Archive for April 2011
As a contemporary anthropologist of sorts working as a CCO in technology-based companies, I often felt like a Muggle - a person without magical abilities - among the Wizards.
Once in Shell, I was talking with a team of senior executives about stakeholder concerns and how we could shape our narrative to connect better. I said that we had no choice. Even Shell had to play by Muggles' rules. Because the Muggles actually rule the world. Not the Wizards.
And, sadly, there was no Platform 9 ¾ (where Harry Potter took the train to Hogwarts) where we could transit from our own energy wizardry to the Muggledom around us.
That episode came back to me recently at an event in London. It was hosted by Echo Research, Arthur W. Page Society trustee Sandra Macleod's company, to launch a new way to calculate the contribution of reputation to a company's market capitalization, called the Reputation Dividend.
Bottom line: The good news is that a value on reputation and its share in the value of a company can now be calculated! CCOs can now put a valuation on the intangible asset they help manage in discussions about resources with the C Suite, including the numbers wizards.
As the press release said, few CEOs would deny that corporate reputation is a key asset, but there has been little appreciation of its true value.
Echo Research, where I'm proud to hold an advisory role, worked with Bestra Brand Consultants for five years to create the underlying diagnostic tool "Reputation Dividend" - an objective way to monitor corporate reputation based on four factors:
• Reputation Contribution - the financial value and proportion of market cap attributable to corporate reputation.
• The comparison of the relative value of a company's corporate reputation to that of its peers and competitors.
• Isolation of nine principal components of reputation value - the individual levers of a company's reputation that do and/or could contribute most.
• Reputation Leverage - a measurement of the return on investment in corporate brand communication. The study measures the growth in market cap due to past investment or what can reasonably be expected from any future investment in corporate reputation.
So what was the worry that buzzed through my mind? And what's with the magical connection?
The worry is simple. The reputation dividend calculates the value that the corporation reputation contributes to a company's market capitalization.
And since the reputation dividend is such a neat calculation, in a CCO's discussion with the C-suite colleagues this could lead to a narrowing of the field of vision. Whereas, if used well, it will provide more breadth, depth and clarity of vision on an important component of reputation
So, it will be critical that CCOs continue using other reputation metrics in order to get to a rounded reflection of how all stakeholders see the firm and its economic, social and environmental performance.
Otherwise, a line from Gandalf, the wizard and sage in The Lord of The Rings, could be applicable, and that would be a pity: "And he who breaks a thing to find out what it is has left the path of wisdom."
Or am I the only one who prefers to see reputation as the sum of what ALL stakeholders think of a company, as an unbreakable construct whose total sum is greater than the sum of its parts?
In the early days of corporate social responsibility (CSR), it was enough to plant a few trees and attend the odd ribbon-cutting junket or photo opportunity. Companies could continue to support lax labour practices, and make few - if any - inquiries into the environmental conduct of their suppliers. So long as profits rolled in, customers - and shareholders - were satisfied. CSR-associated activities were seen as 'bolt-on', rather than critical to business. Indeed, our research shows that in 2000, only 11% of CEO's believed CSR to be integral to improving commercial success. Occasional CSR activity was enough, in a world where sustainable practices were seen as just another PR-related function.
Fast-forward to 2010: Global media attention has skyrocketed, trust and reputation are directly linked to sustainable practices, and both have an immediate, measurable impact on the bottom line. Clearly, the days of superficial 'greenwashing' are behind us, as evidenced by Echo's recent study 'A World in Trust,' analysing trends and practices in global CSR.
Working with the International Business Leaders Forum (IBLF), Echo's survey of over 50 global business leaders included Diageo's Paul Walsh, Coca-Cola's John Brock, and Whitbread's Alan Parker CBE among others, to analyse the latest thinking and insights in CSR. The qualitative data was complemented by business media content collected by media search engine Echo Sonar, and then scrutinised by Echo's analysts.
Our findings tell the story of a shifting landscape. Stakeholder research, feedback and co-creation are seen as key elements, while stand-alone CSR departments are in steady decline.
Indeed, an astonishing 96% of those surveyed told us that sustainability efforts needed to be integrated into their respective strategies and operations. Furthermore, 88% believe that businesses should demand similar commitments from suppliers.
This recognition comes at a critical point in time. Following BP's 'summer of the spill' and the more recent - and scarcely less devastating - toxic sludge in Hungary, companies recognise the increased global scrutiny that is upon them.
Importantly, as resources and raw materials are subject to increasing scarcity and price pressure, companies must not only improve conservation, but also drive innovation. An overwhelming 91% of interviewees believed that their companies would need to employ new technologies to address sustainability issues in the next five years in order to remain competitive. This is a clear example of sustainable practices powering business growth, and of these practices playing a greater role in long-term strategy.
Despite the fact that there has been recent doubt as to the business value of CSR, 69% of those surveyed believed that companies dedicated to long-term sustainability would see better financial results. Indeed, many organisations are holding fast in their commitment to sustainability as a business imperative, despite the decelerating effect of the recession.
The challenge is clear, the rewards evident: those companies that best integrate CSR into overall business practices will reap the rewards born of increased consumer confidence. Indeed, it was one of our interviewees who put it best, tying business and CSR together, as he said "Sustainability is conducting your business in such a way that future generations can do the same".