Barloworld learns that Change can be painful!

The shareholder activism at the Barloworld AGM this past week should serve as a lesson to companies about what happens if you do not manage your reputation in a dynamic manner. Not only did the organisation lose its Chairman, but it faced the wrath of stakeholder activism.

The Business Report articles -http://tinyurl.com/2asp3c and http://tinyurl.com/329qlj contains some serious lessons for executives serious about managing an organisation and its reputation in a changing environment.

An organisation’s reputation is a dynamic entity. It fluctuates all the time and it is affected by the interplay of environmental factors such as socio-economic developments. Thus what drove your organisation’s reputation last year may no longer be valid. What drove your reputation last year can now become its Achilles heel.

In the case of Barloworld they did not transform the organisation quickly enough and the issue of executive remuneration again raised its head. “ The reporter writes :“The chief executive of the PIC (Public Investment Corporation), Brain Molefe, in what many said did not bode well for Barloworld, said he found it strange that 13 years into the new democracy the company had no black executives”.

Now they do, but now their reputation has been tarnished. They have been forced to change, and the negative publicity that went with it did not exactly paint a picture of an organisation that is pro-active. Perhaps the problem is the same as in many organisations where executives just chase the bottom line and forget that there are stakeholders whose stake in the success of the organisation is not just based on monetary reward.

In many cases, organisations want to change but the understanding of what it takes is slow. Look at the following formula and apply it to your organisation.

Change = D+V+S+C

For change to happen a business has to:

- Be dissatisfied with its present state

- Have a clear Vision of where it wants to go

- Take the necessary steps to get there

- Create enough energy (or tension) to overpower the COST required (in terms of money, time and energy) to make the change happen

Covey talks about starting with the end purpose in mind. Where the organisation sees itself to be is vital. In today’s environment change happens so quickly that organisations are often caught napping. Innovation needs to be a crucial value in any organisation if it wants to stay abreast of change.

The alternative is to have a damaged reputation.

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Tip Sheet: Do you want to improve your Reputation amongst your stakeholders?

Then work at it, but work smarter and not harder.

Here are some tips to enhance your organisation’s reputation amongst its various stakeholders.

When I run my workshops on Corporate Reputation I use an exercise called “Peeling the Onion” with my audience. The idea is to apply these questions to the main drivers of reputation. The drivers consist of the following:

Emotional Appeal (Credibility)

Social Responsibility (Community Reputation)

Products & Services (Quality & Dependability)

Financial Performance

Vision and Leadership

Workplace Environment

The idea is to re-evaluate all the messages, images and experiences that individuals, stakeholder groups and the wider community receive about an organisation and its products over time.

Here are some of the questions that you may find useful to raise at your next Board meeting:

- Are you doing enough to tell your story? Are you repeatedly getting your message across to analysts, the right media, the right stakeholders and “influentials”?

- What else can be done to build, sustain and protect your organisation’s reputation?

- How distinctive is your Reputation from the rest of the Industry’s reputation?

- How accurate and consistent are the images that we project to our different stakeholders?

- How can we strengthen our relationships with these various stakeholders?

- Evaluate the way your organisation currently manage Reputational Risk. Is it still appropriate?

- What are the issues and problems at Board, Business Unit and departmental levels?

- What policies, systems, procedures, rules, regulations, actions and behaviour are not consistent with your organisation’s desired reputation?

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Lessons from the World Economic Forum’s Global Risks 2007 report

I have just finished reading the World Economic Forum’s Global Risks 2007 report – http://www.weforum.org/pdf/CSI/Global_Risks_2007.pdf

It makes for thought provoking reading. In it they list the 23 major risks that we face. What I did also find interesting was the reasons that they listed why organisations are not more proactive in mitigating risk.

The following is a list of common reactions to risk (Page 23), which prevent a proactive approach to risk mitigation:

• Someone else will manage my risk.
• The risk is not relevant to my organization.
• Won’t taking action just slow me down?
• No one is telling me that I must act.
• What reward do I get from mitigating risk?
• It is too costly to mitigate.
• Why worry about it?
• It could never happen to me.
• It is too large to manage, and success is not guaranteed.

The report then mentions that in the 2006 report, the Global Risk Network developed the idea of the “5 pathways” to mitigation. I have taken these pathways and have applied them to Reputation Risk so that you can achieve an understanding of where your reputation risk mitigation efforts should focus.

Pathway 1: Improving insight: moving risks from the unknown to the known through research. The best mitigation strategies often derive from the changed mindset which can result from enhanced knowledge and information.

