as perceived by the respondents. Further analysis of the data analysis and interpretation section was done to indentify constructs that can be leveraged by the organisations to improve their reputation standing. These constructs were indentified and presented in the data analysis and interpretation section.
An analysis on the managing of reputation risk in organisations was conducted in the literature review section. From the literature review it can be concluded that the improvement of managing reputation risk in organisations could lead to coveted business such as the increased sales, enhanced stock price and goodwill among stakeholders (Resnick, 2004:4).
A survey was conducted to determine the reputation status of the top ten organisations on the JSE All Share Index.
8 REFERENCES
Aula, P. & Mantere, S. 2008. Strategic Reputation Management: Towards a Company of Good. New York: Routledge.
Cerchiello, P. & Giudici, P. 2010. Ordinal Statistical Models to Assess Reputational Risk. [Online] Available from: www-3.unipv.it/dipstea/workingpapers [Accessed: 2010-06-09].
Crotty, A. 2007. Tiger Brand’s Price’Fixing:a Drop in the Ocean. Business Report, 27 November. [Online] Available from: www.busrep.co.za./general [Accessed: 2009’07’25].
Dolphin, R. 2004. Corporate Reputation: A Value Creating Strategy. Corporate Governance, 4. [Online] Available from: Emerald: www.emeraldinsight.com.innopac.up.ac.za [Accessed: 2009-06-18].
Dowling, G. 2006. Reputation Risk: the Board’s Ultimate Responsibility. Journal of Business Strategy, 2. [Online] Available from: Emerald: www.emeraldinsight.com.innopac.up.ac.za/Insight/View/ContentServlet; jsessi [Accessed: 2009-04-14].
Eccles, R.G., Newquist, S.C., Schartz, R. 2007. Reputation and its Risks. Harvard Business Review, 85(2). [Online] Available from: Pubmed: www.ncbi.nlm.nih.gov.innopac.up.ac.za/pubmed/17345684 [Accessed: 2009-05-23].
Firestein, P. 2006. Building and Protecting Corporate Reputation. Strategy and Leadership, 34 (4). [Online] Available from: Emerald: www.emeraldinsight.com.innopac.up.ac.za. [Accessed: 2009-05-23].
Fombrun, C. J. & Shanley, M.1990. Whats in a Name? Reputation Building and Corporate Strategy. Academy of Management. [Online] Available from: Jstor: www.jstor.org.innopac.up.ac.za/stable/256324 [Accessed: 2009-05-23].
Fombrun, C. J. 1996. Reputation: Realizing value from the corporate image. Boston: Harvard Business School Press.
Forstmoser, P. & Herger, N. 2006. Managing Reputational Risk: A Reinsurer’s View. The Geneva Papers, 31. [Online] Available from: Palgrave: www.palgrave-journals.com. [Accessed: 2009-05-23].
Gitman, L. J., Smith, M. B., Hall, J., Lowies, B., Marx, J., Strydom, B., Van der Merwe, A. 2010. Principles of Managerial Finance: Global and Southern African Perspectives. Cape Town: Pearson/Prentice Hall.
Griffin, A. 2008. New Strategies for Reputation Management: Gaining Control of Issues, Crises and Corporate Social Responsibility. London: Kogan Page.
Harris Interactive. 2010. [Online] Available from: URL: www.harrisinteractive.com/NEWS/. [Accessed: 2009-05-23].
Haywood, R. 2005. Corporate Reputation, The Brand and the Bottom Line. 3rd edition. London: Kogan Page.
Hendrikse, J. & Hendrikse, L. 2004. Business Governance Handbook: Principles and Practice. Cape Town: Juta Academic.
Johannesburg Stock Exchange .2000. [Online] Available from: URL: www.jse.co.za [Accessed: 2009’08’28].
Kabat, M. 1983. Management Policy in South Africa: Text and Cases. 3rd edition. New York: Oxford University Press.
Kapelus, P. 2002. Mining, Corporate Social Responsibility and the ‘Community’: The Case of Rio Tinto, Richards Bay Minerals and Mbonambi. Journal of Business Ethics. [Online] Available from: www.springerlink.com.innopac.up.ac.za/content/hg3ldv6rd8j4cj6p/ [Accessed: 2009-06-18].
Khan, J. & Shaikh, S. 2009. A phenotype reputation estimation function and its study of resilience to social attacks. Journal of Network and Computer Applications. [Online] Available from: www.elsevier.com/locate/jnca [Accessed: 2009-06-18].
King Committee. 2009. King III Report on Corporate Governance. Institute of Directors in Southern Africa. [Online] Available from: URL: www.iodsa.co.za/products_reports.asp?CatID=150 [Accessed: 2011-01-28]
Larkin, J. 2003. Strategic reputation risk management. Hampshire: Palgrave Macmillan.
Leedy, D. P. & Ormrod, J.E. 2005. Practical Research: Planning and Design. 8th edition. New Jersey: Pearson.
Melewar, T. C. 2008. Facets of Corporate Identity, Communication and Reputation. London: Routledge.
Morley, M. 1998. How to Manage Your Global Reputation: A Guide to the Dynamics of International Public Relations. Revised and Updated Paperback Edition. Hampshire: Palgrave.
Morley, M. 2002. How to Manage Your Global Reputation: A Guide to the Dynamics of International Public Relations. Revised and Updated Paperback Edition. Hampshire: Palgrave.
Neef, D. 2003. Managing Corporate Reputation and Risk: Developing a Strategic Approach to Corporate Integrity Using Knowledge Management. New York: Elsevier Butterworth’Heinemann.
Oriesek, D. 2004. Maximising Corporate Reputation through Effective Governance: A study of Study of Structures and Behaviours. Florida: Dissertation.com.
Power, M. 2004. The Nature of Risk: The Risk Management of Everything. Balance Sheet Journal, 12. [Online] Available from: Emerald: www.emeraldinsight.com.innopac.up.ac.za [Accessed: 2009-06-18].
Rayner, J. 2003. Managing Reputational Risk: Curbing Threats, Leveraging Opportunities. West Sussex: Wiley.
Resnick, J. 2004. Corporate Reputation: managing corporate reputation’applying rigorous measures to a key asset. Journal of Business Strategy, 25(6). [Online] Available from: Emerald: www.emeraldinsight.com.innopac.up.ac.za/insight/view/content [Accessed: 2009-05-23].
Saunder, M., Lewis, P., Thornhill, A. (eds) 2007. Research methods for Business Students. 4th ed. Essex: Pearson Education.
Scott, S.V. & Walsham, J. 2005. Reconceptualising and Managing Reputation Risk in the Knowledge Economy: Toward Reputable Action. Organization science, 16(3). [Online] Available from: Organisational Science: orgsci.journal.informs.org/cgi/content/abstract/16/3/308 [Accessed: 2009-04-14].
Shedden, J.P. 2006. A Qualitative Approach to Financial Risk. Master’s thesis. University of Pretoria. [Online] Available from: UPeTD: http://upetd.up.ac.za/ETD-db/ETD-browse/browse?first_letter=A; browse_by=yd=department [Accessed: 2008-04-10].
Siano, A., Kitchen, P.J., Confetto, M.J. 2010. Financial Resources and Corporate Reputation: Toward Common Management Principles for Managing Corporate Reputation. An International Journal, 15. [Online] Available from: Emerald: www.emeraldinsight.com/1356-3289.htm. [Accessed: 2010-06-09].
Zboron, M. 2006. Reputational Risk in the context of A.M. Best’s Rating Analysis. The Geneva Papers, 31. [Online] Available from: Palgrave: www.palgrave-journals.com. [Accessed: 2009-06-18].