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Maintaining Reputation In a Time of Global Change Corporate Communication Institute December 1, 2006 Gary F. Grates President & Global Managing Director Edelman Change and Employee Engagement
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“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 “If you have no reputation, you have no business.” — Dr. Guruswami Raghavan Professor of Finance SDM Institute for Management Development
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Why is reputation so important today? 59% of organizations surveyed state that corporate reputation is becoming a key source of competitive advantage as products/services become less differentiated Source: “Reputation: Risk of Risks” Economist Intelligence Unit 2005 Survey
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Reputation is the A-1 priority 84% of companies surveyed state that the CEO/President/Chairman takes personal responsibility for their organization’s reputation… Source: “Reputation: Risk of Risks” Economist Intelligence Unit 2005 Survey …because nearly 97% of them understand the linkage between reputation and financial performance. Source: “Return on Reputation” Corporate Reputation Watch 2006, Hill & Knowlton
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And it starts inside Building reputation begins inside with engaged employees because they… Embody the organizational values that reputation is built on Fulfill the company expectations every day Shape the company’s reputation, for better or worse
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Reputation represents who a company is The summation of the people who work for it every day Their understanding of customer expectations Their commitment to fulfilling those expectations – everyday FedEx’s on-time delivery McDonald’s dependable flavors Nordstroms’ consistent customer service and support Apple’s innovation
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How do you build reputation in today’s complex business environment? The Age of Transparency Customers, employees, shareholders, investor community are privy to higher levels of product information and company knowledge A New Corporate Ecosystem The lines between stakeholders are blurred; all are integral parts of one organization Growing Sense of Distrust Recent events have elevated concern about corporate governance A New Balance of Power Balance is shifting away from management to employees, suppliers, distributors, customers, business partners and other stakeholders
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The Reputation Challenged
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Continuous global change Truths… Technology will always advance The world will get smaller every day Relationships becoming more important Trust impacting internal and external relationships New business models forcing major changes in employer-employee compact and organization- customer dynamic Leaders must act fast to change
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The impact on business The purpose, premise, rationale and viability of every organization are under attack because of an environment that is increasingly: Global Complex Chaotic“Loud” Commoditized
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The impact on constituents There’s a breakdown in relationships and trust: Organizations v. employees Organizations v. communities Organizations v. stakeholders Inside: Paralysis – employee confusion about their purpose and role Outside: Loss of credibility – reputation plummets
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The impact on employees Only 25% of employees understand personal accountability 84% don’t believe information flows freely in their companies, depriving them of critical, job-related info Majority of employees of large companies believe their size makes them less nimble Wide gap between senior executive and employee perceptions on the functionality and health of their organization Study: A Global Check-Up Diagnosing the Health of Today’s Organizations Booz/Allen/Hamilton (2005)
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2004 Employee Engagement Index Gallup Management Journal The impact on employees 29% of employees are actively engaged in their jobs 54% are not engaged, distracted 17% are actively disengaged
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Employees are working with the “volume off” Noise – people are inundated with so much information – most of it irrelevant and conflicting – that it overwhelms and confuses them Creates cynicism instead of enthusiasm, like watching a sports event with the volume turned off Employees determine truth and reality by watching behavior -- they are watching but choosing not to listen…
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Outside the company If people do not trust your company they will… Refuse to buy your products or services (84%) Refuse to invest in your company (74%) Refuse to do business with you (75%) Ignore your attempts to communicate with them (54%) Edelman’s 2006 Trust Barometer
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People gravitate to institutions that are… …such as: Apple, Citigroup, Goldman-Sachs, Coca-Cola, JP Morgan Chase, Intel, Nokia, Motorola, GE, Duke Power Solid Stable Consistent Trustworthy Credible Secure
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What defines them… Organizational Trust: leadership does what it says Organizational Consistency: organizational performance/service meets or exceeds standards Organizational Accessibility: is available to internal and external stakeholders – is transparent Organizational Responsiveness: organization senses and responds to internal and external issues, inquiries, etc. Organizational Commitment: organization meets/exceeds stakeholder wants/needs Organizational Affinity: organization gives stakeholders a reason to care about and identify with the organization’s mission
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Case in point Apple Computer — a new product dynamo Lives up to its reputation Known as iconoclastic risk-taker Stood PC industry on its head with Macintosh Constantly breaking new ground iMac, eMac, Mac OS X, reinvented iMac (multiple times) Revolution: iPod and iTunes Music Store Reinvented Apple and the music industry Changes the game in other industries Drew out new competitors Everyone else is playing catch-up — Sony, Dell, Microsoft, Time- Warner, Yahoo, et al.
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Case in point CEO Steve Jobs’ vision is key Invites people along for the ride with cutting-edge products that define and enhance their “digital lifestyle” Put Apple at the forefront of new lifestyle trend Apple’s reputation is built on its unique ability to communicate that vision effectively to its many constituencies Customers, investors, employees, media, etc.
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Traditional Approach (Disciplined Process) Progressive Approach (Organizational Priority) PurposeMessaging; Convey informationBuild/strengthen relationships Role Produce/distribute info on initiatives, programs, industry awards/recognition Provide context, interpretation, relevancy PerspectiveReactiveAnticipative, creative Integration w/Strategy Little, sporadicExtensive, well-planned ApproachPushHolistic SkillsJournalistic Human behavior: Sense what people need to know, feel, do Information Flow Top-downTwo-way, lateral Measures“Clips/clicks/hits”Business success From a communication perspective, managing reputation in today’s business environment requires a different approach
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What effective communication can accomplish It can is provide a path for people outside the company to rediscover a company’s positive aspects… It can teach and lead employees to what’s important regarding reputation… …what to do, to stop doing, to think and talk about
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Key strategy: Discover vs. Sell (Promoting vs. Doing) If the organization’s goals are understood, then communications can help stakeholders to experience the changes needed and the benefits of initiatives Communications can provide context and relevance, helping people to “connect the dots” Discovery carries far more credibility than something that has been spoon-fed (“sold”)
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Discover vs. Sell Asks the right questions Drives business strategy Establishes the right mindset Influences desirable behavior Unleashes competitive advantage Shapes the organizational challenge Builds relationships
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Maintaining Reputation In a Time of Global Change Key takeaways… Companies need to acknowledge there is a gap between how they perceive their own reputations and what its stakeholders believe and experience. Companies must take an “outside in” approach to reputation management. Communication can strengthen relationships with internal and external stakeholders. Effectiveness must be measured in communication “outcomes” rather than communication “outputs.”
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Maintaining Reputation In a Time of Global Change …in a world of constant change and constant information, you can't control reputation globally. What can be managed: management protocols and decision making issues management and crisis management open, clear communications internally employee engagement and involvement
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“The way to gain a good reputation is to endeavor to be what you desire to appear.” — Socrates
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