Action required: Use your scissors and create a collage of all the transgressions, incidents and scandals in your local media over a period of at least two weeks. Share this with your management team and ask them the question: “How likely is this to happen to us?” What about ongoing training for managers about risk management, the management of reputation and crisis management competencies?

Pathway 2: Enhancing information flow: allowing information to flow effectively between decision-makers and those experiencing the risk first-hand, to provide early warning, inform the public and exchange best practice.

Action required: Having a proper internal and external stakeholder communication system in place is a start. Why wait for something to appear in the media? Why wait for a whistleblower? Keep your “ear” on the ground. What conversations are stakeholders having about your organisation?

• Refocusing incentives: creating the incentive frameworks that will allow decisions to be made to reduce risks previously considered exogenous.

Action required: Unless managers understand the value of intangibles and are held responsible for violating the organisation’s good name, you cannot expect increased vigilance. Make Reputation Management part of your Performance appraisal scheme.

• Improving investment: providing the investments necessary to mitigate risk.

Some ideas: Investments in Crisis Management preplanning, reputation training interventions and other systems is absolutely necessary and should be budgeted for.

• Implementing through institutions: improving (or creating) the framework needed to mitigate risks for which an institutional response is required.

Action required: The whole idea of an enterprise wide risk management system covers this. Creating a reputation risk management framework should be done. I have some ideas about the use of a RRC – Reputation Risk Committee. I know! More meetings! I can hear you say that. However meetings when conducted by a skilled facilitator and chairperson can become a useful tool to manage reputation. (I will deal with this in another post)

For those managers interested in reading more about risk management I can highly recommend the book called: ”Resilience to Risk – Business Success in Turbulent Times” by Sean Cleary and Thierry Malleret (Human & Rousseau 2006). Cleary says and I quote: “The critical factors for a competitive advantage are to brace ourselves for turbulence and to manage risk skilfully. To do this, we need to acquire relevant information, knowledge, understanding and skills. Next, we need to build our capacity to anticipate, absorb and manage rapid and discontinuous change. In short, we need to build organic, flexible and adaptive organisations that can cope with risk.

“We need to quantify risks, otherwise they will become a nagging concern. We need to develop short-term and long-term scenarios, and we need to look at the worst and best cases. This will give us the best shot at managing global risk.”

How ready are you to manage and mitigate risk to your organisation’s reputation? Have you identified the potential sources of reputation risk in your organisation? To be forewarned is to be forearmed.

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Making the list of the Most Un Admired Companies Survey

The World’s Most Admired Company survey by Fortune magazine –see 2006 study results at http://tinyurl.com/32426v  have been one of the ground breaking annual studies to have been conducted in the field of Reputation and have added much to our understanding of what makes companies great.

But what about those companies that did their utmost to destroy their carefully crafted reputations during the past year (and years). Many companies, institutions and individuals have made this list in the past twelve months.

Perhaps we should start a World’s Most Un Admired Company List. Without being specific, there have been many examples. Many web sites and other bloggers have asked their audiences for their thoughts on the matter. Take a look at the examples cited in articles such as:

PR Missteps and Masterstrokes – A look at some of the public relations disasters  and coups in the business world in 2006: http://images.businessweek.com/ss/06/12/1218_2006pr/index_01.htm

2006 PR Disasters Top Winners – http://www.prdisasters.com/?p=81

The magazine Fast Company is running a slide show depicting how some international brands faced a crisis and rebounded. Visit http://tinyurl.com/yk2vyy to view the slide show. Unfortunately the slide show does not paint a true picture of the damage and impact the crises had on the organizations, but it does encapsulate briefly the response taken.

These examples show that no organization is immune against potential crises and incidents that can destroy their good names. The question that should be arising in your mind is: “What is the potential for my organization to find its way on to this list?”

What is my organization’s potential to destroy its hard earned reputation through for example?

• Lack of safe health and environmental practices

• Being sued successfully due to antiquated or insufficient labor practices

• Being rocked by insider trading scandals

• Improper trading forecasts

• Poor customer service levels and its allied root causes.

Reputation is an asset, which is in need of managing. The Economist magazine of 12 June 1999 said that “The Value of a Business Increasingly Lurks Not in Physical and Financial Assets That Are on the Balance Sheet, but in Intangibles.” In an survey that  Ernst & Young ran called “Measures that Matter”, interviews with portfolio managers and buy-side investors concluded that 30% to 50% of a company’s value is in intangible assets.

