Elliot S. Schreiber, Ph.D. communications, reputation & brand management Reputation & Brand Management: The Role of Corporate Communications in Building and Retaining Value Public Relations Leadership Forum Atlanta, Georgia January 26, 2006 Elliot S. Schreiber, Ph.D. [email protected] The information and slides in this presentation are copyrighted materials and should not be copied, duplicated or used without the expressed written consent of the author or without appropriate reference. Elliot
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Reputation & Brand Management: The Role of Corporate
Communications in Building and Retaining Value
Public Relations Leadership ForumAtlanta, GeorgiaJanuary 26, 2006
Elliot S. Schreiber, Ph.D.
The information and slides in this presentation are copyrighted materials and should not be copied, duplicated or used without the expressed written consent of the author or without appropriate reference.
Elliot Schreiber 2004©
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Situation
• There has been a steady erosion in corporate credibility and trust;
• All companies have been impacted by corporate scandals, whether or not they have done anything wrong;
• Trust is the underlying “currency” in the market economy;
• Without trust, investors stay on the sideline, customers do not buy, employees don’t join, etc.;
• Companies will not regain trust through compliance and governance alone.
Elliot S. Schreiber©
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Key Points
• Companies with good reputations have greater financial success, they attract and keep the best talent, the attract and keep better customers, and their cost of capital is less;
• Good reputation gives companies greater “resiliency” to weather “storms” of negative publicity;
• Companies cannot succeed long-term by focusing only on their financial success—they must balance the needs and interests of a variety of stakeholders;
• Reputation management should be a strategic process that guides the corporation—an “umbrella” strategy unifying activities of the corporation and its business units;
• Reputation management goes to the heart of the debate about the theory of the firm—whether it is a purely economic organization, or if it is a social, economic and political organization.
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tApproaches to Reputation &
Brand Management
• Marketing/Communications Approach: focuses on identity and image and how company represents itself to external stakeholders. Focuses on identity, “image” and messages;
• Holistic Approach: focuses on a wide list of internal and external stakeholders and emphases the importance of coordinated strategy to manage reputation.
Elliot Schreiber 2004©
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Brand & Reputation Defined
• For organizations, both Brand and Reputation can be defined similarly:
the perception by a given stakeholder that a product, service or organization
possesses certain attributes;
• A good reputation occurs when the organization’s attributes (its value proposition) coincide with the needs and interests of key stakeholders better than the value propositions available from competitive offerings.
Elliot S. Schreiber 2004©
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Conceptual Model of Reputation©
Company Attributes
Stakeholder Values
X Experience
Elliot S. Schreiber 2004©
Reputation =
Time
Where: Company Attributes = Organization’s value proposition (attributes) to
stakeholders Stakeholder Values = The importance of the company’s attributes to
stakeholders Experience = How stakeholders perceive they have been treated by the organization and whether its Promise is valid
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Determinants of Reputation
Source: Fombrun & Van Riel, 2004
Reputation
SocialResponsibility Familiarity/
Favorability
Products & Services
Vision &Leadership
FinancialPerformance
WorkplaceEnvironment
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Reputation is a Differentiator of Value
• Employees – Attracts and keeps talent– Builds pride – Makes jobs more
attractive and motivates employees
• Customers– Attracts new customers– Encourages repeat
purchases– Builds market share– Opens new market
opportunities• Investors
– Lowers cost of capital– Attracts new investments
• Media– Generates more positive
coverage• Government
– Enhances support– Minimizes chance of
enhanced scrutiny• Communities
– Builds support– Minimizes concerns
Elliot Schreiber 2004©
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Factors that Affect Reputation
• Visibility• Honesty• Keeping Promises• Transparency• Clarity• Good communications• Consistency• Experience• Expectations
• Continuity of words and actions (“Walking the talk”)
• Good or bad activities of competitors
• Political or business climate
• Public or social issues
• “Crusades” by stakeholder groups
Elliot Schreiber 2004©
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Reputation Builds Financial Success
Reputation Rating Low 60.1 High 80.2
1 Year Measures
Cost of Goods Sold 60.8 49.0Growth in Employment 2.8% 6.9%Market to Book Value 0.81 1.1Net Margin 4.3 8.0Return on Assets 4.3% 8.4%Beta 1.07 1.11
5 Year Averages
Cash Flow to Sales 12.8 18.1Price-Earnings Ratio 21.7 32.5Return on Equity 16.8 38.4Equity as % of Total Assets 35.3 44.9Long-term Debt to Capital 29.9 24.8Quick Ratio 0.82 1.01EPS Growth 7.3 16.5Sales Per Employee $2.46M $4.55M
Source: Fombrun & Van Riel, 2004, p 78
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Financial Results
Employee Satisfaction Customer Satisfaction r =.80
r =.55
Stock Price
r = .45
Organizations included: Nortel, Ford, IBM, Xerox, 3M, Carlson, H-P, etc.
