Posted tagged ‘Bodyproject’

2010 – a year in reputation

29/12/2010

“…Everybody knew that whenever the thaw came that there was going to be big problems with water, so I think that there was a lack of preparation by NI Water, particularly in the issue of communication…”

Northern Ireland Environment Minister Edwin Poots

It’s that time of the year again when the television schedules are packed with the top 100 countdowns and the printed media publish endless top 10s recording everything from the best comedy to the worse gaffes.  December is truly the month of lists.

So it has prompted me to think of 2010 and who are the winners and losers in terms of promoting and protecting reputation.

In the UK, the year was punctuated by two weather related events as temperatures plummeted to record levels and snow and ice deluged our lives.  Virtually every organisation and person was tested and it is interesting how many 365 day 24 hour services really became fine words rather than effective actions.  The first rule of reputation is that ‘actions speak louder than words’.  However it is often the words (communications) or lack of them that really matter when the reputational chips are down.

The organisation that book-ended the year is Eurostar, the high-speed train operator running services between London Pancras and the continent.  The first problems came when their state of the art trains hit a major engineering ‘wall’ grinding to a halt in the channel tunnel in December 2009 and stranding passengers in very difficult circumstances drawing criticism from media, the public, politicians and even the French President.  In January a further failure followed by a three day suspension of service heaped criticism on the company.  And then came December 2010 with pictures of people standing in a line stretching a mile or more into freezing conditions with Police intervention to control the crowds.

Looking back, there is a common theme between the two incidents, a constant complaint of ‘lack of communication and lack of information.’  The operator of state of the art trains and stations unable to communicate basic information.  It’s patently obvious that building the best station in the world is great but when a queue forms the fact passengers have to sprawl onto the streets in minus temperatures is a reputational disaster.

Transport and infrastructure operators are easy reputational targets.  Whilst Eurostar is highlighted here it could well be the British Airports Authority (BAA) at Heathrow or any number of transport operators.  The eruption of a volcano in Iceland was enough to throw our whole infrastructure into turmoil.  And on that point in terms of reputations it isn’t just people and organisations that have a reputation to maintain:  Iceland, Ireland and Greece became economically a reputational disaster.

Utilities came in for a particular panning.  Many of us became aware of the frailties of the ‘combi-boiler’ and its incredible design flaw – the condensation pipe.  Which brilliant engineer and numerous installers had thought that the new energy efficient boiler was to fail on an unprecedented scale.

At the time of writing this blog there is a crisis in Northern Ireland as water has become a scarcity through the thaw and burst pipes.  In the capital city, Belfast, shops are out of bottled water and the council is making emergency supplies available.  Again, the main complaint is the lack of information and communication from Northern Ireland Water – I tried to log onto their website which just can’t cope and is actually displaying HTML source code as it has obviously ‘burst’ its capacity as well.

The biggest loser of the year from an economic, environmental and reputation aspect was BP when its deepwater rig blew up spilling vast amounts of oil into the Gulf of Mexico.  The response was astoundingly inept from the clean up to the communication and top managers feted by their shareholders showed that they had no skill whatsoever in dealing with crisis, risk and stakeholders.

In fact inept and incompetent bosses are often those most in the reputational headlights during 2010.  Take Sepp Blatter of FIFA, an organisation that seems to be beyond any form of normal corporate governance.  Football, by far one of the biggest sports in the world is so badly ruled and managed that is it almost a standing joke.  Take the completely ludicrous attitude to the use of technology to assist officials and then compound it by a perception of corruption that permeates the very core of the sport.  The awarding of the World Cup, a shambolic bidding exercise in public procurement that ended up with FIFA near humiliating the future King of our country and its Prime Minister.

And then there is the ‘deficit’ in truth.  Nick Clegg of the Liberal Democrats has experienced a year when he was seen as the new hope through his X Factor style TV debate appearances that failed to materialise into a credible result at the ballot box yet gave him a mandate for power which has been an unmitigated disaster in terms of his reputation.  A recent local election result swung against his party by 31% and the throwing out of election promises and manifesto pledges has led to a major outcry.

So at its heart reputation is often attributed to individuals, inadequate communications but also how organisations manage their integrity and their risk profile particularly at a time of crisis.  Why are all these organisations that make so much of their performance all seemingly acting like lumbering dinosaurs in terms of their ability to communicate.  Why are top companies unable to talk to customers and listen to them?

Social networking certainly outfoxed most organisations; they are just woefully unable and sometimes unwilling to deal with the Twitter and Facebook generation.  In the Heathrow snow closures ‘critical’ tweets were being sent from stranded customers at a rate of four per second.  During the student protests the might of our Police force were outwitted by such applications and ‘citizen journalists’ recorded every aspect of every notable event.

Of course there were some winners.  Apple Inc faced a real crisis when its normally state of the art products hit a problem.  The technical difficulties faced by the iPhone4 at first led the company into a state of disbelief.  However, as the social networks began to rumble the company acted fast and the CEO was up in front of the cameras taking rapid action to rectify the issue.

Other companies like Caffe Nero just have it right in terms of customer service.  Their recognition scheme, Nero stars, is a great way to recognise good service and reward customers again with clear communication from the CEO.

There is a theme developing here but one that seems hard to learn – that is those organisations who put their reputation as high as their performance and growth strategies are those that perform best.  It is a lesson that hopefully more organisations will learn in 2011.

For more information about Bodyproject and our Advanced Stakeholder Management methodology that helps organisations promote and protect reputation call 0151 709 2288 or e-mail nicktaylor@bodyproject.co.uk

Reputation – why it matters and how you can manage it

09/11/2010

“…Reputation, reputation, reputation! Oh, I have lost my reputation! I have lost the immortal part of myself, and what remains is bestial…”

William Shakespeare Othello. ACT II Scene 3.

