Scales for Measuring Corporate Reputation

Managers, academics, and stakeholders often need to compare and contrast corporate reputations across companies and/or over time. Yet corporate reputation is a socially constructed, intangible asset. Thus, not surprisingly, managers, academics, and other stakeholders face several challenges when measuring corporate reputations.

Researchers have developed several effective ways to measure corporate reputation using scales. Scales are measurement instruments given to a sample of respondents who represent a population of interest, for example, different stakeholder groups. The purpose of the scale is to measure this focal sample’s opinion, perceptions, or attitudes. Specifically, scales consist of multiple items with multiple possible responses to each item. This enables researchers to capture complex attitudes and opinions reliably and validly.

Defining corporate reputation is the first and critical step before deciding how it should be measured. The definition should guide the appropriate choice of scale. This entry provides a brief history of corporate reputation measurement and then describes the different considerations in developing scales for measuring corporate reputation. The third section highlights some of the most visible corporate reputation scales, with a discussion of the corresponding considerations. The entry closes with some guidelines for using the existing scales.

Background

Although the concept of reputation is ancient, the systematic measurement of corporate reputation began fairly recently. Fortune Magazine published its first “America’s Most Admired Companies” (AMAC) list in 1984. Business Week began publishing its rankings of U.S. business schools in 1988. These two magazine rankings of organizations spawned a new industry of corporate reputation measurement. Their annual issues outsell other issues, provide longitudinal data for managers and scholars to compare and contrast organizations over time, and inform other stakeholders about the organizations’ ability to meet the expectations of various stakeholders. In some ways, subsequent reputation scales, rankings, and ratings have been developed in reaction to Fortune’s AMAC, which evolved into the “World’s Most Admired Companies” (WMAC) list. Table 1 contains the corporate reputation scores for the top 10 firms as measured by Fortune, Harris Interactive, and the Reputation Institute using their WMAC, RQ (Reputation Quotient), and RepTrak Pulse scales, respectively, in 2015.

Table 1 2015 Publicly Available Corporate Reputation Scores: Top 10 Companies

It is important to distinguish between the scales, which are measurement tools, and the scores that are compiled and published by some media organizations. For example, a company’s managers could use Fortune’s WMAC ratings to compare its reputation with competitors over time. Or the managers could use the nine items that constitute the scale to measure the reputation of their company and a different sample of companies and/or respondents. In other words, both academics and practitioners can use scales that have been developed by others to measure corporate reputation with the company and the respondent sample that they choose. In doing so, these researchers need to understand the characteristics of the scale and how its developers designed it to be used. These characteristics or considerations are outlined in the next section in terms of considerations.

Publications have developed numerous scales and rankings to measure different perceptions of firm performance, such as the best places to work, the most innovative companies, and so on, because these scales and rankings sell issues and drive the public to their website. The considerations described in the following section could be used for other scales. However, herein, the focus is on measures of overall corporate reputation as opposed to scales that measure a company’s reputation for a specific attribute, such as a good place to work or innovation.

Considerations in Corporate Reputation Scales

Scales are incorporated into questionnaires that often include other scales and items, such as those that measure demographic characteristics. Researchers have numerous decisions to make, including, but not limited to, the sample of organizations, the sample of respondents, the method of distributing the questionnaire, other items included in the questionnaire, and the method of analysis. These are important considerations because the scale should be written at the appropriate level for the respondents; be developed to be appropriate for the choice of medium—for example, computer-assisted telephone interviews, pen and paper, or the Internet; and contain items appropriate for the kinds of companies. In addition, if the researchers plan to use the scale in different countries, they must ensure its cross-cultural validity. The differences in rankings across the three columns in Table 1 illustrate how researchers’ choices can affect corporate reputation measurement.

