Understanding the current Australian and global stakeholder

climate and its implications

Presentation by Noel Turnbull

Director Growth Solutions Group and

Adjunct Professor RMIT University

The presentation

• What is the current social and political climate?

• How does it interact with perceptions of PR/PA practitioners?

• Stakeholder relations and reputation

• A model for managing stakeholders

• The importance of trust and authenticity

…a personal note

• The Millennium Edge predicted:

- The 21st C will be the Asian century

- Millenarians might try to bring about

the apocalypse if it doesn’t come

• Two responses:

- 1997 Asian financial crisis

- August 30 2001

The PR/PA mindset

• Much PR/PA practice presupposes:

- Crisis

- Uncertainty

- Confusion

- Gloom and doom

* Within the context of conventional wisdom

Current confusions

• New Age spiritualism versus “aspirational” class goals

• Downshifting vs longer hours and demands

• Globalism vs localism

• Markets vs communities

• Market triumphalism vs corporate distrust

The top seven strategies for reconnecting with Australians

Eye on Australia 2004

Some social context• 70% of Australians would like to be working at a slower pace• 71% say there is too many pressures in the work environment• 79% of people with children under 18 wish they had more time to look

after their health and well-being• 78% would like to live in a close-knit community• 69% says it’s important to have some kind of spiritual belief• 67% wish life contained more experiences that fed their souls• 51% say technology is making their life more stressful, even 44% of

people aged 18 to 24 agree with this• 89% believe there is too much emphasis on making money• 92% say family is the most important part of their life• 88% want to get to know the neighbours• 86% think it’s important to be involved in the local community

Source: Above and next two slides Grey Worldwide Eye on Australia T

What’s most important?

9.50

8.93

8.62

8.49

8.34

8.07

7.38

7.31

7.07

6.86

6.73

6.30

5.93

Your family

Freedom to be yourself

Your friends

Being safe and secure

Financial security

Your home

Going out and enjoying yourself

Hobbies or pastimes

Travel and holidays

Music or the Arts

Sex

Your career

Your pets

Social equity is a major concern

83%

78%

77%

72%

69%

68%

67%

64%

58%

57%

36%

The growing gap between rich and poor

The high price of housing

Overcoming rising levels of obesity

Immigration problems

Stress in the workplace

Racism

Unemployment

Personal safety

Terrorism

Long working hours

Inequality of the sexes

SCANAustralia

TM

Monitoring Cultural Change

Monitoring Cultural Change

SCANAustralia

TM

Annual Since 1992Representative Sample

DYG Methodology2,000 Adults

Qualitative & QuantitativeFace to Face & self -

completion

The Big Picture’s Looking Less Worse

-80

-70

-60

-50

-40

-30

-20

-10

0

10

20

2000 2001 2002 2003 2004

Better

% nett : Better/Worse In Ten Years Time

WorseIllegal ImmigrationTerrorism

Security fromInvasion

Economy

Unemployment

DAVOS WEF 2004

• Annual Fleishman Hillard “Voices of Leaders” survey of Davos attendees:

– 59% believe the world will be more

prosperous for the next generation

– 48% believe the next generation will live

in a safe world

Attitudes to the corporate sector• 82% want strong corporate governance and diligent Boards but

only 47% think they are

• 85% think honesty and integrity are important but only 38% think they are present

• 76% want independent scrutiny of accounts but only 48% think they get it

• 55% of shareholders think profit is the most important thing for a company – with honesty and social values also important

Source: Crosby Textor survey cited AFR 21 April 2004

Attitudes to Corporate Australia: Summary

84%83%

77%72%

66%66%65%

62%59%58%

56%53%53%52%

47%45%

27%19%

Only thinks of profitsGreedySelfish

SuccessfulHeartless

Just for the shareholdersUntrustworthy

Up there with the rest of the worldSmart

ConservativeBoring

Doesn't think big pictureUnoriginal

SavvyNot visionaryLeading edgeUnintelligent

Caring

% Agree

The Successful Company: Summary

93%91%90%90%90%89%89%

87%85%85%

83%82%82%

79%76%75%

73%73%

70%70%

67%67%

64%61%

57%52%

Well organisedInnovativeInventive

Fresh thinkingVisionary

Comes up with fresh ideasDetermined

A good place to workHas a good presence at a local level

Gives back to the communityIs ethical

Has a bit of personalityIs a leader in its field

Is transparent and honestEntrepreneurial

Interesting and differentFights for a cause

Always tells the truthCares about people first and money second

A real person running company who you know Well publicised

Makes life more funHas fun advertising

Has a long history in the marketHas big profits

Aggressive

% Agree

It’s not all bad …

…corporate Australia is viewed as competent

72% this corporate

Australia is successful.

