Sleight unseen: Are companies making the most of their intangible assets? Brittany Golob examines the relationship between corporate reputation and share price

Abracadabra. Magic, illusion, deception, intangible. The enchanting trickery of the hidden captivates the mind. Magicians on stage rely on misdirection to achieve their illusions, to encourage their audiences to believe in real magic. Communications relies on a similar magic to turn reputation, something intangible and elusive, into a way for a business to create a sustainable, successful strategy. Enchanting, indeed.

Communicators don’t employ the sleight of hand, misdirection trickery that the performer will, but their so-called big reveal is just as impactful – it can prove to a business and its stakeholders that public perception, and other intangible assets, have a real, tangible value.

James Parsons, joint MD at communications and investor relations consultancy, SAS London, says of reputation, “For your brand, that’s a really important thing. And to be seen as a safer investment, some of that’s intangible. You only see that in the share price going up. It’s about how you influence people and being very transparent about what you do and what it is.”

Reputation is inherently linked to share price. There are countless estimations of the monetary value of intangible assets, like reputation, often in the billions or trillions of dollars or pounds. Kevin Murray, chairman of the Good Relations Group, a communications strategy firm that produces the Triple G research into the value of reputation, says it’s probably somewhere around $35 trillion when the value of the stock market amounts to $60 trillion. As he points out, that’s a lot of zeroes. Reputation Dividend, which measures the value of corporate reputation, found that in 2013-14, intangible assets in the British indices are worth £840bn out of an overall market value of £2.36 trillion. A lot of zeroes.

There’s value in the unseen, the intangible. Making sense of the intangible asset of corporate reputation is a job that falls squarely on the s h o u l d e r s of corporate communications.

Simon Cole, founding partner of Reputation Dividend, says, “How it’s rated on independent factors such as those will determine where a company needs to direct its corporate communications to secure the value it’s already got or to grow incremental value. By helping people understand the value of corporate reputation, we can help people look after it. It roots corporate communications in what is there for: building that corporate reputation.”

Intangibles lend way to three factors: trust, authenticity and relationships. Trust, trusted source Merriam-Webster, defines as the belief that someone or something is good, reliable, honest, effective. Reputation is built on that foundation. Measuring trust is another thing entirely.

In his introduction to the Edelman Trust Barometer, one of the long-standing pillars in the measurement of intangibles, CEO Richard Edelman writes, “Trust will be conveyed to those companies and industries that recognize the need to move beyond transactional thinking toward better understanding of the tangible actions that will solve the issues we face.”

Murray says he trusts his wife of 37 years inherently, but he would not trust her to install software onto his computer. “Trust is a generic word. The issue is what do you trust them for? And what do you need to trust them for?” He breaks the concept of trust down into more tangible elements: brand, relationships, communications.

Brand is likely the single most prevalent tangible manifestation of trust in the business world. And there are those who devote time and resources to measuring the value of the brand and the value of trust in a brand. Global brand consultancy Siegel+Gale is one. It measures brand simplicity to appraise brand and show the correlation between simplicity and share price.

The Global Brand Simplicity Index (GBSI) points to a $50bn gain in the U.S., UK and Germany for companies that embrace simplicity. Take EasyJet, a perennially popular consumer option for its low prices, however scored poorly by the GBSI It ranked 94th, down from 80 in 2012, due to a misleading brand promise.

There are many brand valuation studies, all of which approach the measurement and evaluation of brand in a different way. There’s no mistaking that brand has value, though. Carolan Davidge, director of communications at Cancer Research UK, says, “We have always known the importance of brand. Charities might not have always called it ‘brand,’ we might have called it ‘reputation,’ we might have called it ‘profile.’ But I think that as a charity, we’ve always known that how we are perceived by our many and varied audiences will fundamentally either unlock our ambition or it would stand in the way of us achieving it.”

Murray adds, “You can’t inspire people to trust you unless they understand who you are and feel that you’re authentic.” Brand communications lend a sense of authenticity to a company. For Oxfam, that extended internally as well as new CEO Mark Goldring sought to build trust in him as a leader during a period of change. He set out to inspire his workforce. It worked, says head of internal comms Saskia Jones, “He’s authentic and accessible and we just keep building on that,” resulting in trust in Goldring’s stewardship.

Authenticity on the leadership level is necessary to build trust, particularly among the internal audience, but the business itself has to be authentic with its stakeholders. Ben Lloyd, senior director of Millward Brown Corporate, which puts out the BrandZ rating, says, “Businesses now have learned from businesses 10 years ago or a generation ago; authenticity underpins everything.”

Authenticity, or being ‘real and genuine,’ according to Merriam-Webster, can be achieved through conversations with stakeholders. Many companies have realised, maybe from stagnant share prices and dipping reputation levels, that the broadcast technique of communications is not effective in an always-on world.

