Reputational Value | What has HR Done to Add Value?

Reputational value has both an internal and external focus. Internally, it is about whether people think this is a great place to work, whether they would recommend people to work for the organisation, whether they speak highly of the organisation publicly. How this translates into value is whether people's regard for the organisation makes them want to go the 'extra mile' — whether they are prepared to give high levels of discretionary effort to get the job done — and whether organisations are able to hold on to those people, 'key talent', they need to. This is a key component of employee engagement and, we believe, an under-emphasized facet of the employer brand. Externally, it is about how multiple stakeholders (shareholders, customers, governments, potential employees, etc.) perceive the organisation and whether it is an organisation they want to do business with. In the 'war for talent' reputation differentiates employers. How differentiation is achieved is through the employer brand, good governance, corporate social responsibility, public reporting and leadership. In the public sector, public value can also be added to this list.

John Kay, one of the UK's leading economists, has argued that reputation is one of only three bases on which companies in developed economies can compete (the others being brand and knowledge) — and that all three rest on an organisation's ability to develop strong trust relations with multiple stakeholders. We all know that good reputations take many years to develop but a very short time to destroy.

What does this mean for HR? This is probably the area where HR functions have the most work to do. Below we identify four implications.

First, the kind of employer you are matters — not just for current employees but to multiple stakeholders. How you communicate yourself to the public matters. Ethics, social responsibility and corporate stewardship count.

Second, there will undoubtedly be an increasing requirement for greater public reporting on the people aspects of organisation — whether mandatory or voluntary. Whether we call these people profit and loss accounts or human capital accounts is immaterial. Greater public scrutiny of the investment made in people will be a feature of greater regulation and an enhanced role for government in the economy. An example of this is the increasing requirement on firms tendering for government contracts to report on measures to ensure non-discrimination at work.

Third, corporate governance will receive stronger attention, particularly executive compensation. Organisations will need to be more accountable than ever before about the way people, especially senior executives, are rewarded.

Fourth, employer branding will become a key way for organisations to differentiate.

Robert Peston, the BBC's Economics Editor, expressed well the challenges faced by organisations in driving reputational value when he wrote (8 December 2008): 'Those running our biggest commercial businesses will have to be more visible. They'll have to manifest a genuine understanding not only of the anxieties of their employees but of all taxpayers. Those chief executives who succeed will be those who imbue in their businesses very simple, commonsense standards of decency. And they'll almost certainly be paid less for doing so'.

An example of how an organisation has taken deliberate steps internally to build reputation (to address both an internal and external audience) is at KPMG. We present this case study below.

Case Study

KPMG in the UK has won the Sunday Times Best Big Company to Work for three times in the past 5 years, winning in consecutive years 2008 and 2009. These awards are based largely on the views of KPMG employees. This level of external recognition was not always the case. Back in 2004 KPMG UK faced significant obstacles to achieving its goal of becoming the best professional services firm experiencing significant retention, morale, people management and development issues. In response Managing for Excellence was introduced and stands at the heart of KPMG's people strategy. Its aims are straightforward — to professionalise the way people are managed: to embed effective line management. What it has achieved in practice marks a culture shift in the way that people are managed and developed: moving the focus from process compliance to a people centric. The results have been dramatic not least a halving of employee turnover and year on year increases in employee engagement. As Rachel Campbell, Head of KPMG's Global People, Performance and Culture and partner in the UK firm says 'Achieving sustainable competitive advantage is all about attracting, developing and retaining diverse talent and doing it better than our competitors. Our people strategy is not just about securing competitive advantage, it's also about defining what sort of firm we are, what we stand for. It's about doing the right thing by people even when it's difficult — especially when it's difficult. It's about being open, honest, fair, consistent, fulfilling promises, keeping confidences. All of these are important in their own right and they are all at the heart of Managing for Excellence'.