Shareholder and Stakeholder Engagement
Dr Dominik Heil
Managing Director, Reputation Institute
September 2010
Huge Centripetal Economic Forces are Pulling Us Apart
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While Geological Forces are Taking their Toll
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Contributing to a Wild Ride in the Financial Markets
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And Putting “Reputations” On Everyone’s Mind
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Toyota is Reeling from Unintended Effects of Cost-Cutting
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BP is Reeling from a Huge Oil Spill in the Gulf of Mexico
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Clearly Reputations are Always at Risk
"It takes 20 years to build a
reputation and five minutes to
ruin it.
If you think about that,
you'll do things differently.”
Warren Buffett
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Best practices
Organizations that manage their reputations successfully:
Adopt a common model for reputation management across
organizational functions
Understand what the reputation dimensions and attributes mean to
different stakeholders
Align corporate messaging and reputing activities with key drivers
for their stakeholders
Create employee alignment with their reputation platform
Create a cross-functional reputation committee to ensure coherent
actions
Monitor reputation with different stakeholders against relevant
competitors
Integrate reputation management into the business process
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RI has conducted Global Reputation Studies since 2000
34 Countries & 24 Industries –65,000 Consumers
Airlines & Aerospace • Automotive • Beverage • Chemicals • Computer • Conglomerate • Construction & Engineering • Consumer
Products • Electrical & Electronics • Energy • Financial – Bank • Financial – Diversified Services • Financial – Insurance • Food
Manufacturing • Industrial Products • Information & Media • Pharmaceuticals • Raw Materials • Retail – Food • Retail – General •
Services • Telecommunications • Transport & Logistics • Utilities
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Lesson #1: A Corporate Reputation is an Emotional Bond
…and built on 7 Pillars
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Lesson #2: Reputation Operates “Below the Line”
Strategic
Goals
Corporate
Initiatives
Business
Results
Supportive
Behaviors
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Perceptions
of Company
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Lesson # 3: Improving Alignment Increases Reputation
What
Companies
Say
Inconsistency
How Companies
are Perceived
Inconsistency
What
Companies
Do
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Inconsistency
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Lesson #4: Improving Reputation Increases Support
Improve Reputation by 10% – Increase Support by 10%
80
72
% Respondents who Would Recommend
64
56
48
40
32
24
16
8
26
36
46
56
U.S. Pulse Score
66
76
86
Adj-R 2 = 0.889
Source: 2010 Global Reputation Pulse (U.S. Results)
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Lesson #5: …and creates Financial Value
Ratio of
Market Value
to Book Value
Top 30 in
Reputation
Bottom 30 in
Reputation
3.79
1.42
% Change in Market Value = 1.3 * % Change in Reputation
So, on average:
10%
Improvement
in Reputation
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13%
Improvement
in Market
Value
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Lesson #6: So that Investing in Higher Reputation Firms Can Pay Off
REPUTATION & MARKET VALUATION
2000-2006
Cumulative
Returns
40.00%
20.00%
HIGH REPUTATION
PORTFOLIO
S&P 500
0.00%
-20.00%
-40.00%
Ja
n
A -00
pr
Ju -00
O l-00
ct
Ja -00
n
A -01
pr
Ju -01
O l-01
c
Ja t-01
n
A -02
pr
Ju -02
O l-02
c
Ja t-02
n
A -03
pr
Ju -03
O l-03
c
Ja t-03
n
A -04
pr
Ju -04
O l-04
c
Ja t-04
n
A -05
pr
Ju -05
O l-05
c
Ja t-05
n
A -06
pr
Ju -06
O l-06
ct
-0
6
-60.00%
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Lesson # 7: But Reputation Requires Vision & Governance
Energy
Auto
Tobacco
Banking
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Lesson #8: And a Focus on Products & Innovation
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Lesson #9: Companies have to Do the Right Thing
“You can make money without doing evil”
Is Google a great
place to work because
its stock is at $483, or
is its stock at $483
because it's a great
place to work?
