Corporate reputations impact brand and product sales performance. That’s one of the key findings from a recent global study by Weber Shandwick called The Company Behind the Brand: In Reputation We Trust.
As the survey report states, “As consumers around the world have greater online access to a brand’s lineage, the influence of the brand parent, or company behind the brand, matters even more.”
The study identified Six New Realities of Corporate Reputation, which the PR firm says serves as reminders that business leaders cannot view their company’s reputation and their product brands as separately as they once did.
These six “new realities” are:
1. The corporate brand is as important as the product brand(s). For instance seventy percent of the respondents said they avoided buying a product if they dislike the company behind it.
2. Corporate reputation provides product quality assurance.
3. Any disconnect between corporate and product reputation triggers sharp consumer reaction.
4. Products drive customer discussions, with reputation close behind.
5. Consumers shape corporate reputations instantly.
6. Corporate reputation contributes to company market value.
In actuality, none of these are truly “new” realities, other than perhaps the ability of consumers to now shape corporate reputations instantly via social media.
What is also very clear from the survey is that Crises like product recalls or any incident involving the company can cause irreparable damage to the brand and reputation.
In reading the report, the value of minimising potential reputation risk became apparent. For instance, if a Reputation Manager paid attention to the top 5 talking points that the research revealed, he or she could develop strategies to minimise the risk before it occurred.
These five talking points are customer service, how employees are treated, company scandals or wrong-doing, and their feelings about the company as a whole (its reputation).
Understanding Reputation Risk and what could destroy value is now a vital competency for any Reputation Manager.
The report also clearly shows that Reputation Matters now even more than ever, with more than 60% of a company’s market value attributed to it.
The report which makes for excellent reading, is available online here
Last week I facilitated a Stakeholder Reputation Management Master Class in Johannesburg. On the 2nd day I always end off the Master class by getting delegates to develop a set of ground rules of engagement with Stakeholders including a list of tips on how to foster better relationships and reputation.
The title of this article is what the one group suggested.
Differentiate your Suppliers and pay them accordingly.
This really made me think, and prompted me to share a very disturbing trend.
I run a one- person consultancy. My cash flow is key to business continuance. Yet, this year I have had spend more time on collecting money than ever before.
This is what is happening:
1. Managers attend courses and events. I advertise events as prepaid. Registration forms are completed and signed and invoices promptly sent out. But that is where it ends. I meet these lovely & dedicated people and work with them. However, now comes the crunch – To get my money.
Sometimes I have to wait up to 9 weeks to get paid. And, I have to deal with unhelpful back office staff.
- Even worse, the lack of attention is frightening. How can it take 2 weeks for a clerk to inform a secretary that the VAT number she gave the client is wrong and that they need an amended invoice?
- Even worse, my own Bank sent a senior manager on course and it took them 8 weeks to pay me. Yet, if I go over my overdraft limit by R2 they have the audacity to sms me that same day. Is that fair? In fact, it is 6 months since it happened and I am still angry about it.
- How on earth does it take 5 days to process a payment? That after they have all the documents and the invoice? It is nothing other than an admittance of poor administration and stalling payments.
- Recently I even wrote to the Head of Finance on two occasions to get paid. He did not even bother to respond.
2. The new tendency. In order for a manager to attend a once-off event I need to complete supplier database forms that need to be signed off by the Bank, sometimes SARS and often by a Commissioner of Oaths.
Sometimes I am sent these documents after an event – and it can take a day out of my time to comply with all this administration. Billable consulting time.
Who says I want to be an official supplier? Surely there must be a way to fast track certain expenses?
3. Supplier Database Forms ask for your type of business.
Why I don’t know. What difference does it make? If you state that you are a SME or sole proprietor, it makes no difference. In fact, you will probably be paid even later than some of their key clients.
Yet the South African Government wants to assist SME’s. Companies write that they care for their customers and suppliers.
Well, if they did their systems and service surely do not suggest that.
I agree with that group.
Why can they not:
- Fast track sole proprietor and SME payments? (Or do they not understand the different problems experienced by different types of businesses?)
- Why is there no provision for once-off payments such as event attendance?
- Why can managers who attend courses and events, not accept the responsibility for following up the payment of that supplier?
- Why can they not respect my payment terms?
Something is clearly wrong with Stakeholder Management in companies and there is no better place than to witness the lack of focus and lip-service than getting your invoice paid.