Organization Sample

Most definitions of corporate reputation implicitly describe it as a measure relative to other organizations. A company’s reputation may be relative to others in its industry or relative to all companies in a particular geographic location. Whether using existing scores or measuring a new sample with an existing scale, the set of organizations with which a company is compared is a critical part of the assessment. In addition, the scale items need to be appropriate for the organization sample. For example, a scale item assessing profitability may not be appropriate for a state-owned enterprise in China, especially if the respondent sample did not have access to the information. Most publicly available corporate reputation scales and scores only include in their sample companies of a certain size, because the public is most likely to be familiar with and interested in the largest companies.

Respondent Sample

The decision about the respondent sample mirrors that for the organization sample. Whose opinion or perception is important to the researcher or practitioner? Some existing scales and scores are developed for use with industry insiders and executives; others are designed for use by the general public or a specific stakeholder group. Respondent samples may differ on how much information they have about companies, which information is most important, and how they perceive the information. For example, financial analysts may weight financial performance as more important, compared with consumers, who weight corporate social responsibility as more important. In addition to determining whose opinions or perceptions matter, it is important to check that the scale items align with the respondents.

Items

As discussed earlier, the scale items need to be appropriate both for the organization and for the respondent. In addition, researchers need to consider whether the scale is constructed from a set of synonyms for reputation, like most scales used in psychology, or is constructed from a set of items that compose reputation, like most scales used in economics. Corporate reputation can be measured either way. However, this choice can affect how respondents use the scale and relative rankings. Table 2 presents the scale items of nine corporate reputation scales discussed in this entry, including the abridged versions for two of them. For example, the RepTrak Pulse comprises 4 items that are close synonyms with reputation. Responding to this scale requires less knowledge than for the RQ, which measures different types of firm performance with 17 performance items plus 3 synonym items. The number of items is related to the choice of how the items are constructed. Researchers must make a trade-off between brevity and comprehensiveness. Table 1, which contains publicly available reputation scores for 2015, illustrates some of these differences. The following scale descriptions include a discussion of the scale items.

Survey Distribution

Questionnaires can be distributed in person, via the mail, via computer-assisted telephone interviews, or online. Increasingly, market research companies have switched to online panels of respondents. The choice of distribution medium affects the ease with which items can be rotated and the appropriate scale response options. For example, 5-point scales are easier for respondents to use in phone interviews, while 7-point scales, which collect more refined information, are appropriate for online surveys. When using a scale in different countries, the researchers may have to use different distribution formats depending on telephone and Internet access and use.

Cross-National Surveys

Increasingly, practitioners and academics are interested in corporate reputations among stakeholders in different countries. Yet the scales may not necessarily be useful in different countries. It is important that the scale examines whether the items are appropriate given differences in language, information availability, stakeholder expectations, and other aspects of national environments. For example, differences in Spanish across countries may require that different Spanish-language versions be used in Spain, Mexico, and Colombia. By law, Canadian respondents would have to be offered English- and French-language versions. Furthermore, different French versions would have to be developed for Canada and France.

Corporate Reputation Scales

For many years, Fortune’s AMAC scale was the only publicly available scale and ranking system. Companies with high scores issued press releases or even posted the recognition on their websites or products. For example, Delta Airlines has posted the recognition next to the boarding door of its airplanes. Academics used the scores in many types of research across academic fields. Articles were published that complemented and critiqued it. In this section, nine different scales are profiled. Table 2 shows a list of items for each scale.

Table 2 Corporate Reputation Scale Items

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Fortune’s “America’s Most Admired Companies”

The AMAC scale consists of eight items about different aspects of corporate performance. Fortune’s research partner, the Hay Group, distributed the survey to industry members and analysts. The company sample consists of the largest publicly traded companies in each industry. Because the items represent different aspects of performance, they may or may not be correlated. For example, a company could be perceived as innovative but not environmentally responsive. However, numerous researchers found that the items were highly intercorrelated and also highly correlated to financial performance. Some critics wondered if the respondent sample could complete the scale critically without being influenced by financial performance. The AMAC survey data were published from 1984 to 2008.

