Reputation Leader Study. A CCO perspective on better understanding reputation and risk management to drive business success

Transcription

1 Reputation Leader Study A CCO perspective on better understanding reputation and risk management to drive business success March

2 R eputation moves markets. Reputation shapes the narrative of companies, countries, even individuals. Increasingly, reputation also moves the word. And in recent years, it s becoming evident that we re globally in the midst of a reputation economy, where the perceptions of companies are disproportionately being driven by intangibles. But what s evident, is the majority of companies are still not reputation-ready to navigate the swiftly-changing and dynamic world ahead. Given all this and based on our survey of Corporate Communications Officers (CCOs) from around the world, it s interesting to see how the importance of reputation has risen not only from the intent to prepare for risk but also from the standpoint of proactively gearing up organizations to anticipate market opportunities to align with the issues that matter. However, beyond the good intentions of CCOs, the reality is that there are still a majority of companies who have fallen short of the desire to adapt to the reputation economy and still lack a fully integrated, multi-stakeholder, and robust measurement system. This is in part due to some of the direct challenges encountered by the CCO in trying to navigate the institutional inertia that still exists in many companies, but also partly inhibited by the lack of robust data measurement across key stakeholders the absence of which makes it more challenging for the CCO to build a credible argument for the expansion of reputation-related activities. As the adage goes, you can t effectively manage what you don t measure. And for CCO s across the world, it s hard to argue this sentiment has never been truer than right now. What seems evident and apparent in looking at the situation from the CCO viewpoint is that those who believe they are reputation-ready exude more confidence, and generally feel that their organization is better prepared for success. An effective reputation measurement program aligned with a 360- degree reputation management system encompassing the entire company ecosystem, seems to undeniably yield dividends and elevated levels of success. And so perhaps it s no coincidence that companies who are truly reputationready are not only geared up to engender deeper levels of stakeholder support but are also ready to take on the world s macro-economic headwinds, outplay the competition, and better insulate the company against the potential risks of what may come. And so it begs the question: is your company reputation-ready? If not, then perhaps learning from what other CCO s are thinking, what they are most concerned about, and how they are looking at the global reputation 2

3 economy could be highly beneficial. I hope you enjoy this review and summary of our latest Reputation Leadership Study from Stephen Hahn-Griffiths Executive Partner, Chief Reputation Officer Reputation matters but few feel prepared to manage it Business leaders around the world are in clear agreement: Reputation essential to the success of their company. Seven out of ten respondents deem reputation measurement as integral to their business success and use it as a critical key performance indicator (KPI). 67% of all businesses see reputation as critical for their success only 36% feel that they are ready to manage reputation proactively There is also a growing realization that reputation measurement and management is one of the foundational building blocks of corporate performance the number of businesses considering reputation as very important has increased by 8% pts. since Furthermore, three-quarters of all respondents felt that reputation had become more important over the past 3 years. Yet, despite this clear trend and a strong consensus that reputation matters, only a third of all business leaders feel they are very well-equipped to manage it proactively. How are reputation metrics currently used among those companies who measure reputation as a critical KPI? Figure 1 shows that the vast majority of businesses mainly use reputation metrics to either monitor external perceptions of the company or for purposes of risk management. 3

4 Figure 1: Reputation as a key KPI Main use of reputation measures Far less common are the use and integration of reputation into business planning and strategy. Reputation-ready companies those that feel very well-equipped to manage their reputation are more likely to focus on integrating reputation metrics into business planning (+8% pts. vs. lessprepared companies) and less on risk management (-7% pts.). Not suprisingly, the lack of reputation integration is top of mind when assessing the most common challenges around reputation management, shown in Figure 2. Figure 2: Key reputation management challenges 2017 vs The lack of a structured process for integrating reputation is by far the number one challenge organizations and business leaders face followed by deficiencies in Reputation-ready companies are much more likely to have a structured way of integrating reputation throughout the business 4

