Reputation Risk caused by Compliance failure can be costly!

So, maybe you thought Reputation Risk was just a passing phase.

Well, if you did, I urge you to read the story in the Business Day of Monday 29 September – “‘Tiger Brands cracks whip at the top”. You also may recall that I asked some questions about practices at the company in my blog post of May 2008:

http://deonbinneman.wordpress.com/2008/05/11/tiger-brands-cleans-out-its-closets-a-lesson-in-reputation-risk-management/

The article in the Business Day mentions that the company secretary and two former executives will lose close on R19 million in share options after being reprimanded by the company for their role in anti-competitive practices involving the firm’s former healthcare subsidiary Adcock Ingram.

Ouch! The dangers of culture and decisionmaking practices.Leif Edvinsson and Michael S. Malone wrote in the book ”Intellectual Capital”, that “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”

Tiger Brands are really acting now to root out unethical behaviour and restore their credibility. Acting in this visible and powerful manner certainly will assist.

I see that they also will be appointing a Group Compliance Officer. This is a good step, but at the same time it serves as a veiled warning for any company.

Compliance failure interestingly enough has been found to be a major source of Reputation Risk. Compliance has become a very important function and you just have to pick up the phone and contact the Compliance Institute of Southern Africa ( 27 11 642 7974) to learn about the growth in their membership.

Lack of Compliance has a number of impacts:

• It damages Trust and ultimately Reputation
• It is a Poor reflection of Company Standards
• It has Reputation impact – Can we trust you?
• It will invite further scrutiny – Studies for instance show that a company faced with a crisis is 75% more likely to have another crises in the next 30 days or so, because of increased scrutiny.

The term compliance describes the ability to act according to an order, set of rules or request; and the function of the Compliance Department is to ensure that the company provides and maintains an institutional framework that gives assurance that all applicable rules & regulations, laws, policies and procedures are adhered to.

This is the traditional view. Here I must caution that there are actually three levels of compliance to take into account in any framework:

1.Level 1 – compliance with external rules that are imposed upon an organisation as a whole

2.Level 2 – compliance with internal systems of control that are imposed to achieve compliance with the externally imposed rules.

3. Level 3 – This level is often ignored. This is the realm of stakeholder interaction and best practice in a court of public opinion. The conduct of rules govern the manner in which a business conducts itself in its relationships with stakeholders. These rules impose minimum standards of acceptable conduct upon regulated businesses, but what is acceptable?

What are the rules of stakeholder engagement and conduct? Compliance Officers will need to do their homework on the differing rules of engagement in dealing with various stakeholders. They will need to conduct research and attend workshops like the Stakeholder Reputation one so that they can understand which rules is appropriate.

Ultimately, there are 3 key lessons for us as managers from the Tiger Brands fallout and response:

1. We need to comply with the laws, rules, regulations and policies that govern behavior of the organisation.
2. Each of us is responsible for making sure that our own conduct and the conduct of those we supervise fully complies with all applicable laws and regulations.
3. We must recognize that even the appearances of misconduct or impropriety can be damaging to the reputation of the organisation, and act to avoid them.

I have produced a white paper about the steps that I believe is necessary to foster a compliant culture in the organization. If you are interested in it, just e-mail me for a free copy.

RISKWELL 2008 Conference Feedback

I just returned from Sun City, SA’s premier holiday resort where I presented a keynote on Reputation Risk; at the 2nd annual RISKWELL 2008 Conference.

This event featured a really interesting group of speakers, and attracted visitors from China, the UK as well as Sudan.

RISKWELL 2008, the International Risk and Wellness Conference and Exhibition provided latest market trends, explored case studies and provided solutions covering a wide range of topics relating to Enterprise Wide Risk Management.

For me, one of the speakers presentation – Stefan Raubenheimer’s “The Clock is ticking and few are really paying attention” really stood out, because it presented a serious business case about the dangers of global warming and climate change impact. It certainly made me realise that the time to act is now and not later about climate change.

Stefan really made the point that our children and their children will be affected by our decisions and ability or inability to act now.

Just in case, you could not attend and are interested in getting copies of the presentations, here is the link:

http://www.ighgroup.com/RiskWellSite/RiskWell_DashBoard.aspx

Fancy doing some reading on Managing Reputation?

I am often asked for a list of books to read by those wanting to learn more about managing corporate reputation.

Here are three of my favourites that I have used as guidance in my stakeholder reputation & reputation risk consulting and speaking work:

 

http://www.amazon.com/Fame-Fortune-Successful-Companies-Reputations/dp/0130937371

Companies with strong reputations are better able to attract customers, investors, and quality employees-and to survive crises that would destroy weaker firms. Fame and Fortune shows how to quantitatively measure your company’s reputation, estimate its business value, and systematically enhance it over both the short- and long-term.

