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  1. 1. Presented by: John Dalton Director of LSPR Worldwide REPUTATION MANAGEMENT: A Holistic Business Tool ® 2005
  2. 2. Financial performance and capital Customer benefits Tangible assets Intangible assets Human/Structural capital Stakeholder engagement Culture values Business processes Adapted from: Intangible Assets: J. Daum; Wiley, 1999
  3. 3. REPUTATION: <ul><li>“ If we picture a company as a living organism, say a tree, then half of the mass or more of that tree is underground in the root system. And whereas the flavour of the fruit and the colour of the leaves provides evidence of how healthy that tree is right now, understanding what is going on in the roots is a far more effective way to learn how healthy that tree will be in years to come” </li></ul><ul><li>Leif Edvinsson and Michael S. Malone; Intellectual Capital </li></ul>
  4. 4. REPUTATION: An overview <ul><li>What does reputation mean to you? </li></ul><ul><li>How much is your company’s reputation worth? </li></ul><ul><li>Can you measure and manage your reputation? </li></ul><ul><li>How much of your organisation is made up of intangible assets? </li></ul>
  5. 5. REPUTATION: An Overview <ul><li>What one mistake do businesses keep making? </li></ul><ul><li>Answer: </li></ul><ul><li>Asking the wrong questions </li></ul><ul><li>Issues facing business change little, but the answers do </li></ul><ul><li>Ask not what I should be doing, but WHAT NEEDS TO BE DONE: source P. Drucker </li></ul><ul><li>“ We must become the change we want to see” </li></ul><ul><li> - Ghandi </li></ul>
  6. 6. REPUTATION: An overview <ul><li>Corporate image can be created, but corporate reputation must be earned </li></ul><ul><li>What exactly does reputation mean? </li></ul><ul><li>Various perspectives and meaning, both in a business and cultural sense </li></ul>
  7. 7. REPUTATION: An Overview <ul><li>Hill and Knowlton’s Corporate Reputation Watch 2004 Survey: Some key findings </li></ul><ul><li> </li></ul><ul><li>93% of senior executives believe that customers consider corporate reputation important or extremely important </li></ul><ul><li>79% of senior executives believe that investors and lenders consider CR either important or very important </li></ul><ul><li>The impact of corporate governance has increased dramatically since 5 years ago: now 40% of senior executives believe that strong corporate governance is a critical factor that potential investors consider before committing, whereas 5 years only 19% thought the same. </li></ul>
  8. 8. REPUTATION: An Overview <ul><li>In 2001, the insurance firm Aon polled 2000 top UK’s private companies and showed that “loss of reputation” was viewed as the greatest risk, followed by failure to change” </li></ul><ul><li> </li></ul>
  9. 9. WHO IS AT RISK? <ul><li>You are at particular risk if you: </li></ul><ul><li>Offer life-saving or life threatening products – pharmaceuticals or arms </li></ul><ul><li>Enjoy high, global brand awareness – luxury brands </li></ul><ul><li>Are based on new technology – GM, mobiles </li></ul><ul><li>Confront changing social mores – fashion, alcohol, tobacco </li></ul><ul><li>Produce significant spill-over effects – mining, waste, oil </li></ul>
  10. 10. GLOBAL BUSINESS CONTEXT <ul><li>Pluralism: over time markets are inherently entropic </li></ul><ul><li>This leads to CREATIVE DESTRUCTION </li></ul><ul><li>Sustaining a competitive brand now relies more on reputation than it did a decade ago: reputation is one of the key sustaining factors </li></ul>
  11. 11. TRUST: the engineering of consent <ul><li>Trust vs. Trustworthiness </li></ul><ul><li>Increased fraud – reward based incentives </li></ul><ul><li>Loss of authority from key institutions </li></ul><ul><li>Media distortion and anti-campaigning </li></ul><ul><li>Growth of urban decay and ant-social behaviour </li></ul><ul><li>Poor corporate governance and corporate behaviour – The Precautionary Principle </li></ul>
  12. 12. CHANGE IN ATTITUDES <ul><li>In the Industrial age, the marketing model was driven by advertising </li></ul><ul><li>For knowledge-intensive products, inherent value cannot be as easily communicated in 5-10 sec commercial </li></ul><ul><li>Therefore, products and services rely more on reputation – the key vehicle for which is the BARND and its ability to create value </li></ul>