--Business Week, January
22, 2007
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Lesson #10: As Well as Do Things Right
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So a Mind-Shift is Taking Place
From Brand to Reputation
Brand
Reputation
The promise a company makes
to its stakeholders
The degree to which the company
fulfills its promises
“Owned” by the company
“Owned” by stakeholders
A brand is a promise…
when you live up to that promise you build Reputation
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The World’s Best Corporate Reputations (2010)
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How are Corporate Reputations Created?
Stakeholder
Experiences
Products
Investments
Customer
Service
Employment
Corporate
Messaging
Branding
Marketing
Public
Relations
Social
Responsibility
Perceptions
Trust
Admiration
Respect
Good Feeling
Corporate
Corporate
Reputation
Reputation
Media
Conversation
Print
Broadcast
Internet
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Reputation is driven by 7 dimensions
RepTrak™ measures them
The RepTrak™ Scorecard
has been developed
though research over the
past 10 years
This scorecard is the
basis for standardized and
custom work that RI
conducts around the world
with all stakeholder
groups
Reputation Institute has
been building a
proprietary database of
reputation research in 32
countries around the
world enabling geographic
and industry benchmarks
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Measuring and managing reputation:
Understanding the dimensions of reputation
PRODUCTS/SERVICES
PERFORMANCE
What is the perception of the company’s
financial performance and the prospects for
future growth?
Do stakeholders think highly of the products
and services the company provides? Are
products and services associated with quality
and value? Does the company stand behind
its products?
INNOVATION
LEADERSHIP
How do stakeholders perceive the
leaders and management
competences of the company? Does
the company appear well organized
with a clear vision for the future?
CITIZENSHIP
Is the company perceived as innovative and
skilled to meet market changes? Does the
company regularly introduce new products?
WORKPLACE
Does the company contribute positively to
its surrounding community in a socially and
environmentally responsible fashion?
Are employees treated fairly and paid a
decent wage? Does the company invest in
developing employee skill sets and career
opportunities?
GOVERNANCE
Is the company business run in a fair and transparent fashion? Do
stakeholder associate the company with high ethical business
standards?
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RepTrak™ Framework integrates perceptions across
stakeholders
General Public/
Opinion Elites
Academia
Advocacy Groups
Customers
Prospective
Employees
Partners
Current
Employees
Media
Financial
Analysts
Individual
Investors
Industry Analysts
Institutional Investors
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Different dimensions are important to different
stakeholders (illustrative only…)
Customers
Employees
Investors
Government
Media
Regulators
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Stakeholder Reputation and Supportive Behaviour Most Stakeholders are between Active Detractors
and Evangelists
Evangelist
Believes that company has a strong
reputation and is willing to provide
support (e.g. buys products/services
and recommends them to others).
Unsupportive
Admirer
Evangelist
Reputation
High
Active Detractor
Believes that company has a poor
reputation and acts negatively towards
the company (e.g. dislikes company
and actively discourages others from
buying its products/services)
Unsupportive Admirer
Low
Active
Detractor
Disgruntled
Supporter
Believes that company has a strong
reputation, but does not support with
any action.
(e.g. likes company but does not buy
its products/services)
Disgruntled Supporter
Low
High
Believes that a company has a poor
reputation but nonetheless continues
to support it (e.g. dislikes company,
but continues to buy
products/services)
Supportive behaviour
Source Study: Comparison of Reputation (Using Reputation Quotient: Harris Interactive/Reputation Institute) and Supportive
behaviour Intent (Employment, Investment, Purchase). Fame and Fortune: How Successful Companies Build Winning Reputations.
Fombrun, Van Riel, ©2004, p.68
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Supportive Behaviour Explained –
stakeholder support with a great reputation…
Opportunities
Risks
Employees
Unsolicited applications
Ambassadorship
Best candidates do not apply
Lower productivity
Customers
Builds market share
Encourages repeat purchase
Declining sales and boycotts
Lower prices
Investors
Lowers capital costs
Attracts new investment
Lower stock prices
Increased capital costs
Media
Favourable press coverage
Trust in crisis
Negative coverage
Lack of trust
Financial
analysts
Favourable ratings
Recommendations
Lower ratings
Fombrun, C. & C.B.M. Cees 2004: Fame & Fortune, Prentice Hall, US
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How do we tie Reputation to Business Results?
