The business case for a strong corporate reputation no longer needs to be made. There have been too many high profile catastrophes, too many risks and too many regulatory pressures for reputation not to be high on the board's agenda. And it is possible to manage it and mitigate the risks. The challenge for directors is to define the scope of reputation management, to integrate it effectively across the entire organisation and to monitor, measure and report progress, so that uncomfortable lessons from the past are learned and acted upon.
Reputation is not solely the remit of a corporate affairs function tasked with applying reputation gloss. It must be an inherent and integral part of the daily life of the organisation, the result of values, attitudes and behaviour. It needs to be closely aligned with both long-term vision and short-term business goals to ensure that reputation management is strategic, tactical and highly effective.
In recent interviews with five leading corporate communicators to establish how they are rising to these challenges, it became clear that some UK boards are taking their corporate reputations very seriously. But not all. These organisations are among the trend-setters. Too many boards are still leaving the management of reputation to a single function, rather than recognising that it is everyone's responsibility.
There is no magic formula, no panacea. Every organisation has a different vision, leadership, objective and strategy. Each has its own stakeholders with rapidly changing priorities and agendas. Add to this differing cultures, formal and informal organisational structures and communications systems and it is clear why there is no Holy Grail, no formula that can be applied successfully everywhere. But there are guiding principles, and there are a growing number of examples of best practice. Organisations should use such principles as a foundation for the development of a reputation management strategy and framework - a framework that helps the organisation to recognise the need to manage reputation, to accept individual and collective roles and responsibilities and, in time, realise the benefits.
The principles challenge the board to:
- identify clear, measurable objectives and desired reputation benefits aligned with business objectives in other words, to build the reputation business case
- lead and own corporate reputation
- integrate reputation risk management into day-to-day decision making and project management
- put in place formal reputation planning, implementation, monitoring, measuring and reporting.
We examined if and how the board (or equivalent team) in five influential organisations applied these principles; how they formally addressed reputation, and how they viewed the place of reputation within business planning.
We also asked them how risk and reputation management were integrated, and how their business was organised for reputation monitoring, measuring and reporting.
Reputation leadership
The often-used phrase 'reputation is not someone's job; it is everyone's' is absolutely true. As such it is not a discipline with job titles. At Royal Mail, according to director of external relations, Paul Budd, the reputation focus is on "helping operational managers engineer change, thus enabling them to bring about practical improvements. It is not a top-down management exercise".Why is it tackled from this angle? Because the operations team has the greatest impact on reputation, and their actions speak louder than words.
"They are the ones who control the realities and the impact on our reputation."
This pragmatic approach to reputation management is very much the result of new leadership under Allan Leighton. This has brought a robust focus on the reality of what the company is and how it operates, rather than an academic or cosmetic vision of what certain stakeholders or the board would like it to be.
At the BBC, whose vision is to be 'the most creative organisation in the world', two board directors are charged with reputation and relationship management: the director of marketing, communications and audiences, who is responsible for consumers, press and non-political opinion formers, and the director of policy and legal, who is responsible for government and political opinion formers.
While there is no formal reputation management process or agenda, nor specific issue managers, the BBC has put processes in place to continually assess perceptions, which are reported to the most senior levels. A weekly cycle of meetings starts with the director general on Monday and ends with the communications team meeting on Friday. The top 80 managers review reputation regularly, and the executive committee is regularly briefed on performance benchmarks such as approval ratings.
At UKOOA, the UK Offshore Operators' Association, reputation is not reviewed at board level. However, everything UKOOA does is assessed in the light of how effective it is in terms of 'political risk management'.
Acting director general, Steve Harris, explains why: "Reputation is our reason for existing; all our work is tied to reputation. Yet there is a lack of connection between our recognition that the entire industry's behaviour has an impact on our reputation, and our lack of any strategic approach to reputation management. As a result, we are actively developing a reputation strategy to underpin everything UKOOA does. It will be driven by our new chief executive and four policy directors. Reputation is an integral, inherent day-to-day management issue and it is also a function of behaviour and communications. If we get either wrong we have a problem."
