“Rateocracy” and Corporate Reputation

Real-time ratings will raise stakeholders’ expectations of businesses.

By Robert Moran

Today, consumers rate sellers on eBay, restaurants on Yelp, and local companies on Angie’s List, providing detailed product reviews online. Job hunters and employees can read and rate employers on Glassdoor.com. College students rate their professors on ratemyprofessors.com. Neighbors and friends can view each other’s reputations (and their own) at honestly.com. And Facebook’s more than 800 million users can endorse a product or organization by “liking” it.

Soon, we will also rate corporations on their behavior and have real-time mobile access to the aggregated, stakeholder-generated reputation scores of nearly every corporation on the planet. We will use this information to reward and punish companies by buying their products or spurning them. We will have entered into a completely new era of corporate reputation, one in which reputation is radically transparent and extremely valuable.

I call this new era Rateocracy because it will combine real-time ratings within a transparent and democratic structure.

All the necessary technologies and building blocks are in position to create a real-time, reputational rating system for corporations. Current rating systems will be knit together, and “ratestreams” will become as significant as “clickstreams” are today.

Corporations will closely track the rise and fall of their reputational “credit rating.” They will begin to draw the link between their numerical reputational rating and growth, profitability, and employee retention.

Corporate reputation, something that has been traditionally tracked on an annual basis, will have entered an entirely new era—the Rateocratic era.

Rateocracy will be numeric and transparent, providing real-time data that push corporations to “live their purpose.” It will also increase public expectations, creating a virtuous “race to the top,” forcing businesses to compete in areas they may have never competed in before.

Corporations in the Rateocracy Age

While there will be many unforeseen impacts from this new age of corporate reputation, there are at least nine implications that will flow from Rateocracy. These are:

1. The New Balance of Power. Customers, suppliers, and employees will gain power in this new era of Rateocracy. And, relative to these groups, the corporation will lose power as it controls relatively less of its own reputation.

2. Role of Corporate Leader. The CEO of the future will need to work harder to align the corporation, its employees, and stakeholders around a shared vision. It will be increasingly difficult to sweep customer service and employee morale problems under the rug. CEOs of the Rateocratic era will have nowhere to hide, so they will have to be strong communicators and even better listeners. They will have to be as transparent as the new era.

3. 24/7 Reputation Management. While corporate reputation grows in strategic importance for firms, the tactical, day-to-day management of reputation will become critical. Corporations will build reputational dashboards that aggregate multiple rating sites and information flows, including customer relationship management (CRM) data. The key will be managing reputation in real time by improving the quality of interactions with the firm and intervening before unhappy stakeholders voice their concerns on rating sites. This will undoubtedly boost the size of the current reputation management industry.

4. Feedback Loop. Much has been made of Peter Senge’s ideas around a “learning organization” and Henry Mintzberg’s “strategy as learning.” Life in this new age of corporate reputation will present the corporation with the tightest possible feedback loop across its entire stakeholder footprint. Some corporations will find unique ways to harness this information for competitive advantage, using their rapid learning as a core competency.

5. Employees as Leading Indicators. With employees already participating in rating their employers on sites like Glassdoor.com, we can assume that these internal rating systems will only intensify and that other stakeholders will look to these internal ratings as a leading indicator of business health. Employee assessments will function as the canary in the coal mine. This is already beginning to happen. As just one example, Oracle CEO Larry Ellison has a 78% job approval from the 1,011 Oracle employees who have rated his performance on Glassdoor.

6. Statistical Projectability. How close will these aggregate ratings of a corporation’s reputation track with statistically representative survey data? Given limited participation in most rating sites at the moment, we can only assume that this data is not yet robust enough to match rigorously collected survey data. But, as participation in these sites increases, the data should begin to converge. Even then, however, survey-based stakeholder data will still be needed to track a corporation’s reputation among critical, but small, stakeholder communities and as an independent check.

7. Great Expectations. Stakeholder expectations of corporate behavior will likely play a large role in the scores corporations receive. But expectations will vary by industry, region, and situation. For example, consumers have very different expectations of quick service versus formal dining restaurants, and those expectations will be factored into their ratings. Moreover, we already know that people in different cultures rate subjects in surveys differently. We can anticipate that aggregated, open-source corporate reputation data will reflect these cultural differences. And finally, we can expect that the macroeconomic situation as well as the track record of the company will impact its ratings.

8. Information Trends. As these reputational information sets evolve and converge, corporations will need to better understand seasonal trends (e.g., retailers getting a reputational bump from consumers during back-to-school shopping, but taking a reputational hit during the Christmas rush), reputational cycles, and event-driven data spikes. For example, in the future, corporations will ask why a one-week rise in employee ratings occurred. The data will show a spike, but the cause or causes will need to be determined. Was it positive earnings news announced by the CEO, the new announcement on operations safety, the preceding three-day weekend, or a combination of each?

9. Rateocracy Meets Augmented Reality. At some point late in this decade, corporate reputation ratings systems and augmented-reality layers will begin to merge. Layar, the Amsterdam-based creator of the world’s first mobile augmented-reality browser, is already turning mobile phones into devices that enrich the visual environment of the user. When augmented reality and Rateocracy merge, corporate reputation data will be superimposed onto a company’s geographically based assets.

Consumers will be able to purchase many different augmented-reality layers that enrich the visual overlay on their smartphones. These layers will “paint” companies’ buildings based on aggregated reputation scores. For example, imagine an augmented-reality layer available on a smartphone that aggregates all Yelp restaurant rating data at the corporate and individual store level. This augmented-reality layer will flash red for a restaurant with poor reviews and an abundance of health department citations, but will flash green for a restaurant with stellar reviews. This will play out across all storefront businesses.

Game Changer?

Some will contend that Rateocracy is an entirely new ballgame for corporations. But, in many ways, it is a very old ballgame and one that predated the large industrial societies of the nineteenth and twentieth centuries. As anyone who has grown up in a small, rural town can tell you, a local business’s reputation is very well known. There aren’t many secrets in small-town life. It was only since the advent of large cities, national markets, and labor force mobility that a level of anonymity arose.

Rateocracy can be viewed as a tectonic power shift toward technology-empowered stakeholders, but it can just as easily be viewed as the construction of a digital village in which a business’s reputation returns to the immediacy of small-town life.

Robert Moran is a partner of the Brunswick Group, an international corporate communications partnership. He may be reached at rmoran@brunswickgroup.com.