October 2001 vol.1 no.

the
Mount Vernon Report
Issues Affecting Re putation Management and Strategic Communication

A Year of High Hopes and High Anxiety

As children, we first lear ned math through a simple conce pt: If Mary has six apples, and she
gives three to John and two more to Sally, how many apples does she have left?
T hat rudimentary problem stands as an apt metaphor for CEOs and corporate communicators.
In this year of high anxiety, there simply are not many apples left. Our challenge is to succeed
with what we are given, not wring our hands and wish for more.

From a business perspective, a year full of high hopes and expectations stumbled into the doldrums of a slowing economy and now has been
sorely injured under the weight of sorrow, despair, terror and war. The future is unpredictable, as we have been tragically reminded. But as
evidence of the perseverance and tenacity of the American spirit is seen in community groups, civic halls and neighborhoods throughout
the country, so too is it seen in American business. Companies are responding to the tragedy by re-assessing, re-shaping and re-establishing
themselves securely in their markets. The short-term future is what businesses must divine as they look for ways to communicate with their
key audiences in the days and weeks ahead.
{ S E E A N X I E T Y- P G 4 }

Personal Perspective
The events of September 11 have brought out the best of America’s ideals, hopes and aspirations. What was intended
to divide us, in fact, has brought us closer together. Many obscure companies and countless individuals have
demonstrated uncommon valor. By their deeds, they have earned our lasting respect and trust – and the reward
of enduring reputations.

As I walk across the Boston Common each morning on my way to our offices, I am reminded of the history this city
has shaped. Boston has been called the Athens of America because, like the ancient Grecian city, it is a birthplace of
{SEE PERSPECTIVE- PG 4}

The Reputation Puzzle Building a Corporate Reputation

“Perception is reality” is an old cliché that has great influence over
a company’s reputation – especially when dealing with a weak
stock market and the negative news or sentiment that comes with
it. For 2001, the “reality” is that profits in all industries are down
sharply from one year ago and numerous Fortune 1000 compa-
nies have laid-off employees. Yet while the dollars and cents value
of a company may be sinking, its reputation can still soar.
{SEE PUZZLE- PG 2}
Fortune’s most admired companies have two things in common: They
have performed well and their performance has been noted. Corporate
reputation is a combination of both perception and reality.
Seeing this list, some are undoubtedly wondering why superior per-
formance at their company went unnoticed. It could be that they
have been invisible, hiding their business success and good works.
{ S E E R E P U TAT I O N - PG 3}