Reputation Strategy is Business Strategy
RI’s model – enabling strategy development
Initiatives drive perceptions, which drive desired behavior
Strategic
Goals
Corporate
Initiatives
Business
Results
Supportive
Behaviors
towards the
company
● Use/
recommend products
● Invest in company
● Employee engagement
Perceptions
of the
company
(Reputation)
● Products/Services
● Innovation
● Workplace
● Governance
● Citizenship
● Leadership
● Performance
Stakeholder support:
© Reputation Institute
1.
2.
3.
3
Buy
Recommend
Invest
Work
Support
What are our reputational strengths and weaknesses?
What are the drivers of our reputation and business-critical
stakeholder support?
What actions and communications should we focus on or change in our
interactions with our most important stakeholders?
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The Changing Face of Reputation…
How the concept of reputation has evolved
Not long ago the concept of reputation was an academic exercise
centering on 4 basic questions…
•
•
•
•
How is reputation defined?
Does reputation matter?
Can reputation be measured?
Is reputation valuable?
We now know:
• What reputation is: the trust, admiration, good feeling and overall esteem
people have for an organisation.
• Reputation is created by perceptions people have about 7 key reputation
dimensions.
• Strong reputations lead to supporting behaviour.
• Supportive behaviour leads to improved organisational performance.
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Critical Considerations:
How are corporate reputations influenced?
Several years ago we knew that reputations were influenced by:
1) Excellence in performance on all reputation drivers
2) Excellence in communications
3) Understanding the context in which the company operates
We now know that reputations are influenced by:
1) Stakeholders Experiences: peoples’ personal experiences with the
company.
2) Corporate Messaging: the company’s corporate communication and
initiatives.
3) Media Coverage: How and what the media and third parties are saying
about the company.
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Communication Platforms –
Communicating with Stakeholders
Communicates Appropriately to everyone…
Carries out Visible Stakeholder Initiatives…
Participate in Worthy Social Initiatives
Visible
Is Recognizably Different…
Makes a Distinctive Promise…
Stands Out…
Distinctive
Walks the Talk…
Is Easily Identifiable in its Communications…
Conveys a Consistent Message
Consistent
States Its Beliefs Openly…
Discloses Information in a Timely Fashion…
Shows Responsiveness to All Stakeholders…
Transparent
Is Credible and Sincere in its Communications…
Is Honest…
Is Appealing to Deal With
Authentic
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RI’s Reputation Equity Process
Reputation
Landscape
Phase 1
Audit: Stakeholder mapping, scorecard development, stakeholder
perceptions, reputation profile and drivers, strategic reputation framework
Reputation
Platform
Phase 2
Strategy: What is company’s core message/story and promise to its
Stakeholders? How does it correspond with current position and drivers?
Reputation
Workout
Phase 3
Planning: What can company do to manage reputation actively through
activities and communication initiatives?
Reputation
Activities
Phase 4
Action: Execute against strategy and plan by intiating stakeholder
engagement- and branding activities both internally and externally
Stakeholder
Alignment
Phase 5
Monitor: Track effectiveness of actual performance in the stakeholder
marketspace – optimize stakeholder engagement
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Who is the Reputation Institute?
Reputation Institute is the leading international
organisation devoted to advancing knowledge about
corporate reputations.
Through systematic research and analysis, Reputation
Institute helps companies build comprehensive strategies
and make operational decisions that are designed to align
stakeholders with corporate objectives and create
tangible economic value.
Reputation Institute's global network of local offices,
associates, practitioners, and academics regularly produces
thought leadership about corporate reputations that is
shared in our conferences and workshops, and gets
featured in our newsletters and peer-reviewed quarterly
journal, Corporate Reputation Review.
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