5 cross-functional collaboration. These structural shortcomings along with a lack of internal management competencies have also become more salient for today s business leaders and point to a deepening need for a more comprehesive integration of reputation into business planning and strategy development. Even reputation-ready companies struggle with the integration of reputation, but to a lesser degree. Over half cite the lack of a structured process for integrating reputation as a hurdle, compared to 85% of non-reputation-ready ( other ) companies. former also report one fewer challenge on average. In sum, surveyed companies feel that reputation management has become more challenging than ever in part due to a lack of a structured process for integrating reputation into their business planning and strategy. This is clearly reflected in their current use of reputation metrics which is largely limited to reputation perception monitoring and risk management. Consequently, only a minority of businesses feel prepared when it comes to measuring and managing their reputation despite the recognition that the latter is becoming increasingly critical to achieve business success and to gain a competitive advantage. Most companies don t have multi-stakeholder measurement across the ecosystem Given the importance that business leaders attach to reputation, it is not surprising that companies use multiple ways to measure their reputation over half of them leveraging at least 3 different metrics. Figure 3 shows the most commonly used metrics to that effect and how they have evolved since While the use of most types of metrics has remained comparable over time, reputation scores have become a much more critical metric. More importantly, nearly all reputation-ready companies (89%) are using reputation scores as compared to those who feel less equipped to manage their reputation overall (48%). 5

6 Figure 3: Metric used to measure reputation 2017 vs Despite increasing efforts to measure reputation, a comprehensive assessment of the stakeholders driving a company s success is critical. Identifying and understanding the relative importance of stakeholders, their interests, and how they view the business, is key in evaluating what drives a company s overall reputation and what targeted strategies can be implemented to both improve reputation and manage risk. Figure 4 shows which stakeholders business leaders deem as critical to their organization s success and which ones they are currently measuring reputation for. Figure 4: Stakeholders - % critical to business vs. % measured 6

7 Customers and employees, regulators and investors are clearly the most important stakeholders with a similar importance ranking vs (not shown here). While businesses report success at measuring their two most critical audiences, they fall short on all others. Even reputation-ready companies only assess their reputation among 7 out of 10 of their important stakeholders, though this effort still outperforms lesser-prepared companies (only 50% assessed). Reputation-ready companies put a higher effort into comprehensively measuring their reputation among all of their critical stakeholders When it comes to measuring reputation, our findings suggest companies leverage multiple metrics, and that the use of reputation scores is becoming increasingly prevalent and quasi-universal among companies who feel very prepared to manage their reputation. But despite companies best efforts, they still fall short on consistently measuring all the stakeholders that are critical to their success. A more comprehensive measurement approach is what differentiates more successful businesses from others, as reputationready organizations are more effective at assessing reputation among their most important stakeholders. Corporate Ssocial Responsibility (CSR) and Leadership are key messaging focus areas, primarily through companyowned media hat content areas do businesses focus on when managing their reputation? Figure 5 shows that CSR-related programs as well as internal/external communication by company leaders rank highest Win prevalence but barely exceed 50%. 7

8 Figure 5: Areas of focus in reputation management These data reflect an increasing trend of the C-suite taking on a more public Reputation-ready role that includes taking a stand on companies report 2 or more social and economic hot button topics. content areas of focus in Given the increasingly important role that enterprise plays in shaping reputation management business performance, it comes as no surprise that the topic of CSR takes on the most prominent role in the context of reputation management. It is notable that those companies who feel the best equipped to manage their reputation report on average two more areas of focus as compared to other, less prepared ones especially innovative programs and partnerships. The latter reflects the realization that effective reputation-building requires showcasing a company s performance across multiple domains, including products, innovation, CSR, leadership and financial performance. While certain content may play a more important role in shaping reputation, a comprehensive approach is best suited to both building an organization s reputation and mitigating risk. How are business leaders reaching out both internally and externally to highlight activities, campaigns, and programs in an effort to boost reputation? Figure 6 shows that all companies surveyed leverage at least one owned channel (99%) followed by earned (81%) and paid (64%). The top 5 most commonly used touchpoints are all company-owned, reflecting the lower cost and higher control associated with these modes of communication. 8

9 Figure 6: Channels used to build corporate reputation Figure 7 illustrates the importance of using all channels to reach critical stakeholders. Using data from the US National Pulse 2017, we see that reputation increases along with the number of reported exposures to different sources of communication. Reaching one s audience via at least one channel is especially crucial, with gradually declining benefits from each additional touchpoint. Figure 7: Channel reach and multi-channel impact on reputation 9