{ P U Z Z L E - cont. from pg. 1}
The dictionary states that reputation is the
general estimation in which a person or entity
is held by the public. In the business world,
that definition is altered slightly to include
other audiences and factors. For example,
Charles Fombrun, executive director of
The Reputation Institute says, “A corporate
reputation is a perceptual representation of a
company’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.”
Most experts agree that presuming good
product or performance is constant, a com-
pany’s reputation is built on word-of-mouth
references, positive energy, momentum, profits
and employee satisfaction.
Reputation can be thought of as a jigsaw
puzzle- a composite of hundreds of different
interlocking pieces that don’t carry tremen-
dous value as individual components, but
when linked together, create a clear image, a
vibrant portrait, a palpable feeling and an
overall impression. And, because the public
takes away impressions – big and small – to
form an opinion, establishing measured
benchmarks and understanding the correlation
between reputation and business perform-
ance has become an increasingly important
corporate goal.
Fortune magazine and Roper Starch
Worldwide, a global marketing research and
consulting firm, recently collaborated on a
first-of-its-kind “Corporate Reputation
Index.” The Index rates companies across
multiple key components including:
• Quality of management
• Quality of products/services offered
• Innovation
• Value as a long-term investment
• Wise use of corporate assets
• Ability to attract, develop and keep talented
people
• Responsibility to community and/or
environment
The Fortune/Roper endeavor is revolution-
ary because, unlike prior isolated studies on
reputation, the Corporate Reputation Index
provides a specific set of criteria for use in
the objective evaluation of any company’s
reputation. But while these components are
no doubt important criteria, they slight two
other key pieces of the reputation puzzle:
the
Mount Vernon Report
Business Performance and Conduct Of
Business. And, the distinction between the
two is critical. Reputations are made or lost
on the latter, not the former.
Business performance is a strictly financial
measurement that may falter at times due to
market volatility, an out-of-favor sector or
simply a bad business decision. It is a numer-
ical snapshot of how well a company is doing
at a finite point in its long history. Over the
long haul, it has very little to do with reputa-
tion. After all, as many great companies
discovered this year, bad business news is
sometimes beyond a company’s control. How
they handle the news is not.
The way a company conducts its business,
however, provides a more textured picture of
{ }
Think of the companies you admire. Why are they
at the top of your mind? Is it because they are
extremely profitable? Or do you admire a company
because of the feeling they conjure up in your
mind when their name is mentioned?
the actions, ethics and candor displayed in
both times of fortune and of distress. It is the
consistency of word and deed that employees,
customers, vendors and analysts have come to
rely on – the feeling and emotion evoked with
the mere mention of the brand.
The rewards of consistent corporate behav-
ior can yield great dividends, too:
• A reserve of goodwill built by companies
that habitually “do the right thing”
• The loyalty and devotion of true allies
(customers, analysts, vendors, partners, etc.)
who will continue to support and/or shelter
the company from potential negativity and
cynicism during times of crisis
• More motivated and dedicated employees
• And, an increase in revenues over the long term
Take a moment to think of companies you
admire. Why are they at the top of your
mind? Is it because they are extremely prof-
itable? Or do you admire a company because
of the feeling you get when their name is
mentioned? A 1998 survey by Fortune
pg.
2
found that “companies with the highest rep-
utation rankings had an average annual
return of 22.2 percent increase, including
dividends, far outperforming the Standard &
Poors 500, which had a 16.3 percent return
during the same period.” Conversely, compa-
nies ranking the lowest on Fortune's
reputation survey had a negative return
of 1.7 percent.
Sometimes – although not often – companies
with strong reputations no longer have to be
making a profit. Amazon.com and Yahoo!
proved this early on in their existence. And
today, both are ranked among the top 30
companies in the Corporate Reputation
Survey conducted by Harris Interactive and
The Reputation Institute. Over time, every
company must become profitable – but
residual goodwill and positive reputations
can sometimes buy them the time they need
to meet financial expectations.
The foundation for a good reputation is laid
at the outset of any kind of corporate com-
munication. The circumstances of a compa-
ny’s news (good or bad) will dictate the tone,
manner and substance of the delivery.
The main reason that a company with a good
reputation enjoys increased success is because
people know about them. Their constituen-
cies are aware of their civic involvement,
corporate philosophies, products, conduct
of business and economic challenges. In
essence, the company has made a point to
communicate all their good deeds, successes
and failures, openly and honestly.
The bottom line, however, is that corporate
reputations are not made by osmosis. The
ingredient puzzle pieces must be effectively
communicated to key audiences for the
whole picture to take shape. So, perhaps the
old cliché should be updated: Without per-
ceptions, there is no reality. "
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{ R E P U TAT I O N - cont. from pg. 1}

Or it could be that their competitors have defined their reputation for them. There is a saying in the public relations business: “If you don't tell
your story, someone else will.”

Ensuring that perception is aligned with business reality is the mission of the public relations profession. In the 17 years that Fortune has been rank-
ing corporate reputations, managing a company's perception has become increasingly challenging. The proliferation of information and media, intense
public scrutiny and constant corporate change has created confusion, distrust, and cynicism that erode the reputations of American businesses with their
employees and external publics. But why care…unless reputation contributes to a company's business or stock performance.

It does. Business experience and research has demonstrated time and again that a good repu-
tation helps a company sell its products, recruit the best and the brightest, and attract the
most desirable business partners. One of the clearest examples of that impact is a survey of
high income Americans who were asked how they would behave with respect to companies
with reputations as “winners”.