This book will help you to benchmark your firm’s reputation against key rivals in six key areas, ranging from product quality to emotional appeal. In particular, it shows why reputations matter: the proof, in cold, hard cash. It offers guidance on a roadmap for building the kind of reputation you need and deserve.

This book clearly shows the powerful business value that arises from a world-class reputation.

 

 http://www.amazon.com/Waltzing-Raptors-Practical-Protecting-Reputation/dp/0471327328/ref=sr_1_1?ie=UTF8&s=books&qid=1221654385&sr=1-1

This book presents the cutting-edge concept of Reputation Assurance, an indispensable system for measuring a company’s reputation and social accountability. Based on a global study of multinationals in North America, Europe, and Asia, Reputation Assurance is used by PricewaterhouseCoopers, the global thought leaders.

Reputation Assurance applies a framework of principles for business excellence across the company. The new paradigm ensures fair and competitive returns for shareholders, understands and meets customer expectations and guarantees, offers employees fair compensation, honesty, and openness in communication, and takes suggestions and complaints seriously.

Finally, the framework promotes corporate accountability to society as a whole by contributing to the economic power of its citizens, promoting human rights, disclosing relevant information, and respecting at all times local culture and laws. Waltzing, after all, isn’t just fancy footwork but an art. Once companies learn and practice the steps, they will find their reputations admired by all.

This book shows how managers who actively listen and are responsive to their company’s stakeholders, who monitor, verify, and report on performance, can transform powerful and feisty critics into partners, thereby protecting and enhancing their company’s reputation.”-Alice Tepper Martin, President, Council on Economic Priorities.

http://www.amazon.com/Performance-Prism-Scorecard-Measuring-Managing/dp/0273653342/ref=sr_1_2?ie=UTF8&s=books&qid=1221654990&sr=1-2

This book by authors from the Cranfield School of Management’s Centre for Business Performance—introduces a powerful, practical ’scorecard’ framework for measuring important relationships: with customers, investors, employees, suppliers, alliances, regulators, and communities.

It is a must read for Stakeholder Relations Managers.

I find it useful as it shows the importance and how of measurement in an increasingly complex business environment of multiple priorities and stakeholders.

The Performance Prism presents an innovative and practical solution to balancing conflicting priorities and numerous stakeholder demands. It puts key stakeholders, and managing the organisation’s relationship with each of them, centre stage with a novel framework.

How Interactive is your Environmental Reporting?

An article on GreenBiz.com – ”Fortune 50 Lacks Transparency in Web-Based Environmental Reporting raises some really interesting questions”.

The article states that the majority of Fortune 50 corporations use the Internet to disclose some information on their environmental performance but most are missing opportunities to involve stakeholders, tap the interactive potential of the web, and provide transparency in their reporting, new research suggests.

Researchers at Brigham Young University and KDPaine and Partners set out to test a new model for transparency,  a hot topic in the field of corporate communications. After studying environmental information reported in the websites of F50 companies, researchers found that a minority allow for any two-way interaction with stakeholders, which could inform and enhance the type of information they report.

“Make it more interactive,” said Bradley Rawlins, the report’s co-author and chair of Brigham Young’s department of communications. “Open it up and let people comment because you might think you’re doing a good job but until your stakeholders say this is what they need, you don’t know.”

The transparency standard researchers used to measure corporate environmental reporting includes four tenets:

1. Stakeholder participation in defining the type of information being reported;
2. Usefulness of information;
3. Balanced reporting that holds the company accountable for their performance; and a
4. Sense of openness in providing information that is easily available, easy to understand and timely.

“Measuring the Transparency of Environmental Sustainability Reporting Through Websites of Fortune 50 Corporations” found that few companies take advantage of the Interactive tools afforded by the Internet, such as blogs or discussion forums. Most reporting is static and one-way. For instance, the web allows for real-time reporting but all companies instead only report progress once a year.

Only 38 percent offered evidence of stakeholder involvement in the development of the reports. Most environmentally reporting was two to three mouse clicks away from the home page. 

Many companies didn’t score well in providing balanced information or accountability. For example, only 36 percent reporting some sort of unfavourable result but only 6 percent included an explanation. Most lacked context to help readers understand the results. The results of only 13 percent of companies included third party verification.

Actions to take:

1. Revisit your disclosure practices.

2. I would get a number of SME’s in the same room to brainstorm better ways to disclose information. People from departments such as Corporate Communication, Training and Marketing. Invite consultants skilled in social media, corporate reporting, NLP and accelerated learning to the table.

3. Read books such as the New Rules of Marketing and PR – How to use News releases, Blogs, Podcasting, Viral Marketing & Online Media to Reach Buyers Directly by David Meerman Scott.

