A Bulletin of Strategic Reputation and Communication Insights

POWERLINES: A Bulletin of Strategic Reputation and Communication Insights

Quotes/Thoughts of the Week:

“May your Reputation shine in the communities of practice where you operate – online, off line, face to face, marketplace and workplace!”

Table of Contents:

Reputation Predictions
Understanding Reputational Risk
Independent Verification and Assurance
Pick ‘n Pay most trusted
Displaying Goals, Achievements & Code of Ethics
News Alerts
Some valid Humour: A Lesson in Memory Management
Resources: Book Review
Reprint and Contact Information

1. Reputation Predictions:

This is the time of the year that every consultant forecast their own predictions for 2004. So I am no exception.

Some predictions for 2004 are:

1. In a world where fewer and fewer organisations and individuals , TRUST politicians, corporations and the processes that create our lives, some companies and individuals will realize that they have to act responsible and become model corporate examples. Ways and means to build and restore trust in these organisations will become a top priority.

2. Attempts to engender trust through corporate social investment, transparent reporting and voluntary programmes will increase. Unfortunately this will be of little help unless there is change in irresponsible behaviour and practices. In many industries stakeholders will take management teams to task and these companies will face an uphill battle to respond timeously to stakeholder demands, activist actions and public opinion. Some companies will realise that they need to go beyond the obvious and demonstrate real commitment to sustainable transformation.

3. The demands for social and environmental audits of corporate reports, codes and practices will increase and stakeholders will no longer be happy with just being told. They will want proof and will demand independent auditing and verification* of responsible citizen behaviour, accountability, transparency, governance and reputation building practices.

4. Shareholder Activism will increase in South Africa. Last year the SA Reserve Bank got a taste of this through the actions of a minority shareholder. The King 2 Corporate Governance report and The Minister of Finance‘s call for increased activism has been heard and action will be taken.

5. More and more companies will incur crises simply because their risk departments and internal auditors are not doing a proper job to uncover both tangible and intangible risks. As it stands, white collar crime appears to be rampant worldwide, with boards of directors failing to adequately monitor the obvious and concealed risks. Would you like to add to the list? Parmalat being the latest casualty? Who is next in South Africa?

6. Media outlets will report new allegations about improper behaviour by ÎO’s and CEO’s will be even more scrutinized than in the past. CEO’s will realize that their decision-making approaches and ethical behaviour need re-evaluation, and that stakeholder reactions and expectations will have to be taken into account.

7. Some organisations will sensitise their management so that Reputational risk incidents can be minimized and mitigation take place smoothly. These organisations will be praised for their foresight and quick action. See point 4 below.

2. Understanding Reputational Risk

The spate of recent financial and ethical scandals (Parmalat, Boeing etc) clearly demonstrates the amount of damage that can be done to an organisation once its reputation is damaged. It is particularly significant because the more diverse and physically spread an organisation is, the more it becomes immune to risk, and yet the more it becomes exposed to the possibility and consequences of damaging its reputation.

However as reputation damage can harm organisations of all sizes and activities, why is it the most misunderstood and ill-managed of company’s risk management activities? Is it because there was a misconception in the past that PR after the fact could restore trust in an organisation?

Once an organisation has done something that reveals or even gives the possibility that its products or services are unsafe or unreliable, or that there were incompetent, corrupt or self-serving people in key positions, no amount of immaculate crisis response or highly paid PR consultants can prevent the fall out – as has been demonstrated by the numerous companies unable to restore market confidence after a crisis. The fallout almost ever leads to loss of earnings, loss of sales, share value decreases and breakdown of relationships, unless carefully managed.

One institution defines Reputational risk as the risk that an activity, action or stance performed or taken by the organisation or its officials will impair its image in the community and/or the long-term trust placed in the organisation by its stakeholders, resulting in the loss of business and/or legal action/and (loss of face – in a situation of negative public opinion). Essentially all risks and all related components of an organisation potentially impact on reputational risk.

