Managing Reputation in New Zealand

An investigation into perceptions of reputation and risk management

Neil Green, Managing Partner, Senate CommunicationsGary Lembit, Managing Director (New Zealand), TNS Global

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Well known examples

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Reputation management Internationally

Recognised as a management discipline Multinational high-profile scandals (e.g. Enron) – heightened awareness of reputation

management

Economist Intelligence Unit (2005) research: Reputation now considered a top priority for global leaders Reputation most important corporate asset … but most difficult to protect Many organisations have integrated reputation management plans (not solely risk

management) Many organisations still struggling to quantify risk to reputation Uncertainty over responsibility for owning reputation management within company

Little known about New Zealand situation – until now …

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Study design

Letters were sent to senior managers in a wide range of organisations, including companies listed on the stock exchange, Government organisations, and private companies, introducing the survey in September

An email invitation was sent in October inviting senior managers from over 200 of New Zealand’s largest organisations to participate in a 15 minute online survey.

Fieldwork was conducted between October 2006 and January 2007

54 organisations completed the survey comprising 17 CEOs and 37 Communications Managers or equivalent

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Key findings Summary

Reputation is considered the second biggest risk to any organisation

The things organisations most fear are all reputation issues

Failure to deliver product or service to an expected standard

Exposure of unethical practices

Bad management of a crisis

Reputation considered by only half of managers to be an organisational asset

Fewer than half of all Boards and executive teams consciously attempt to influence their organisation’s reputation

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Key findingsIn more detail

Few organisations conduct formal research with stakeholder groups

Reputation only on a quarter of the organisations’ monthly board agendas – 90% covered it annually; 27% on a quarterly/six monthly basis.

Responsibility a key issue – nearly every respondent claimed it was the CEO.

40% of organisations don’t plan how to handle communication in a crisis

Plans in place:

Crisis management – 61%

Formally discuss corporate management at board level

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Perceptions of reputational riskCEO & Communications Manager

CEOs: Stronger Agreement

Communications Managers: Stronger Agreement

Strong Agreement My organisation is proactive in enhancing and protecting its reputation

There has been an increase over the past 5 years in risks involving an organisation's reputation

Fifty-Fifty Corporate reputation is harder to manage than other forms of risk

Corporate reputation is the primary asset of any organisation

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What are the biggest risks?Scores of 9 or 10 out of 10 where 10 = very high risk

1. Human capital risks2. Reputational risks3. IT network risks4. Regulatory risk5. Political risk

But both groups rated reputational risk second

biggest risk

More CEOs rated regulatory risk 9 or 10

than any other risk

More Communications Managers rated human capital risk 9 or 10 than

any other risk

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So what do they believe most impacts on reputation?Considerable impact %

1. Failure to deliver minimum standards of service and product quality – 69%2. Exposure of unethical practices – 63%3. Poor crisis management – 52%4. Non-compliance with regulations/ legal obligations – 48%5. Category of business within which you operate – 46%

CEOs had “whether the organisation is seen as a NZ one” in their top 5 but

not “poor crisis management”

Communications Managers had “exposure of unethical practices” as

number 1

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Is reputation a primary asset?

54% say corporate reputation is the primary asset of their organisation

Not all think of reputation as their primary asset

Eight of 17 CEOs feel this way

Eighteen of 31 Communications

Managers feel this way

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More than Half Less than Half

Crisis management plan – 61%

Discussion at board meetings – 61%

Form relationships with pressure groups and critics – 57%

Employees trained to identify and manage risk – 52%

Cross-functional team handles threats and crises – 52%

External perceptions rigorously measured – 52%

Standards for environmental, human rights and labour practices set publicly – 41%

Crisis scenarios rehearsed annually – 39%

Managing reputation riskWhat organisations do

Specific programme for corporate social responsibility in place – 36%Nothing – 11%

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Managing reputation riskWhen no planning for risks occurs, why is this so?

Not a priority 4 out of 10

Lack of human resources 2 out of 10

Never needed to 1 out of 10

Lack of budget 1 out of 20

Some other reason 4 out of 10

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What is the Board’s involvement?

Discussion at Board Meetings (61%)

Only 44% believe reputational risk management is well understood in the

boardroom

But 79% agree more should be done to address this primarily through training

and case studiesBut only 51% quarterly or more often

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Measurement of stakeholder group perceptions Influence on reputation

Greatest Influence

1. Government

2. Current Customers

3. Employees

4. Company Investors / Shareholders

5. Potential Customers

6. Regulators

Measure Perceptions at Least Annually

1. Employees – 72%

2. Current Customers – 61%

3. Company Investors / Shareholders – 44%

4. Government – 39%

5. General Public – 33%

6. Media Groups – 28%

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Key findings Our interpretation

Nowhere near enough discussion is taking place

Organisations are actively managing risk – key: integration of plans

All plans should be integrated to focus on the overall reputation of the organisation

Reputation is an organisation’s primary asset

What does this mean in a practical sense?

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“By failing to prepare, you are preparing to fail”

Benjamin Franklin

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Reputation management Solutions

Stakeholders

Stakeholder engagement crucial

Engage, discuss and monitor (regularly)

Integration

Link risk mgmt / operational plans with reputation

Identify reputational drivers

Monitor

Responsibility

CEO

Board

Everybody

Reputation “Guardians”

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Reputation management Next steps

Challenge for organisations to build reputation management into day-to-day practice

Actively look to strengthen knowledge about reputation and risk management – CEOs, directors, board members.

Openly discuss reputation management

Seek advice on harmonising and integrating existing plans into a reputation management process.