4. Benchmark what other companies are doing, not activity benchmarking but rather best practice benchmarking.

5. Alternatively commission research into Points 1 – 4. Reputation is a reflection of what others think about you. Finding ways to engage stakeholders and to communicate better is money well spent, as stakeholders will then understand your organization better and will be able to formulate better opinions.

Learn from Coca-Cola and leverage your success as a Consultant and/or Company

Let’s talk about name recognition: Why is the Coca-Cola brand so universally identifiable?

Well Coke is consistently being advertised and promoted. It is constantly reinforced in your active mind span. For a consultant the secret will be to get into circulation and make your name be heard. Not only do you have to get into circulation – You have to stay in circulation, or as Christopher Leach has said: ” Nothing succeeds like the appearance of success”

Thus you have to start networking, circulate flyers, write articles, making the talks, advertising and creating publicity to expand your circulation.

Think of what you are selling and how you can improve its circulation. The word”circulation” comes from the Latin root: to form a circle. In terms of your marketing efforts view your efforts in terms of the circles you have or are forming:

Circles of friends, circles of acquaintances, circles of contacts, circles of leads, circles of influential people.

Then work those circles. Make sure they all know what you can offer. Are you on Linkedin? Do you use Twitter? Do you have a profile on Facebook and other social networks?

Coca-Cola South Africa today ran an advertisement thanking South Africa for once again voting…

• Coca-Cola”‘ as South Africa’s Favourite Brand (for the 4th year in a row!)
• Coca-Cola”‘ as SA’s Top Cold Drink
• Coca-Cola”‘ as South Africa’s Second Coolest Brand
• Coca-Cola”‘ as the country’s Second Favourite Advertiser
• Coca-Cola South Africa as the Company That Does The Most To Uplift The Community.*
• and Coca-Cola South Africa as the Third Most Reputable Company in the country.

# The first five ratings are from the 2008 Sunday Times/Markinor Brand and Branding survey, whilst the last rating is from the Reputation Institute Global RepTrak(tm) Pulse 2008 survey.

The Reputation Institute’s research model is built on 7 dimensions of reputation: Products/Services, Innovation, Workplace, Citizenship, Governance, Leadership, and Performance. What interested me was that when two drivers — Governance and Citizenship — are combined, they account for more than 30% of a company’s reputation. This proves that leadership at the top and corporate responsibility are critical to reputation today.

If an organization increases its lead or goes down it is because of the way they are perceived. I recall that in one study it showed that those companies who spend more on PR, tend to achieve higher scores on reputation barometer surveys.

That is not unusual. Out of sight, out of mind. Again we can learn from Coca- Cola. They share their successes and leverage them, so as to leave no doubt in your mind.

They are Number One on the psychological ladder of  marketing when it comes to cold drink, and they make sure that they stay there.

One other thing – no company’s reputation is sacrosanct. The better you are, the bigger the chances that you will be under attack. Wikipedia feature a section called Criticism about Coke – it makes for interesting reading about where risks may come from:

http://en.wikipedia.org/wiki/Criticism_of_Coca-Cola

Lesson – Leverage your successes and mitigate your risks!

Will your Reputation stand up in Court?

I read a very interesting article today in the Business Day called ”Tender fell victim to SABC’s internecine struggle, court told”.

The article covers the story that the SABC Board ignored management recommendations in awarding a R400m tender for the supply of broadcasting equipment to Japanese subsidiary Sony SA.

Apparently management felt that Sony’s SA design did not display any technological advances since the previous HD ODB unit. Court documents on behalf of other bids apparently show that the competition offered the best technical solutions.

Here is where it gets interesting. Advocate Peter van Blerk, for the SABC, argued that the award to Sony SA was proper and legitimate and that Sony SA has a reputation which the competition, Digital Horizons did not have.

Although judgement is only expected next week, there are a few lessons here for Reputation Managers, as follows:

1. Remember that your Reputation is always something to work on. This means ensuring that your products and solutions take into account not just tender specifications, but also changing environmental conditions and issues. Just because you were brilliant last year, standards may now be lagging.

2. Realise that reputation permeates everything. It will influence decisionmaking processes, problem solving and will even be mentioned in court. The perceptions that stakeholders hold against your organization and its services cannot be ignored nor should it be taken lightly.

In my Powerlines newsletter Number 67 dated the 1st December 2006, I wrote an article called ”Avoiding Reputation Risk when contracting with the Government” that has bearing on some of the points mentioned above as well as tendering processes in general.

AVOID REPUTATION RISK WHEN CONTRACTING WITH THE GOVERNMENT

=============================================

The so called “mutually beneficial symbiosis” or as reported “generally corrupt relationship” between Schabir Schaik and ex-President elect Jacob Zuma coupled with numerous tender maladministration exposes and court cases have illustrated the risks that companies face in doing business with any government department .