5

6

6

9

10

10

11

12

18

21

28

33

36

44

49

53

Well known CEO

Successful Overseas

Highly Profitable

Advertises a lot

Always trying new things

Contributes To Charity

Involved in Community

Solves social problems

Environmentally Active

Australian Owned

Good Employer

Handles Complaints Fairly

Consistent Quality

Honest & Responsible

Treats Customers Well

Good Value For Money

Business Must Do the Job Well% Vitally ImportantJudging the reputation of a business or company

What is an ethical company?

• Looks after its employees first and foremost (82%)

• Is honest and transparent in its dealings (81%)

• Puts people before profits(79%)

• Cares for local communities (78%)

• Is environmentally friendly (74%)

• Gives to charity (59%)

Source: Grey Worldwide Eye on Australia 2004

Some conclusions about the climate

• Spiritual, non-material yearning exists

• People are stressed and over-worked

• Companies are greedy and not as ethical as should be

…and yet…

• People believe the world is getting better (or less worse)

• Companies performance / reputation judged pragmatically

How should we respond?

The conventional answer is clear cut:

Manage your reputation and focus on Corporate Social Responsibility

…..but is this enough?

Some reservations

• Does CSR change attitudes or is it a given?

• Is it the most important benchmark for reputation?

• Who defines CSR?

• Do we agree on what it is?

The CSR bandwagon

• CSR is clearly important:

– Federal Government offering $2000 prize to

school children for an essay on CSR

– Reputation indices proliferation

– FTSE and Dow Jones socially responsible

companies indices

But will they take yes for an answer?

• Christian Aid: “calling on politicians to take responsibility for the ethical operation of companies rather than surrendering it to business peddling fine words and lofty sentiments”

• Shell, BAT, Coca-Cola “pay lip service to CSR while making things worse for the community in which they work”

• CSR is the new “great sham”

Source: The Economist 24 January 2004

So, what is to be done?

• Recognise there are too many contradictory indicators to be certain about too much

• Recognise there are too many stakeholders with too many agendas

• Recognise that you can’t respond to all stakeholders and all issues

• Focus on what can be done

Key Priorities

• Build trust to build reputation

• Behaviours which demonstrate

values, ethics , responsibility and performance

* Base trust and reputation on relationships

Where do you start?

Developing relationships depends on defining the stakeholders with which you

need to have them

Stakeholder Segmentation

• Stakeholders who are directly interested/involved in your business eg shareholders, neighbours

• Stakeholders who want to fix problems

• Stakeholders who want to exploit problems for their purposes eg Greenpeace

• Stakeholders who want to monitor performance or set standards eg Human Rights Watch

Stakeholder Strategies

• Involve and engage the directly interested

• Ally with those who want to fix problems

• Distance yourself from the exploiters

• Establish dialogues with the monitors

Reputation and Relationships

• There is no one strategy but there are ways you can approach the issue and ways that you can measure both reputation and relationships

• ……and that’s NOT by using reputation management indices

Corporate Brand & Reputation Building Blocks There are a set of conceptual building blocks for Corporate Reputation that incorporate the

logic that a ‘good reputation’ is an asset that provides access to the sort of resources and

support that is critical to an organisations success

Reputation is an asset of value. [It’s synonymous with Corporate Brand]

Reputation largely exists in the heads of strategic

stakeholders - and is primarily shaped by their

experiences and interaction with the company.

The benefits of a (good) reputation come from superior outcomes in gaining

access to resources or support from strategic stakeholders.

A reputation is enhanced by the organisation delivering on its value proposition to

specific stakeholder groups (provided the value proposition is relevant and ‘valuable’).

A reputation can be managed proactively or reactively, but is sometimes affected

by events beyond the control of management.

Access to Resources - Role of Reputation Stakeholder Group

Customers

Investment Community

Business Partners

Employees

‘Resource’ required to do business

What is it worth to have a ‘Good Name & Reputation’

Environmental Interests

Governments

Communities

Access to markets/customers

Capital - debt + equity

People & expertise

Projects & Joint Ventures

‘Permit to operate’

‘Permit to operate’

Tax and fiscal regime

• Superior credibility with customers is a key driver of market share and the last 1-5 percent on price

• Credibility with shareholders may be worth 10-50 percent market capitalisation

• Credit agencies - 10 basis points on US $500m - $1m pa

• Business partners - delays on development concepts - $millions

• Recruitment - 20% better productivity from next 150 recruits equivalent to more than $3m pa

• Credibility with environment groups influence the speed of approvals/permits

‘Permit to operate’

• Legislative changes may impact the scope and profitability of all activities.

• Credibility with local communities influence speed of approvals/permits and ‘conditions’

Possible “Tangible” Outputs The most tangible outputs from a Corporate Brand Diagnostic might be the creation of a

framework for managing the brand across all activities and stakeholder groups.