Employee & Customer Satisfaction are strongly correlated and together drive stock price,
BUT, stock price does not necessarilydrive employee & customer satisfaction
Employee & Customer Satisfaction are strongly correlated and together drive stock price,
BUT, stock price does not necessarilydrive employee & customer satisfaction
Elliot S. Schreiber©Source: Competitive Advantage through Customer Satisfaction & Excellence (CATCSE)
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Importance of Values
• A 2005 study by the Aspen Institute and Booz Allen Hamilton of 365 international companies founds values linked to success in reputation & relationships:
Source: Strategy + Business, June 2005
Ethical behavior Concern for Employees Honesty/Openness Adaptability
98%
88% 88%
68%85%
47%42%
9%
VALUES
Financial leadersOthers
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tWhy Reputation Needs to be a Corporate
Process
ReputationConsistent, Trustworthy Behaviors
Consistent Communications
Employee Commitment
Policies & Practices
Business Objectives
Values©Elliot Schreiber 2006
Intern
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Resource Allocation
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tThree Key Reputation Goals for All
Companies
1. Be disproportionately valued (financially, as a provider of goods and services, etc.) as a company in general and specifically against your company’s competitive set;
2. Win the talent war by establishing your company as the company with an engaged, committed and proud group of employees at all levels whose value to society is recognized by others;
3. Be recognized as a “winner” and leader within the community.
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Primary Reputation Drivers
For Most Companies:• Quality Products & Services (including customer
service)• Quality of Organization as a place to work• Perception of the CEO and Leadership• Financial Performance
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tIntangible Assets Increasingly Drive
Reputation
• From a strategy perspective, an asset can be defined as anything an organization possesses, or is perceived to possess, and which can be leveraged to enhance its value and success;
• Ernst & Young (2003) found that 82% of market value of S&P 500 was comprised of perception of value of intangible assets, with 15% from tangible assets;
• In 1982, intangibles comprised only 35% of the market value;
• Intangible assets are “a claim to future benefits that do not have a physical or financial component” (Lev 2001).
Elliot Schreiber 2004©
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tSources of Organizational Value—
Types of Assets
Value
PhysicalCapital
FinancialCapital
IntellectualCapital
ReputationCapital
UniqueKnowledge
UniqueSkills
BrandEquity
StakeholderRelationships
Plants &Equipment
Net Liquid Assets
Elliot S. Schreiber ©
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Normalized Earnings
Subtract: Return on Physical Assets
Subtract: Return on Financial Assets
Capitalize: Intangible Assets
Equal: Intangibles-Driven Earnings
Past Earnings + Future Earnings
Source: Feng Gu and Baruch Lev, “Intangible Assets: Measurement, Drivers, Usefulness”, April 2001
Calculating Intangible Assets
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Fea
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Complexity of Information in DecisionLow High
High
Marketing & Advertising is NotAlways the Way to Build Reputation
6
Driver: Personal need & desireBrand Emphasis: ProductDemand: Short-term, basic needDemand Created by: AdvertisingValue of Corporate Reputation: LOWExamples: Coke, Pepsi,
M&Ms, Alka-Seltzer
Driver: Social AcceptanceBrand Emphasis: ProductDemand: Short to long-term Demand Created by: Advertising & product-in-use by endorsers Value of Corporate Reputation: LOW to MODERATE Examples: Air Jordan, Chanel No. 5 Martha Stewart products
Driver: Superior PerformanceBrand Emphasis: Ingredient BrandingDemand: Moderate to Long-termDemand Created by: Integrated Communications focused on technical differentiationImportance of Corporate Reputation:HIGHExamples: Intel’s Pentium Chip, Scotch Tape by 3M, pharmaceutical ingredients
Driver: Personal or Family SecurityBrand Emphasis: MasterbrandDemand: Long-termDemand Created by: sales and Integrated communications to create referralsValue of Corporate Reputation:
VERY HIGHExamples: GE, IBM, Bank of America
Elliot S. Schreiber ©
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Creating an “Umbrella” Strategy
Corporate Reputation Goal
Strategy & Vision
Objective 2Business Units
various business & functional activitiesaimed at reputation
Values
Stakeholders
Primary
Secondary &Intermediary
Value
©Elliot Schreiber 2006
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tOthers Need to Change to Make
Reputation Management a Success
• Strategic Planning needs to focus on leading and integrating plans of all units and not just providing strategy “roll ups”
• Human Resources needs to move from benefits & compensation to employee motivation and “work brand” leaders
• Finance needs to fully recognize value of intangible assets
• Marketing needs to more fully understand how reputation is built and not rely on advertising
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Make Reputation Management a Success
• Focus on outcomes, not outputs—stop focusing on the things that you do and focus instead on how to move the “needle” in the right direction;
• Lead the analysis of the attributes of reputation, both inside-out and outside-in;
• Focus on strategy, not on implementation (message development, media relations, etc.);
• Recognize importance of stakeholder relationships to build reputation;
• Continually monitor and interpret the internal and external environment and help keep the organization’s attributes current;
• Understand and advocate for the value proposition desired by key stakeholders;
• Be the catalyst for an “umbrella” strategy that integrates all of the activities aimed at key stakeholders;
• Be the organizational catalyst and change agent, when needed.
Elliot S. Schreiber©
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