Fortune’s “World’s Most Admired Companies”

The popularity of the AMAC led Fortune and the Hay Group to develop a related scale to measure the reputation of corporations beyond the United States. The WMAC scale debuted in 1997. The nine items included the eight AMAC items plus an item on global competitiveness. The respondent sample was expanded to include industry insiders and analysts in other countries. Neither Fortune nor the Hay Group has addressed the cross-cultural validity or reliability of the WMAC scale. Subsequently, in 2011, Fortune ceased publishing the AMAC list. Over time, the WMAC sampling has changed. In 2015, the Hay Group surveyed 668 large companies (with sales of $10 billion or more) from 29 countries. Respondents included executives, directors, and analysts. Interestingly, of the 50 WMAC, only 8 were headquartered outside the United States: BMW, Singapore Airlines, Toyota, Samsung, Nestlé, Unilever, Volkswagen, and Accenture (now headquartered in Ireland).

Although some researchers are critical of the items and the sampling frame, MAC (AMAC and WMAC) remains the longest longitudinal database of corporate reputation, with about 25 years of reputation scores, and reflects the views of financial insiders and industry leaders.

Organizational Reputation Scale

Timothy Coombs and Sherry Holladay developed one of the first scales on organizational reputation in 1996. Their scale was based on the concept of character. Organizational reputation is associated with trustworthiness and goodwill—that is, acting in the interests of others. At the time, the scale was called organizational image, but this was before the term corporate reputation was used in the communication field. It was first applied in the context of organizational crisis. A few items are reverse coded; the items should be highly correlated. To this date, no evidence of cross-cultural validity has been presented.

Reputation Quotient

The Reputation Institute and Harris Interactive, the public opinion polling organization, created the RQ in the late 1990s. The scale’s development included focus groups in the Asia-Pacific region, Europe, and the United States. Items were translated, tested, and validated in about 15 countries, including Australia, Belgium, Denmark, France, Germany, Greece, Italy, Japan, the Netherlands, Norway, South Africa, Sweden, the United Kingdom, and the United States. The RQ consists of 20 items constituting six dimensions of corporate reputation. However, its content validity has not been possible to establish in certain national contexts because some items important to certain countries were not included in the scale.

Based on stakeholder theory, the researchers increased the number of items to better capture different dimensions of corporate behavior important to different stakeholder groups. Seventeen items measure perceptions of firm performance, while three are based on synonyms. Harris Interactive used state-of-the-art public opinion polling to capture the perceptions of the general public.

Distinct from other publicly available corporate reputation scores, the RQ uses a nomination phase, rather than size, to identify the company sample. Thus, the RQ measures the reputations of firms with very visible reputations—good or bad. This is apparent when comparing the 2015 rankings reported in Table 1. The highly ranked Wegmans Food Markets and Publix Supermarkets are regional grocery store chains rather than multinational corporations.

The Wall Street Journal published the first RQ studies in 1999. Subsequently, the Reputation Institute and Harris Interactive published numerous studies spanning different countries and industries in the Wall Street Journal until 2007 (based on the 2006 results). Although validated cross-nationally, as of 2015, Harris Interactive was using and publishing the RQ summary data only for the United States. In 2015, Harris Interactive published a list of the reputations of 100 of the most visible companies. See Table 1 to compare the rankings of the 2015 MAC, RQ, and RepTrak Pulse studies.

The MERCO Index

The MERCO Index (Monitor Empresarial de Reputación Corporativa, referred to in English as the Spanish and Latin American Monitor of Corporate Reputation) was developed in Spain in 2001 and is the result of cooperation between the Complutense University of Madrid and different financial media partnerships in each country (Colombia, Argentina, Chile, Ecuador, Bolivia, Brazil, Mexico, and Peru). The purpose of the exercise was to create a reputation ranking for Spanish and Latin American companies that would overcome the methodological weaknesses of other international ratings.

The index’s method is based on two strategies: (1) triangulation methodology and (2) the use of criteria for specialized populations. Results are triangulated because they aim to combine the data received in surveys of stakeholders with specialist audits of the objective merits of companies. Although evaluations are dominated by the information received from highly informed groups (executives, financial analysts, consumer associations, trade unions, journalists, etc.), they also incorporate the opinions of the general public and employees.