If companies were really stakeholder management focused, they would pay more attention to their service providers needs and expectations. As an external service provider who often has already rendered a service, I expect my payment terms to be respected. I expect them to be more sensitive to my needs.
I am not interested in the internal systems and procedures. That’s your problem.
Pay my invoice on time.
It is simple. Differentiate your suppliers and pay them accordingly. Surely it is not that difficult.
Or is it just that Stakeholder Management thinking is just a fad?
Organisations come up short with respect to reputation management for a number of principal reasons. Here are some:
1 . Managers have been trained in every conceivable discipline except reputation management. Many managers with reputation responsibility have not been trained for that assignment. Perhaps that describes you. You do not have the same level of experience in managing that function that you do managing others. Perhaps you are not entirely confident in leading the people and programs that are pivotal to perceptions of your organizations. Because you are not as comfortable with reputation management as you are with other aspects of your business, it may not be at the top of your priorities. In the turbulent years, you need to gain control over your reputation destiny, or it will control you.
2. Because the importance and scope of reputation is new to many managers, there is often little or no program in place to sensitize employees to the importance of your company’s good name. Employees do not understand that need. If they did, many of the contacts all of us have with employees would be far different.
3. Reputation expectations have never been set. Nobody has empowered employees to ask this question: "If we do this, will it hurt our reputation?" Managers address questions of cost, of timing, human resources, and pricing regularly, but they pay scant attention to questions of reputation and, by default, the potential for reputation damage is always present.
4. Far too often, management’s expectation is that good public relations after the fact can fix what ails them. But this type of thinking is wrong and leads to reputation problems, not solutions. The truth is this: Even the best public relations programs cannot overcome flawed policies, bad results or inappropriate actions.
All managers would do well to pay attention to what Warren Buffet said to Salomon Brothers employees when he stepped in as interim chairman in 1991: "If you lose money for the firm by bad decisions, I will be very understanding. If you lose reputation for the firm, I will be ruthless."
Yesterday I had the opportunity to facilitate a workshop on Reputation Risk and the Consumer Protection Act at a conference held at the Indaba Hotel in Fourways, Johannesburg by the Intelligence Transfer Centre (http://www.intelligencetransferc.co.za/).
Not wanting to overdo the legalities of the Act itself (since that was covered by other speakers) I focused on the implications of this Act and its potential impact on the reputation of an organisation.
Since the audience consisted of mainly legal advisers, I focused on the court of legal opinion versus the court of public opinion.
What struck me in the interaction with the audience was the disconnect between the two. Obviously this act brings a number of difficulties to the table, but it seemed that the focus by companies is minimum legal compliance, i.e doing only what is necessary in terms of the specifications of this Act.
The audience found it interesting when I showed them why the Act was promulgated in the first place, namely that it was because companies paid lip service to the reasonable expectations of the consumer stakeholder. The Act now codifies basic rights such as the right to safety, the right to not be taken unduly advantage of and so on.
In my presentation I also focused on the importance of having proper and tested product recall procedures, adequate product labelling, communicating in a crisis situation and I showed them how lack of compliance with this Act could be equated with the lack of commitment to show that you care about the consumer, could lead to public naming & shaming on top of penalties, an increase in lack of trust, a damaged Reputation and ultimately lead to an increase in unnecessary cost.
I also emphasised the point that an organisation will have to address the thinking processes in the company through increased awareness training of this Act and Consumer focused thinking training sessions.
What got me though, was the lack of understanding and preparation amongst the audience when I gave them a simple exercise to do:
Think about communicating about a defect to consumers. What would you need to have in place?
Granted the audience were mainly legal advisers, but they did not know where to start. They did not know where a strategic communications plan would start or end. I just hope that they do have skilled PR or Communications personnel in their companies, otherwise they will find themselves in a pickle over their lack of adequate communication when the time comes.
Ultimately this Act does pose Reputation Risk in that a lack of compliance or adherence to public opinion demands will raise questions about the ethics, values and practices in an organization.
In 2010 I will be assisting companies with this compliance by facilitating in –house workshops on the importance of the Consumer Protection Act. This compliance needs to be viewed as part of the Stakeholder Management processes of a company and should not just be seen as a Compliance issue to be handled by the Compliance Officer or Legal Advisers.
