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A family vacation last week enabled me to catch up on my reading, including Fortune’s list of Most Admired Companies.  Billed as “the definitive report card on corporate reputations,” it’s only right we discuss it here. 

It’s always interesting to see which companies move up, fall down or appear for the first time, and attempt to interpret the root causes of changing positions.  In recent years I’ve noticed the “intangible” categories increasingly impacting positions on the list.  This year that impact appears even greater. 

An old business maxim dictated that influencers focused 80% of their attention on “the business”: asset utilization, competitiveness, financial performance, etc., and the other 20% was for those ’softer’ activities – thought leadership, corporate responsibility, brand development.  This year’s list shows that the ratio is more like 60/40, at least in terms of the elements we consider to be part and parcel of a strong reputation.  In some cases the ratio seems closer to 50/50.  In other words, influencers now give quite a bit of weight to things beyond the balance sheet, particularly when balance sheets are in disarray amidst today’s recession. 

I’m not suggesting companies should abandon focus on the bottom line in favor of the intangibles.  What I am suggesting is that companies are realizing that marketing the intangibles of reputation can in some cases be just as critical to long-term success.  Take Apple, which comes in at the top spot as the Most Admired Company. Apple ranked lower in categories like “Global Competitiveness” and “Long Term Investment” but did very well in the likes of “Innovation” and “People Management.”  Of course, part of Apple’s reputation comes from that of Steve Jobs – the very name is synonymous with innovation – and the brand awareness generated from its iPod publicity machine doesn’t hurt. 

Numerous other companies saw a jump up the rankings on the strength of intangibles like social responsibility, increasingly an aspect of a company’s personality scrutinized by consumers, customers, investors, and shareholders alike.

The trick to a potent reputation (and doing well on Most Admired rankings) is striking the right balance between the tangible and intangible…and between investor relations and reputation management.  There is no magic formula or ratio, but determining what is important to each of a company’s constituencies is a good place to start.

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PR Week (UK) reported yesterday that Microsoft will be “slashing” the PR budgets for its corporate social responsibility activities “in favour of driving awareness for key products such as Windows 7, Office and Xbox,” and that “the company was looking to ‘protect its business lines first’ – in response to this year’s economic upheaval.”

They noted that “across Europe and the UK, it is thought as much as a quarter of Microsoft’s citizenship PR spend is being shelved. Similar cuts have been made in Asia, while a source said pullbacks in global and US budgets were imminent.” 

Microsoft’s PR director said the claims were incorrect and that CSR communications remains an important focus area for the company.  Even still, their agencies in Europe and the UK are none too happy.  One “agency source involved in the process” said that budget cuts on the CSR front will ”hit hard at Mic­rosoft’s reputation as a committed advocate of long-term CSR policies.”

The article goes on to say, “Microsoft account dir­ectors at key agencies said specific programmes affected by the PR cuts include the Imagine Cup student technology competition and CSR work around human trafficking. Other PR budgets under threat include the BizSpark initiative that pairs start-ups with Microsoft software, and the Unlimited Potential community technology programme. ‘These initiatives will definitely happen, but PR support will go down, and a lot of the stories are driven by PR outreach,’ said a source.

It seems to me that the unnamed agency sources griping about cuts are missing a couple of key points. 

First off, corproate social responsibility is about outcomes, not outputs.  Microsoft isn’t cutting the actual socially-responsible programs or abandoning their commitment to community and environmental initaitives, they’re reducing the investment they make in getting credit for those good works.  25% fewer press releases, media hits, etc. doesn’t make the actual CSR activity any less effective, it just reduces the “look at me” factor. 

Second, a good PR team could turn the fact that even amidst the current economic ice age, Microsoft is maintaining its commitment to the environment and the community.  Facing the need to reduce expeditures associated with CSR, Microsoft weighed the importance of ‘looking good’ and ‘doing good’ and decided the later was far more important.   Sounds like the right decision to me…perhaps even a bit noble.

A bit of advice for the agency exec offering up pearls of wisdom on how hard a PR budget reduction will hit their client’s ”reputation as a committed advocate of long-term CSR policies”…be very glad you’re not losing 100% of the budget.  There are plenty of other agencies willing to take over that assignment at the reduced budget level, and who could enhance and extend Microsoft’s reputation as a CSR advocate regardless.

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