Building a strong understanding of the organisation and a positive perception over time will provide a degree of insulation “benefit of doubt” if things go wrong. And “over time” are the operative words – good reputations are not built overnight, or off the back of a single event. Demands a collective approach – not through publicity and advertising alone. Combining internal and external activities is essential. We surveyed 54 organisations from around NZ on reputation management, risk and crisis management (Fieldwork was conducted between October 2006 and January 2007 - 17 CEOs and 37 Communications Managers or equivalent) We hope you find the results as interesting as we have. A good reputation: Insulates the brand Increases loyalty Strengthens market position Increases shareholder value Lowers cost of capital (perceived less risk) Permits higher prices Helps attract top talent Helps attract and maintain investors Builds good will (“the good will bank”) Builds stronger and more productive relationships with regulators Opens opportunities
Ribena 101 - Prime example of company failing to deliver product or service to an expected standard, exposure of unethical practices and bad management of a crisis. The company, despite knowing of the students’ study 2 years prior failed to recognise the potential impact on their reputation until it was too late. Initial consumer reactions strongly suggest relationships with many mothers (the principal consumers) have suffered a fundamental breakdown. Sales dropped 12 per cent immediately after the announcement (according to Foodstuffs). In line with a court order, GlaxoSmithKline took out ½ page ads in all major weekend newspapers with a correction and apology. Whether these have won them public sympathy is yet to be seen. In our view, the language and tone used won’t be helping this.
Talking Points: Recognised management discipline. International context brought about by high profile crises: Enron, Barings Bank, One Tel, Exxon Valdez to name a few. Our research sought to explore the NZ situation – how we compare with our overseas counterparts.
We’ll explore these further later in the presentation.
Many New Zealand organisations do no formal research among some of their stakeholder groups. For example, over a quarter of respondents never research media perceptions of their organisations – despite the fact that media power to destroy reputations was recognised to be consistently growing. The research found an organisation’s reputation was only on a quarter of the businesses’ monthly board agenda. Most (90%) covered it on an annual basis, with 27% formally discussing their reputation on a quarterly and/or six-monthly basis. We suggest this is by no means regular or constant enough to offer real assistance in building and protecting reputation. Responsibility was a key issue discussed in the survey findings – asked who had responsibility for managing reputation, nearly every respondent claimed it was the CEO. How an organisation responds and reacts to a crisis can play a key role in enhancing or damaging its reputation. Many New Zealand organisations have faced what they regard as crises quite recently – but almost half of organisations (40%) don’t actually plan how to handle communication in a crisis. Of the organisations interviewed, 61% have planned processes for crisis management; 27% formally discuss corporate reputation at board meetings at least every three months. However, these plans do not appear to be integrated into an overall reputation management plan and do not incorporate formal systems or processes to regularly and actively monitor reputation.
CEO’s more concerned about the risk itself, while Comms Managers more concerned about the management of the risk
Very high recognition of potential impact of reputation EIU survey comparison. International research shows senior execs consider direct threasts to their organisation’s reputation as their greatest risk
Organisations want to protect their reputation but not sure how to go about it”! Most respondents agreed threats to reputation were harder to manage than other sorts of risk
Contrast with EIU research where 90% of execs cited reputation as one of the most important corporate assets
Many organisations are planning and managing individual sources of risk, but not integrating this work into a comprehensive reputation management plan For some, a focus on reputational risk is arbitrary
There is a desire to ensure boards become more heavily involved and take greater responsibility
Government perceived to have greatest influence yet perceptions rarely measured Bad news spreading faster through media – 46% Regulators raising standards – 30% Pressure groups increasing activity – 29% Government getting more involved in issues of public concern – 28% Reputation becoming key source of competitive advantage – 24% Customers changing suppliers more often – 22% Customers focusing on buying from ethical suppliers – 17
Fundamentally, the findings point to not enough being done in NZ management teams and boardrooms to manage reputation. We’re not saying NZ organisations are completely inept – many have plans in place to deal with risk and crises. Some are driven by business continuity planning. Some are driven by communications. The key issue we’re dealing with here is the integration of these plans into an overall reputation management process. NZ organisations have been slower than our international counterparts to understand the significance of reputation or to explore the management of it in detail. The fact that only half of those surveyed actually measure external perceptions shows that half have not even engaged in the initial step of benchmarking their reputation – the first step to protect and increase it. Reputation is an organisation’s primary asset – it’s not enough to have an irregular or haphazard approach. A good reputation takes time and effort to maintain. Consistency is crucial. As a recent article in the Harvard Business Review stated - “Knowing first aid is not the same as protecting your health”
We found from the survey, there is a high level of focus on business continuity planning and insurance risk. Most managers had not linked their work to reputation management in any shape or form. Most automatically said it should be when topic was discussed.