  13. 13. CHANGING ATTITUDES <ul><li>Corporate value can no longer be determined by short-term profit and sales </li></ul><ul><li>Long-term, sustainability is the key </li></ul><ul><li>Mobile phone industry is a classic example </li></ul><ul><li>Old systems deemed employees as cost factors, not as value creating elements and stakeholders </li></ul>
  14. 14. CHANGING ATTITUDES <ul><li>Transition from the neo-classical economic theory to socio-economic theory – stakeholders </li></ul><ul><li>Triple bottom line and sustainability: </li></ul><ul><li>Economic </li></ul><ul><li>Social </li></ul><ul><li>Environmental </li></ul><ul><li>Differentiate by behaviour </li></ul>
  15. 15. REPUTATION ICE BERG <ul><li>Union Carbide (USA –Bhopal, India) </li></ul><ul><li>Enron (USA) </li></ul><ul><li>WorldCom (MCI) (USA) </li></ul><ul><li>Shell (UK) </li></ul><ul><li>Nike (USA) </li></ul><ul><li>Arthur Anderson (USA) </li></ul><ul><li>Parmalat (Italy) </li></ul><ul><li>Yukos (Russia) </li></ul>
  16. 16. REPUTATION: An Overview <ul><li>Reputation is the sum values that stakeholders attribute to a company, based on their perception and interpretation of the image that the company communicates over time </li></ul><ul><li>John Dalton – Managing Corporate Reputation </li></ul>
  17. 17. REPUTATION: An Overview <ul><li>Reputation is the principal means through which a market economy deals with consumer ignorance </li></ul><ul><li>Professor John Kay </li></ul><ul><li>Reputation exists because of asymmetric information </li></ul>
  18. 18. REPUTATION: An Overview <ul><li>Reputation is a collective term referring to all stakeholders’ views of corporate reputation, including identity and image </li></ul><ul><li>Professor Gary Davies –Manchester Business School </li></ul><ul><li>Reputation = experience - expectations </li></ul>
  19. 19. IT ALL ABOUT ISSUE MANAGEMENT <ul><li>Good reputation management is based on issue management </li></ul><ul><li>Issue identification </li></ul><ul><li>Issue Analysis </li></ul><ul><li>Issue Change Strategy Options </li></ul><ul><li>Issue Action Programme </li></ul><ul><li>Evaluation of Results </li></ul><ul><li>Monitoring Weblogs and user groups online </li></ul>
  20. 20. SOME “HOT” ISSUES <ul><li>Obesity, salt and food labelling </li></ul><ul><li>GM technology </li></ul><ul><li>Mobile phone radiation </li></ul><ul><li>Stem cell and embryo technology </li></ul><ul><li>Nanotechnology </li></ul><ul><li>Biodiversity loss and pollution </li></ul><ul><li>Compliance, governance & CSR </li></ul><ul><li>Off-shoring </li></ul><ul><li>Innovation and value creation </li></ul><ul><li>IP theft & counterfeiting </li></ul><ul><li>Customer retention and equity </li></ul><ul><li>Development of an amateur media online </li></ul>
  21. 21. BRANDS AND REPUTATION Phase I Phase II Phase III Corporate Identity Reputation Corporate Image Positioning
  22. 22. CORPORATE IDENTITY <ul><li>Logo –TM </li></ul><ul><li>Name – typeface </li></ul><ul><li>Slogan or tagline </li></ul><ul><li>Packaging and uniforms </li></ul><ul><li>Colour and semiology </li></ul><ul><li>Brochure and advertising </li></ul><ul><li>Annual Report </li></ul><ul><li>Websites </li></ul><ul><li>Photography </li></ul>
  23. 23. IMAGE FORMATION Corporate Image Attitude & behaviour of employees Experience Corporate Social Responsibility Physical Environment Financial Performance Organisation Structure & Culture Quality of goods & services Communities Communications
  24. 24. ROYAL DUTCH SHELL: Image problems <ul><li>Nigeria and the Ogoni People </li></ul><ul><li>Greenpeace and Brent Spar 1995 </li></ul><ul><li>Profits before principles </li></ul><ul><li>Pollution and biodiversity loss </li></ul><ul><li>Reserves crisis 2004 – over estimate </li></ul>
  25. 25. ROYAL DUTCH SHELL: corporate communications <ul><li>Shell’s Society Report </li></ul><ul><li>Shell Foundation </li></ul><ul><li>Profits and Principles campaign </li></ul><ul><li>Environmental Reports </li></ul><ul><li>Local Reports and external assurance </li></ul><ul><li>Reporting GRI and UN Global Compact </li></ul><ul><li>Adaptation of International Financial Reporting Standards: Dow Jones Sustainability Index: </li></ul>