Advertisement: I do offer a Crisis Manager Toolkit that can be used by companies as part of their preparation for product recalls and other incidents. See http://deonbinneman.wordpress.com/toolkits/ for more information or contact me.
There is a full page spread today on page 16 of the Star newspaper featuring an advertisement by Aspen Nutritionals entitled ‘’ASPEN’s S26 ASSURANCE OF QUALITY’’
Obviously such an advertisement is costly, but what is more important? Protecting your Reputation or the cost? The advertisement clearly spells out what makes the product great.
See also statement: Aspen Pharma – News Room – Quality of S-26 in South Africa Guaranteed http://bit.ly/T2JG2
The Tanzanian Health authorities recently withdrew S26-1 from the market in that country following 4 complaints regarding the quality of the product. The advertisement spells out the reasons – possible counterfeiting and non-adherence to required storage conditions. It further states that Aspen is actively investigating the matter and will take measures required to ensure the matter is managed.
This example offers a number of lessons for companies and Leaders:
1. Is your company prepared for a crisis? Crisis can come in many shapes and sizes, from life safety to product safety crises to just plain allegations and rumours. Have you done your homework about what could go wrong and planned the relevant response? Realise that planning for a potential crisis, actually start when you launch a product.
2. In any crisis, there are a number of communication challenges. Have you planned your messages and with whom you need to communicate and on what basis?
3. Has your organisation actually simulated, tested and had your crisis plans audited by a 3rd party to provide objective oversight?
Research shows that those companies who respond quickly and decisively in a crisis**, weathers the storm best.
How prepared are you?
** REPUCOMM – my consultancy has a Crisis Management & Crisis Communication Toolkit available for purchase. This toolkit available as a download or on CD contains all the necessary information to design, develop, write and test a crisis management & crisis communication plan. It provides a fast start and could make the difference between failure and success.
Depends though on a simple premise. What do you cherish the most – Your Reputation or the cost involved in planning and prior preparation?
The new SA Consumer Protection Act 68 of 2008 (CPA), which was gazetted on 29 April 2009, and which is scheduled for implementation in two phases, will have an effect on the reputations of companies.
A risk emerging about this Act is that a lack of knowledge in complying with the Act could cost a business dearly. Courts are given comprehensive powers to grant orders dealing with any contravention of this Act. Should a business be convicted for contravening the act, it may face a hefty fine or even imprisonment!
But that is a minor impact compared to the potential impact on reputation.
Such fines will attract negative publicity which could have a spiral effect. Reputation risk means the risk that an institution’s reputation is damaged by one or more than one reputation event, as reflected from negative publicity about its business practices, conduct or financial condition. Such negative publicity, whether true or not, may impair public confidence in the company, result in costly litigation, or lead to a decline in its customer base, business or revenue. Lots of research has shown the impact on shareholder value of incident mismanagement.
Complying with the requirements of this Act will necessitate changes to decision making patterns, procedures, systems and attitudes*. Many a service or product delivering businesses, amongst others, will require specialist advice to ensure that they are complying with the provisions of the CPA.
REPUCOMM with its specialist stakeholder management knowledge and training solutions are ideally placed to assist organisations with this mammoth task of not only complying with the Act’s requirements but bringing about a mindset shift and culture that will factor in the consumer’s stakeholder right from the beginning of the planning cycle and value chain and not after the fact.
Stakeholder Reputation Risk refers to the risk that emerges when the reasonable expectations of stakeholders are not met. For many years companies professed that they took the interests of the consumer at heart when they planned strategies. However continuous scrutiny, scandal revelations and stakeholder complaints have highlighted that basic consumer expectations have not been met, with the result that the regulator decided to take action and protect society. Ultimately this law is a direct result of companies mismanaging the stakeholder process.
It is generally concurred that the CPA, through its specific focus contributes to a more fair and balanced relationship between suppliers and consumers. However the issue is that it is enforced, raising even more mistrust. Will Businesses comply because they are forced or out of free will? Believe you me, actions will now be even more thoroughly scrutinised.
Ultimately, this Act together with legislation such as the National Credit Act and the Competition Act will provide more rights and greater protection to the consumer stakeholder. This will lead to potentially more negative publicity and consumer activism.
Footnote – The impact of the Competition Commission in the Bread and Pharmaceutical pricing collusion sagas should also not be discounted. As one article stated – Look out for Early Morning Raids…..! Intentions will be measured and weighed.