To what extent is your company managing its intangibles -its reputation assets? It’s perhaps important to discuss the meaning of reputation. What is reputation? It is the net result of the interactions of all the experiences, impressions, beliefs, feelings and knowledge all stakeholders have about a company and it is expressed or built through advertising, marketing, public relations, employee communications and servicing elements.

The key word is stakeholders. So many companies have customer service or shareholder programs in place, ignoring their other stakeholders. What are the perceptions of suppliers, the government and the media with regards to your company?

Let me leave you with a question: Who in your organization has assumed a holistic (systemic) view of managing reputation?

If there is no one, your organization is in danger of making the Un Admired company list.

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Social Media Predictions for 2007

Check out the predictions made by Jennifer McClure, executive director of the Society for New Communications Research, a non-profit organization dedicated to the study of new communications tools, technologies and emerging modes of communication and their effect on media, professional communications, business and society. She forecasts some really interesting developments, in the article called "Six Tips for Web-Savvy PR-and Tech Trends to watch in 2007" in the Bulldog Reporter – http://tinyurl.com/ywksq5

One of her statements really made me think: "Pod casts, video blogs, virtual societies-these are all things to watch in 2007. But ultimately, these are tactical tools of the trade. What we need to watch for strategically this year is the blending of traditional media with citizen journalism and social media using all of these tools. This is already happening in a big way. For example, The New York Times just added Digg and other social media tools to its offerings. Time magazine added some blogs. And BBC used citizen journalism pictures in its coverage of the tsunami and London bombings. You’ll see a lot more of this in the year ahead."

In South Africa we already have citizen journalism. Look at http://www.reporter.co.za . As I pointed out in my Powerlines newsletter Number 67 dated November 2006 in the article: "Are you managing your Cyberspace Reputation?" -  these new technologies has revolutionised the way communicators reach out to the crucial stakeholders with major repercussions. News and information is travelling in lightning speed and is easily accessible anytime, anywhere, on any device.

This raises the level of reputation risk and a company’s protection strategies can be severely tested. What are you doing to take advantage of the technologies and to protect your organisation against potential harm? Send me a mail.

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CEO’s turn to Blogging!

I just read the new blog by Bill Marriott, Chairman & CEO of Marriott International- the Marriott chain of hotels – http://www.blogs.marriott.com/

It is pretty darn good and an example of a blog with a personal touch. I also like Mr Marriott’s description and understanding of the need to form a dialogue – not just with top managers but with all associates, i.e. stakeholders.

He writes and I quote:"Ten years ago when my people first started talking about selling room reservations over the internet, I was a skeptic. Today Marriott.com is not only the biggest website in the hotel industry, it’s also our fastest growing reservations channel. I’m a convert!".

What an example of real listening! Many years ago I read a book called – Organisational Diagnosis- a Practical Approach to Company Problem Solving and Growth by Andrew O Manzini, in which the author wrote: "The solution to many organisational problems lie within the company – itself – with its own people. If you create an environment that encourages people to communicate their perceptions about problems and issues that prevent the company from being as effective as it can possibly be, and then solicit their input about what can be done, you tap a reservoir of talent that is more than adequate".

Real listening adds to the credebility of leaders and ultimately will impact on reputation as people want to work in an environment where they feel important and their ideas are cherished.

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What has a Floor and Reputation got in common?

I was paging through the JFM Africa, the Journal Of Facilities Management yesterday when I saw an advertisement that caught my attention.

This advertisement by a commercial and industrial floor cleaning equipment company (http://www.numatic.co.za/) carried such a powerful message:

Your Floor. Our Reputation. Spotless

Here is a company that understand its reputation. Companies who realizes  the value of their reputation are prepared to state it boldly upfront. Now I have never dealt with this company so I hope that their support and service backs up this claim so that perceptions meets reality.

Another organisation who cherishes their reputation is the Graduate School of Business of the University of Cape Town. If you go access their website http://www.gsb.uct.ac.za/gsbwebb/home.asp , you will see a statement: “What sets the GSB apart?”

And there as one of the four pillars is the word Reputation. Upon further exploration you will see what drives the GSB’s reputation and why it is valued so highly.

If you value your reputation, say so. In your marketing materials, through your actions and behaviours.

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The Value of Intangibles

I recently read a post in Leslie Gaines – Ross’s blog that she (http://reputationxchange.blogspot.com/2007/01/issue-of-decade.html) was sent a report in intangible assets (customer loyalty, know-how, talent, patents, innovativeness, leadership, reputation, ideas, etc.). The report is written by the Institute of Practitioners in Advertising and underscores the importance of intangible assets in the 21st century.