10 Taking a comprehensive approach to reaching one s audience via multiple channels is key in maximizing one s reputation a strategy that companies best equipped to manage their reputation are putting into practice. Eight out of ten reputation-ready companies report leveraging all three channels to build reputation as compared to half of those who feel less prepared. 82% of reputation-ready companies report leveraging all channels to build reputation vs. 46% of those who have reputation management gaps When evaluating the overarching content and communication strategies of businesses, a picture emerges of a predominant focus on CSR and Leadership in reputation management particularly in leveraging owned media. Reputation-ready companies though take a more comprehensive approach by focusing on additional content elements to build reputation and by taking advantage of multiple touchpoints to reach their stakeholders. Opportunity to make reputation a strategic focus area and key corporate KPI How do businesses integrate reputation into their budget planning, long-term business strategies, and investments? Despite the perceived growth in the importance of reputation overall, and its role as a critical KPI, only 58% of all surveyed businesses currently have an ongoing dedicated program that measures and manages reputation. This is much more common among reputation-ready companies, where more than eight out of ten have implemented such a program. Our earlier findings on the main perceived challenges associated with reputation management indicated that the lack of a structured process for integrating reputation is by far the greatest hurdle, as are deficiencies in cross-functional collaboration internal management competencies. Figure 8 shows at which levels reputation is discussed and prioritized within a given company. 10

11 Figure 8: Levels at which reputation is discussed and prioritized Only 37% (C-Level + crossfunctional) of all businesses discuss and prioritize reputation at the highest level and very few do so across all functions within the company. Reputation-ready organizations, however, are much more likely to assign an important role to reputation at the C-level, with over 50% doing so. 82% of reputation-ready companies have a dedicated management/ measurement program and 52% report that reputation is discussed and prioritized at the C-level - vs. 30% of all other businesses This level of prioritization of reputation also directly translates into which departments are responsible for managing reputation. Figure 9: Departments responsible for managing reputation 11

12 As expected, corporate communications/public affairs are, and have been, mainly responsible for managing reputation, followed by the CEO s office. Interestingly, fewer departments are seen as being responsible in 2017 as compared to 2016 especially from a corporate branding and corporate strategy perspective. The overall decline in the number of responsible departments may be in part at the root of the perceived increase in reputation integration challenges YoY (see p. 4). Reputation-ready companies are more likely to have one additional responsible department on average (3) and significantly more accountability at the highest levels (+12% pts. - board of directors / +10% pts - CEO s office). Reputation-ready companies have more departments responsible for managing reputation and at higher levels The level of C-Suite engagement may be a direct reflection of how important reputation is currently deemed to be at that level. Figure 10 shows how important the use of reputational insights is to the CEO/Board with respect to a wide variety of activities*. Even among companies who have a dedicated reputation management program, reputation is only seen as very important by a majority of businesses with respect to planning strategic communication management as well as for it to translate insights into campaigns. Here again, reputation-ready companies differentiate themselves, as their CEO and Board of Directors views reputation as critical for two more activities on average. Similar to the discrepancy between stakeholder importance and measurement, we see some of the same dynamics when it comes to implementing reputation insights. * among those businesses currently supporting a reputation management and measurement program 12

13 Figure 10: Reputation management activities - % important to CEO/Board among companies with a current reputation measurement/management program Figure 11 shows that companies only consistently leverage reputation for planning strategic communication management with the smallest delta between importance and execution. Companies therefore face two compounding challenges: CEO buy-in when it comes to reputational importance and the ability to make reputation an integral part of their organization. Figure 11: Reputation management activities - % important to CEO/Board vs. used among companies with a current reputation measurement/management program 13

