The Importance of Non-Financial Metrics When Measuring PR’s Value

For years, critics have disparaged PR for its alleged inability to prove its value.

In response, PR measurement gurus now recommend that PR measure its results in relation to company goals.

Most companies focus on sales growth, earnings and return on investment (ROI) as key metrics to measure progress. As a result, many in the PR community now concentrate their measurement efforts on financial outcomes by measuring PR’s impact on the sales funnel.

Financial impact matters, no question, and demonstrating the impact of PR on sales growth can certainly impress executives. But other criteria are also important – and can deeply affect the success of a business. When assessing PR’s value, non-financial metrics count – a lot – and must be included in the PR measurement strategy.

Reputation management is at the top of the list of non-financial factors.

Importance of Reputation Management

“Although reputation is an intangible concept, research universally shows that a good reputation demonstrably increases corporate worth and provides sustained competitive advantage,” states Kim Harrison, principal of Cutting Edge PR.

A Burson-Marsteller survey indicates that 95 percent of chief executives believe corporate reputation, also called the company’s “good name,” is important or very important. Yet only 19 percent have a formal system in place to measure the value of their corporate reputation.

That perplexing discrepancy could come about because executives are busy with immediate issues and reputation is intangible, complex, and difficult to quantify.

Yet, corporate reputation is the most valuable asset the board and shareholders entrust to a CEO, according to Drexel University LeBow College of Business. The university states that:

• Reputation risk is the No. 1 risk concern of CEOs globally, according to an Aon Insurance study.
• Reputation builds competitive advantage. Studies show that organizations with better reputations do better financially, attract and keep talent at lower costs, have lower costs of capital, and more easily gain support from government and other stakeholders in times of need.
• Every organization has a reputation, whether or not they help shape that reputation. Organizations that do not manage their reputations will have it managed for them by competitors and critics.

Corporate reputation stems more from what a company does than what it says. It reflects the public’s level of trust in the organization.

The elements of corporate reputation include:

• products and services,
• financial performance,
• workplace environment,
• social responsibility,
• vision and leadership, and
• emotional appeal.

By gaining widespread recognition for what the organization does, PR can move the corporate reputation needle to higher levels and deliver all the tangible and intangible benefits of an improved corporate reputation.

PR can and should supply the data and analysis to help the CEO understand positive or negative changes in the various elements of corporate reputation and their impact on the business. Connecting the improvements in corporate reputation to PR results can make a persuasive case for the value of PR.

How to Measure Corporate Reputation

Commercial market research organizations such as the Harris Poll Reputation Quotient conduct annual surveys on reputation of major corporations, measuring multiple factors that impact corporate reputation. Harris’ methodology can be applied to customized surveys for specific corporations and their competitors. The surveys can be conducted internally or outsourced to market research services. Measuring over multiple years provides critical insights on trends. Measuring against competitors provides benchmarks.

Traditionally, PR counted media mentions, or tracked clips, in an attempt to quantify its value, and corporate reputation remained a difficult-to-track intangible. But now media monitoring and measurement services, such as CyberAlert, measure reputation through sentiment analysis. The systems track media and social media mentions of companies and analyze tone of the content to determine if the media mention is negative, neutral or positive.

The media mentions with sentiment analysis can be sorted into the different factors that go into corporate reputation. Measuring reputation separately for each segment can deliver insights on strong and weak points in the overall corporate reputation.

Those insights can then point decision-makers to areas where changes in how the company does business will markedly affect how the public perceives the company. VisionEdge Marketing points out that financial metrics are trailing numbers that report past activity while non-financial metrics can predict a company’s financial performance. Non-financial metrics are critical to understanding the public’s perception of the company and often provide a valuable and distinct perspective of the company’s position.

Bottom Line: Over-emphasizing the importance of ROI and other financial factors can be a mistake when attempting to measure PR’s contribution to corporate success. To properly quantify PR’s value, executive leaders must take into account reputation management and other key non-financial factors.