Fidelity Investments' approach is less explicit. Head of corporate communications, Paul Kafka, reports to the operating committee (board). While he does not report formally on reputation or communications, his team is responsible for reputation and has input into all business decisions. "No business head can do his or her job without considering reputation. Each individual is accountable for reputation management in this sense.
"We do not make a single strategic decision or take a single tactical step without considering the repercussions of what we do. We continually weigh up the reputation benefits and the risks."
Reputation has always been a core consideration for Allied Domecq, according to Stephen Whitehead, director of corporate affairs. "Alcohol producers have specific reputation onus placed on them, and we have had to exercise the highest ethical standards on promotion and market entry approaches.
"There is certainly an awareness that the behaviour of irresponsible companies can impact on the reputation of the industry as a whole. For this reason we have initiated a leadership position in an attempt to differentiate our reputation from the industry as a whole. As the company has transformed its financial performance so too it has been enabled to lead in the area of reputation management."
Why lead from the top?
Increasingly, as managers realise that anyone at any level has the potential to enhance or destroy reputation, that reputation is becoming recognised as 'everyone's responsibility' not 'your' or 'my' responsibility.However, leadership of corporate reputation should rest, whether formally or informally, with the chief executive and with the board. Reputation, in terms of leadership behaviour, critical alignment with business vision and objectives, and the need for the continued review of reputation risks, can only be driven from the top. The delegation or, even worse, the abdication of responsibility suggests that this business critical issue is not important.
But how many organisations thrive on poor or even average reputations?
Business planning and risk management
Given the increasingly recognised value of reputation as an intangible asset, notwithstanding the difficulty of measuring its value, the challenge is to formally integrate it into the business planning cycle. Aligning business strategy and reputation strategy has to be the starting point.In turn, the reputation strategy must be integrated with all operations and functions, not buried in the corporate communications department.
Execution and measurement of the strategy should also be a shared responsibility.
Fidelity Investments puts reputation at the heart of its quarterly business planning cycle, but it is in the minority. However, as Paul Budd at Royal Mail puts it: "If you took a slice through the company, it would suggest that we are some way short of having a sophisticated reputation management approach and discipline over and above roles and structures organised for compliance. This is deliberately so. The entire organisation is managed with one reputation goal and we are all held to account. If we achieve it, then customer service, profits and cash generation will follow. So reputation is central to planning at any level."
Organisations are operating in a period where reputation and other intangible assets dominate the balance sheet. Financial performance alone is not a complete guide to a company's worth, and shareholders demand a broader perspective on the risks facing the business. To meet such demands and to comply with new company law requirements (the Operating and Financial Review), forward-thinking organisations are considering the need for a formal reputation risk framework that is integrated with established risk management procedures.
Royal Mail operates both a risk management and issue management process.
However, according to Budd, it is an enabler and a checkpoint, not a goal in its own right. Risk management is owned by the finance director and driven by commercial risks, but importantly, it integrates internal reputation risk and external (social responsibility) risk. "Our process reviews all the risks, logs them, scores them and puts action plans in place. It is built, as you would expect, upon an internal control register and regular Board review."
As regulation becomes part of the planning cycle, the focus shifts to operations to deliver. At Allied Domecq, the challenge for Stephen Whitehead is the integration of reputation planning and management into daily operations.
Project management processes now review financial, operational, environmental and employee 'reputation impacts'.
At Royal Mail, internal and external communications issues are both addressed at an organisational level by a centralised corporate team. The organisation has recently moved to what it describes as 'mandatory joined up communications'.
Monitor, measure and report
Organisations need not only to measure reputation, but should identify at the outset why they are doing so and what benefits the investment will bring.For Fidelity, customers' views are monitored across a range of issues.
Opinions are tracked via MORI polls, attitudinal surveys and focus groups.
Reputation is measured by comparing the tone of recent and historic media coverage and through client interactions. The company cites an obsessive drive to stay ahead of its competitors.
