I was kindly invited by Sifiso
Falala, CEO of Plus 94 Research, to
address the Mail & Guardian’s Top Companies Reputation
Index Awards. Here is a copy of my talk:
Last year, you may have been
lucky enough to listen to the charming and insightful Michael Judin. I
have it on good authority he talked a lot about Arsenal. I’m not going to talk
about Arsenal, mainly because I’m a Man U girl.
But I do want to talk a little
about an area that Michael and I have been exploring, based on his work in the
writing of King
III, and the increasing importance of Reputation in Governance.
Our question is: “Who’s seated at the top table?”
- Julius Malema.
- Barack Obama.
- Angelina Jolie.
- Meryl Streep.
- Woolworths.
- Auction Alliance.
- Apple.
- BP
In a heartbeat, your brain has
created a reputation index of your own, hasn’t it? It's what Malcolm Gladwell
refers to in his book “Blink”,
the ability to sum up something in ‘the blink of an eye’.
Obviously the measure of
reputation is far deeper than the immediate outward representation, these “snap
judgments”. But it’s like Jeremy Bullmore, former Chairman of ad agency JWT,
says about how consumers build brands: “like birds build nests – from the
scraps and straws they chance upon” little pieces of foam, sticks and twigs
from anywhere form our opinions about things, people, products, brands,
companies.
Some of these reputations you
formed in your mind are because of things you’ve been told, you’ve personally experienced,
someone else told you, or maybe something you read on Twitter.
And we all know what happens when
what we've been told or promised is out of synch with what is delivered? A
change in trust occurs. Of course it can be a positive change (Angelina Jolie
went form the weird girl who kissed her brother and wore a vial of blood around
her neck, to a paragon of good work with the UN). But if there’s a disconnect,
mistrust sets in. A lack of credibility arises. Future dealings are affected.
And boy oh boy is there a lot of
chat.
On every social network, word of
mouth is amplified. Take the Zuma spear story. How many of you have ever been
to an exhibition at the Goodman Gallery? How many of you would have seen the
picture in its exhibition? How many of you saw the picture in the press? How
much more damage was done by the reaction to the painting? The impact of the
social media in this case is staggering. As of yesterday (24th May),
the online reputation management company, Brandseye,
reported that 108 million people had engaged with the issue online!
We know that there are two
fundamental areas in which things can go wrong:
·
Where
there is a gap between what you say, what you do
·
Where
there is a gap between what you do and what people expect you to be doing.
(Source: Yardstick)
And many companies only realize
the potential impact of it, when it all goes horribly wrong. This breakdown in
reputational trust can shut a business down.
Ask Rael Levitt.
I read a great report called “The Trust Deficit –
views from the Boardroom”, and their point was that every business nowadays
starts with negative trust: a Trust Deficit. As one FTSE 100 CEO commented, “in
the world of business, it’s not you’re innocent till proven guilty: it’s -
prove that you’re not guilty first”.
There is growing scepticism and
cynicism about claims and actions of businesses – primarily driven by the
behaviour of the financial institutions abroad, but in daily actions that
undermine the trust we had in a company or brand, or the expectation we had
from them. We’re seeing this in the role of the National Consumer Commission
and the CPA (Consumer Protection Act). Take the Woolworths
Frankie's example, where there was outrage the Woolworths had copied
(‘stolen’) a small producers retro drink’s concept.
And, as with the Woolworths
example, the greater the trust in a company or brand, the greater the outrage
and sense of being let down, when they do something we don’t expect from them.
The flip side is the greater the trust, the more rope we will sometimes give
them.
A wonderful example of this is,
years ago, I used to work on a Trade Opinion panel, with Perry & Associates. Interviewing the
Checkers guys, they said: “when a customer finds us out of stock, they’re
furious with the store manager. When a Woolworths customer finds that something
they wanted is out of stock, they say “I should have got here earlier”.
CEO’s see the increasing need to
verify claims and demonstrate trustworthiness - more independent or external
certification to prove they are trustworthy (eg Fairtrade, Beauty without
Cruelty). In SA, testing beauty products on animals is illegal – you can’t have
beauty with cruelty or you’ll be in
jail. So there is no real need for this badge – yet we want it anyway. In the
absence of this proof, businesses feel they are deemed untrustworthy. Any malpractice
is deemed indicative of a greater malaise anyway: “I knew it – they all do the
same”.
There is also the dynamic of the
24 hour news cycle: as one CEO said, “the media has got the news almost as soon
as the Company has it”.
So the quick turn around of news
is forcing companies to react much faster - how fast is fast enough? Take the
recent Blackberry
example, when it took several days for the company to respond to a Twitterstorm
about a network problem.
Overwhelmingly, TRUST IS INCREASINGLY
UNSTABLE.
Also, this thing called trust is
also deeply personal. It’s about relationships. Trust cannot be outsourced. And
I’ll talk more about outsourcing later.
Now, I know that we all know all
of this.
We understand the business
imperative of reputation management, of building and maintaining trust amongst
our stakeholders, by saying, then doing, then delivering. And the risks if we
don’t. Warren Buffet said it succinctly, “It takes 20 years to build a
reputation, and 5 minutes to ruin it. If you think about that, you will do
things differently.” Apple lost $100m due to one blog post!
(See this excellent article by Tim
Shier, Quirk).