  26. 26. ROYAL DUTCH SHELL: Corporate Communications <ul><li>Developed and pioneered scenario planning for crisis management </li></ul><ul><li>Highly developed CSR and Branding </li></ul><ul><li>Corporate communications centralized </li></ul><ul><li>Significant alteration to organizational structure </li></ul><ul><li>Strategy of stakeholder engagement </li></ul><ul><li>Listing on the Dow Jones Sustainability Index </li></ul>
  27. 27. TELECOMS: Orange - rags to riches <ul><li>Classic example of corporate brand-building success </li></ul><ul><li>1994 equity worth little – by 2000, Market Cap - $50 billion </li></ul><ul><li>Strategy – brand focused </li></ul><ul><li>Good use of corporate identity – name and slogan: use of semiotics </li></ul><ul><li>1996 IPO – youngest company ever to enter FTSE-100 </li></ul><ul><li>Integrated marketing communications campaign: strong positioning against competitors </li></ul>
  28. 28. TELECOMS: Vodafone <ul><li>Vodafone is the world’s largest mobile telecommunications community, employing over 65,000 staff and over 130 million customers </li></ul><ul><li>Success and reputation because of its brand: brand driven </li></ul>
  29. 29. TELECOMS: Vodafone <ul><li>Brand strategy – key to its success </li></ul><ul><li>Operates over 300 of its own stores </li></ul><ul><li>Sells through independent retailers </li></ul><ul><li>Extensive sponsorship </li></ul><ul><li>Advertising - high profile-celebrity endorsement </li></ul><ul><li>Extensive below the line promotion </li></ul><ul><li>High profile involvement in CSR: award winning </li></ul>
  30. 30. TELECOMS: Vodafone <ul><li>Extensive market research and focus groups </li></ul><ul><li>Innovation – Vodafone live! </li></ul><ul><li>Increased penetration of new data services </li></ul><ul><li>Sponsorship of: </li></ul><ul><li>Ferrari and Formula 1 </li></ul><ul><li>Manchester United </li></ul><ul><li>English cricket </li></ul><ul><li>Epsom Derby </li></ul>
  31. 31. GUINNESS: A REPUTABLE DRINK <ul><li>250 year-old beer brand </li></ul><ul><li>Well know and identifiable </li></ul><ul><li>Irish provenance </li></ul><ul><li>Made from nature ingredients </li></ul><ul><li>Owned by Diageo- UK </li></ul><ul><li>Sold in 150 countries & brewed in 49 </li></ul><ul><li>Brewed for local tastes </li></ul><ul><li>In UK, Europe, USA – Guinness Draught </li></ul><ul><li>In Africa, Asia and Caribbean – Foreign Extra Stout </li></ul><ul><li>Nigeria – largest overseas market </li></ul><ul><li>A pint of Guinness has less calories than equivalent Semi-skinned milk </li></ul><ul><li>In Muslim countries –sold as Malta Guinness – non-alcoholic </li></ul>
  32. 32. GUINNESS: A Brilliant Brand <ul><li>Brilliant marketing communications: advertising </li></ul><ul><li>Highly innovative and adaptive: </li></ul><ul><li>-introduced larger – Harp </li></ul><ul><li>-introduced Guinness Draft Extra Cold </li></ul><ul><li>-in Nigeria it is seen as a Nigerian brand </li></ul><ul><li>Large degree of passion involved with the brand </li></ul><ul><li>Single global brand vision: Power; Goodness; Communion </li></ul><ul><li>Brand experience; “perfect pint “ campaign </li></ul><ul><li>Good congruence in sponsorship </li></ul>
  33. 33. INTANGIBLES <ul><li>The last two decades have witnessed a revolution - transfer from industrial capitalism to a new knowledge-based economy </li></ul><ul><li>Industrial capital based mainly on physical assets </li></ul><ul><li>New economy based on intangible assets and value creation </li></ul>
  34. 34. INTANGIBLES Market Capitalisation Brand Reputation IP Customers Employees Innovation Organisational structure Book value ___________ $ * The above would also be affected by other variables including macroeconomic factors, shareholder sentiment and market speculation
  35. 35. INTANGIBLES <ul><li>A company’s market value is driven by its anticipated earning potential – the net present value of its future economic profit </li></ul><ul><li>Intangibles are systematically underreported within existing accounting practice </li></ul>
  36. 36. INTANGIBLES <ul><li>The Brookings Institute found that in 1962 - 62% of an average company’s value was represented by physical or hard capital - by 1992 this had decreased to 38% and in 2000 was as low as 20% </li></ul><ul><li>The market to book value ratio </li></ul>