14 Not only do CEOs of reputation-ready companies realize the value of reputational insights, they also facilitate better implementation: seven out of ten critical reputation-leveraging activities get executed vs. four out of ten for other companies. Budgetary constraints are likely to pose a hurdle to not only integrating reputational insights into companies strategies and decision-making processes, but to also measure reputation among key stakeholders in the first place. Figure 12 shows that half of all surveyed businesses have a dedicated budget for reputation management and that it has seen only a small net increase at best vs. previous year. Figure 12: Dedicated budget for reputation management/yoy change Self-professed reputation-ready businesses are also much more likely to have a dedicated budget 63% vs. 44% for others - and 46% reported a YoY budget increase vs. 29% of those companies who currently feel less ready to manage their reputation. Reported budgetary challenges similarly extend to the percentage of corporate communications budget dedicated to reputation management/measurement, as shown in Figure 13. Despite the fact that among businesses with a dedicated reputation management plan - 65% of CEOs feel that leveraging reputation is very important for planning strategic communication management, only a small fraction of all companies dedicate more than 10% of this budget to that effect. The fact that reputation-ready companies allocate a greater portion (an estimated additional 4% pts) of their corporate communications budget to reputation is one of the deciding factors in their ability to leverage multiple channels to reach critical stakeholders (see p. 9) 14

15 Figure 13: Percentage of corp. comms. budget dedicated to managing/measuring reputation Reputation-ready companies on average report allocating 4% pts. more of their corporate communications budget to reputation Do companies tie executive pay to reputation-based performance metrics? This may be indicative of the most committed integration of reputation and it is fairly rare. Only one in four surveyed businesses indicate such a practice and even among reputation-ready companies, only one in two use reputation performance to calculate executive compensation. Businesses view the lack of a structured integration of reputation as the single biggest hurdle to adequately measure and manage their reputation and much more so than in A closer look at existing practices corroborates these perceived challenges. Only 58% of all surveyed businesses currently have an ongoing program to assess and manage their reputation and a bare majority report having a dedicated budget to that effect a budget that has largely remained unchanged over time. The number of departments responsible for managing reputation has also declined since 2016 and, more importantly, reputation is not top of mind at the highest organizational levels. Fewer than half of all companies report that reputation is prioritized, or even discussed by the CEO s office, and among those with a current reputation management program, reputation is not consistently deemed critical by the CEO and board. Even reputation-ready companies face significant organizational challenges around integrating reputation into their business planning and strategies. They do differentiate themselves by having a dedicated reputation measurement/management program and budget, with increasing funding YoY. Reputation management is much more likely to include the C-suite and work across multiple internal stakeholders. Finally, reputation-ready 15

16 companies have CEOs who are strong advocates for leveraging reputation insights and ensuring that implementation takes place. Despite an increasing focus on managing reputational risk, only one third of all companies feel ready to manage it comprehensively In addition to building reputation capital and fostering stakeholder support, it is critical that companies also manage the downside, or potential risks to reputation. These vary by industry, but commonly cover product recalls, service disruptions, and data and privacy breaches, among others. Highreputation companies are better equipped to face the consequences of negative events either self-inflicted or by industry association as their stakeholders are more likely to give them the benefit of the doubt in times of crises and trust them to adequately deal with any fall-outs. With the ever-increasing speed of information flow and the quasi-immediate publicity generated by such events, not being risk-ready can be a costly proposition. How ready are companies to tackle reputation risks including likelihood and impact assessment, evaluation of readiness, as well as capabilities to monitor and mitigate? Only a bare majority of surveyed companies (51%) put a lot of time and money into measuring and managing reputation risks. Reputation-ready companies also invest more resources from a risk perspective, as seven in ten heavily invest in measuring and managing risk, compared to four in ten of other companies. Investments not-withstanding, only 36% of businesses comprehensively measure and manage reputation risk. Figure 14 provides an overview of how ready companies are in dealing with different elements of risk management, from identification of reputation risks to highlighting everyone s role in mitigating risk through internal training, appraisal, and reward systems. Results highlight the percent of companies who state that they are very ready to tackle reputation risk in each of these domains, and the % pt. change vs Besides risk identification, less than half of all companies report being very well equipped to manage reputation risk in any single domain largely unchanged since The biggest YoY progress has been made in assessing the actual business impact of risk(s) occurring, with a 6% pt. increase in reported readiness. Overall though, only 36% of all companies are very prepared across all six dimensions of risk measurement and management - 16

