The 2014 Enterprise Value Study - FTI Consulting/media/Files/us... · Leadership positioning Employee engagement Change management OPTIMAL VALUATION Capital markets counsel ... communications

The 2014 Enterprise Value Study: How Confidence Drives Stakeholder Behaviors

October 2014

2

Enhancing and Protecting Enterprise Value

MARKET & REPUTATIONAL

LEADERSHIP

Organizational positioning

Marketing communications

Thought leadership

Crisis preparedness and response

ENGAGED LEADERSHIP,

COMMITTED WORKFORCE

Leadership positioning

Employee engagement

Change management

OPTIMAL VALUATION

Capital markets counsel

Corporate governance

M&A advisory

Risk mitigation

ENHANCED LICENSE

TO OPERATE

Public affairs

Corporate social responsibility

Issues management

RESEARCH-BASED

INSIGHTS

Landscape analysis

Media/dialogue analysis

Reputational benchmarking

Message testing

Engaged leadership, Committed Workforce

Market & Reputational Leadership

Enhanced License to Operate

Optimal Valuation

3

The Basis of This Research

As a global business advisory firm, FTI Consulting helps companies drive business

outcomes that enhance and protect their enterprise value.

• Our Strategic Communications business works with companies to help them engage and

communicate with their stakeholders to support business outcomes…

• They want employees to be passionate about working for the company

• They want customers to buy products and services

• They want investors to invest in the company

• And they want citizens to support the company operating in their communities

This research project was conceived and designed to better understand how

communications and engagement can drive these critical business outcomes.

3

4

Audiences

Investors N = 107

Globally located institutional

portfolio managers and analysts

B2B Customers

N = 312

Decision makers within

companies who have

purchase authority and

responsibility

Employees N = 1,815

Full- or part-time private

sector employees of

companies with 100+

workers

Public Influencers N = 2,099

Top 10% of Americans involved in their

communities, engaged and vocal on public

affairs issues

What drives employee behaviors?

What drives decisions to buy from a supplier?

What drives support for a company’s public agenda?

What drives decisions to invest?

5

Summary Findings & Implications

To drive stakeholder

behaviors, it is more

impactful to drive

confidence than

reputation

A good reputation is

necessary, but not

sufficient, to drive desired

stakeholder behaviors.

To achieve confidence,

companies have

to satisfy certain

attributes

• Strong Leadership

• Good Employer

• Strategic Execution

By, increasing

confidence, companies

can turn stakeholders

into “advocates” for

companies

Confidence helps segment

stakeholders into:

• Advocates,

• the Moveable Middle,

and

• Detractors.

To achieve those

attributes, companies

should provide insight

into their vision and

behaviors

• The company’s 5-10

year vision

• How it will execute its

vision

• The company’s plans

for serving customers

• How the company treats

employees

4 3 2 1

To drive stakeholder behaviors, it is more impactful to drive confidence than reputation

7

7

For companies to attract investment and drive optimal valuation, it is

more important for them to build confidence than to build reputation

Investment Criteria Importance to Investment Decision

Company's record of financial performance

Confidence in the company

Whether industry conditions are favorable

Trust in leadership to make future decisions

The overall reputation of the company

How much you agree with the company's past decisions

The reputation of the company as an employer

74%

71%

44%

31%

72%

In an additional question about what drives optimal valuation, investors ranked confidence behind

only financial performance and industry conditions – 13x that of reputation. 13x

2.4x

“When thinking about a company as a potential investment there are many important factors to consider. Below is a list of

seven factors that are often said to be important. Please rank the top three (in order) based on how important they are to you.”

6%

3%

8

Likewise, across other stakeholders,

confidence is a higher-order behavior than reputation

Employees Public

On average, stakeholder confidence is 27% more difficult to achieve than is a good reputation.

Customers

Top two box scores on behaviors asked about.

