Books Strategy Documents L0 1/2012 Reputation The Alignment Factor: How to Link Up All Stakeholders in Order to Achieve Business Excellence What determines the success of corporate strategy? What are key success factors from the viewpoint of managing intangibles? Should one take into account only clients and shareholders when developing the corporate strategy, or should employees, suppliers, regulators and the societies also be involved? In order to win, one has to align. Such is the conclusion made by Cees B. M. van Riel, Professor of Corporate Communication of the Rotterdam School of Management and Vice Chairman of the Reputation Institute, in his book titled The Alignment Factor ( Alinear Para Ganar in its Spanish translation). The book highlights the need for support on the part of stakeholders in order to enter different markets, obtain operating licenses and minimise potential obstacles. The message is clear: alignment of different business units and departments of an organisation, as well as alignment of the corporate strategy with the expectations and interests of the stakeholders is the key tool at present for building excellent reputation. The best strategy may fall through if it is not supported by key stakeholder groups. This statement is illustrated with numerous examples of multinational companies such as Unilever, Deloitte, ING, Google, Southwest Airlines, IBM, Philips, Ikea, Toyota, McDonald s or Nestlé, as well as many Spanish companies, for example Telefónica, BBVA, Santander, La Caixa, Iberdrola, Repsol or Gas Natural Fenosa. The importance of internal external alignment Luis Abril, Chairman of Corporate Excellence, believes that today, in the context of the reputation This document was prepared by Corporate Excellence Centre for Reputation Leadership and among other sources contains references to research of Cees B. M. van Riel, Professor of Corporate Communication at the Erasmus University Rotterdam Business School and Vice Chairman of the Reputation Institute, and comments of Luis Abril, Chairman of Corporate Excellence Centre for Reputation Leadership and General Manager and Chairman Chief of Staff of Telefónica, and Ángel Alloza, CEO Corporate Excellence Centre for Reputation Leadership, made during the presentation of the book Alinear para ganar, the first title in the Corporate Excellence Library published by LID publishing house. The presentation was held at EOI Business School in Madrid, on April 19, 2012.
Figure 1: Perspectives on issues Perceived Desired Source. Van Riel, Cees (2012): The Aligment factor, Projected economy, it is possible to achieve prestige and recognition by projecting a coherent message onto the society, thus aligning internal stakeholders (employees and shareholders), as well as external stakeholders (suppliers, clients, regulators and associations) with one s corporate strategy. Ángel Alloza, CEO of Corporate Excellence Centre for Reputation Leadership, believes that this is a very important observation, because the key to building reputation is the : reputation is built from within, starting with the employees, and is achieved through coherence of, values, brand, communication and corporate reputation as a result of this effort. Van Riel points out in his text that there are three types in an organisation: 1. Desired : a search for the direction. 2. Projected : derived from communication. 3. Perceived : evaluated by the employees. The first objective and the first stage is to align these three identities and to make sure that the employees take part in the initial vision, share the mission, establish mutually beneficial relations and thus achieve alignment with other stakeholders (external stakeholders). This is because according to van Riel alignment with internal stakeholders ensures better results: alignment improvement by 10% leads to a 6% increase in satisfaction and a 2% increase in business results. Reputation is built from within, starting with the employees, and is achieved through coherence of, values, brand, communication and reputation In this sense, the behaviour of the employees and their alignment with corporate objectives that goes beyond formal commitment and connection with the organisation, is essential. If commitment does not lead to specific behaviours, it is of little use and value. Adjustment of these two factors may be extraordinarily beneficial for the organisation and may be achieved by analysing and trying to bridge possible gaps. Designing a clear and elaborate roadmap In order to achieve this result, it is extremely important to design a roadmap. The roadmap is also helpful for improving efficiency by choosing the right focus that can have an impact on business results and anticipating the obstacles that the company may face, thus making it easier to overcome them. First, certain techniques should be used for alignment, including the following two main work directions: 1. Negotiation: asking (holding consultations via internal presentations and negotiations) and Figure 2: Techniques for creating alignment Negotiation Consultations Presentations and negotiations with unions Presentations and discussions with the committee (s) of company Consensus Briefings Management meetings Improvisations Confrontation Replication Exposure inevitable internal messages Use of external corporate announcements to persuade domestic public Assignment of trainers to key management targets set role behavior Power game New organizational structures and decisionmaking processes Appointment of new directors in key roles Training in internal training programs New rules for evaluation Source: Cees BM Van Riel, The Aligment factor, 2012. Books 2
