The link between reputation and profits

When you analyse a profit and loss statement, you’ll realise that there are only three ways you can boost a company’s profits - increase the quantities of sales, increase the sales price and finally slash costs.

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We have already seen from my previous two articles that selecting the right employees, giving them the right training, setting and measuring their right performance and finally giving them the right reward will boost a company’s profits.

What exactly do all these four factors have to do with the organisation’s reputation and how does it distil into profits? That we shall dive into today.

When you analyse a profit and loss statement, you’ll realise that there are only three ways you can boost a company’s profits: increase the quantity of sales, increase the sales price and finally slash costs.

What is reputation actually? It’s what a company’s customers, suppliers, employees, government, and public think of it. It can therefore be a good reputation, bad reputation or no reputation. Actually a zero reputation is equivalent to a bad reputation.

When a company has a great reputation, its customers will return to do business with it frequently and even buy more at each visit, too. They will tell their friends and family to patronise the company.

When your reputation is awesome, you will be able to sell at higher prices than your competition and your customers would gladly pay you because of the great customer experience you provide.

Analyse MAS and SIA airfares and will you be surprised that SIA can charge more than MAS to the same destination. SIA has a sky-high (pun intended) reputation compared to MAS and SIA customers are happy to pay such prices, but MAS’ will grumble and leave.

MAS used to employ based on job specifications but we all know that due to politics it has abandoned this and is paying the price.

Reputation and lower costs

A great reputation will help you negotiate with your suppliers for better prices. Why should a supplier want to do this? Simply because he would rather lower the price for a customer who has a better chance of sustainable business.

The longer a supplier’s customer will be a going concern, the more profits the supplier also makes in the long term.

That’s the basic link between reputation and profits.

Let’s now look at the four factors – right employee, right training, right performance and right rewards – and what they have to do with reputation. Probably you’ve already made the connection.

Right employee

Selecting the right employee, according to the job specfications, will help ensure that the chances of that employee making your customers ecstatic are much higher than just employing Ah Meng, Sukhvinder or Malik simply because they belong to the owner’s race or religious beliefs.

If the right employees are sales persons, they will help you increase sales. Furthermore, with a good reputation, it’s also easier to get more right employees to work for you. Who doesn’t want to work for a reputable company?

Right training

The right training is not a one-off event but a continuous effort and it’s also not just focused on certain functions, but also involves the entire company. The right training should be continuous because employees need their skills to be enhanced and learning never stops until you’ve expired.

In many Malaysian companies most employees are like zombies – the living dead for whom learning ended when they left school or college.

Continuous training ensures that your sales people continuously delight customers.

It will also ensure that your supply chain staff find ways to ensure optimal stock levels are maintained and they will also find innovative methods to reduce logistics costs. An accountant who is trained in the latest technology will be able to close the accounts before the deadline every month, accurately.

Right performance

When staff are told what is expected of them and how they will be measured, a company’s objectives are aligned from the CEO to the receptionist. The best motivator is performance feedback.

When people are motivated, they will take the initiative to increase sales and reduce costs, without the bosses hounding them. Such behaviour will go directly into jump-starting the company’s reputation.

Right reward

Pay people when they have performed well and they will stay and tell others how good the company is.

This will naturally increase the reputation of the company to those who hear about it. When people perform and are not rewarded, they’ll be actively looking to jump ship.

When this happens, it impacts the bottom line of a company because it will have to spend money and time looking for replacements and there will be opportunity costs involved because work is not done due to the vacancy.

The majority of Malaysian businesses don’t have pay-for-performance system. It’s a flat salary and it’s given at the end of the month regardless of the productivity. Eventually, the staff will just become automatons.

Any Malaysian company that fanatically implements these four factors is sure to become successful and have the confidence of venturing beyond Malaysian shores on their own. Think AirAsia.

Next week, we shall look at a critical strategic planning step most companies overlook that will boost their reputation.

James Pereira is a Reputation Marketing and Organisational Development Coach Consultant. He has spent more than 20 years in multinational companies in the areas of marketing, sales and organisational development. He was also the Deputy Dean of the Post Graduate School at a local university.