Most Difficult to Achieve

Support Legislation the Co. Supports 45%

Recognized & Rewarded for Work 47%

Would invest in the Co. 48%

Would Recommend as Employer 51%

Informed about Co. Progress 54%

Has Confidence in Co. 55%

Would Continue Working at Co. 59%

Inspired to Perform 61%

Feels Work Makes a Difference 61%

Co. has Good Reputation 66%

Least Difficult to Achieve



Recommend Goods & Services 46%

Increase Business Relationship 46%





Co. has Important Viewpoint

on Issues 21%

Would Defend Co.’s Reputation 22%


Support Co. Operating in Community 33%




9

Reputation is three times more foundational to

Confidence than Confidence is to Reputation. 3x

Confident,

but poor reputation…

Good reputation,

but not confident…

3x

In nearly 1-in-5 cases, it is possible to have a good reputation without

having confidence. But, it is almost impossible to create confidence

without having a good reputation

5% 17%

10

Once achieved, stakeholder confidence affords companies

a better probability of achieving the desired behaviors

Stakeholder Behaviors

Recommend Goods & Services to Others

Increase Business Relationship with the Company

Would Recommend as Employer

Support the Company Operating in the Community

Would Invest in the Company

Would Continue Working at the Company

Would Defend the Company’s Reputation

The Company Has an Important Viewpoint on Issues

Informed About Company Progress

Support Legislation the Company Supports

Recognized & Rewarded for the Work I Do

Inspired to Perform At My Best

The Work I Do Makes A Difference

121%

84%

48%

38%

36%

33%

27%

17%

6%

4%

0%

7%

13%

All

*Advantage is calculated as the ratio of the probability of achieving the behavior if the stakeholder is confident in the

Company to probability of achieving the behavior if the stakeholder rated the Company as having a good reputation.

Advantage of a Good

Reputation

Advantage of Stakeholder

Confidence

On average, companies have a 30% better chance of achieving the desired behaviors if

stakeholders are confident than if stakeholders say the company has a good reputation.

To achieve confidence, companies have to satisfy certain attributes

12

There is a progression of attributes that lead to both a good

reputation and stakeholder confidence

*All possible combinations of attributes were analyzed based on the average ratio of the probability of achieving the attribute given the paired attribute is not

achieved to the probability of not achieving the attribute given the paired attribute is achieved. Subsequently, the attributes were tiered based on descending

order of aforementioned ratio.

**% change in difficulty is calculated based on the average probability of achieving the attributes at the specified level in the hierarchy versus the average

probability of achieving the attributes at the preceding level in the hierarch.

% of Companies

that Achieve Level

43%

46%

52%

54%

57%

59%

Agreement with Co.’s Past Decisions

Co. Cares about Communities

where it Operates

Achievement of Stakeholder Confidence

Has Strong Leadership

Has a Reputation as a Good Employer

Industry Conditions are Favorable

Has Innovative Products/Services

Has a Good Reputation

Leader in Industry Has Good Financial

Performance Provides Value to

Customers

Focused on Delivering for

Customers

Executes its Strategy Well

13

Certain attributes are both necessary and significantly

impactful to achieving greater confidence

Average = .954

Ave

rage

= 8

.39

x

Pinnacle Attributes

Need to Haves

Price of

Entry

Nice to Haves

* Rate of increase in confidence via each attribute was calculated based on the slope of the least-squares regression line with confidence as the dependent variable

and the specified attribute as the independent variable.

** Increase in odds of confidence if attribute achieved is the ratio of the odds of confidence given the specified attribute was satisfied versus the odds of confidence

given the specified attribute was not satisfied.

Agree with Company’s

Past Decisions Cares About

Communities Where it

Operates

Good Leadership

Good Employer

Executes Strategy

Favorable Industry

Conditions

Innovative

Good Financial

Performance

Customer Focus Customer Value

Industry Leader

0.90

0.92

0.94

0.96

0.98

1.00

1.02

1.04

6.0x 6.5x 7.0x 7.5x 8.0x 8.5x 9.0x 9.5x 10.0x 10.5x

Ra

te o

f In

cre

ase

in

Co

nfi

de

nc

e v

ia A

ttri

bu

te

Increase in Odds of Confidence if Attribute Achieved

14

Mo

st

Imp

ac

t

“Nice to Haves”

Cares About Communities

Favorable Industry Conditions

“Pinnacle Attributes”

Agree With Company’s Past Decisions

Strong Leadership

Good Employer

Executes Strategy

Le

ast

Imp

ac

t

“Cost of Entry”

Innovative

Good Financial Performance

Industry Leader

“Need to Haves”

Customer Focus

Customer Value

Least Essential Most Essential

Certain attributes are both necessary and significantly

impactful to achieving greater confidence

15

The payoff from having achieved those

attributes significantly improves confidence

Given achievement of attributes, a company can significantly increase its probability of achieving

confidence.

46%

71%

45%

72%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Pro

ba

bil

ity

Avg. Probability of Confidence if

Attributes Achieved Avg. Probability of

Behaviors if Confident

Probability of

Confidence

Avg. Probability of

Achieving Key

Stakeholder

Behaviors

Δ 56%

Δ 60%

* Probability of confidence is calculated as the average probability of achieving confidence across all stakeholders and attribute levels; Avg. probability of

confidence if attributes achieved is the average of the conditional probabilities of confidence given the specified attribute is achieved, across all attributes.

** Avg. probability of achieving stakeholder behaviors is the average probability of achievement of each behavior across all stakeholders and attributes;

Avg. probability of behaviors if confident is the average of the conditional probabilities of each behavior given confidence is achieved, across all behaviors.

