Public confidence in business, corporate culture and governance has been slow to recover in the wake of high-profile corporate collapses in Australia and overseas. Cameron Cooper reports.
An Economist Intelligence Unit survey of senior company executives in the US, Europe and the Asia-Pacific region reveals only one in five respondents believes public trust in business is returning. Bosses are even having trouble convincing their own staff that they are trustworthy. A study, Commitment@Work 2003, of 1200 people by Aon, the risk management and human capital consultancy, shows 60 per cent of employees do not trust the leaders of their organisation.
Simon Longstaff, Executive Director of the St James Ethics Centre, says businesses are increasingly trying to do the right thing. But he stresses that brand development and marketing is not an “antidote for bad business practices”.
Longstaff says management must avoid the trap of habitual behaviour and being “wedded” to unthinking practices because “that’s just the way that we do things around here”.
“The challenge for directors from a point of view of corporate governance is to try to break habits and get conscious decision-making founded on a firm and well-established core of values and principles,” Longstaff says.
Boards must question all facets of a business to create sustainable benchmarks.
“So the first job of a board is to make sure that it can actually say what’s good and what’s right and set that in a code of ethics,” Longstaff says. “The second thing they need to do is ensure that they preside over a culture in which that kind of process is possible.”
Tony Sharley is not one to rely on marketing mumbo jumbo. As Manager of Banrock Station – a fast-growing vineyard nestled on the edge of the River Murray about 250km east of Adelaide – Tony Sharley can talk branding and bottom lines but prefers to champion the merits of regulated deficit irrigation and partial root zone drying.
Such technicalities might elude the average wine connoisseur, but Sharley is confident such water-management strategies and a decade-long commitment to restoring fragile wetlands around the vineyard are enhancing the reputation of Banrock’s “Good Earth, Fine Wine” positioning.
Sharley, an environmental scientist, oversees a major wine and ecotourism attraction at Banrock – part of the Hardy Wine Company empire – which has been helping to restore 1375ha of bushland and wetlands with the aid of Landcare Australia and Wetland Care Australia. Up to 100,000 people a year visit Banrock to taste and buy wines and view the wetlands on walking trails. Through its export sales, Banrock is also sponsoring wetland conservation projects around the world. “We’re building a nature-based experience around the wine,” Sharley says.
Seeking best practice
The Banrock eco-marketing approach is a successful example of a strategy to enhance brand value and manage reputation in a business world still reeling from corporate governance scandals involving companies such as HIH, One.Tel, Enron and Arthur Andersen.
Some argue Australian businesses have been slow to meet growing demands for corporate social responsibility. The controversial RepuTex ratings of 100 leading Australian companies show that only 54 receive an overall rating of satisfactory or better when judged on categories such as social impact, workplace practices, environmental impact and corporate governance. Only one company, Westpac, had the top AAA rating. The ratings reaffirm the Federal Government’s recent Mays Report, which says Australian corporations’ level of environmental responsibility lags behind international practice.
David Redhill, Chief Marketing Officer of professional services firm Deloitte, says while many companies are exploring ways to enhance their reputation, perceptions of trust and integrity must be earnt.
“You don’t stand up and beat your chest and say, ‘I’m trustworthy’; it’s like a comedian standing up and saying ‘I’m funny’. It only comes through consistent actions over a period of time,” he says. Redhill advises business not to make trust or integrity “your celebrated cause”.
“If you make that the central plank of your marketing strategy, you’d better be 100 per cent sure that 100 per cent of your people can live up to it 100 per cent of the time,” he says. “That’s obviously not possible.”
A “great sea change” in Australian business means companies are being forced to adhere to more strict corporate governance regulations, Redhill says.
“But on the positive side companies are also seeing that a more transparent way of operating, creating structures that avoid problems before they occur, is a better way of running a business.”
At Banrock, a commitment to a better business and its green credentials extends to key export markets in the UK, Europe, the US and Canada where a cut of sales profits is fed into groups that promote wetland care projects. The approach is resonating overseas, says Sharley, who adds, “you’ve got a food and wine consumer who is becoming very environmentally aware”.
He says the end product of the “cause-marketing” campaign has been additional respect for the Banrock brand that could not have been achieved merely through wine-tasting sessions and rack sales.
Companies are now dealing in an atmosphere where they must show customers that they are worthy of trust, not just tell them, according to Tim Riches, Managing Director of FutureBrand in Melbourne.
“It’s what (companies) are seen to be doing that’s one of the most powerful drivers of how they are perceived,” he says.
For a winning brand strategy, Riches urges companies to align promises with what they deliver.
“This captures the distinction between brand and advertising,” he says. “Whereas advertising and communication is primarily about promise, brand has to contemplate delivery as well.”
This delivery ethos extends to creating a positive corporate culture for employees. What’s more, organisations that invest in their staff are more likely to outperform competitors. Data collected by consultants Hewitt Associates for the Best Employers to Work for in Australia Awards in 2003 reveals that companies with higher levels of employee engagement achieve markedly better financial results than competitors. Winning companies in the study – including Flight Centre, Cisco Systems, SEEK Communications, Diaego Australia and Virgin Blue – achieved average revenue growth of 13 per cent and profit growth of 21 per cent between 2000 and 2002. Big Four professional services firm PricewaterhouseCoopers (PwC) agrees on the need to establish corporate benchmarks following an overhaul of corporate reporting through the new International Financial Reporting Standards, or IFRS, regime.
Over the past five years PwC has developed a framework known as ValueReporting that aids greater precision in accounting standards and focuses on ensuring that market perceptions of a corporate performance are accurate and informed.
ValueReporting provides a structure for internal and external reporting of financial and non-financial information – including factors such as customer relations, networks, brands and employee management – to assess a company’s performance and likely future prospects.
