REPUTATION MANAGEMENT. Presentation by John Dalton

REPUTATION MANAGEMENT Presentation by John Dalton

What s Changed 2 Image is no longer a credible communication tool people and organisations talk about reputation Today, to sustain a competitive advantage, even for a short term, requires a brand to have developed a reputation, which means that it delivers on its promise and not just its image Reputation is about transparency and delivery, through consistent, credible communications and behaviour central to which is a strategic corporate communications function

Context 3 The economic advantage of having a good reputation is well established Issue of causations and correlations between positive reputation and financial performance still being debated as issues are complex Reputation relates to social capital and social authority Reputation and its management witnessed a paradigm shift since early 2000 and the development of social media

Context 4 Witnessing an era of a reputation economy Brands cannot hide and must deliver on brand promises Reputation cannot be managed per se, just guided and shaped Reputation also linked to business resilience the ability of a brand to adapt and market pressures and withstand volatility

What is Reputation? 5 No universally accepted definition A collective representation of an organisation s past actions and results that describe the organisation s ability to deliver valued outcomes to multiple stakeholders (Fombrun 2001) A form of assessment - how stakeholders perceive organisational and employee behaviour Growth in reputation agents: credit agencies; NGOs; regulators; scorecards and indices Dow Jones Sustainability Index

Confusion of Terminology 6 Brand/product reputation Organisational reputation or corporate reputation Industry reputation The concept of reputational capital

What is Reputation? 7 A collective representation based on stakeholders opinions An aggregate evaluation that stakeholders make about how well an organisation meets its customer needs based on current and past actions A holistic impression of a person or company based over time; it can neutral, positive or negative

What is Reputation? 8 For many, the reputation construct is based on: Past action: based on past performance, therefore reputation has an important retrospective component Current state: the perceived state of the organisationbased on direct and indirect experiences and information received Future prospects: financial and behavioural environmental or social LSPR 2012

What is Reputation? 9 Reputation is most damaged when a crisis attacks an organisation s core competence this leads to considerable reputational damage Problems do not even have a reality, just a perception that something is wrong Intangible risks are all too often overlooked and far too much emphasis is still placed on risk analysis post crisis event: need to develop pro-active risk and issue analysis systems

Corporate Communications & Identity Image & Reputation IDENTITY IDENTITY IMAGE REPUTATION Identity Various perspectives Marketing : IMAGE impressions received REPUTATION 10 Organisational : visual design & personality

11 Corporate Reputation- The Interplay of Identity & Image Vision & Mission Corporate Identity Shaped by Corporations Positioning Corporate Image Shaped by Customers Corporate Reputation

Reputation: An Overview 12 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 John Dalton Managing Corporate Reputation A company s overall reputation is a function of its reputation amongst its various stakeholders Harvard Business Review Feb 2007

What is Reputation? 13 It is a intangible economic asset Linked to brand equity and management Should not be considered interchangeably with image some differences Perception is important in reputation and can often be viewed as the reality Tone for reputation is set at the top CEO s reputation very important Involves the management of visibility and credibility

What is Reputation? 14 Reputation is emotional as well as rational Depends of consistency of delivery and credibility Built up over time through repeated interactions (can be catalysed by celebrity or events) Subjective and socially dependent Relative- depends on the behaviour of the market and others Reputation is largely controlled by stakeholders viewpoints

Related Issues 15 Reputation and the mismatch between capabilities and assets Business models increasingly based on trust 24-hour news media User-generated content (UGC) Online communities Innovation and disruptive technologies Power micro-constituencies Black Swan events and the global economy Regulatory compliance

Sources of Reputational Risk 16 Management decisions Unacceptable employee behaviour Breaches of environmental or social behaviour Technology failures or data loss Failures in health and safety Failure of regulatory compliance Failure in traceability contamination Accidents Online/social media damage/rumours IP infringements NGO activisms Faux pas by employees or senior management

Misconceptions about Reputation Management 17 RM is largely a function of corporate communications RM is relatively simple Reputation issues can be tackled and solved by technical and legal address Just doing the right thing is enough Reputational challenges are largely the result of external challenges RM is a corporate function Reputation is best understood in terms of analytics, numbers and financial performance Growth and previous success are essential ongoing elements of building reputation Reputation exists within the corporation

Basic Rules of Reputation 18 Have credible brand experiences and products/services Having strategic intent: vision and mission Having sound brand values Admit errors and correct them Have a social media strategy to develop reputation and tackle online reputation management (ORM)

19 Basic Rules for Reputation Ensure that structures and operations are fit for purpose Have a credible and congruent CSR strategy Develop customer experience Have a strong brand identity Be adaptable and innovative Understand risk and issues analysis pre-crisis planning Stakeholder engagement Brand narrative