  37. 37. INTELLECTUAL CAPITAL MARKET VALUE Market Value Financial Capital Intellectual Capital Human Capital Structural Capital Customer Capital Organisational Capital
  38. 38. INTANGIBLES <ul><li>Welcome to the world of intellectual capital </li></ul><ul><li>Human capital </li></ul><ul><li>Structural and organisational capital </li></ul><ul><li>Customer or stakeholder capital </li></ul>
  39. 39. INTANGIBLES <ul><li>Market to book ratio: </li></ul><ul><li>Dell – 17.5 </li></ul><ul><li>Pfizer – 18.2 </li></ul><ul><li>Capital is now not just financial – it is anything that adds wealth and value </li></ul><ul><li>Back in 1999, only 6.6% of Coca-cola’s market capitalization was reported as book value </li></ul>
  40. 40. INTANGIBLES Brand capital Human capital Working capital Physical capital Sales “push” focus Customer “pull” focus Production focus Customer focus High Low (WIP, finished goods) (direct delivery to customers) OLD ECONOMY NEW ECONOMY
  41. 41. INTANGIBLES <ul><li>Development of the value of intangible assets as a percentage of total market value of S & P 500 companies between 1982 and 1999. – Intangible Assets; J. Daum (1999); Wiley, p4 </li></ul>Market value
  42. 42. INTANGIBLES Market value as a multiple of net book value: Taken from eCFO, Wiley 2001, p95
  43. 43. INTANGIBLES AND ACCOUTNING <ul><li>Off the balance sheet </li></ul><ul><li>Problems with global accounting - do not properly allow the inclusion of internally generated assets, except those obtained by acquisition </li></ul><ul><li>The issue of “goodwill” </li></ul><ul><li>REPUTATION IS AN INTANGIBLE ASSET IN ITS OWN RIGHT </li></ul>
  44. 44. REPUTATION AND METRICS <ul><li>The FT World’s Most Respected Companies 2004 Financial Times – November </li></ul><ul><li>Coca-Cola </li></ul><ul><li>Dell </li></ul><ul><li>Wall-Mart </li></ul><ul><li>GE </li></ul><ul><li>Microsoft </li></ul><ul><li>Toyota </li></ul><ul><li>IBM </li></ul>
  45. 45. REPUTATION INDEXES <ul><li>The Harris – Fombrun Reputation Quotient (RQ) </li></ul><ul><li> </li></ul><ul><li>Fortune Magazine – Global Most Admired Companies </li></ul><ul><li>Management Today – Britain’s Most Admired Companies </li></ul><ul><li>FTSE4 Good Index: </li></ul><ul><li>The Dow Jones Sustainability Index </li></ul><ul><li>Financial Times – World’s Most Respected Companies </li></ul>
  46. 46. REPUTATION AND METRICS <ul><li>Vital Attributes: </li></ul><ul><li>Corporate Governance </li></ul><ul><li>Shareholder value </li></ul><ul><li>Innovation </li></ul><ul><li>Corporate responsibility (CSR) </li></ul><ul><li>Role and leadership of CEO </li></ul><ul><li>Satisfied employees! </li></ul><ul><li>Value creation that is sustainable </li></ul>
  47. 47. DRIVERS OF CHANGE <ul><li>Increased specialisation – outsourcing and disintermediation </li></ul><ul><li>Relationship marketing – one-to-one customer relationship </li></ul><ul><li>Business is increasingly customer-led rather than production driven </li></ul><ul><li>Alliances and partnerships </li></ul><ul><li>Vulnerability of brand equity </li></ul><ul><li>Decline in trust – especially institutional </li></ul>
  48. 48. DRIVERS OF REPUTATION <ul><li>Financial performance and shareholder value </li></ul><ul><li>Corporate responsibility </li></ul><ul><li>Corporate governance: compliance and regulation </li></ul><ul><li>Technology – Internet and wireless </li></ul><ul><li>Weblogs (blogs) over 5 m web journals </li></ul><ul><li>Investor engagement (SRI) and NGOs </li></ul><ul><li>Stakeholder convergence and managing stakeholders’ expectations </li></ul><ul><li>Employee expectations </li></ul><ul><li>Brand and operational risk </li></ul>
  49. 49. DRIVERS OF REPUTATION Indicators <ul><li>Cash flow </li></ul><ul><li>Earnings </li></ul><ul><li>Costs </li></ul><ul><li>Capital expenditure </li></ul><ul><li>Market growth </li></ul>Financial performance Sustainability Indicators <ul><li>Shareholders </li></ul><ul><li>Number of shareholder resolutions </li></ul><ul><li>Results of shareholder satisfaction survey </li></ul><ul><li>Customers </li></ul><ul><li>Satisfaction survey </li></ul><ul><li>Customer complaints </li></ul><ul><li>Third-party ratings and awards </li></ul><ul><li>Employees </li></ul><ul><li>Employee turnover </li></ul><ul><li>Employee profiles (ability, gender, race) </li></ul><ul><li>Employee satisfaction </li></ul><ul><li>Society </li></ul><ul><li>Boycotts, marches, incidents </li></ul><ul><li>License to operate </li></ul><ul><li>Direct action </li></ul><ul><li>Media reports </li></ul><ul><li>Partners </li></ul><ul><li>Quantity of partnerships accepted, sanctioned or rejected on basis of stewardship criteria </li></ul><ul><li>Health and safety records of partners </li></ul>Indicators of reputational value taken adapted from: eCFO ; C. Read et al, p115, Wiley, 2001