Reputation also influences performance in the financial markets. For the past several years,
Yankelovich researchers have been working with Fortune to survey their subscribers to track
the impact of reputation on stock price. They defined a “corporate equity” score that repre-
sents a weighted combination of awareness, familiarity, overall impression, perceptions and
likelihood to engage in supportive behavior. In this year's study, companies with high corpo-
rate equity had 12 percent higher P/E ratios than those with low equity. For the average
Fortune 500 company, that translates into a market capitalization increase of $5 billion.

How does a successful company get credit for being a winner and build a high corporate equity? It takes a long-term building of relationships with a wide
variety of audiences from customers to competitors, shareholders to Senators. Some audiences have a particularly strong influence on others. Employees
make that all-important first impression on customers. Because they do not have a stake in the company, the media, stock analysts and other third parties
have strong credibility. And since they have access to and acceptance by many other audiences, gaining their support is both efficient and effective.

Convincing skeptical third parties is the primary – and toughest – job of public relations, particularly when things are not going well. A strong reputa-
tion is like an insurance policy, money in the bank for a rainy day. It probably won't help a company avoid a nasty story in the newspaper, but it may
keep it to a one-day story rather than the contin-
ued hemorrhaging in the media that can take a
toll on a company's sales, stock price and strategy.

Building the relationships that preserve company

reputations in good times and bad requires
pro-active communications. There is a direct
correlation between high levels of corporate
equity and the frequency that a company’s
publics hear about it.
Sources of Information

While a company benefits by telling its story

proactively, success in communicating depends
on more than volume and frequency of messages. The public is saturated with a mind-numbing information overload and a clutter of advertising. Today,
strategically targeted communications and strong and lasting relationships with each of a company’s audiences must build reputations.

Communications and relationships have taken on a new and increasing importance as intangible assets represent more and more of a company’s total worth.
Not just reputation, but intellectual capital, employee commitment, public trust, and corporate brands are corporate assets that must be developed and pre-
served for business success. "
Reprinted with permission from The Council of Public Relations Firms.
pg.
3
 “
{ A N X I E T Y - cont. from pg. 1}
A man’s judgment is best when he can forget himself and any reputation he may have acquired
and can concentrate wholly on making the right decisions.

In the wake of the Sept. 11 terror attacks, four hurdles now confront
~ Raymond Spruance

anyone hoping to use the media to deliver their messages:
Weaker Economy: We have been thrust into a recession, and the primary
and secondary economic fall-out from the attacks and counter-attacks
will put advertising, marketing and public relations budgets through the
wringer, as companies cut their budgets further in a last-ditch bid to
make year-end numbers.
Less Advertising: Paid advertising was plummeting before the terrorist
attacks, as witnessed by the demise of many media outlets. Since ads deter-
mine the amount of space for news and features, there will be less space for
both across the media spectrum. And, since ads pay the media’s overhead,
there will be even fewer reporters and editors to pitch. Communicators will
need to be more focused and targeted and attuned to what is news.
Media Overload: Journalists are human beings too. They have families.
They have anxieties. A disruptive atmosphere of this immensity causes
them to question their priorities and adversely affects their ability to focus.
For newspapers, in particular, a story of this magnitude is just plain hard
to cover. Reporters and editors will be increasingly difficult to reach, not
just physically but mentally. And there is no sign of a respite for them.
The Next “War:” Just when the relief and recovery stories run their
course, a prolonged, multi-disciplinary “war” against terrorism will begin
worldwide. This campaign will take so many forms – military attacks,
clandestine operations, diplomatic and economic tactics – and will occur in
so many places over such a prolonged period that it will require an unprece-
dented level of coverage, especially among print and broadcast media.
If you haven’t been thinking strategically about what you hope to
accomplish on the communications front for the remainder of 2001
and early 2002, now is a good time to start.
”
Take newspaper business pages, for example. They will have less space
due to less advertising, and they have been and will continue to “lose”
pages to news sections that need more room. Much of their remaining
business-technology section space will be eaten up by economic cover-
age. Only the biggest (or baddest) business news will make the cut.
Broadcast media will be virtually impenetrable.
Long-lead periodicals are in an unenviable position. Already competing
for shrinking ad dollars, they now face daunting editorial decisions. If
you are an editor approaching deadline for a monthly publication in a
world changing this fast, how do you assign content that won’t be hope-
lessly irrelevant when you publish in a month or two? Only the most
compelling and evergreen stories will have a prayer of securing coverage.
Technology trade magazines will remain a relatively good pitch target, but
they too will suffer from dwindling advertising. With topical case studies
and solid, accessible customer references, coverage can still be had if you
are creative and aggressively fight your way through the growing crowd.
Taking advantage of editorial calendar opportunities will gain importance.
Industry verticals – the media often shunned as too pedestrian by many
PR pros– will now become the pitching target of choice. No media is
closer to your customer. That’s the good news for B2B plays. The bad news
is that the offline and online versions of these publications are small and
minimally staffed, and they will quickly become overwhelmed with a wave
of news and feature opportunities.
It’s clear that the final quarter of 2001 will find traditional third-party
influencers more difficult to reach than ever before. But the business
world cannot and will not shut down. Savvy CEOs and their communi-
cations counsel can meet these new challenges by taking the most direct,
most targeted and most efficient routes to their key audiences. "