Reputation management is thus no longer primarily a function of the corporate communication department. To address effectively the variety of risks and complex issues that corporations face today, reputational risk management must be mandated from the top of the organisation and driven and implemented by all key business functions jointly. Ownership of reputation has to start with top management. They will need to make it a priority and set the example through their attention to it and application of corporate responsible practices.

Reputation Culture change will require “executive walk the talk” or culture shaping by role modelling. If the executive team does not live out the values, norms, beliefs, customs, traditions, etc that constitute placing a premium on reputation, then any change in culture or shift in stakeholders opinion of an organisation will be a none starter.

Reputational Risk management also needs a corporate custodian that ensures plans and skills are up to date throughout the organisation. Processes must be established, and tools that facilitate and speed up crisis response are critical.

Therefore, Reputation Risk Management can only be effective if it operates holistically – not as a specialist function to be activated in an emergency but as a major influence on the organisation’s actions, behaviour and standards.

The key to this is to understand that to manage Reputational Risk, a multidimensional approach will be needed that includes the convergence of risk management, reputation management, stakeholder relationship management, crisis management, corporate communications, training, corporate governance and sustainable business practices.

As many things can have an effect on reputation, a well-executed Reputation Risk Management exercise will have spin-off benefits that can, by themselves, massively improve corporate performance and profitability.

3. Independent Verification and Assurance

Why do companies get their products tested by the SA Bureau of Standards? Why do only some companies participate in quality competitions and aim for certifications such as the ISO’s? It is because these companies understand that independent verification serves as an indicator of quality and helps to engender trust in the company and products. In an era where trust is dwindling, companies need to find ways to assure stakeholders that their products and services are trustworthy.

How do you know as a customer when you sit down to have a meal in a restaurant, that the products used in preparation of the meal is quality and safety tested? How do you know that a service provider is not using inferior products when he is providing service to your organisation?

You only know because you have either implicitly trusted the provider or because the provider is bold in communicating a message that they conform to best practice, or because you factored these requirements into the Service level agreement when you negotiated terms with the supplier.

These days’ customers no longer just accept situations like the above. Today they want proof of where and from whom the company sourced its materials. They want to be ensured that the products were not manufactured using child labour or at the expense of the environment. They want assurance that a company is acting in their best interests. Today customers study labels and read up as much as possible about the ingredients in dishes, especially as it relates to their future health.

Enlightened companies realise this, and use this information to ensure that their products and services are independently tested. They then use the information boldly in their marketing and communication materials to ensure that their customers put their faith and trust in them.

They employ independent verification organisations that that can assist them with this process. These organisations should be chosen with care.

After all the financial scandals in which auditing firms have been implicated, there could be a danger that the verification and assurance firms could also be at fault. These firms will need to have a close look at their own business practices and ensure that they are independently funded and that in no way fingers can be pointed at them.

4. Pick ‘n Pay most trusted

A survey conducted by research group Ask Africa in association with Business Day, has found Pick ‘n Pay to be SA’s most trusted company. The survey, which involved stakeholders in 30 of SA’s top firms, as well as the public, employees, shareholders, customers and the media, found that the poison-extortion in 2003 didn’t affect the general feeling that

Pick ‘n Pay practices what it preaches and cares about the opinions of people.

If you read Powerlines Number 45 article “Will your company survive without a Crisis Management Plan?” you would recall that I wrote about the importance of being prepared and the impact of a crisis on the bottom line. However a company also needs to act decisively and remember the two angles to any crisis:
– Dealing with the actual crisis
– Dealing with the perceptions created by a crisis
The survey results clearly show the importance of preparation, action, and ÎO involvement, intelligent use of outside suppliers such as risk management, PR and crisis management consultants and most of all dedication to stakeholders.