  50. 50. DRIVERS OF REPUTATION <ul><li>A more intrusive and sensational media – media amplification </li></ul><ul><li>Need for transparency (disclosure) and accountability </li></ul><ul><li>Companies as social institutions </li></ul><ul><li>Globalization and the rise of corporate brands </li></ul><ul><li>Notion that ethics counts </li></ul><ul><li>Historical – Enron and WorldCom </li></ul><ul><li>Reputation as an asset in its own right - $ </li></ul><ul><li>Victim culture – insurance claims </li></ul>
  51. 51. CORPORATE GOVERNANCE <ul><li>Good corporate governance and compliance are seen by many as the primary force behind reputation management </li></ul><ul><li>FSA in (UK) </li></ul><ul><li>Basel II </li></ul><ul><li>Sarbanes Oxley (USA) </li></ul><ul><li>Role of compliance officers </li></ul>
  52. 52. REPUTATION: an enabler? <ul><li>Gain control and anticipate events </li></ul><ul><li>Avoid long-term brand equity damage </li></ul><ul><li>Avoid boycotts or sale losses </li></ul><ul><li>Ensure compliance and shareholder value </li></ul><ul><li>Better stakeholder relations – NGOs </li></ul><ul><li>Better media relations and issue management </li></ul><ul><li>Understand your risk exposure and allow easier entry into new markets and brand extensions </li></ul><ul><li>Improved investor relations and profile </li></ul>
  53. 53. REPUTATION: an enabler? <ul><li>Better employee output, retention and internal communications </li></ul><ul><li>Better understanding of issues </li></ul><ul><li>Preparation for crisis situation </li></ul><ul><li>Alignment of strategy with key stakeholders’ expectations </li></ul><ul><li>Sustainable wealth and value creation </li></ul><ul><li>Development of alert systems and a “radar” </li></ul>
  54. 54. REPUTATION: an enabler? <ul><li>Positive influence on regulators when issuing licenses </li></ul><ul><li>Local authorities may take it into account when considering planning applications </li></ul><ul><li>In the financial markets more likely to raise capital </li></ul><ul><li>Reduce the cost of entry into new markets, thereby securing a price advantage </li></ul>
  55. 55. MEDIA MANAGEMENT <ul><li>Good and diligent management of the media is central to reputation management: media profile </li></ul><ul><li>Learn which media are the most influential within your target group </li></ul><ul><li>Supply the press with information that is accurate and useful </li></ul><ul><li>Build relationship with journalists </li></ul><ul><li>Look for triggers within issues – monitor the media and other users groups </li></ul><ul><li>Use media intelligence agencies </li></ul>
  56. 56. MEIDA INTELLIGENCE <ul><li>Romeike: </li></ul><ul><li>Metrica: </li></ul><ul><li>Echo: </li></ul><ul><li>Prnewswire: </li></ul><ul><li>Prweb: </li></ul>
  57. 57. PR AND REPUTATION <ul><li>World of confusing terms </li></ul><ul><li>Public relations: a discipline in transition </li></ul><ul><li>Public affairs and lobbying </li></ul><ul><li>Corporate affairs </li></ul><ul><li>Corporate communications </li></ul><ul><li>Reputation management </li></ul><ul><li>What’s the difference? </li></ul>
  58. 58. PR AND REPUTATION PR REPUTATION Desired image Vehicle of promise Delivery of promise BRAND
  59. 59. CORPORATE COMMUNICATIONS Management Communications Marketing Communications Organisation Communications - Van Riel (1995)
  60. 60. REPUTAION: An Overview Brand Reputation Organisational Reputation Stakeholder Reputation Reputational “Radar”
  61. 61. Relationship between PR and Reputation <ul><li>Public relations and reputation are intricately linked: </li></ul><ul><li>PR – more specific issues: media relations, public affairs, crisis management, event management and branding </li></ul><ul><li>Reputation management is more holistic in its approach and involves all employees. </li></ul>