PwC partner Nick Ridehalgh says ValueReporting is a simple framework applicable to organisations of all sizes.
“If you manage those value-driving activities effectively you’ll end up with the strategic financial results that you are trying to achieve,” he says.
Organisations must ensure that values and goals are clearly articulated and consistently applied over time, according to Ridehalgh.
“Having a reputation for being an organisation with such concerns and values is not just good for the community and the environment, it’s also good business sense.”
With the ramping up of regulations, Ridehalgh says organisations are now obliged to be more transparent.
“That’s definitely a positive trend. There is more disclosure of key information and it’s broader now than just financial information.”
At Deloitte, Redhill says the collapse of Arthur Andersen – a 100-year-old plus firm that perished within 12 months of the emergence of damaging management scandals – reveals lessons for all organisations and particularly those with foreign interests or aspirations. He notes Andersen branches around the world were “tarred by the brush” of the “categorical errors” of the firm’s head office in the US.
“The answer is to demand a lot from the brand controllers; insist upon consistency, upon minimal levels of conformity on brand standards, and on issues that might affect the global brand’s reputation.”
All companies must have a crisis plan in the event of a financial or PR crisis, says Redhill, who advises organisations to “fess up” and have a strategy in place to placate the media, stakeholders and fellow employees: “Be very open, no doublespeak, no smokescreens”.
Making a stand
At FutureBrand, Riches says brands don’t have to be loved but must stand for something. Businesses must resolve tension between being predictably trustworthy and innovative.
“You have to get the customer to trust you but within that relationship provide leadership and challenge their preconceptions about what you can be,” he says. “If you let that sit static for too long somebody else will come in and provide a more exciting option.”
On the River Murray wetlands, Sharley and Banrock Station have no plans to sit still. Banrock is implementing the next phase of a five-year program to maintain improvements to the wetlands.
Sharley acknowledges Banrock took a risk in undertaking such an ambitious and ongoing program.
“(But) that’s what leadership is about,” he says. “You’re the first to do something and there’s always greater risk being first. But if you back it up properly, to me that says the company is committed to making it work.”
Sharley says organisations should not enter such brand-building campaigns without a long-term commitment.
“Environmental restoration is an ongoing project,” he says. “We’re committed to restoring our wetlands and environmental projects for the long term.”
Cameron Cooper is a Sydney-based business writer.
With The Smith Family it’s all about reputation
Don’t expect any fancy name changes or expensive branding overhauls from The Smith Family.
The venerable, not-for-profit organisation has been helping disadvantaged Australians since 1922 and appreciates the value of its good name.
“Our reputation is all we’ve got at one level,” says CEO Elaine Henry. “This is what we live and breathe every day.”
The name The Smith Family was selected in 1922 because “Smith” was the most common name in the phone book.
“Actually, it still is by about a nose from Ng,” Henry says. She admits it is a “strange name”, but market research shows “it’s too precious, it’s too enduring” to swap.
The Smith Family has shifted its emphasis from Christmas charity and clothing handouts to developing programs that support education, but Henry says there is an understanding attached to the name from the public, government and stakeholders that can be a “huge burden”.
“For us our internal branding is as important as external branding. Our people are our brand and if they’re inconsistent in the message that we are giving people or they’re not acting in the way we want them to, they’re quite capable of completely destroying our brand and reputation.”
To maintain consistency, The Smith Family undertakes regular communication planning that sets out the organisation’s key messages.
“We drive ourselves crazy with communication,” Henry says.
Nothing is left to interpretation regarding the meaning of the organisation’s values: respect and caring, inclusiveness and diversity, collaboration and teamwork, innovation and creativity, and excellence and professionalism.
“We have a word and we have a definition of what that word means,” Henry says. “And we have a definition of what our values mean.”
Recruiting staff that complement The Smith Family culture is also critical. Henry says organisations must be quick to correct hiring errors.
“If we make a mistake, that’s okay, everyone makes mistakes with recruitment at some time,” she says. “But you should correct the mistake and correct it quickly.”
Reputation – what is it worth?
AIM National President, Gary Neat says it’s revealing how both companies and government alike find it much easier to value their reputation only when it’s being dismantled around them.
Neat, who has a background as a strategic marketer, says “if we can manage to look past the ‘puffery’ on the topic, we can see that reputation management is not some passing fad but an ongoing reaction to a world characterised by globalisation, turbulence and complexity – an era of message clutter and all within a period of increased public savvy and disregard for old structures.
“Naively, some firms believe that all they need do is put their senior executives through some shallow image training or make a donation to a worthwhile cause. These are fine, but are only a small part of the reputation mix and need to be leveraged with a multitude of marketing and management concepts such as corporate value and culture, differentiation, accountability, branding, stakeholder attitudes, sustainability, government relations and crisis management.”
Neat adds, “it’s not just business that’s embroiled in the reputation management push. For instance, with government, only the emphasis varies. Governments are increasingly employing community consultation methodologies. What you are today is partly what you communicated to the public yesterday. And, what you said or did today is almost inevitably tomorrow’s perception.
“For both the corporate and government sectors, a good starting point is a system theory process to allow you to track the influence factors that shape reputation. By altering these influence factors, you can achieve advantageous change.
“The biggest mistake people make about reputation management is in believing it’s all about saying the right thing. This absurdity belongs in the ’70s when the world was less complex and less questioning. In 2004, it’s more about cultivating systems that provide value not only for your organisation, but more importantly for stakeholders and society itself.”
Top 10 global brands
|Company||Brand value||Country of ownership|
(All figures are US dollars. The list, compiled by Interbrand, is for companies with publicly available marketing and financial data. Brand value is a mathematical figure reached using a combination of company sales figures, an analysis of brand earnings versus other intangibles, and a multi-factor assessment of brand strength.)