To build confidence, companies should

provide insight into their vision and behaviors

17

What areas do stakeholders say will

help build confidence?

Public Influencers

B2B Customers

Communication 7% 9% Financial &

company

execution

29% Financial &

company

execution

25% Quality

product/

services

Quality

product/

services 27% 9%

Social

responsibility

Investors

26% Financial &

company

execution

Honest &

forthcoming w/

information

35%

35% Strategic Plan/

Vision

Employees

Financial

compensation

& benefits

10%

25% Financial &

company

execution

13% Quality

product/

services

Open-ended responses

18

Channels to increase confidence: Business Media Coverage,

Face to Face & Financial Reports

Public Influencers

B2B Customers

Investors Employees

Open-ended responses

56% 70%

55% 34%

35% 34%

33% 29%

28% 20%

30%

90%

84%

72%

62%

60%

Analyst Reports

Annual Reports

Industry/ Trade

General Business

Media

Meeting w/ Company

Leaders

Meeting w/ Company

Employees

Meeting w/

Company Leaders

Meeting With

Account Reps

Analyst Reports

Industry/ Trade

General

business media

39%

39%

32%

31%

26%

Employee

newsletters

Department

Manager

Meeting w/

Company Leaders

General

business media

Employee

Intranet

General

business media

Annual Reports

Info shared by

friends &

family

Social media/

websites

Industry/ Trade

Increasing confidence can turn stakeholders

into “advocates” for companies

20

Breakdown of stakeholders

Moveable Middle

65%

Detractors

17%

Advocates

17%

However, progression to advocacy requires achievement of confidence and behaviors.

* Advocates, Moveable Middle, and Detractors were determined based on each participant’s average score across all relevant behaviors, including confidence; the

average scores were ranked by percentile with the Moveable Middle occupying the middle 80%, and the Detractors and Advocates occupying the lowest and highest

10%, respectively.

21

Levels of knowledge and interactivity vary by segment

Moveable Middle

65%

Detractors

17%

Advocates

17%

Advocates are significantly more confident, knowledgeable, and interactive than other segments.

Confident 95%

Knowledgeable 81%

Interact weekly 67%

Confident 43%

Knowledgeable 47%

Interact weekly 40%

Confident 6%

Knowledgeable 43%

Interact weekly 30%

* Advocates, Moveable Middle, and Detractors were determined based on each participant’s average score across all relevant behaviors, including confidence; the

average scores were ranked by percentile with the Moveable Middle occupying the middle 80%, and the Detractors and Advocates occupying the lowest and highest

10%, respectively.

22

Four attributes are significantly more important to advocates

than they are detractors

Advocates are as much as 27 times more likely to exhibit certain

behaviors compared to detractors.

Advocates

Detractors

* Probability of each attribute is based on the average probabilities among Advocates and Detractors, respectively. The ratio is the ratio of the probability of the attribute

among Advocates to that of Detractors.

Leadership

10x

Cares

16x

Good Employer

16x

Agree

27x

0x

5x

10x

15x

20x

25x

30x

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Industry

Leader

Fin. Perf. Industry

Cond.

Customer

Focus

Customer

Value

Executes Innovative Leadership Cares Good

Employer

Agree

Ra

tio

of

Ad

voc

ate

s t

o D

etr

ac

tors

Pro

ba

bil

ity

23

Advocates access richer sources of information

Advocates seek multiple types of content…

● The company’s vision for the next 5-10 years (44%)

● How the company plans to execute it strategy (32%)

● The company’s long-term succession planning (32%)

● The company’s plans for products & services (27%)

Advocates access multiple channels…

● Company’s publications on trends (30%)

● Financial analyst reports of the business (28%)

● Meetings with executives / company leaders (23%)

▲ Employee newsletters (21%)

▲ My department manager (19%)

Customer Content

Employee Content

Public Content

Content of All Stakeholder Groups

Detractors seek fewer sources of content…

● How the company treats its employees (54%)

● The company’s plans for serving its customers (40%)

● How the company addresses public issues (37%)

● How the company plans to sustain/ improve operations (33%)

Detractors access fewer and more informal channels…

● General business media coverage of the business (57%)

● Industry-related / trade publications (27%)

■ Information my friends, neighbors, family, co-workers share (19%)

▲ Peers and coworkers (18%)

Other Stakeholder and

Industry Findings

25

55% 61%

51% 56% 57% 57% 55% 54% 56% 56% 54%

CONFIDENCE in the company (top 2 box)

Employees

Employees of small companies have the highest

confidence in their employer. There are only minor

differences by type of work or type of company.