At the BBC, measurement (of monthly viewers and listeners, press research and more) provides the corporate and public relations team with the ability to prepare for and then manage issues.
Says Andrew Whyte, head of corporate and public relations: "We recognise that some stakeholders are disproportionately important, as they have an enormous impact on shaping the debate. However, I recognise that we sometimes lack perspective; possibly we spend too much time on the scrutiny of politicians. We have introduced 'audience advocates' to work with programme producers to voice the needs of the public".
UKOOA measures reputation by conducting biennial research into 'special publics' (stakeholders who could have an immediate impact on UKOOA). The research produces both quantitative and qualitative data - the former drives action programmes, the latter shows movements in perception.
Reputation measurement is based on outputs, impacts and outcomes. Yet all too often, reputation thinking stops at impacts and even at outputs; it is the outcomes that are important.
- OUTPUTS: Were the right reputation drivers addressed? Were the right stakeholders reached and was the stakeholder engagement process effective?
Were the right reputation risks identified?
- IMPACTS: Did the outputs make a difference? What effect has refocusing and engaging people differently had on your audiences' perceptions? Has it closed the gap between current and desired perceptions? Are key stakeholders more favourable towards you? Has reputation shifted?
- OUTCOMES: What changes in attitudes and behaviour have resulted from this? Have these ensured that business objectives are met?
Having assigned ownership of reputation, integrated it into business planning, considered how it fits with risk management and established how it should be monitored, it is a wasted investment for any organisation if outcomes are not measured.
The benefits
Boards can expect the conscious management of reputation to contribute to incremental changes in each of the following areas:
- enhanced intangible asset value
- talent attracted and retained
- revenues grown, protected
- risks managed
- capital raised, partnerships and alliances developed, strategic acquisition and disposal programmes undertaken
- 'licence to operate', goodwill, enhanced
- corporate governance/regulations compliance (tighter disclosure, reporting)
- engagement with stakeholders
- crises managed.
Organisations who are serious about reputation ensure that all employees understand the vision and their individual roles in delivering it.
GREEN CLAIMS WARNING
The UK government recently warned that companies making misleading environmental claims for their products could be risking their reputations.Lord Whitty, Minister for Business and the Environment, said: "Many products we use every day, from detergents to TVs, carry some kind of environmental claim or symbol about the materials they are produced from, the energy they consume, or how to dispose of them responsibly.
"Many parts of industry have a good record, but false, misleading or meaningless information undermines consumers' faith in green claims and labels generally. It is not acceptable just to stick 'environment friendly' or 'kind to nature' on a product. We want to ensure that business gets it right, avoids mistakes and follows good practice.
"Environmental information is important. Where there is a good story to tell, it can help enhance a company's reputation, but the opposite applies if the information is confusing, not credible, or just not right for the product."
The Department for Environment, Food and Rural Affairs (Defra) and the Department of Trade and Industry (DTI) have published Green Claims - Practical Guidance which encourages more firms to give consumers better information about the environmental performance of their products.
Ministers want to raise the standard of green claims, with labels that are accurate, truthful and unambiguous, in plain language or with symbols that have clear meanings. Businesses should be able to substantiate and verify any claims they make.
The new guidance adds to the existing Green Claims Code, and in partnership with industry bodies, the Government has produced more detailed advice for makers of aerosols, paints, greetings cards, cleaning products and growing media.
Another new initiative is an e-mail newsletter and website, Pitching Green, aimed at getting the message about good practice direct to businesses.
Defra has also published a Shopper's Guide explaining the range of reliable green symbols seen in UK shops.
The five sector guidance notes are online at: www.defra.gov.uk/environment/consumerprod/index.htm
FINANCIAL SECTOR COURSE
Financial sector training company Russell and Associates runs day courses in London on reputation risk management. Areas covered include:- common practice - how organisations get it wrong
- best practice - strategy, crisis prevention and crisis handling
- keeping reputation management relevant and up to date.
Further information is available from: www.russellandassociates.co.uk