{ P E R S P E C T I V E - cont. from pg. 1}

noble ideas that tend to reverberate throughout society and around the globe. It is known as a hub of intellect, business and commerce, especially in
the areas of academic research, financial services, high technology and medicine. Those who live and work here are reminded every day that enlight-
ened thinking can effect massive change.
You are holding the first issue of The Mount Vernon Report, a quarterly publication in which the staff of Morrissey & Company, and other repu-
tation management experts, hope to share knowledgeable advice. More importantly, we hope to inspire thoughtful dialogue, intellectual discourse, cre-
ative ideas and innovative strategies– the kind of special ideas that will successfully shape your business as well.
We aim to make this report a living, breathing example of our commitment to the best practices in strategic communications. From our offices on
Mount Vernon Street in the Meeting House on historic Beacon Hill, we invite you to share in this dialogue. "

• Two-thirds of all CEOs would prefer “infre- • Fifty-three percent of CEOs would turn first
What CEOs Think quent but positive” media coverage, while 22 per- to PR to manage their company’s reputation --
cent want “regular, widespread” coverage and 12 besting management consultants (17 percent),
There were some surprises when chief executives
percent want no media coverage at all. marketing experts (13 percent), advertising exec-
from among the top 5,000 U.S. companies were
utives (7 percent) and lawyers (1 percent).
asked to connect the dots between public
• Two-thirds of CEOs believe a company’s repu-
relations and corporate reputation. Among the
tation is its most important asset. An additional • Nearly the same proportion (54 percent) con-
eye-opening results: Only 16 percent of CEOs
21 percent consider reputation as important as sider PR to be either “very important” or
believe the Internet makes it harder for them
strong earnings. “important” to boosting corporate stock price.
to manage their company’s corporate reputation
and public image; 49 percent said the Internet
• More than 90 percent of CEOs say their own • Nearly three-quarters of all CEOs believe that PR
makes that job easier. Other interesting responses
public image is either “important” or “inextrica- is either “very important” or “important” to boost-
from the PR Week/Burson-Marsteller 2000
bly linked” to their company’s overall reputation. ing product sales and creating brand awareness. "
CEO Survey:

The Mount Vernon Report is published by Morrissey & Co., an independent strategic communications and public relations firm headquartered at 121 Mount Vernon Street, Boston, MA 02108.
Further commentary or response to any of the topics discussed in this issue is welcomed and should be directed to 617-523-4141 or via email to peter@morrisseypr.com.

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