PR and Reputation Management 20 PR how brands, people and organisations manage their media and customer perception; largely tactical and short term Corporate communications how organisations manage their internal and external communications; more strategic than PR and engages with multiple stakeholders Reputation management how stakeholders collectively view the organisation i.e. reputation exists outside of the organisation

Brand & Reputation 21 What is the difference between brand and reputation are they the same? Brand = promise Reputation = delivery on the promise 21

Traditional PR Less strategic Non-integrated Focus - short-term Key people involved Aims to give the best possible image Media relations focused Focus on transactional stakeholders Reputational Management More strategic Integrated Holistic - long-term Involves all employees Aims to deliver an image and brand promise Uses all forms and opportunities to communicate policy and values Greater emphasis on multiple stakeholder relationships 1990s, 2010 2017 22

PR and Reputation 23 PR BRAND Reputation Desired image Vehicle of promise Delivery of promise 23

Reputation and CSR 24 Corporate social responsibility (CSR) or corporate sustainability/citizenship has become a vital strategic tool for managing reputation Examples: Pampers Mont Blanc Avon and breast cancer Marks and Spencer Plan A Marine Stewardship Council

25 Social Media and Reputation Management Online reputation management (ORM) Social media requires a strategic response Platforms for social media Blogs Twitter Facebook Linkedin Social bookmarking Social news YouTube Wikis

Purpose of Online Reputation Management 26 Online reputation management (ORM) is largely reactive with emphasis on SEO However, it should be equally be strategic and proactive, with a clear understanding of who are the key influencers, the best platforms to engage and what content to include

27 Places to Search for Negative Comments Blogs SERPS Review sites Message boards Online forums and discussion pages Hate sites Twitter Social bookmarking sites

28 Structure/Process of ORM Conduct an audit on of online comments and opinions Establish any key phrases or terminology being used, frequency and origin How are comments being framed? Establish, what, if any, issues, need to be addressed and why? Establish if there is any factual or perceptual misrepresentation Monitor what is being said and actively engage Publish and promote new sites to help displace any existing negative comments

Monitoring Reputation 29 Google Alerts: www.google.com/alerts IceRocket: www.icerocket.com Technorati: www.technorati.com Twitter Search: www.twitter-search.com TwitterMeme: www.tweetmeme.com Alexa: www.alexa.com

Financial results and capital Customer benefits Tangible assets Business processes Intangible assets 30 Human/Structural capital Culture values Stakeholder relations Adapted from: Intangible Assets: J. Daum; Wiley, 1999

Reputation and Intellectual Capital 31 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 Leif Edvinsson and Michael S. Malone; Intellectual Capital

Intellectual Capital 32 MARKET VALUE Market Value Financial Capital Human Capital Intellectual Capital Structural Capital Customer Capital Organisational Capital

Intangibles 33 Sales push focus Brand capital Customer pull focus NEW ECONOMY OLD ECONOMY Human capital Production focus Customer focus High Working capital Physical capital Low (WIP, finished goods) (direct delivery to customers)

Intangibles 34 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

Importance of Intangibles 35 Most people recognise the importance of intangibles and how brand and reputation are the two critical elements, but people are still poor at fully comprehending how intangibles can be made to work harder and, hence, generate more wealth the erosion of reputation as an intangible results in significant and long-term damage for a corporation that is difficult to reverse Reputation is the outcome intangible upon which stakeholders based their collective views on the performance, values and behaviour of an organisation

Reputation Elements 36 Reputation and capabilities Reputation and business models Reputation and innovation Reputation and audits Reputation and brand narratives

Financial Performance and Reputation 37 Link with investor relations (IR) Need to understand the value of a business Its potential to deliver in the future shareholder value Enterprise value and brand equity value Fundamental or relative value

Fundamental Valuation Models 38 Discounted cash flow (DCF) model Cash flow return on investment (CFROI) Dividend discounted model (DDM) Real options valuation The above are based on cash flow Residual income model Economic value added (EVA) The above based on returns

39 Examples of Relative Valuations Earnings multiples P/E Cash and EDITDA Asset multiple - price/book value Operating multiples EV/customer

Value Drivers 40 A value driver is some entity that helps generate value for the corporation it can be financial, operational, technological, or reputational Barriers to entry Brand strength Relative market share Satisfied customer index Customer loyalty index Industry growth Appreciation rates for target groups

Reputation and Shareholder Return 41 Reputation is more than just shareholder return Shareholder value is an outcome, not a strategy Linked to TSR is socially responsible investment (SRI)

SRI and Reputation 42 What is meant by socially responsible investment? How important is it? What is investment screening and the purpose of ethical investment?