Later this month, the Chartered Institute of Management Accountants (CIMA) will publish a report by Leslie Kossoff entitled: “Reputation – why it matters and how you can manage it.”

In the weeks leading up to publication, Bodyproject will be debating the role of reputation in relation to high performance and growth.  Bodyproject’s Advanced Stakeholder Management (ASM) methodology supports organisations in protecting and promoting reputation.  In this first article we look at the importance of reputation and its critical role within successful organisations.

CIMA President, George Glass, recently drew a parallel to a famous beer commercial when he said: “Management accountants add value to the corporate parts other accountants cannot reach.”  It’s an interesting thought and not before time that a key business profession realises that they have further to go in adding value than their role suggests by also considering the value attributed to reputation.

In our opinion there are three dimensions to business success: performance, growth and reputation.  The first two dimensions are tangible, measurable and therefore manageable.  They are the bastions of traditional accounting defined by the elements that make up book value and can be measured by the strength of the balance sheet.  The third dimension, reputation, is different.  It is almost wholly intangible, difficult to measure and therefore very difficult to manage.

And yet, reputation’s value and consequent potential liability is great, almost infinite in some respects.  Whilst book value and traditional accounting is one way of valuing a business, it misses the true value that makes up a business’s intellectual capital – the goodwill that creates the absolute value that is often only realised during a sale but may be severely damaged or enhanced at almost anytime.

Mario Simon, the Managing Director of American market research company Millward Brown Optimor illustrates this when he says: “In 1980 almost 100 per cent of the value of an average Standard & Poor’s 500 company consisted of tangible assets such as chairs, factories and inventory.

“That figure is now more like 30 or 40 per cent – the rest comes from intangible value, about half of which is attributed to brand.

“It is not a stretch to say that for many companies brand is their single biggest asset.”

So, it is hardly surprising that reputation is now being recognised as increasingly the most critical dimension of success.  High growth and performance are vitally important but equally so is the protection and promotion of reputation.

So what exactly is reputation and how does it differ to brand?

Brand is often defined as the ‘corporate promise’ that it is assumed that the organisation has some control over, whilst reputation is more a way stakeholders perceive the organisation.

Chris Fill, co-author of Managing Corporate Reputation, describes brand as: “how a company wants to be seen and is all about the corporate promise. Reputation is entirely a stakeholder perception over time.

“Stakeholders will make an assessment of how well the organisation has performed against the brand’s promise.”

In our view reputation is not that simple to define and its lack of tangibility makes it a difficult proposition for people to understand.  Reputation is made up of three component parts:  identity, image and personality.

Identity is similar to the corporate promise in that it is almost wholly controlled by the organisation and is ostensibly what it says about itself through its brand, advertising, products and services etc.   Image is the reverse opposite – the perceptions of its stakeholders.  The third aspect is that of personality – often this can be viewed of how well the identity and image match up but actually is more like the state of reality in which the organisation exists.  It is actually the organisation’s true self as opposed to the rather different realities created through identity and perceived through image.

This is hugely complex and is deeply swathed in all sorts of philosophy and psychology.  But if organisation leaders do not intellectually grasp its importance then they risk their performance and growth.

When Kraft Food Inc bought Cadburys they were buying a company with a book value of £4bn.  They actually paid more like $11.9bn.  The element of ‘goodwill’ or intellectual capital was a huge proportion of the value of that acquisition.  The battle for the sale was hard fought and included a massive aspect of reputation with over 94% of the British population reporting through a YouGov poll that they were aware of the sale.  For the harsh corporate Kraft it all came as a shock.  When they went on to sell a factory, against promises made during the sales process, their reputation was badly hit and ended with them apologising to the British Parliament.

In fact the Kraft Foods Chief Executive Irene B Rosenfeld in the lead up to the sale recognised the importance of reputation and its link to the intrinsic value of intellectual capital when she wrote to the UK Government’s business secretary stating: “(she understood) the concerns of the UK government and I can again assure you of our intentions to proceed with sincere respect for Cadbury’s heritage, people and identity.”

On her recent visit to the UK she jokingly said that she had been surprised at the role of the Crème Egg in British culture.  No joke really when that product alone has estimated brand value of £45m.

David Haigh, CEO of brand valuation consultancy Brand Finance, explains the value of reputation in relation to brand when he says: “Brands affect all audiences or all stakeholder groups – from customers to staff and financiers.

“If the brand is highly regarded then they behave in a more favourable way towards the organisation, which then drives up its value.

“For each of the audiences of an organisation there is the same broad set of criteria – functional delivery, image and conduct – by which they judge whether it’s a good brand or not.”

At Bodyproject, we try to look at the entire role played by performance, growth in concert with reputation.  We no longer think that book value is an adequate judgement of value and that competitive advantage is derived solely from the tangible aspects of doing business.  It is the management of stakeholders and the integration of marketing communications as a ‘hard’ discipline alongside accounting and legal that the true difference is seen.

The Kossoff report will make vital reading and what is most important is that it is being published by CIMA.  Reputation has long been associated with the ‘softer’ professions such as public relations and marketing but it is time that its role is recognised at every boardroom table.  Because, no matter how good your performance, no matter what your growth aspirations are you will only be as good as your reputation.

In our next article to be published week commencing 15th November we will consider in more detail one of the components of reputation – identity.

For more information about Bodyproject and our Advanced Stakeholder Management methodology that helps organisations promote and protect reputation call 0151 709 2288 or e-mail nicktaylor@bodyproject.co.uk