As the report rightly says, "Intangible value is the issue of the decade." She writes and I quote:

• Intangibles make up 78% of the market value of the Fortune 500, 72% of the value of the FTSE 350 and 35% of the market of all listed companies worldwide.
• In 1955, tangible assets accounted for nearly 80% of the value of non-financial businesses; by 2005 that figure fell to just over 50%.
• The value of intangibles has tripled over the past 30 years.
• Some sectors are more dependent on intangibles than others – Media (91% intangibles); Pharmaceuticals (89%); Food, Retail and Telecom; Oil and Gas; Banking. Those more dependent on tangibles include Insurance; Electricity; Automotive and Manufacturing.
• The country with the largest proportion of intangible assets is Switzerland (probably because of Roche and Novartis), followed by India, U.S., U.K., and Canada.

These amazing facts once again prove the importance of reputation and the need to manage it well. CEO’s and other top leaders are increasingly held accountable for managing reputation and making sure no harm comes to it. For this very reason, CEOs receive more of the blame for any reputation erosion (Weber Shandwick’s research just found this to be the case).

Leslie Gaines-Ross goes on to write in her blog that “Reputation could become the fourth bottom line”.

Perhaps it will be in companies favour if they start to look at how other large organisations such as Fed-Ex and SAB Miller manage their reputations.

SABMiller plc, one of the world’s leading brewers, recently announced the appointment of Michael Farr as Head of Reputation and Corporate Communications for the Group, effective 01 March 2007. This is a newly created position at the company.

Reporting to Sue Clark, Corporate Affairs Director SABMiller plc, based in the UK, Michael will direct the development and positioning of SABMiller’s reputation across global stakeholder groups. He will be responsible also for a number of key activities to build the company’s corporate brand.

Michael will head a team which will also be responsible for SABMiller’s e-communications strategy, the production of corporate publications, events and hospitality activities and will also direct and develop the positioning of SABMiller with the company’s 70,000 employees across the group.

Commenting on the appointment, SABMiller’s Corporate Affairs Director Sue Clark said: “In creating this new position, SABMiller has given full acknowledgement to the fact that our reputation is one of our key assets. Michael is ideally placed to bring his expertise in the important areas of reputation and brand management to the group’s global operations.

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Deon’s Five Quick Reputation Tips

Tip 1: An organisation’s reputation is its most valuable asset. Research has proven this time and time again. So why do you not manage it like a normal company asset?

Tip 2: Reputation is an organisation’s biggest risk. Have you realised that reputation is at risk on a daily basis and should be protected at all costs?

Tip 3: Reputation is not optional. Every company, every organisation, individual has a reputation. The only option is whether to manage it or allow it to be inferred. What are you doing to manage it in your organisation?

Tip 4: Reputation is stakeholder deriven. It is based on what they see, hear, read, think or infer. Their perceptions count. When last have you measured your organisation’s reputation(or your own) amongst the organisation’s various stakeholders? Or are you suffering from “perception deficit” saying “Mirror, Mirror on the wall, we are the best company of all”. Just ask your stakeholders? Is there no room for improvement?

Tip 5: Many reputation problems cannot be prevented. Even the best prepared business under the best of circumstances may incur a crisis that could not have been avoided. BUT most reputation crises are preceded by warning tips. In most cases, crises can be prevented by identifying warning signs and fixing problems before they transform into full crisis and reputational disasters. And, if you don’t believe me – Ask Ford. Ask Firestone. Ask HP.

So what are the warning tips in your organisation? Do you know? If not, you are sitting on a potential powder keg. How prepared are you to deal with the hand of fate?

Welcome to Deon’s Blog

My name is Deon Binneman and I am a speaker, trainer and consultant about the management of reputation and the mitigation of reputation risk.

My blog will explore what reputation is, how it manifests, what drives it and how it is sometimes destroyed by individuals and organisations.

I am very interested to find out how and why companies and individuals damage their carefully crafted reputations. I adopt systemic thinking to most ideas and have always had an interest in accelerated learning.

If you are interested to view my profile, access the bio link in the section About Me in the blog.

Some of my work includes helping companies to develop and implement crisis management & communication response plans.

Apart from writing, I like to listen to a variety of good music. I am always reminded of the statement:”My life is a more satisfying drama with good music playing in the background”.

I am looking forward to communicate with you and to share learnings and resources. If you wish to contact me directly, please send me an e- mail on deon.binneman at gmail.com