  62. 62. Traditional PR <ul><li>Less strategic </li></ul><ul><li>Non-integrated </li></ul><ul><li>Focus - short-term </li></ul><ul><li>Key people involved </li></ul><ul><li>Aims to give the best possible image </li></ul><ul><li>Media relations focused </li></ul><ul><li>Focus on transactional stakeholders </li></ul><ul><li>Strategic in nature </li></ul><ul><li>Integrated </li></ul><ul><li>Holistic - long-term </li></ul><ul><li>Involves all employees </li></ul><ul><li>Aims to deliver an image and brand promise </li></ul><ul><li>Uses all forms and opportunities to communicate policy and values </li></ul><ul><li>Greater emphasis on multiple stakeholder relationships </li></ul>1980, 1990s, 2000 2010 Reputational Management
  63. 63. Some Traditional PR functions Crisis Management Events & Exhibitions Change Management Sponsorship Corporate Affairs & Lobbying Investor Relations Corporate Publications: Annual reports Internal Communications Media profile, monitoring CSR Stakeholder conflict Assessing stakeholders’ opinions PR
  64. 64. Some Key Tools For PR Practitioners Viral Features Launch Events Webcasting Interviews Advertorials Editorial Coverage VNRs Case Studies Websites & Portals Corporate Structure Hospitality Events E-mail Press Release Stunts Photography PR
  65. 65. Integrated marketing communications Advertising Sponsorships Point of sale Events Internet/ wireless Word-of- mouth Exhibitions Packaging Direct marketing PR FILTER
  66. 66. BRAND AND REPUTATION <ul><li>What is the difference between brand and reputation – are they the same? </li></ul><ul><li>Brand = promise </li></ul><ul><li>Reputation = delivery on the promise </li></ul>
  67. 67. THE BUSINESS CASE FOR REPUTATION? <ul><li>Links between reputation and financial performance are not easy to generalize about – evidence to-date unclear and inconsistent </li></ul><ul><li>Question – how do you measure and what? </li></ul><ul><li>Mathematical co-relations do not necessarily demonstrate causality </li></ul><ul><li>The question is complicated and multidimensional </li></ul>
  68. 68. BUSINESS CASE FOR REPUTATION <ul><li>Does a good financial performance develop a perception of a good reputation? </li></ul><ul><li>Good links do exist between corporate image and customer satisfaction </li></ul><ul><li>Satisfied customers are not always loyal </li></ul>
  69. 69. REPUTATION AND FINANCIAL PERFORMANCE <ul><li>Risk and reputation are linked </li></ul><ul><li>Traditional methods of assessing risk: </li></ul><ul><li>Value at risk VaR – a measure of the riskiness of a portfolio, based on assessing the maximum amount that would be lost 19 out of 20 days, given typical levels in market prices </li></ul>
  70. 70. BUSINESS CASE FOR REPUTATION MANAGEMENT <ul><li>How do FTSE 100 companies currently measure performance? </li></ul><ul><li>Growth in earnings per share (EPS) </li></ul><ul><li>Total Shareholder Return (TSR) </li></ul><ul><li>Earnings before Interest and Tax (EBIT) </li></ul><ul><li>EBITA </li></ul><ul><li>Economic Value Added (EVA) </li></ul><ul><li>Return on Capital Employed (ROCE) </li></ul><ul><li>Net Operating Profit After Tax (NOPAT) </li></ul>
  71. 71. BUSINESS CASE FOR REPUTATION MANAGEMENT <ul><li>How do FTSE 100 companies currently measure performance? </li></ul><ul><li>Cash flow </li></ul><ul><li>Cost of capital management </li></ul><ul><li>Market share </li></ul><ul><li>Strategic targets </li></ul>
  72. 72. BUSINESS CASE FOR REPUTATION <ul><li>Measuring Shareholder Value </li></ul><ul><li>EVA = (rate of return - cost of capital) x capital employed </li></ul><ul><li>Other ways of measuring shareholder value include : </li></ul><ul><li>Net Present Value (NPV) </li></ul><ul><li>Price/earnings ratio (P/E) </li></ul><ul><li>Capital asset pricing model (CAPM) </li></ul><ul><li>The Du Pont Equation </li></ul><ul><li>The Wealth Added Index (WAI) </li></ul>
  73. 73. REPUTATION AND CREDIBILITY FOR FOREIGN FIRMS <ul><li>IPO </li></ul><ul><li>London Stock Exchange </li></ul><ul><li>Alternative investment market (AIM) </li></ul><ul><li>OFEX </li></ul><ul><li>Share price is now an indicator of </li></ul><ul><li>a company’s “reputational capital” </li></ul>