17 clearly showing a need for more effective and concerted efforts in comprehensively mitigating reputation risks. Figure 14: Reputational risk readiness by domain (vs. 2016) 60% of reputation-ready companies report comprehensively managing risk vs. 23% of those that feel less prepared. Not surprisingly, the larger investments that reputation-ready companies make into risk management result in higher levels of preparedness: 60% of reputation-ready companies report comprehensively managing risk vs. 23% of those that feel less prepared. Figure 15: Departments responsible for managing reputation risk 17

18 From an organizational perspective, companies have definitely made strides in assigning risk management responsibilities to more departments since 2016, as Figure 15 illustrates. Similar to reputation management, risk is most likely to be assigned to corporate communications and public affairs, followed by the CEO s office and a dedicated risk management department. Risk-ready companies have one more responsible department on average, suggesting a more integrated, cross-functional approach to risk management as compared to companies who feel less prepared to manage reputation risks. An additional way to assess companies risk management is to look at how they classify risk and whether they have a centralized way of collecting and tracking risk-related data which can then be shared/managed throughout different levels of the organization. Figure 16: Reputation risk classification Figure 17: Use of Enterprise Risk Register Figure 16 shows that only half of all Risk-ready companies view surveyed companies view reputation risk in a multi-dimensional way, or both as reputation risks as both operational (internal resources, systems, operational and strategic in processes, and employees) as well as nature and are more strategic (risk of failing to achieve likely to use an Enterprise business objectives). Risk-ready Risk Register companies clearly take a more comprehensive view of risk, as three out of four classify reputation risks both as strategic and operational. As shown in Figure 17, the (a) low prevalence of and (b) and uncertainty around the existence of an Enterprise Risk Register further points to the 18

19 challenges of an integrated, cross-functional approach to risk management and measurement. While the number of responsible departments has increased over time, these findings suggest that coordination among departments remains a significant pain point and may further hinder and efficient response in times of crisis. Even among risk-ready companies, barely six in ten report using an Enterprise Risk Register. In sum, few companies currently measure and manage reputation risk comprehensively. Risk-ready companies stand out by (a) making the necessary investments in risk management; (b) having a dedicated department; (c) taking a more multi-dimensional view of reputation risk as being both strategic and operational and by (d) leveraging an Enterprise Risk Register to centrally collect and monitor risk-related information. Implications from the key learnings and five things a company could do to become more ready for reputation and risk management The insights presented above provide us with an intimate view regarding the ways in which major companies worldwide manage and measure both reputation and risk. Despite the variation in how (and even whether) businesses decide to leverage reputation. These are five concrete steps that any company can take to both build their reputation and manage potential risks: #1. Identify and measure your critical stakeholders ideally on a continuous basis with actual reputation scores #2. Go above and beyond CSR to build reputation also focus on innovation, leadership, products and financial performance #3. Leverage multiple channels to reach your most important stakeholders #4. Secure buy-in for reputation measurement/management at the C-Suite level and integrate across all company levels/functions #5. Share the responsibility of comprehensively measuring, tracking and managing risk across all departments These deliberate calls to action, while not exhaustive, reflect crucial strategies that reputation- and risk-ready companies use to differentiate themselves and gain competitive advantages within their respective industries: sound and comprehensive measurement of reputation and risk, combined with a 19

20 deep commitment to building and leveraging reputation throughout all levels of the organization. Study Design In the Spring of 2017, Reputation Institute conducted an online survey among 75 business leaders across 14 industries in 16 countries around the world (25% North America, 57% Europe, 3% Asia Pacific and 15% Latin America). Respondents - incl. C-level, and other management - were filling key roles within their companies with respect to setting business strategy in reputation, marketing, corporate communications, and/or public affairs. Participants were asked about a wide range of company practices around reputation and risk measurement and management, including the role that reputation plays, current capabilities/readiness; measurement programs and practices, as well as challenges around the implementation of reputation management. About Reputation Institute Reputation Institute powers the world s most reputable companies. By tracking and analyzing stakeholder perceptions, we unleash the power of reputation to enable leaders to build better companies. Our RepTrak model analyzes the reputations of companies and is best known as the Forbespublished Global RepTrak 100. Underlying the model is the RepTrak methodology, the global gold standard for measuring reputation. About the Author Sven Klingemann, Ph.D., is a Global Research Manager at the Reputation Institute in Boston, MA sklingemann@reputationinstitute.com 20