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Comms Clusters and Reputation Management

7 Jun 2019

Mike Kaiser, a Partner at KPMG, shares his insights on PR disasters and managing reputation. Join us for our free Midweek Mingle on 12 June to hear more from Mike on Comms Clusters.

Corporate Australia is facing unprecedented challenges to protect its reputation and build trust between government, business and citizens. We’ve seen an explosion of scrutiny, citizen journalism and online activism, alongside a growing number of Royal Commissions. Boards and Executives are realising that reputation impacts their bottom line, and safeguarding and rebuilding reputations are extremely important.

What do we mean by ‘reputation’?

Quantifying reputation has always been difficult, but the World Economic Forum suggests that approximately 25 per cent of a company’s market value is directly attributable to its reputation.

Reputation is informed by a broad range of stakeholders like employees, government, customers, citizens and shareholders. And a company’s ‘social licence to operate’ (i.e the ongoing acceptance of an organisation’s practices by society) has never been more important.

But after months of controversy, the Australian Securities Exchange (ASX) has removed the phrase ‘social licence to operate’ from its updated Corporate Governance Guidelines and replaced it with ‘reputation’ and ‘standing in the community’. While not synonymous, the change reflects the call for organisations to better meet community values and expectations. The harsh reality is, if businesses don’t do this, they risk highly publicised community opposition and campaigns, often followed by regulatory and legislative reform.

So, whose responsibility is it to protect an organisation’s reputation and build their social licence to operate? Increasingly it is falling to Corporate Affairs teams to take a more proactive seat at the C-Suite table as the caretakers, protectors and enablers of an organisation’s reputation. With a strong focus on external engagement, Corporate Affairs teams are best placed to understand external perceptions and sentiment and respond to the trust crisis facing business and government.

Are Corporate Affairs teams up to the task?

Our KPMG’s Corporate Affairs Advisory team has developed a maturity model to assess the performance of Corporate Affairs functions. Some common issues we come across include a lack of proactive engagement, misalignment to broader business strategy and a lack of systems and processes to support issues management. In times of crisis and prolonged reputational damage, it is important to employ three key characteristics –accountability, empathy and credibility. Known as the trust target, balancing and illustrating all three characteristics can greatly assist with building and maintaining trust in your brand and your business or organisation.

Recent public relations disasters demonstrate this simple, yet effective model.

Accountability

Taking ownership of any crisis is important. Regardless of your level of involvement or responsibility, be prepared to admit fault, accept responsibility and be transparent with the public and your stakeholders about what transpired and how you will make amends. When the US SEC charged Goldman Sachs with fraud at the start of the global financial crisis, the firm said the allegations were “completely unfounded in law and fact”. They failed to take accountability for the bank’s actions, but moreover failed to protect its reputation.

Empathy

Depending on the nature of the crisis, someone may have experienced serious or fatal injuries. Deepwater horizon is a well publicised example where 11 people died as a result of the largest ever marine oil spill. In response to ongoing media interrogation, the Chief Executive said, “there’s no one who wants this over more than I do. I would like my life back.” With 11 grieving families, playing the victim is never the right approach. Putting people before profits is another key lesson that is often forgotten as large executive salaries and bonuses are exposed during crises, resulting in a loss of public support and significant reputational damage, particularly if this is combined with a lack of accountability.

Credibility

Often reputation is affected by a lack of knowledge. Understanding the details while communicating these in a relatable way will create legitimacy, confidence and trust. A former political candidate was asked in a television interview to explain the details of an election commitment. Clearly lacking any knowledge of the details and unable to name a single point in a six point plan, the candidate was unable to speak with authority on the subject, suffering significant media backlash, criticism and a loss of credibility with the community.

With public opinion playing a greater role than ever before in business success or failure, our think about conducting detailed stakeholder engagement on your organisation to uncover key issues and insights that inform targeted objectives, strategies and tactics to build legitimacy, credibility and ultimately trust.

Mike Kaiser is a Partner at KPMG and heads the firm’s Corporate Affairs Advisory practice nationally.

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