Corporate reputation just got uber important: why you need to take the public value test

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26/09/2017

Managing your reputation is like locking the stable door after the horse has bolted.

Corporations operate in a landscape rife with threats to their reputations.  With threats coming from any angle, inside or out, companies are often caught unawares by small fires that turn into raging infernos thanks to the oxygen effect of social media. Then if your story is reported in the press, you’re already into a crisis communications meltdown and your reputation is toast.  BP, (Gulf of Mexico oil spill); Volkswagen (‘Deiselgate’ now shaking up Germany’s car industry), and the latest debacle, Uber (TfL in London revokes the company’s licence citing ‘lack of corporate responsibility’). Regardless of your views on this latest reputational disaster, the impact is undeniable.

Reputational disasters are a long time in the making

The big consulting firms have studied reputation, developed strategies and then created coping strategies when things go wrong. Most agree that endemic and systemic problems in the company’s culture, inherent flaws in the business model and dereliction in leadership can take a business to the brink of brand and financial ruin. Behind the particular incident that catches fire, lies a catalogue of failures. Which is why managing your reputation is a little after the fact. What’s needed is a proactive approach and a new model to assess and measure where you are.

What makes an organisation valuable to society?

The University of St. Gallen in Switzerland under the leadership of Profession Timo Meynhardt has developed a “Public Value Scorecard” (PVSC) and states that the public value lens is above a narrative or performance notion. Public value creation can be seen as a contemporary attempt to articulate how organisations contribute to the common good. This approach is resonating around the globe in both the public and private sectors and stimulating a number of different concepts. It’s a key question. What value are large organisations bringing to society? And, when they are getting it right, how can and should businesses build trust and gain legitimacy within society? The Public Value Scorecard is used to help organisations understand and increase their value to society. This is a different notion to corporate reputation and takes a rounded view of contribution in the broadest sense.

The concept of public value

Wikipedia describes the concept well – “Public value is not limited to the public sector but widely adopted by private sector companies that want to maintain a license to operate and understand what implications new strategies and projects might have in terms of public value creation or destruction. Public value acknowledges that established business paradigms such as customer value or stakeholder value risk overemphasising certain aspects of business’ value contribution to society at the expense of other important dimensions. It pledges for a redefinition of the entire notion of value creation as it takes utilitarian and hedonistic as well as political and moral aspects of value creation into account”. 

Public value lies in the eye of the beholder

In a comparative study, the American psychologist Seymour Epstein identified four basic human needs, on which the four public value dimensions are based according to Meynhardt. The Public Value Score Card is a simple but powerful framework.

1.  Task fulfilment – basic need for orientation and control

As individuals, we strive to understand our environment and predict the cause-effect relationship. Associated with this is a need to orientate ourselves in our environment, to understand it in its context, and to maintain and/or broaden our scope for maneuvering. In order to evaluate an action from this perspective, it is necessary to assess its usefulness to achieve a goal. The object of the evaluation is a relationship between ends and means. Hence, an instrumental-utilitarian value aspect is pivotal. (This is also the conceptual link of an economic value concept which expresses value as financial-economic figures. Value measured in monetary units is, in the narrow sense, no value in respect of individual basic human needs, unless it is specifically identified as an instrumental-utilitarian value.) The instrumental-utilitarian value dimension generally draws attention to the immediate need. An organization can contribute to this aspect of public value if, in the eye of the beholder, it is successful in its core business. The organization fulfils its task by creating a noticeable benefit with its products and services.

2. Social cohesion – basic needs for positive relationships

Individuals strive for acknowledgement and cohesion in a social collective. They search for a sense of belonging and group identity, but simultaneously they also search for a balanced relationship between closeness and distance. The need for positive inter-human connections aims at the human “social nature.” The need for acknowledgment in social relationships is higher than the individual’s need to be acknowledged as a moral being. The focus is therefore on group acceptance and the associated experiences. From this perspective, the dominant evaluation point of view is a socio-political one, which turns values, like solidarity, cooperation, power, sense of status, and group identity, into topics of discussion. Organizations contribute to these socio-political value dimensions when, in the eye of the beholder, their actions and conduct advance social cohesion.

3. Quality of life – basic need for pleasure and avoidance of displeasure

We strive towards positive emotional experiences and the avoidance of pain. Initially, the need broadly aims at the avoidance of pain and at gaining positive experiences. This evolutionary, deeply anchored need is directed at survival and at a secure livelihood as an organism. Through cultural transformation, this need develops into a need for pleasure and even further into a need for aesthetic experience. Thereby, this fundamental evaluation viewpoint aims at hedonistic-aesthetic values, for example, security, beauty, fun, joy, as well as general wellbeing and experiences of happiness, which are expressed in various ways, also on the collective level. In the eye of the beholder, organizations contribute to this value dimension by contributing to the quality of life and providing us with positive experiences as individuals.

4. Morality – basic need for self-worth preservation and growth

Individuals strive towards a positive self image and a strong feeling of self-worth. As individuals, they want to be appreciated and fairly treated. This need focuses on the perception of a person and, thus, also of the individual. This is referred to as moral-ethical evaluation, because it broaches the issue of the evaluation aspect within the social environment, to what extent an action or decision leads to more equality or inequality; or whether something applies to all humans (in a self-defined context) or not. An action is always morally valuable (“decent”) if the individual sense of justice is not violated, confirmed, or even strengthened. If, however, a person experiences a discrepancy about what she/he considers appropriate, just, and fair, the emotional-motivational anchored feeling will be destroyed and the discrepancy will be classified as “immoral”. In any case, this evaluation is always in relation to the self-concept as a person and, thus, one’s self-image and self-esteem. On a societal-collective level, established values, like human rights, human dignity, and the autonomy of the individual, are essentially moral-ethic values. They endeavor to define the characteristics of a person as a human being if his or her individuality and self-understanding are addressed. In the eye of the beholder, an organization behaves morally valuable and, thus, decent, if this organization enables an individual’s positive self-worth, thereby creating value focused on the individual. This is the foundation of the morality dimension.

Results of the study using this methodology in the German survey in 2015 make for interesting reading.

The Public Value Score Card is a strategic tool to allow you to hold a mirror to your organisation and take the broadest view of how you may be perceived, identify where your strengths and weaknesses lie and propose areas for redefinition. If you are looking beyond ‘managing your reputation’ and want to take the long view on value creation then the public value framework may be the route you need to take.