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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
“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
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
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
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
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
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
The Reputation Challenged
The Reputation Challenged
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 organizationcustomer dynamic
Leaders must act fast to change
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
Commoditized
“Loud”
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
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)
The impact on employees



29% of employees are
actively engaged in
their jobs
54% are not engaged,
distracted
17% are actively
disengaged
2004 Employee Engagement Index
Gallup Management Journal
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…
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
People gravitate to institutions
that are…
Solid
Consistent
Stable
Credible
Trustworthy
Secure
…such as: Apple, Citigroup, Goldman-Sachs, Coca-Cola,
JP Morgan Chase, Intel, Nokia, Motorola, GE, Duke Power
What defines them…


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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
Case in point
Apple Computer — a new product dynamo
Lives up to its reputation

Known as iconoclastic risk-taker


Constantly breaking new ground


iMac, eMac, Mac OS X, reinvented iMac (multiple times)
Revolution: iPod and iTunes Music Store


Stood PC industry on its head with Macintosh
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, TimeWarner, Yahoo, et al.
Case in point

CEO Steve Jobs’ vision is key


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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.
From a communication perspective, managing
reputation in today’s business environment
requires a different approach
Traditional Approach
Progressive Approach
(Disciplined Process)
(Organizational Priority)
Messaging; Convey information
Build/strengthen relationships
Produce/distribute info on
initiatives, programs, industry
awards/recognition
Provide context, interpretation, relevancy
Perspective
Reactive
Anticipative, creative
Integration
w/Strategy
Little, sporadic
Extensive, well-planned
Approach
Push
Holistic
Journalistic
Human behavior: Sense what people
need to know, feel, do
Top-down
Two-way, lateral
“Clips/clicks/hits”
Business success
Purpose
Role
Skills
Information
Flow
Measures
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
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”)
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
Maintaining Reputation
In a Time of Global Change
Key takeaways…
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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.”
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
“The way to gain a good reputation is to
endeavor to be what you desire to appear.”
— Socrates