26

54%

56%

49%

50%

46%

47%

42%

62%

57%

61%

62%

64%

61%

59%

67%

62%

71%

72%

74%

76%

71%

67%

59%

72%

66%

78%

74%

Managers

44%

50%

39%

35%

30%

41%

33%

47%

48%

64%

65%

57%

53%

47%

62%

56%

67%

67%

64%

69%

61%

62%

50%

62%

57%

69%

66%

Non-Managers

Degree of CONFIDENCE

Would like to work for the

company over the long-term

Would recommend the

company as an employer

Would invest in

the company

Would support legislation

the company supports

Satisfied with information received about

priorities & progress

Appropriately recognized &

rewarded for the work that I do

I feel the work I do makes

a difference

I am inspired to

perform at my best

26

More frequent interaction with management yields

dramatically more support and “buy-in” from both

managers and rank-and-file employees. Employees

Impressions of Employer by Frequency of

Interaction with Company Leadership

< Once per week

1-2 times per week

3 or more times per week

27

Energy, Chemicals & Materials Companies Engender

the Highest Confidence Among Their Customers

31%

45%

47%

47%

50%

52%

53%

60%

65%

Business Services

Durables

Industrials

Financial Services

Health Care

Technology

Telecom

Consumer Products

Energy, Chemicals & Materials

By industry, the percentage of B2B Customers Who Are Very Confident In

The Companies They Do Business With (% Top 2 Box 6-7)

B2B Customers

28

22%

73%

89%

Confidence 5 Confidence 6 Confidence 7

Likelihood to Increase or Broaden Business with Company

By Level of Confidence (7-point scale)

B2B Customers

Among B2B Customers, their stated likelihood to increase

business with a provider rises dramatically with increased

levels of confidence.

Appendix

30

Methodology: Research Audiences

Public Influencers (“Public”)

N = 2,099

B2B Customers (“Customers”)

N = 312

Institutional Investors (“Investors”)

N = 107

Employees N = 1,815

• Globally located

institutional investors

• Portfolio managers

and analysts

• At least 18 years old

• All races and genders

• High School Graduate

or above

• At least $50K in

household income

• Employed full-time

• Salaried or paid hourly



• High School Graduate or

above

• No household income

requirement

• Employed full-time or

part-time


• Works at company with

at least 100 employees

• Works at a private-sector

company



• Four-year College

Graduate or above

• At least $50K in

household income

• Employed full-time


• Works at any size

company

• Works at a private- or

public-sector company,

or government

31

Methodology: Segment-Specific Stakeholder

Behaviors Tested

B2B Customers

• “Support Legislation the Company Supports” = I would support legislation that this company supports

• “Increase Business Relationship” = This company is one with which my company would increase or broaden our business

relationship with

• “Recommend Goods & Services” = Recommend to co-workers in my company or industry purchase this company’s goods

and services

Employees


• “Informed About Company Progress” = I am satisfied with the information I receive on the company's priorities and progress

• “Recognized & Rewarded for the Work I Do” = I am appropriately recognized and rewarded for the work that I do at this company

• “The Work I Do Makes A Difference” = I feel the work I do makes a difference at this company

• “Inspired to Perform at My Best” = I am inspired to perform at my best at this company

• “Would Continue Working at the Company” = This company is one I would like to continue working for over the long term

• “Would Recommend as Employer” = Recommend to a friend, family member or co-worker that they go to work for this company

• “Would Invest in the Company” = Invest in your company, if given the opportunity

Public Influencers


• “Would Defend This Company’s Reputation” = Defend this company’s reputation to a friend, family member or co-worker

• “Support the Company Operating in the Community” = Support this company operating as a business in my community

• “The Company Has an Important Viewpoint on Issues” = This organization is one I think offers an important viewpoint on public issues

32

Methodology: Stakeholder Attributes Tested

“Stakeholder Confidence” = Overall, to what degree do you have confidence in this company?

“Good Reputation” = The overall reputation of the company is good

“Good Employer” = The company’s reputation as an employer is good

“Agree with Company’s Past Decisions” = I generally agree with the company’s past decisions

“Good Financial Performance” = The company’s record of financial performance is good

“Strong Leadership” = The company has strong leadership and decision makers

“Executes Strategy” = The company executes its strategy well

“Favorable Industry Conditions” = The conditions of the industry the company is in are favorable

“Customer Focus” = The company is focused on delivering for its customers

“Customer Value” = The company provides value to its customers

“Innovative” = The company has innovative products/services/ processes

“Industry Leader” = The company is a leader in its industry

“Cares About Communities Where It Operates” = The company genuinely cares about the communities

where it operates

Contact:

Bob Knott

Senior Managing Director

Strategic Communications – FTI Consulting

+1 202 346 8861

[email protected]

The 2014 Enterprise Value Study - FTI Consulting/media/Files/us... · Leadership positioning Employee engagement Change management OPTIMAL VALUATION Capital markets counsel ... communications

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