Above everything your actions need to clearly reflect that you care. That is why Pick ‘n Pay is viewed favourably. Being ill prepared is a very clear sign that you don’t care. If a company cannot find the time to prepare before a crisis the perception of the stakeholder in saying: “They only care now, because they are in the …” will be justified.
5. Displaying Goals, Achievements & Code of Ethics
Many individuals feel that displaying their achievements, diplomas and code of ethics is brash advertising and unnecessary boasting. However there are very clear benefits to do so.
Anthony Robbins in his one book tells the following story:
“Have you ever bought a new outfit or car, and then started spotting it everywhere?
Surely it’s always been around. Why haven’t you noticed it up till now?
Quite simply, a portion of your brain is responsible for the screening out of information except what is essential for your success. He goes on to say that the secret to goals is mental conditioning. By placing them on the wall you trigger your RAS – Reticular Activating System.
This part of your brain/mind becomes like a magnet, attracting any information or opportunities that can help you to achieve your goals more rapidly.”
Tripping this powerful neurological switch can transform your life”

I would think that having your goals, code of ethics and conduct, diplomas, etc. on the wall can serve to psychologically remind you of who you are and what you need to achieve. This form of communication takes place both consciously and unconsciously in a very subtle but powerful manner.

Code of ethics and conduct displayed can go a long and subtle way to remind employees of their duty to act ethically and protect the organisation’s reputation. On my last visit to the USA I was reminded of this when I saw how many institutions and individuals display the American flag boldly and with pride. No wonder there is such a state of patriotism in the US.

6. News Alerts
A Survey shows corporate reputation is growing in importance. After two years of corporate scandals, reputation is at the front of the minds of the world’s top company executives and leaders, a new survey released Wednesday shows. Fleishman Hillard and the World Economic Forum surveyed delegates to the forum, currently under way in Switzerland….

7. Some valid Humour: A Lesson in Memory Management
A person in an organization went to a memory course. The week after he had taken it, he met a co-worker in a hall, who said to him, “Didn’t you go to a memory course last week?”

The graduate said “Yes, I did.”
“Well,” said his fellow, “how was it?”
Oh, it was wonderful,” said the graduate. “They gave lots of really clever association techniques to aid our memory.”
“Then you recommend it?” The co-worker inquired.
“Absolutely!” said the graduate.
“Well what was the name of it?”
The graduate paused, “A, a, what’s the name of the flower with pretty buds and long stems and thorns?” said the graduate.
“A ‘rose?’”
“Yeah, that’s right,” said the graduate, turning back into his office and speaking to his secretary, “Rose, what was the name of that memory course I went to last week?”
8. Resources: Book Review
The Performance Prism – The Scorecard for Measuring and Managing Business Success by Andy Neely, Chris Adams and Mike Kennerley (FT Prentice Hall) – this book provides a framework for better stakeholder relationships. To quote Mark Wade, Sustainable Development Group, Shell International:” The Performance Prism recognises the importance of companies taking a holistic approach to stakeholder management in the “show me/involve me” world of today”.

The book present a wealth of case studies and simple checklists designed to help management focus on key measures of stakeholder performance, and is in my opinion essential reading for any reputation manager.

9. Reprint and Contact Information
Powerlines is published by REPUCOMM whenever we have accumulated enough information to justify another issue. Please feel free to forward it to someone =you= like! As information only becomes POWER once it is shared.

REPUCOMM is a consultancy that provides management consulting, speaking and training services in Reputational Risk Management, which includes reputation building, sustainment and reputation protection strategies including inter alia; the planning and preparation for all types of business crises, communication response in a crisis and stakeholder management strategies.

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COPYRIGHT: Please distribute this newsletter freely. Credit excerpts to Deon Binneman. This newsletter may not be sold.

Material in this newsletter can be reprinted if the following information is printed:
By – Reputation Management Speaker, Consultant and Trainer, REPUCOMM.

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Copyright 2004, by Deon Binneman, All Rights