The Truth About Financial Performance and Reputation

The Performance of a company has mostly alluded to its financial health and trajectory. Whether or not the company stands for a purpose greater than profit, all companies strive to meet and exceed their financial goals. Financial performance is how companies measure the security of their business—the foundation for all other company operations.

While it isn’t the only driver of reputation, Financial Performance is an important contributor to a company’s corporate reputation score. In the RepTrak system, Financial Performance is one of seven drivers of reputation (along with Workplace, Leadership, Citizenship, and others). How stakeholders perceive a company’s Financial Performance is instrumental in building the company’s perception and ultimately helps maintain the business while driving its economy, talent acquisition and retention efforts, customer loyalty, and so much more.

RepTrak delivers answers to the following Financial Performance questions

• Does the perception of a company's Financial Performance meet the current reality?

• How much do financial metrics matter in driving a company's reputation?

• How does this reputational impact of Financial Performance differ by key market, stakeholders, and industries?

When it comes to reputation, stakeholders don’t expect high performance only for the sake of profitability—they want to know that a company is capable of running an efficient, high-scale enterprise. So, we know that a company’s perceived financial success affects other drivers of reputation such as Products and Services, Workplace, and Leadership. The greater the company’s Financial Performance, the greater the credibility of the company’s investment and work across the remaining drivers.

In our 2019 Global RepTrak study, Google, Amazon, and Walt Disney are the three highest-rated companies when it comes to Financial Performance. When consumers think about whether they are willing to purchase their products or invest in these companies, they will take into consideration the degree to which they trust they will receive a high-quality product or how robust their investment choices feel. As three of the strongest corporations, Google, Amazon, and Walt Disney inspire trust and security in consumers’ choices; they believe that any interaction with these companies will be professional, efficient, and come with top-tier service

What's more important than Financial Performance?

It is important to note that Financial Performance is a driver that usually does not rank in the top 3 most impactful drivers of reputation. Even so, it still drives 12.9% of a company’s reputation, and it can drive reputation even more significantly depending on specific stakeholders, companies, markets, or industries. For example, in China, Financial Performance ranked 3rd in importance. Given that most large corporations fare well in performance and profitability, Financial Performance is mostly important in managing reputational risk. If a corporation were ever to suffer related to its finances, the rest of the drivers of reputation are likely to see declines.

Elements of reputation are interconnected

Reputation may be a more or less intangible concept, but it is built upon the backbone of corporate success: Financial Performance. Excellent company performance indicates a stable company that is growing, which is a quality of a strong reputation. Financial Performance may surprisingly not be the #1 driver of a company's reputation, but it does impact the rest.

Jenny Cho Associate The RepTrak Company [email protected]