Not only can the government bring suit, but even competitors are now alleging tendering & procurement fraud based on violations of tendering requirements unique to the government. Fortunately, companies have ways to mitigate these risks.

Today, a vast number of suppliers and service providers try and do business with Government. But there are risks, as all the negative publicity shows.

For organisations and individuals that view their reputation a top priority, the lessons must be clear. Issues of noncompliance with tendering procedures can result in fraud allegations that although not true can be damaging as it creates an appearance of impropriety. With the key words in society today being openness, honesty and trust, an organisation will need to comply carefully with tendering procedures and the impressions created by their approach.

Behind the scenes conniving and leveraging can result in not only administrative sanctions, such as suspension or debarment, but also damage to a supplier’s reputation from publicised allegations. The Star newspaper of 7 November 2006 reports that the World Bank has blacklisted a German firm called Lahmeyer for seven years from deals financed by the World Bank because it bribed an official to win a Lesotho Highlands Water Project (LHWP) contract.

The bank said in a release that the ban might be reduced to 4 years if it “met specific compliance conditions and fully co-operated in disclosing past sanctionable misconduct”.

RISKS INVOLVED

Compliance Risks – There are various requirements that a vendor needs to comply with including various certifications. If a vendor omits or does not comply with requirements it can influence outcomes and impact negatively in the future.

Honesty and transparency in the tendering process is absolutely vital. An Organisation’s Reputation can be severely damaged by allegations made by a competitor that its rivals were hiding or manipulating information.

The clear message is that tender requirement compliance, is of primary importance to all companies tendering for government business. The lesson from all the negative publicity is that any supplier needs to understand that their application and delivery will be scrutinised by outsiders and that they will question its compliance with schedule requirements.

Moreover, noncompliance with schedule requirements poses a high risk that the vendor will be accused of fraud, which alone can generate unwanted negative media attention and damage customer relations.

The following list presents some guidelines to consider when pursuing Government business:

1. Analyse every one of your business relationships. Is there a potential for conflict of interests or a skewed perception? Decide on what you value most – short term gains or your intact reputation.

2. Understand all obligations and requirements for schedule contracts, including pricing disclosures and obligations, before submitting a proposal.

2. Establish and maintain department or unit dedicated to the tender and maintain a compliance and delivery program tailored to your contract.

3. Ensure that disclosure of commercial practices is accurate, current and complete taking into consideration both legal and public opinion, with all deviations and other qualifying information disclosed in detail in writing.

4. Ensure that the Service Level agreement states clearly what you can and cannot deliver. Choose words carefully. It is not enough to get legal experts to review the documents; you should get your communication experts to look at it as well.

5. Make sure that no finger can be pointed at you because of previous relationships based on prior knowledge, power or other forms of leveraging.

Remember that in the long run it is more important to have a succinct and intact reputation than to gain financially in the short term.

Helping People apply what they Learn

I saw a cartoon the other day in which one person said to the other: ” I taught my dog, how to whistle”. The other person then said: ” But I don’t'hear him !, to which the reply was : ” I said I taught him, I didn’t say he learnt it”.

This raised a thought in me : ” Why conduct training unless it changes behavior on the job or causes productivity to increase?” Training has to be an investment and the payback must be increased performance. Yet there are so many factors that can hamper application of new concepts learnt in the workplace. These can include personal factors such as lack of motivation, the ability to learn, including whether the learner sees the information as relevant, instructional factors such as ineffective instruction not matching learning styles, too much theory, to organisational factors such as the lack of a learning culture in a company,
and lack of coaching and other support behaviours.

What can we do about these factors( AND, yes it is a communicator’s responsibilty):

We can often do little about personal factors(these are often internal),but with guided coaching and counselling, and appropriate instruction wonders can be achieved – Remember Dead Poets Society, etc.

Ensuring that trainers are up to date in the most effective accelerated learning techniques can play a part  BUT ultimately for learning and ultimately performance to take place, a system that recognises learning and reinforces correct behaviours will be necessary if ROI is to be achieved. But how do we do that?

The following ideas may help.

1. Train managers in Coaching skills. Numerous studies have shown the value of coaching in the workplace.Reward successful coaches.
2. Get each person to complete an action plan of what steps he or she will take to implement the information in the workplace. Then measure and follow
up.
3. Develop checklists, planning sheets, flow charts, and other job aids to help them apply.
4. Catch people doing things right. Feedback skills serve as wonderful reinforcement tools.
5. Think of training as a ” Waterfalls flow from the top” approach. By planning and acting on your own development in ways that are visible and instructive to your employees, you will be sending out an impactful message. Your employees will follow the lead in your example. It’s a chain reaction that begins with YOU.
6. Use all the wonderful communication tools, such as inhouse newsletters, e-mail, the intranet, social media tools and frequent communiques to stimulate learning.