  74. 74. FOREIGN FIRMS AND REPUTATION DEVELOPMENT <ul><li>Develop investor relations and financial communications </li></ul><ul><li>Produce detailed Annual Reports </li></ul><ul><li>Develop media profile </li></ul><ul><li>Work towards best practice and compliance with corporate governance </li></ul><ul><li>Establish a strong and transparent working board </li></ul><ul><li>Integrate risk analysis in all areas of the business </li></ul><ul><li>Develop strong and clear corporate responsibility polices </li></ul><ul><li>Appoint risk and reputation officers </li></ul>
  75. 75. INVESTOR RELATIONS <ul><li>Educate key stakeholders: NGO </li></ul><ul><li>Help shape and modify legislation </li></ul><ul><li>Correct misconceptions </li></ul><ul><li>Lobby on behalf of a trade body </li></ul><ul><li>Lobby at the Diplomatic level </li></ul><ul><li>Highlight unfair or restrictive practice </li></ul><ul><li>Grassroots campaign development </li></ul><ul><li>Develop high profile media campaigns </li></ul>
  76. 76. THE STAKEHOLDER IMPERATIVE <ul><li>Classic discussion based on whether a company is solely responsible to just its shareholders or a wider range of interests </li></ul><ul><li>Pure economic argument focuses on optimising or maximising shareholder return </li></ul><ul><li>BUT: modern business operates in a volatile, hostel environment – a more pluralistic approach is required </li></ul>
  77. 77. STAKEHOLDERS <ul><li>CONTRACTUAL </li></ul><ul><li>Customers </li></ul><ul><li>Employees </li></ul><ul><li>Distributors </li></ul><ul><li>Suppliers </li></ul><ul><li>Shareholders </li></ul><ul><li>Lenders </li></ul><ul><li>Alliances </li></ul><ul><li>COMMUNITY </li></ul><ul><li>Consumers </li></ul><ul><li>Regulators </li></ul><ul><li>Government </li></ul><ul><li>Local community </li></ul><ul><li>Media </li></ul><ul><li>NGOs </li></ul><ul><li>Trade groups </li></ul>
  78. 78. STRATEGIC APPROACH TO REPUTATION <ul><li>Since 1980s Three big ideas </li></ul><ul><li>TQM - Xerox and Motorola </li></ul><ul><li>Reengineering </li></ul><ul><li>Intellectual Capital (KM) – GE </li></ul><ul><li>It is not the strategy itself sometimes, just the way it is executed. </li></ul>
  79. 79. STRATEGY AND REPUTATION <ul><li>An organisation’s strategy describes how it intents to create value for its shareholders and stakeholders </li></ul><ul><li>What is the link between reputation and intangibles? </li></ul><ul><li>Intangibles are hard for competitors to imitate, therefore they are a source of competitive advantage </li></ul><ul><li>Co-creation of value </li></ul>
  80. 80. STRATEGY AND REPUTATION <ul><li>Intangibles per se do not directly affect financial performance; instead they work more indirectly via a complex chain of cause and effect </li></ul><ul><li>The impact of a new tangible asset tends to be more immediate </li></ul><ul><li>Intangibles need to be generally combined with other assets – HR and IT </li></ul>
  81. 81. BALANCED SCORECARD <ul><li>Kaplan’s and Norton’s – Balanced Scorecard approach and strategic maps </li></ul><ul><li>Four perspectives: </li></ul><ul><li>Financial </li></ul><ul><li>Customer </li></ul><ul><li>Process </li></ul><ul><li>Developmental </li></ul>
  82. 82. CASE STUDY: Coca-Cola: problems <ul><li>Poor executive reshuffle </li></ul><ul><li>Anti-Americanism: Mecca and Zam Zam Cola </li></ul><ul><li>Problems in Belgium 1999 </li></ul><ul><li>Faltering financial performance </li></ul><ul><li>Crisis with “Dasani” drinking water UK 2004 </li></ul><ul><li>Obesity issues </li></ul><ul><li>Problems with NGOs in India </li></ul><ul><li>Trying to grow faster than the market </li></ul><ul><li>Deaths in Colombia </li></ul>
  83. 83. Coca-Cola: Solutions <ul><li>Continuous brand equity building within communities </li></ul><ul><li>Citizenship initiatives </li></ul><ul><li>Work with Greenpeace on reducing carbon dioxide emissions </li></ul><ul><li>Open acknowledgement of the obesity issue within the US </li></ul><ul><li>Sustaining brand identity and Image </li></ul><ul><li>Re-evaluation of strategic growth </li></ul>