Stakeholder engagement is paramount. First step is to benchmark stakeholder perceptions of your organisation. You have to know what they think about your organisation, the manner in which it conducts itself, and how you can improve any issues. Need to identify areas of potential risks and your stakeholders’ potential reactions before you can plan to resolve them. Cannot afford to ignore that stakeholder’s attitudes and expectations are either valid, and / or are changing. Must maintain constant monitoring to ensure you are not out-of-touch 80% of recipients stated they never regularly monitored political activists and pressure groups or the media – yet these groups have the power to enhance and/or place considerable pressure on reputations. Identify, build relationships, monitor perceptions, maintain relationships, prepare.
The challenge – build reputation management in practice. We know from the research that CEOs and directors would like to know more about how to do this. The first challenge is to actively look to strengthen knowledge for yourselves as CEOs and directors, and for others in your organisation. Talk about reputation management in your organisation – raise awareness across stakeholders. Seek advice on harmonising and integrating existing plans into a reputation management process. Managing reputation does require effort and investment. However, what is clear is that most organisations already do some, or many, of the elements that combine to form a reputation management programme. The key is bringing them together, and to invest in some new areas. Given the imperative – and the value – of getting it right, the investment is not significant. Senate and TNS are here to help. Over the coming months we’ll be talking to CEOs about this research – taking the research to the business community.
Managing Reputation in New Zealand
Managing Reputation in New Zealand An investigation into perceptions of reputation and risk management Neil Green, Managing Partner, Senate Communications Gary Lembit, Managing Director (New Zealand), TNS Global
Reputation management Internationally <ul><li>Recognised as a management discipline </li></ul><ul><li>Multinational high-profile scandals (e.g. Enron) – heightened awareness of reputation management </li></ul><ul><li>Economist Intelligence Unit (2005) research: </li></ul><ul><ul><li>Reputation now considered a top priority for global leaders </li></ul></ul><ul><ul><li>Reputation most important corporate asset … but most difficult to protect </li></ul></ul><ul><ul><li>Many organisations have integrated reputation management plans (not solely risk management) </li></ul></ul><ul><ul><li>Many organisations still struggling to quantify risk to reputation </li></ul></ul><ul><ul><li>Uncertainty over responsibility for owning reputation management within company </li></ul></ul><ul><li>Little known about New Zealand situation – until now … </li></ul>
Study design <ul><li>Letters were sent to senior managers in a wide range of organisations, including companies listed on the stock exchange, Government organisations, and private companies, introducing the survey in September </li></ul><ul><li>An email invitation was sent in October inviting senior managers from over 200 of New Zealand’s largest organisations to participate in a 15 minute online survey. </li></ul><ul><li>Fieldwork was conducted between October 2006 and January 2007 </li></ul><ul><li>54 organisations completed the survey comprising 17 CEOs and 37 Communications Managers or equivalent </li></ul>
Key findings Summary <ul><li>Reputation is considered the second biggest risk to any organisation </li></ul><ul><li>The things organisations most fear are all reputation issues </li></ul><ul><ul><li>Failure to deliver product or service to an expected standard </li></ul></ul><ul><ul><li>Exposure of unethical practices </li></ul></ul><ul><ul><li>Bad management of a crisis </li></ul></ul><ul><li>Reputation considered by only half of managers to be an organisational asset </li></ul><ul><li>Fewer than half of all Boards and executive teams consciously attempt to influence their organisation’s reputation </li></ul>
Key findings In more detail <ul><li>Few organisations conduct formal research with stakeholder groups </li></ul><ul><li>Reputation only on a quarter of the organisations’ monthly board agendas – 90% covered it annually; 27% on a quarterly/six monthly basis. </li></ul><ul><li>Responsibility a key issue – nearly every respondent claimed it was the CEO. </li></ul><ul><li>40% of organisations don’t plan how to handle communication in a crisis </li></ul><ul><li>Plans in place: </li></ul><ul><ul><li>Crisis management – 61% </li></ul></ul><ul><ul><li>Formally discuss corporate management at board level </li></ul></ul>