However, if we take a look at how
this year’s Reputation Index pans out – the 8 factors show us that there are
areas we are doing far better than others. The ranking is as follows:
- Financial performance
- Products and Services
- Vision and Leadership
- Workplace environment
- Governance
- Communication
- BEE
- CSR
And this emphasises our key
question:
How come the areas that define
how we engage or communicate with our diverse stakeholders (Communication and
CSR) are so low on the list? Remember – these are the scraps and straws we can
actually control, in a world of communication that is largely out of our hands.
And, when I say ‘communication’
its not just external. Employer branding plays a vital role. Sustainability and
community engagement are also critical areas both of communication and CSR.
So why so low on the scale?
In our opinion it’s because
they’re too far removed from the Board, from the CEO. Are Boards too focused on
the operational and inward aspects of Reputation? Have the communication
aspects of Reputation been too far outsourced inside and outside the
organisation? We think so.
Corporate reputation seems to
have separated out from Brand reputation. Corporate reputation has the CEO’s
ear. But the discussions of how the overall corporate reputation is maintained
and built through its brands’ messaging and actions, are missing in action on
these boards.
Question:
How many Marketing Directors do
you think sit on Boards?
I asked Donovan Neale May, the
head of the Global CMO Council and he
said “worldwide, we estimate less that 5 percent of corporate boards have
experienced marketers as either internal or external directors.”
We estimate that under 20% of
companies in SA have a strong marketing presence on the Board. And, we have it
on good authority that those Marketing Directors that do sit on their Board
often feel undermined, too often treated like a cost centre, rather than a
strategic business builder.
Perhaps this is because of what
they call the CEO-CMO disconnect.
In a study done by Fournaise
in the UK, US and Europe it was found that 73%
of CEOs think marketers lack business credibility.
Some of the top issues CEOs have
with their Marketers are:
·
They
keep on talking about brand, brand values, brand equity and other similar
parameters that their top management has great difficulties linking back to
results that really matter: revenue, sales, EBIT or even market valuation (77%)
·
They
bombard their stakeholders with marketing data that hardly relate to or mean
anything for the company’s P&L (70%)
·
Unlike
CFOs and Sales Forces, they don’t think enough like businesspeople: they focus
too much on the creative, “arty” and “fluffy” side of marketing and not enough
on its business science, and rely too much on their ad agencies to come up with
the next big idea (67%)
The worrying part: while 73% of
CEOs think Marketers lack business credibility and are not
effectiveness-focused enough to generate incremental customer demand, 69% of
the Marketers Fournaise talked to feel their strategies and campaigns do make
an impact on the company’s business, even though they can’t precisely quantify
or prove it – confirming the great CEO-Marketers disconnect.
The report is summed up like
this:
“Until Marketers start speaking
the P&L language of their CEOs and stakeholders, and until they start
tracking the business effectiveness of all their strategies and campaigns to
prove they generate incremental customer demand, they will continue to lack
credibility in the eyes of their CEOs and will continue to be seen more as a
cost centre than an asset” said Jerome Fontaine, CEO & Chief Tracker of
Fournaise.”
So, the CEO thinks the Marketer
is talking about arty and fluffy things?
Yet, these are two of the areas
in which they rank lowest in terms of Reputation Index?
Is it because their role is seen
only as “generating incremental consumer demand”? That may have been their role
in the past, but in today’s world, their role has become much, much broader
than that.
What piqued our attention, was King III’s attitude towards management of reputation.
There is a new age afoot. And it
may as well be called “Brand Governance”.
King III has 9 chapters and a
full chapter is dedicated to the issue of reputation as part of governance. King
III’s Chapter 8: Governing Stakeholder Relationships defines the principle
that “the Board should appreciate that stakeholders perceptions affect a
company’s reputation”.
The Board, it is suggested, is
the ultimate custodian of this reputation and the relationships with these
stakeholders.
These stakeholders are the very
people who may now, in terms of King III,
demand to know what you as a board are doing to protect the value of the
brands, the intangible assets are increasingly almost more valuable than the
tangible assets. Why have you chosen this positioning? Why have you embarked on
this new creative route? Why did you respond in that way to a Twitter
conversation? Who is the face of Twitter? Is it outsourced or is it the CEO?
They are the communities who can
question your authenticity and ethics in your CSR programmes. They are your
staff who ask how you can make promises to customers which they can't keep.
Consumers and communities are now empowered! And we’ve seen huge business losses as a result.
These things traditionally have
kept Marketing Directors awake at night. They’re now going to keep the CEO awake too,
unless changes are made.
EisnerAmper, a US based firm,
conducted a Board of Directors survey about concerns facing Boards, and
found that reputational risk has for the first time overtaken regulatory
compliance risk as the primary concern.
66% stated that reputational risk is most important to them (other than
financial risk).
It’s time, in our opinion, to
marry Governance and Due diligence with Brand management and Reputation.
It’s time for Boards to ask the
questions about key reputation issues the brands and the company are facing.
It’s time the most senior executives are put in charge of these conversations
and these programmes.
An excellent example of this is
Michael Jordaan from FNB, who presents an accessible and responsible face of
FNB as the CEO, through his personal management of his active Twitter stream (@MichaelJordaan).
Or perhaps it’s time that the person currently tasked
with this increasingly important and critical job, The Marketing Director or
CMO, is elevated to a higher place in the organisation.
In our opinion, it's time that
Brand and Corporate Reputation be invited to lunch together at the Top Table.