  84. 84. HOW TO DEVELOP A REPUTATION <ul><li>Quality of products and services </li></ul><ul><li>Passion for brand </li></ul><ul><li>Customer relationship marketing </li></ul><ul><li>Strong corporate governance and compliance </li></ul><ul><li>Integrated risk and issue management </li></ul><ul><li>Crisis planning </li></ul><ul><li>Corporate responsibility (CR) </li></ul><ul><li>Strong brand values, experience and communications </li></ul><ul><li>Organisational culture and structure </li></ul><ul><li>Contract fulfilment </li></ul><ul><li>Business presentation and conferences </li></ul><ul><li>Customer facing staff </li></ul>
  85. 85. HOW TO DEVELOP A REPUTATION <ul><li>Innovation </li></ul><ul><li>Vision and leadership by CEO </li></ul><ul><li>Investor relations and public affairs </li></ul><ul><li>Intelligence gathering </li></ul><ul><li>Developing media profile </li></ul><ul><li>Adaptive and ability to reinvent </li></ul><ul><li>Community relations </li></ul><ul><li>CEO’s reputation </li></ul><ul><li>Core competencies </li></ul><ul><li>Establishing networks and alliances </li></ul><ul><li>Understand the market </li></ul><ul><li>Develop brand experience: “moments of truth” </li></ul>
  86. 86. HOW TO DEVELOP A REPUTATION <ul><li>Clear strategies and resources </li></ul><ul><li>Learning from other’s mistakes </li></ul><ul><li>Listening to customers’ opinions </li></ul><ul><li>Audit and assurance </li></ul><ul><li>Measuring and evalutation </li></ul><ul><li>IP protection </li></ul><ul><li>Stakeholder analysis, mapping and engagement </li></ul><ul><li>Deliver on customer promise </li></ul><ul><li>Think global, act local </li></ul>
  87. 87. HOW TO DEVELOP A REPUTATION : Organisational Structure <ul><li>Who talks to who? </li></ul><ul><li>Final “gatekeeper” responsibilities </li></ul><ul><li>Question of internal communications </li></ul><ul><li>Vertical to global matrix to e-business network structures </li></ul><ul><li>The Case of ABB – Asea Brown Boveri </li></ul>
  88. 88. A REPUTATION PLAN CEO leadership and senior management commitment Communication audit Frame your corporate communicational structure Implementing programme and resources Maintaining and evaluating
  89. 89. HOW TO CONDUCT A COMMUNICATION AUDIT <ul><li>Based on GCI group – Corporate Brand study </li></ul><ul><li>Internal – management survey - employee survey </li></ul><ul><li>External – Stakeholders survey </li></ul><ul><li>Assessment </li></ul><ul><ul><li>Gap analysis </li></ul></ul><ul><ul><li>Structural equation modelling </li></ul></ul><ul><ul><li>Sensitivity analysis </li></ul></ul><ul><ul><li>Competitor analysis </li></ul></ul><ul><li>Strategic communication planning </li></ul><ul><li>Communication programme implementation </li></ul><ul><li>Evaluation, measuring and monitoring </li></ul>
  90. 90. CONCLUSION <ul><li>The early part of the 21 st Century is the era of reputation management and the management of intangibles </li></ul><ul><li>The ruthless organisation cannot succeed </li></ul><ul><li>Companies must adopt pluralistic approaches to managing risk and reputation- must adopt a socio-economic approach </li></ul><ul><li>Emphasis must go on pro-active approaches, risk and issue management - not just crisis management </li></ul>
  91. 91. CONCLUSION <ul><li>Reputation management must be strategic in nature, but must incorporate emergent properties and reporting: involve everyone, not just managers </li></ul><ul><li>Getting organisational structure right and managing structural capital is critical </li></ul>
  92. 92. CONCLUSION <ul><li>Corporations must be innovative, passionate, and adaptive </li></ul><ul><li>Reputation must be viewed as a strategic weapon, emergent and monitored </li></ul><ul><li>Stakeholders’ views must be measured and evaluated: what is stakeholder reputation? </li></ul><ul><li>Reputation management should not stop at senior management and customer facing staff: all employees should be involved </li></ul>
  93. 93. CONCLUSION <ul><li>Brands are the glue of reputation </li></ul><ul><li>Develop brand equity internally and externally </li></ul><ul><li>Ensure your employees understand your intangible assets </li></ul><ul><li>Be proactive with the media </li></ul>
  94. 94. CONCLUSION <ul><li>Ensure your brand is not too easily copied or imitable: differentiate by behaviour </li></ul><ul><li>View CSR as a way forward, not a defence mechanism </li></ul><ul><li>Develop first rate corporate governance </li></ul><ul><li>Ask the right questions, then integrate, integrate, and integrate </li></ul>