Schwaiger’s Formative Measure of Corporate Reputation

Manfred Schwaiger understands reputation as an “attitudinal construct,” meaning that when a person evaluates a company, he or she expresses a disposition to act accordingly. Treating reputation as an attitude means revealing its dual nature: cognitive and affective. That is why two reputational factors called competence and sympathy are considered. The model identified four sources that generate reputation: (1) quality, (2) performance, (3) social responsibility, and (4) attractiveness. The approach has been validated in Germany and China and has even been applied to nonprofit organizations.

Helm’s Formative Measure of Corporate Reputation

Parallel to Schwaiger’s work is Sabrina Helm’s formative measure. Prior to Schwaiger’s and Helm’s studies, all the scales presented were based on the reflective approach. Reflective models are usually employed for measuring psychological constructs such as motivation, satisfaction, or corporate reputation. Signaling theory supports the reflective approach because informational attributes are signals, or reflections, of the underlying attitude. Reflective form assumes that the observed indicators are a reflection or representation of a construct. In the formative approach, indicators cause the latent variable (i.e., they are the elements whose combination forms this latent variable). The indicators do not have to correlate in order to construct an unobserved variable.

The formative research approach supports a mixed model. The model’s exogenous variables, such as rational reputation, should be formative, while its endogenous variables should be reflective. The formative mode clearly determines the impact of each predictor on the endogenous variable, something that the reflective mode is unable to achieve. By using this approach, it is possible to measure the impact of each indicator on building reputation. The scale’s structure combines two levels: (1) the level of indicators and (2) the level of global reputation. The weights of the indicators are established by means of partial least squares regression, which uses a question about reputation as the dependent variable: “Does Company X have a good or bad reputation with the public?”

The 10 items echo items appearing in prior scales with the exception of the item “credibility of advertising claims,” which adds more of a marketing or communications tone to the scale. To narrow the items, the author interviewed stakeholders, ran focus groups with students and academics, asked 12 academics to perform an item-sorting exercise, and distributed questionnaires to German consumers. The scale was designed so that items would not be synonymous or highly correlated. Some researchers have concerns that the measure may have too few items to measure corporate reputation across different stakeholder groups.

RepTrak and RepTrak Pulse

In 2006, the Reputation Institute launched a pair of complementary scales that operate in tandem to measure corporate reputation. The RepTrak methodology was jointly developed by Charles Fombrun—along with his research team, who previously had designed the RQ—and the Foro de Reputación Corporativa (today called Corporate Excellence—Centre for Reputation Leadership), a group forum established by Spanish companies in 2002 to professionalize the strategic management of intangible assets. These two worked together to develop the complementary scales following a research study to create a tool capable of measuring reputation as perceived by different stakeholders (employees, shareholders, customers, and the general public) that would be instrumental for its management and valid within different cultural contexts. The RepTrak Pulse is a 4-item scale that aggregates respondents’ emotional attachment to companies. The RepTrak is a 23-item scale that aggregates perceptions of different areas of corporate performance. These scales allow the researcher to tease out the most important drivers of corporate reputation for different stakeholder groups across different countries. Thus, the Reputation Institute attempted to balance brevity and comprehensiveness using two different scales. Both the scales were validated in more than 40 countries across six continents.

The RepTrak research focuses on determining the structure of the various weights attached to attributes and dimensions. The weights structure streamlines the calculation of the RepTrak Index, both in terms of components, such as the indices constructed by averaging out the values of corresponding indicators, and in terms of the general index, calculated as a linear combination of the seven dimensions.

Similar to the RQ, the RepTrak and RepTrak Pulse were designed to be used with specific stakeholder groups or the general public. The Reputation Institute releases results of both international and industry-specific studies. Its researchers then analyze the results to understand how corporate reputation drivers differ across stakeholder groups and countries.

