reputation: the future of corporate communication

Paul Holmes, a journalist and editor of the prestigious The Holmes Report has never worked in the communication sector or PR agencies, but is very familiar with this industry: he has been writing about the industry for more than 20 years, he saw it growing, transforming and superseding advertising in the task of building and defending brands – in the way advocated by the expert Al Ries–.

However, the radical change in the digital environment and the society brought about the need to understand its impact on brands and organisations, which puts the communications industry in a vulnerable position, forcing it to face the new challenge and turn it into an opportunity to survive. Otherwise, other important actors in companies, such as marketing, HR and advertising professionals in large U.S. companies,will be promoted to the position of Communication Directors. This was described by Holmes during a conference held by the Association of Communication Directors in Madrid.

The era of transparencyDaniel Goleman coined this term to refer to the current moment, when the need for open and honest communication without borders is required by the society and different stakeholders, both in the business and political environments (a good proof of this trend is the recent phenomenon of Wikileaks).

A company with glass walls will soon become a reality, because according to Holmes, everything that is said, done and thought by an organisation is subject to close public scrutiny like never before. Managers responsible for Corporate Communication and Public Relations of companies have to be aware that any individual, the mass media or an NGO can at any moment take interest in the activities of the company and that in the globalised world any action may have unexpected negative repercussions for the reputation of a brand.

In the past, the fi nancial press only reported about the changes in the market value of listed companies or employee actions against the employers due to a labour confl ict. Nowadays, more attention is paid to the environmental damage, treatment of the employees, the type of leaders in the management committees, to the reports like, for example, an advertising campaign carried out by this or that brand that was misleading and/or insensitive to the feelings of social minorities.

The brand is not only what you say, but also what others say about youThe idea that important information about a company is provided by Communication Directors, PR or advertising agencies stayed in the World 1.0, where the digital impact of communities,

Understand the new circumstances, adapt to them and win: communication and public relations are now at a turning point, and if they are unable to understand the new rules of the game and adjust to them, they may lose their leading position.

Strategy DocumentsI18/2012

Reputation: the Future of Corporate Communication

Communication

Insights

The document was prepared by Corporate Excellence and contains references to the statements made by Paul Holmes (journalist and expert on the sectors of communication and public relations, author of The Holmes Report) during the conference organised by the Association of Communication Directors in Madrid, on February 21, 2012.

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social networks and interconnectivity of different stakeholders was not yet present.

The number of stakeholders has increased, furnishing them with greater control – in terms of opinion – over the companies. They share their experiences and views of companies – and slogans are not sufficient any more – making their reactions unperceivable, quick and hard to monitor. In this sense, the role of the employees comes to the fore, as they can evaluate their own experience with an organisation and compare their opinion with the reputation gained by the brand among external stakeholders: after all, they are responsible for fulfilling the promise made by the brand, because the behaviour and attitude of the employees has more impact on the consumers’ opinion than any advertising campaign.

The new social media are accelerating this trend, at the same time becoming a source of important competitive advantage for the communication professionals in the sense that it enables them to expand their responsibilities, traditionally focused on relations and managing the dialogue. But this may be possible only if they manage to generate positive and attractive content with a social impact, like the one achieved in the past with the help of advertising.

Until recently, it was believed that the brand was the only message made the by a company. And in such context it’s no wonder that advertising played such an important role. But everything has changed: now, the brand is not only what you say (intended projection of the identity or creation of an image), it’s also what others say about you (unintended projection of the identity or perception of the reputation), especially if the company does not

control the situation, and this is exactly what’s happening in the World 2.0.

Consumers, employees and clients speak openly about brands because no one can control what they say. This means exactly the loss of control by the brands. The rules and principles of the brand – stakeholder interaction are now different: they are about dialogue, integrity, transparency, authenticity, honesty, commitment…

“A company with glass walls will soon become a reality, because everything that is said, done and thought by an organisation is subject to close public scrutiny like never before”.

In order to achieve engagement and involvement of stakeholders, it’s necessary to establish a more direct, clear and transparent relationship with them. It is still important what brands say, but their actions are much more important for defending and determining the reputation. And stakeholders base their opinion and awareness on the perceived reputation.