RM and Systems Perspective 43 Reputation as a complex construct cannot be understood or defined from one simple perspective As complex open systems, modern organisations should be best viewed with a systems perspective A system is a product of the relationship between any of its parts, giving primacy to the interrelationship between elements and not the elements themselves in the system

Reputation Management The Key Elements 44 Identity and Image Use and protection of assets and IP Management quality Strategic media relations - messages Customer experience Brand experience Innovation + R & D Communications Structures and operational efficiency Financial performance and stability Investor relations Stakeholder relations Brand equity and credibility (relevance and strength)

45 Other Factors that Influence Reputation Leadership getting people to work in the same direction to a common purpose Values workers and other critical stakeholders should understand through your corporate communications what are your values and beliefs as an organisation Culture: corporate culture is shaped by both the above and is central to

Reputation and Image 46 There is some confusion over the use of these two terms. They are often used interchangeably, but there are some fundamental differences: Image and reputation differ in time - reputation evolves over time image is very much the here and now Reputation, as a concept, is more deeply rooted in moral language, whereas more diffuse copywriting-like language is associated with image Image is orientated on how things might appear, whereas reputation is more symbolic and fragmented Reputation is based on the collective assessment by many stakeholders on an organisations identity and image

47 What are the Advantages of Reputation? Increased market share Enables premium pricing Better protection shield especially in a time of crisis Employee loyalty Better capital investment Easy to enter new markets Helps build brand equity over time More attractive to investors and builds credibility Facilitates brand extensions Reduces impact of competitor actions Provides stability and gives credibility Increases brand loyalty

Critical Questions 48 Who is in charge of managing your reputation? Do you have your own scorecards? Define what issues matter to you? Have you conducted a reputation audit? How credible are your corporate messages? How does your industry and market affect your reputation? How do you deal with audit and assurance?

49 Fortune- World s Most Admired 2010 1. Apple 2. Google 3. Berkshire Hathaway 4. Johnson & Johnson 5. Amazon.com 6. Procter & Gamble 7. Toyota 8. Goldman Sachs 9. Wal-Mart Stores 10. Coca-Cola Source: Fortune Magazine March 2010

50 Fortune- World s Most Admired 2011 1. Apple 2. Google 3. Berkshire Hathaway 4. Southwest Airlines 5. Procter & Gamble 6. Coca-Cola 7. Amazon.com 8. FedEx 9. Microsoft 10. McDonalds

51 Fortune- World s Most Admired 2012 1. Apple 2. Google 3. Amazon.com 4. Coca-Cola 5. IBM 6. FedEx 7. Berkshire Hathaway 8. Starbucks 9. Procter & Gamble 10. Southwest Airlines

52 Tools for Managing Reputation Corporate advertising Corporate presence in social networking sites Developing a strong identity/image Strong risk and issue analysis (environmental scanning) Congruent and developed CSR programmes Good governance and regulatory compliance Innovative products and services brand energy Monitoring of evaluation of noise in the web Strategic marketing and promotion (sponsorship) Well developed stakeholder management and external communications Talent management and employee engagement Effective crisis management

Corporate Advertising 53 Paid media that seeks to benefit the image of the corporation as a whole Issue or advocacy advertising Publicise CSR or philanthropic activity Correct a misconception or response to an activity (crisis) recovery strategy Issue plastics industry; BP; Shell; Total Before an IPO Crisis situations: Mattel United Technologies Corporation (UTC)

54 Directing Communication Through Common Starting Points Identity Strategy Common Starting Points Brand Marketing Communication Management Communication Organisational Communication

Reputation and Corporate Communications? 55 Reputation can be managed and controlled partly through corporate communications Corporate communications is a management function that offers a framework for effective co-ordination of all internal and external communication with the overall purpose of establishing and maintaining favourable reputation with stakeholder groups upon which the organisation is dependent

Reputation Must Be Strategic 56 Although it is increasingly difficult to manage reputation, through the strategic corporate communications function, it is possible to manage three key elements; Good communications (getting across vital themed messages Good deeds and behaviour (link CSR and sustainability) Good stakeholder relations (work in collaborations with organisations to solve mutual problems)

Best Practice in Developing a Reputation Strategy 57 Make it credible and serious accountability - make it a senior management priority with Integrate it across functions make a joined-up, holistic system that aligns all the values and behaviour irrespective of the organisation function under consideration: adopt a common model Be realistic, set sensible objectives with appropriate funding Understand the complexity of the issues involved and stakeholders concerns Appreciate stakeholder conflict Actively engage with stakeholders and be prepared to be criticised Demonstrate transparency and a readiness to talk to the media and advocacy groups, especially NGOs

58 Principal Elements of Corporate Communications Management Communications Organisation Communications Marketing and Reputation Management