Building on its experience with the RQ, the Reputation Institute revisited how the public thinks about and constructs corporate reputation. For instance, most have an overall emotional response to organizations with which they are familiar. They know that they admire or trust an organization. The Reputation Institute named the scale the RepTrak Pulse because it captured the emotional component (the “beating heart”) of corporate reputation. The Reputation Institute measures and publishes the RepTrak Pulse scores of 100 large companies across 15 large countries each year. See Table 1 for the 10 highest-ranked firms in 2015.

The RepTrak scale complements the RepTrak Pulse scale by taking a deeper dive into the components of firm performance. Stakeholders report their perceptions of different aspects of corporate performance, such as financial performance, social performance, and treatment of employees. The RepTrak captures stakeholders’ perceptions of 23 items regarding performance in seven dimensions. It is similar to the RQ but with additional items that examine transparency, governance, and innovation.

Customer-Based Reputation

The RQ, RepTrak, and RepTrak Pulse scales were developed to measure overall corporate reputation across stakeholder groups. Building on the RQ, the customer-based reputation (CBR) scale was developed by Gianfranco Walsh and Sharon Beatty to capture perceptions of one primary stakeholder group. The authors believed that perceptions, interests, and the values of stakeholders were different and at times conflicting and, for this reason, it was natural to develop rational measurement tools specifically for each stakeholder group, as in the case of the CBR scale.

The CBR comprises 28 items nested within five dimensions: (1) customer orientation, (2) good employer, (3) reliable and financially strong, (4) product and service quality, and (5) social environmental responsibility. Subsequently, an abridged version of the CBR was validated in Germany, the United Kingdom, and the United States. The abridged version is configured on only two levels: attributes and factors. This framework facilitates identification of the company’s strong and weak points since it determines factors that are better or worse in the eyes of the customer. The abridged version consists of 15 items similarly nested in five dimensions. The short form is not as comprehensive as the original CBR but places fewer demands on respondents, especially if it is used in a long questionnaire.

Guidelines for Using Various Scales

The nine corporate reputation scales described in this entry represent research efforts in communications, management, and marketing. Five scales are associated with annual surveys of corporate reputation that are published in the media and on the sponsors’ websites. With the exception of the actual number of items, the nine scales share more similarities in the items than differences. Whether using the publicly available scores or incorporating these scales in one’s own research efforts, it is important to choose the scale with the items most appropriate for the company and the respondent sample. For example, if the scale were to be used in multiple countries, the researcher would need to use a cross-culturally validated scale such as the RQ, RepTrak, or RepTrak Pulse or run a pilot study to ensure that the scale is appropriate.

To highlight specific considerations, refer to Table 1. Column 1 presents the rank in the top 10 for the three studies in 2015. Column 2 contains the Fortune MAC results. The company sampling frame is based on size and prior ranking. The respondents are industry insiders and analysts from a worldwide sample. The 10 highest-ranked companies are all headquartered in the United States. The MAC scale is the only scale with an item on “effectiveness in doing business globally.” An oddity is the inclusion of Southwest Airlines, whose only foreign markets are Mexico and the Caribbean (as of 2015, its foreign markets did not even include Canada).

Column 2 presents the results of the annual RepTrak Pulse 100, which uses the four-item scale based on synonyms of reputation and emotional attachment. The annual study samples the general public in 15 countries accounting for 75 percent of the world’s gross domestic product. The company sample is based on size. The top 10 ranking includes one Danish firm, two German firms, two Japanese firms, one Swiss firm, and four U.S. firms. With the exception of Intel, all are consumer-oriented companies.

Column 3 presents the 2015 RQ top-10 ranking. The company sample is derived from a nomination process using the general public in the United States. This unique characteristic allowed L. L. Bean—a family-owned business—as well as two regional grocery store chains to be included in the sampling. Samsung is the only foreign company among the top 10.

In conclusion, despite the challenges in measuring intangible assets, researchers have developed several viable corporate reputation scales. They vary considerably in the number of items and the use of synonymous or independent items. Whether using publicly available scores or incorporating the scales in independent research, practitioners and academics should review the scale’s appropriate audience, its cross-cultural validity, and appropriate statistical methods.