Figure 3: Drivers of strategic alignment behavior Information Motivation Training Strategically aligned behavior Source. Van Riel, Cees (2012): The Aligment factor reconciling (holding meetings for informing and choosing the direction). 2. Confrontation: replicating (internal and external messages) and power game (decisionmaking, new appointments, reviews and training programmes). Therefore, it is essential to hold consultations first, then to inform involved actors, then to motivate, empower, and finally, achieve the results, follow up and compare them to the objective. The next stage consists of paying due attention to communication, trying to provide answers to the following questions: 1. Who is the source of initiative and leader of the process. 2. What strategy means for every actor. 3. What is the key audience. 4. How consistent are the messages. 5. What abilities should be developed. 6. Who should avoid being silent and made to speak up. The final stage consists of analysing and securing support of different stakeholders by creating and building on relations based on mutual and shared benefit, where everybody wins and, where possible, achieves the benefits they expected. In other words, it means integrating collective ambitions under the umbrella of a common goal. Developing a good balanced scorecard with internal and external KPIs (Key Performance Indicators) that allows one to extrapolate results into the future depending on the changes of each attribute is also extremely important. Van Riel s research shows that those companies that introduce a 20% increase of bonus or variable remuneration of their managers for successful alignment, achieve better strategy alignment with the stakeholders. Reputation as a cross-cutting function Abril believes that Van Riel s book shows that reputation management may be successful only if it is understood as a cross-cutting function in organisations, where internal alignment is followed by external alignment and linked to communication management. This is because by managing the causes and policies, one can influence the consequences and perceptions. That s why the worst enemy of reputation management is the inclination of every department to pursue its own interests, to fight with other departments and drive the organisation in opposite directions a tendency characteristic of many companies and institutions that have a strong divisional component. According to Van Riel s model, the reputation function should have a long-term vision in order to anticipate risks and opportunities, but at the same time avoid turning into a kind of Matrix, alienated from the reality of its stakeholders, their true problems and needs. Reputation management may be successful only if it is understood as a crosscutting function, where internal-external alignment as well as the alignment of communication and management are key The role of the CCO (Chief Communications Officer) should be characterised by an integrated vision, combining centripetal and centrifugal forces, as well as uniting all departments (Marketing, HR, Technology, Operations, with a special emphasis, as suggested by Van Riel, on Finance). This is key for effective management of intangible assets and company success. This success no longer depends solely on the capacity to compete on the market or create best products. Instead, an important factor now is establishment of rational links and strong emotional connections with the society in general and stakeholders in particular who become increasingly savvy about analysis and evaluation of behaviours and actions of companies. However, in order to build a good reputation (which ultimately protects and grows value, increases capital, draws clients and talent, helps to obtain Books 3
licenses, shields in the times of crisis and ensures sustained and sustainable growth), it is necessary to observe the following three prerequisites: 1. Have a clear idea of one s mission and vision, one s goals and how they can be achieved. 2. Have a clear idea of one s values, the form and the style of doing things. 3. Have a clear idea of action principles, the limitations and the red lines that cannot be crossed. Conclusion: we are competing for reputation; in order to win one has to align The Alignment Factor ( Alinear para ganar ) has a highly practical focus for all those organisations that have to face profound transformations due to the processes caused by what we call the new reputation economy. In this new cycle the key is not only what one does, but also what others think and how they evaluate these actions. In this context, trust is a weapon in a competition for a scarce good: reputation as a key value, as the most important competitive advantage that is impossible to imitate. The key here is to ensure that the universe of stakeholders, starting with internal stakeholders, is aligned with the corporate strategy and shares the goals, hopes and success of the company. In order to demonstrate this, the book presents some good practices successfully applied by Spanish and international companies. The result is predictable: greater alignment leads to greater satisfaction and connection, and eventually brings about better business results. Books 4
Leading by reputation 2012 Corporate Excellence Centre for Reputation Leadership Business foundation created by large companies to professionalize the management of intangible assets and contribute to the development of strong brands, with good reputation and able to compete in the global market. Its mission is to be the driver which leads and consolidates the professional management of reputation as a strategic resource that guides and creates value for companies throughout the world. Legal Notice This document is property of the Corporate Excellence Centre for Reputation Leadership and has as its objective to share business knowledge about Brand, Reputation, Communication and Public Affairs Management. Corporate Excellence Centre for Reputation Leadership is the owner of all the intellectual property rights of the images, texts, designs and any other content or elements of this product and has the necessary permission for its use, and therefore, its copy, distribution, public release or transformation is prohibited, without express authorization from the owner.