Marketing & Reputation Management 59 Media Relations Corporate Advertising Product Advertising PR & Reputation Management Community Relations Special Events Sponsorship Product & Brand Management Online Management and e-engagement

Overlap Between Marketing & Organisational Communication 60 Advertising Sales Promotion Marketing Communication Personal Selling Marketing Public Relations Experience Marketing Organizational & Management Communication Public Relations and Issues Management Public Affairs Investor Relations Internal Communication

VISION REPUTATION 1. STRATEGIC INTENT 2. DEFINE COMMUNICATION OBJECTIVES 3. IDENTIFY & PRIORITIZE TARGET AUDIENCES 4. IDENTIFY THEMED MESSAGE(S) 5. DEVELOP MESSAGE STYLES Corporate Communication in Practice 6. DEVELOP MEDIA STRATEGY 61 7. PREPARE THE BUDGET

LEGO Philips Shell 62 Alcatel-Lucent

Brands and Reputation 63 Phase I Phase II Phase III Corporate Identity Corporate Image Reputation 63

How to Develop a Reputation 64 Quality of products and services Passion for brand Customer relationship marketing Strong corporate governance and compliance Integrated risk and issue management Crisis planning Corporate responsibility (CR) Strong brand values, experience and communications Organisational culture and structure Contract fulfilment Business presentation and conferences Customer facing staff

How to Develop a Reputation 65 Innovation Vision and leadership by CEO Investor relations and public affairs Intelligence gathering Developing media profile Adaptive and ability to reinvent Community relations CEO s reputation Core competencies Establishing networks and alliances Understand the market Develop brand experience: moments of truth

How to Develop a Reputation 66 Clear strategies and resources Learning from other s mistakes Listening to customers opinions Audit and assurance Measuring and evalutation IP protection Stakeholder analysis, mapping and engagement Deliver on customer promise Think global, act local

67 How to Conduct a Communication Audit Based on GCI group Corporate Brand study Internal management survey - employee survey External Stakeholders survey Assessment Gap analysis Structural equation modelling Sensitivity analysis Competitor analysis Strategic communication planning Communication programme implementation Evaluation, measuring and monitoring

Steps in Recovering a Reputation 68 Take the heat analyse and show distinct leadership Do not stop communicating at any stage disclose things swiftly and honestly Analyze in depth what when wrong and why Initiate change strategies to restore errors and communicate any major changes to key stakeholders Measure what others are saying about you Nielsen BuzzMetrics

Critical Questions 69 Ask What business are we in and what are our primary objectives? Who are our most important stakeholders? Which competitors do which wish to measure ourselves against? What do stakeholders believe about us now? What, and how big, is the gap between how we want to be perceived and how we are perceived? Which of messages have the most credibility? What benchmarks are we going to measure reputation and its improvement?

Measuring Reputation 70 Y & R s Brand Asset Valuator WPP s Brand Z Harris Interactive EquiTrend Fortune s Most Admired Harris-Fombrun Reputation Quotient (RQ) The Reputation s Institute -RepTrak

Measuring Reputation 71 Various ways to measure reputation Measures based on commercial, applied research programmes and indices General measures based on corporate performance

72 Measures based on research programmes Harris Poll Reputation Quotient (RQ): www.harrisinteractive.com Reputation s Institute Rep Track: www. reputationinstitute.com WPP s Brand Z: www.wpp.com Fortune s Most Admired: www.money.cnn.com Y&R s Brand Asset Valuator: www.bavconsulting.com Harris Poll EquiTrend: www.harrisinteractive.com Brand Power: www.corebrand.com FTSE4 Good index: www.ftse.com Interbrand: www.interbrand.com Dow Jones Sustainability Index: www.sustainability-index.com

73 Alternative Ways of Measuring Reputation Financial P/E ratio Total Shareholder Return (TSR) Economic Value Added (EVA) Return on Equity (ROE) DuPont Model EBITDA

74 Alternative Ways of Measuring Reputation Customer and employee surveys Shareholder resolutions Customer complaints Risk reports Staff turnover Safety reports Cases of litigation Cases of regulatory issues Carbon footprint Social and environmental audits

The Reputation Institute s RepTrak Scorecard Well organized Appealing Leader Excellent management Clearvision of its future Profitable High-performing Strong growth prospects ESTEEM RepTrak High quality Value for money Stands behind Meets customer needs Innovative First to market Adaptsquicklyto change Environmentally responsible Supports good causes Positive influence on society TRUST Open & transparent Behaves ethically Fairin the wayitdoes business Rewards employees fairly Employee wellbeing Offers equal opportunities 75 PERFORMANCE

Widescreen Test Pattern (16:9) Aspect Ratio Test (Should appear circular) 4x3 16x9