International pharmaceuticals giant GSK learned that lesson before the London 2012 Olympics. Director of digital communications Simon Quayle says the Olympics marked a turning point for the brand as its sponsorship of the anti-doping centre was one of the biggest awareness-building activities in recent years. He says one of the goals was to create a “Greater consistency and cohesiveness about the brand and to be clearer with employees and stakeholders about who we are and what we stand for. It was about moving forward with this refocused brand.” On the Reputation Dividend scale, GSK’s intangible assets were worth £34.823m in 2012-13, a value that jumped to £39.948m this year – good enough for fourth-best brand. 

That change in thought around corporate communications led to a reevaluation of the company’s digital assets. With the help of comms and brand consultancy Radley Yeldar, GSK relaunched its corporate website with a focus on local market customisation and user experience. Quayle says, “The way I look at this is that the corporate website is one of a number of channels telling the world who we are and what we do, helping us to manage our company reputation. What the website does is gives us an owned space, but operating social media channels gives us a more interactive way of being transparent by communicating directly with stakeholders.”

Though the website and the recent inquiry into GSK’s suspicious activity regarding corruption are unrelated in terms of cause and effect, the website shows a move toward transparency. Richard Coope, digital director at Radley Yeldar, says, “It can’t clean up an image for GSK that’s obviously been under the spotlight. You can’t clean that up overnight, but you can revamp a website to align to your brand to create a consistent brand experience and get that makeover and get it delivered quickly and effectively across your corporate real estate.” 

Consistent brand communications can build reputation, Coope says, “If there’s no consistency or coherence in its external appearance and it’s under the spotlight for reputation issues, it can encouarge an erosion of trust rather than raising it.” Quayle adds, “If you only ever have closed doors, that is not the way to build trust. You don’t give an appearance of transparency when all the doors are closed.”

Publicly-funded Cancer Research UK has to have a similar stance on transparency and authenticity. Says Davidge, “Charities have been under a lot of scrutiny in the last couple of years and I think its right that charities are scruitinised and need to be transparent about how we spend donors’ money. That’s right. But it also has meant more emphasis on needing to demonstrate the impact that we are making.”

This aura of openness is changing communications. Social media now falls under the purview of the corporate communications officer and ensuring a consistent strategy underlies all communications – digital, brand, social or traditional alike – is and has always been the role of the corporate communicator. But change is prevalent as a response to the ways in which reputation impacts a company in a tangible way. Share price is linked to reputation. For years, says Lloyd, that was known, but never proven. It’s taken an influx of reputation and brand metrics and ratings to impress upon corporate leaders that reputation is their responsibility to manage. Those studies not only provide a value of intangible assets, but indicate the areas in which a company can work in order to improve reputation. That has made the life of the communicator easier because, says Cole, “Communicators can spend less time arguing the case and spend more time doing things.”

Behind the mystery of intangible assets lies an audience traditionally tied to tangibles: investors. But the move in the past few years toward narrative reporting, storytelling and integrated reporting in investor relations indicates an interest in the sustainability of a business beyond its net profit and loss. Parsons says the risks are just as important as the positives in corporate reporting. Investors need to know what their risks will be when putting money behind a business. As Murray puts it, “Basically investors are taking a bet. They’re betting on your ability to give them a return on their investment. More and more investors are actually spending time looking into and trying to understand what state those intangible assets are in in order to take bets on the company’s future.”  

Parsons says a focus on intangibles in annual reports is a natural development because they form the foundation of a business’ operational and communications strategy. Private shareholders, he says, are looking for information about the business’ overall sustainability, a concept that includes CSR and environmental sustainability but also its relationships with suppliers and consumers, its internal culture, its innovation and efficiency and its ability to achieve what it promises to do.

That has the added benefit of mitigating potential crises. “When a business blows up in the press you can say, we were honest there. You can mitigate those situations much more going forward,” Parsons says. Such was the case with the investment community’s relative indifference to last year’s consumer tax scandal concerning Amazon, Google and Starbucks.

London Mining, an AIM-listed British firm operating in west Africa, was faced with low brand awareness among investors. It highlighted snippets of useful information about the business throughout its annual report. It focused on what the business’ purpose is and what it stands for; in antoher word, intangibles. That changed perceptions and, ultimately, increased share price.

Intangibles create market value. Jackie Nixon, head of marketing, Cisco UK & Ireland, said of participating in the Triple G research, “The way that we operate in the business and in the economy is key when people are making decisions: Where do they want to invest? Who do they want to partner with to succeed in the business world?” Business leaders are putting money into brand and corporate communications because, if done right, they make money. They raise the value of the company. As Murray says, $35 trillion is a lot of zeroes. Cole says, “It’s making the intangible tangible. Every part of a reputation is by definition intangible. You cant kick it, you cant touch it, but it’s impact is very tangible because it sits there in the share price.”

Reputational threats, the great unseen terror, can hide around every corner if a company does not actively mitigate them. Intangible assets, though seemingly illusory, can be defined, measured and turned into actions by a capable communications team. It’s not about creating something from nothing, but turning the unknown into the known, pulling the rabbit out of the hat. Abracadabra.