Explicit Development of Stakeholder Value Proposition

Realignment of what is tracked and measured

Framework for the management of the Corporate Brand/Reputation

Realignment of communications/other priorities to respond to Reputation Gaps

• Moving beyond Retail Brand attributes and a commitment to sustainability

• Precise descriptions of how Origin intends to be different/better than competition

• Beyond satisfaction to the ‘core promises’ inherent in the value proposition

• Realignment of Reports, KPI’s, Research Scope

• Including CEO/Board level management (see attached)

• ‘Holistic’ priority setting across company

• Potential realignment of communications

Checklist for CEO/Board - Managing Corporate Reputation A checklist for the CEO and Board might therefore include clarification of the preferred

reputation and what it can deliver, and include its measurement, reporting and management

Do we have a set of stakeholder-specific value propositions that informs what reputation we want to have?

Do we have a clear evaluation of what good reputation delivers is each stakeholder group?

Do we know where we stand with each group, and why there is or not an alignment with the reputation we want?

Do we have reporting measures and mechanisms that enable early warning signs of declining reputation?

Do we have management response processes that highlight proactively (or reactively) issues/decisions that will adversely impact on reputation?

Are tradeoffs between reputation and costs/service-levels resolved with information on impact?

The CareCom approach

• Seeks to identify how relationships with stakeholders influence their behaviours

• Identifies key relationship factors as well as factors which enhance and build

• Develops a reputation profile rather than an index

• Measures commitment and advocacy

Whose Relationship Do We Measure?

Brand, Organization

or Entity

CustomerRelationships

ReferralRelationships

VendorRelationshipsExisting/

PotentialShareholder

Relationships

MediaRelationships

EmployeeRelationships

Any entity that has a relationship with stakeholders:

– Corporation/ Company

– Brand/Product

– Industry Groups

– Government & Department

– Retailers …etc

Brand and corporate relationships are a primary influence on the behavior of key stakeholders …

0

20

40

60

80

Advocates Positives Neutrals Negatives Bad Mouther

% o

f S

tak

eh

old

ers

Brand/Corporate Relationship Profile

Two organisations with similar “average” profiles require different strategy

CareCom© 1999 - 2002

Company B:Make the relationship more exciting/meaningful

Company B:Make the relationship more exciting/meaningful

Company A:Deliver to the Antagonists that which the Advocates receive

Company A:Deliver to the Antagonists that which the Advocates receive

A Corporate Relationship Profile

CareCom© 1999 - 2002

0

20

40

60

80

Customers Employees Shareholders Media Dealers

% o

f S

tak

eh

old

ers

Advocates

Positives

Neutrals

Negatives

Bad Mouther

Uninformed

Importance of Corporate Brand and Reputation According to a 2004 survey of World Economic Forum participants, most saw Corporate

Brand and Reputation accounting for more than 40 percent of their market capitalisation

Market Capitalisation Impact of Uncertainty; CAPM Financial Principles

Percent represented by Corporate Brand/Reputation

20 40 60 80 100

20

40

60

80

100

Percent of Participants

Per

cent

of

Mar

ket

Cap

italis

atio

n

Source: WEF Participants (132). Survey by Fleishman-Hillard - Jan 2004

• Value of certain cashflow with 2 percent p.a growth

in perpetuity - multiple = 25

• Value of cashflow with ‘average’ market

certainty/volatility and growth - multiple = 15

• Valuation where credibility and certainty at issue -

multiple = 10

• Valuation Differentials - $100m p.a

- Fully certain (+ growth) $2500m

- Average certainty $1500m

- Highly uncertain $1000m

• Average ‘expected’ percent of market capitalisation

represented by average certainty versus

uncertainty: 33%

Some concluding thoughts

The role of the CEO:

“If a chief executive has an inner strength and a constant set of values everyone can rely on; if his (sic)

personality inspires because of a combination of modesty and extraordinary competence; and, if he is

frequently in the trenches with his troops – if these are the kinds of qualities which emerge as opposed to the lust for self-aggrandisement, then charisma is sure a

prerequisite for steering a big organisation”

Jeffrey Sonnefeld, Yale

The focus for the company

“Medicine is for the people. It’s not for the profits.

The profits follow”.

Ray Gilmartin, Merck

The role for the PA/PR practitioner

“CEOs need to surround themselves not just with the usual sycophants but with me and women who are willing to challenge every decision”

Jeffrey Garten

Yale School of Management Dean –The Politics of Fortune: a new agenda for business leaders

A value set for all?

The Nolan principles:– Selflessness – Integrity – Objectivity – Accountability – Openness– Honesty and – Leadership

* You build trust by aspiring to authenticity and practising transparency