Reputation Manager and Cutting Across the DivisionsThe implications of these changes for the companies go far beyond communication and directly affect the financial, legal, labour and operational

Graph 1: Valid Metrics Framework Template

Source: Paul Holmes, Dircom, 2012.

Key Area of Communication Awareness Knowledge /

UnderstandingInterest /

ConsiderationSupport /

Preference Action

Public Relations Activity

Intermediary Effect

Target Audience Effect

Organization/Business results

Com

mun

icat

ions

Pha

ses

Communications/Marketing Stages

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activities. That’s why some American companies start establishing a new role that reports directly to the CEO and is responsible for relations with all stakeholders and whose task is to tell the CEO what he or she sometimes doesn´t want to hear.

This new function expands the role of the Chief Communication Officer in the sense that it no longer covers only what the company says, but also what it does, its strategic decisions taken by the top management which affect the experience of different stakeholders at different points of contact that they have with the brand. That’s why persons in this role in addition to being professionals in communication, should have good knowledge of the business in general.

Below are seven key responsibilities of this post:

1. Develop synergies between different departments, overcoming traditional divisional structure of the organisations.

2. Ascertain that the values of the Brand are shared and implemented by them in their daily communications and interactions with the stakeholders.

3. Transmit these values securely, naturally and credibly together with the organisation and outside its scope.

4. Contribute to understanding the market, the society and the expectations of stakeholders in order to achieve their favourable judgement and support.

5. Align different messages and policies of the company in order to achieve full coherence.

6. Achieve alignment between the identity and corporate culture of the brand, the business strategy and the reputation of the company.

7. Facilitate permanent improvement and transformation of the organisation by means

of reputation management in order to attain corporate excellence.

In order to ensure the implementation and to demonstrate the impact of these activities, it is essential for the world of Public Relations to improve the mechanisms of measuring the effectiveness. So far, only insignificant amounts of money were invested in the research on this matter and development of the models apart from the traditional evaluation of press clippings and monitoring comments on the Internet.

“The brand is not only what you say (intended projection of the identity), it’s also what others say about you (perceived reputation is the true identity)”Holmes advocates a unified model of measurements focused on the business of the company - a standard similar to the one used by the Association for the Measurement and Evaluation of Communication (AMEC) – which would relate the impact of communication to business results. Holmes also supports the concept of the Net Promoter Score (NPS), suggested a few years ago by the American expert Fred Riechheld. This index measures recommendations of the brand made by persons in one´s immediate circle (friends, relatives, colleagues, etc.) and correlation of this index with the results of the enterprise.

Conclusion: the golden age of communication and public relationsThe next ten years may become the golden age for corporate communication. Public Relations are now

10

% Promoters % Detractors

8

9

7

6

4

2

5

3

1

0

% Net Promoters– =

9-10 Promoters

7-8 Passively Satisfied

0-6 Detractors

On a scale of 0-10, How Willing Would You be to Recommend [GE Money] to a Colleague?

Graph 2: Leveraging Net Promoter Score

Source: Paul Holmes, Dircom, 2012.

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at a turning point, moving from the primitive role of a transmission channel for announcements made by companies to a channel of communication between the stakeholders and the brands that enables the company to monitor their concerns, suggestions, expectations and desires.

Clients, employees, shareholders, consumers and users are now the new owners of the brands. The most important issue now is their reputation and the opinion that these groups have of the brands.

Creation of value for the owners of companies has to be compatible with creating greater value for the stakeholders and the rest of the society.

The era of business and life transparency and ethics suggests a radical change in the interaction between organisations and their stakeholders, where sincerity, honesty, integrity, credibility and engagement are key in the relationship between the brands, their environment and the rest of the society.

©2012, Corporate Excellence - Centre for Reputation Leadership Business foundation created by large companies to professionalize the management of intangible assets and contribute to the development of strong brands, with good reputation and able to compete in the global market. Its mission is to be the driver which leads and consolidates the professional management of reputation as a strategic resource that guides and creates value for companies throughout the world.

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