Perceptions of reputational risk CEO & Communications Manager Corporate reputation is harder to manage than other forms of risk Corporate reputation is the primary asset of any organisation Fifty-Fifty My organisation is proactive in enhancing and protecting its reputation There has been an increase over the past 5 years in risks involving an organisation's reputation Strong Agreement Communications Managers: Stronger Agreement CEOs: Stronger Agreement
What are the biggest risks? Scores of 9 or 10 out of 10 where 10 = very high risk <ul><li>Human capital risks </li></ul><ul><li>Reputational risks </li></ul><ul><li>IT network risks </li></ul><ul><li>Regulatory risk </li></ul><ul><li>Political risk </li></ul>But both groups rated reputational risk second biggest risk More CEOs rated regulatory risk 9 or 10 than any other risk More Communications Managers rated human capital risk 9 or 10 than any other risk
So what do they believe most impacts on reputation? Considerable impact % <ul><li>Failure to deliver minimum standards of service and product quality – 69% </li></ul><ul><li>Exposure of unethical practices – 63% </li></ul><ul><li>Poor crisis management – 52% </li></ul><ul><li>Non-compliance with regulations/ legal obligations – 48% </li></ul><ul><li>Category of business within which you operate – 46% </li></ul>CEOs had “whether the organisation is seen as a NZ one” in their top 5 but not “poor crisis management” Communications Managers had “exposure of unethical practices” as number 1
Is reputation a primary asset? <ul><li>54% say corporate reputation is the primary asset of their organisation </li></ul>Not all think of reputation as their primary asset Eight of 17 CEOs feel this way Eighteen of 31 Communications Managers feel this way
Managing reputation risk What organisations do Specific programme for corporate social responsibility in place – 36% Nothing – 11% <ul><li>Standards for environmental, human rights and labour practices set publicly – 41% </li></ul><ul><li>Crisis scenarios rehearsed annually – 39% </li></ul><ul><li>Crisis management plan – 61% </li></ul><ul><li>Discussion at board meetings – 61% </li></ul><ul><li>Form relationships with pressure groups and critics – 57% </li></ul><ul><li>Employees trained to identify and manage risk – 52% </li></ul><ul><li>Cross-functional team handles threats and crises – 52% </li></ul><ul><li>External perceptions rigorously measured – 52% </li></ul>Less than Half More than Half
Managing reputation risk When no planning for risks occurs, why is this so? <ul><ul><li>Not a priority 4 out of 10 </li></ul></ul><ul><ul><li>Lack of human resources 2 out of 10 </li></ul></ul><ul><ul><li>Never needed to 1 out of 10 </li></ul></ul><ul><ul><li>Lack of budget 1 out of 20 </li></ul></ul><ul><ul><li>Some other reason 4 out of 10 </li></ul></ul>
What is the Board’s involvement? <ul><li>Discussion at Board Meetings (61%) </li></ul><ul><li>Only 44% believe reputational risk management is well understood in the boardroom </li></ul><ul><li> </li></ul><ul><li>But 79% agree more should be done to address this primarily through training and case studies </li></ul>But only 51% quarterly or more often
Measurement of stakeholder group perceptions Influence on reputation <ul><li>Greatest Influence </li></ul><ul><li>Government </li></ul><ul><li>Current Customers </li></ul><ul><li>Employees </li></ul><ul><li>Company Investors / Shareholders </li></ul><ul><li>Potential Customers </li></ul><ul><li>Regulators </li></ul><ul><li>Measure Perceptions at Least Annually </li></ul><ul><li>Employees – 72% </li></ul><ul><li>Current Customers – 61% </li></ul><ul><li>Company Investors / Shareholders – 44% </li></ul><ul><li>Government – 39% </li></ul><ul><li>General Public – 33% </li></ul><ul><li>Media Groups – 28% </li></ul>
Key findings Our interpretation <ul><li>Nowhere near enough discussion is taking place </li></ul><ul><li>Organisations are actively managing risk – key: integration of plans </li></ul><ul><li>All plans should be integrated to focus on the overall reputation of the organisation </li></ul><ul><li>Reputation is an organisation’s primary asset </li></ul><ul><li>What does this mean in a practical sense? </li></ul>
<ul><li>“ By failing to prepare, you are preparing to fail ” </li></ul><ul><li>Benjamin Franklin </li></ul>
Reputation management Next steps <ul><li>Challenge for organisations to build reputation management into day-to-day practice </li></ul><ul><li>Actively look to strengthen knowledge about reputation and risk management – CEOs, directors, board members. </li></ul><ul><li>Openly discuss reputation management </li></ul><ul><li>Seek advice on harmonising and integrating existing plans into a reputation management process. </li></ul>