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FIFA’s unending Sepp Blatter problem is a glaring example of the ways in which an organisation’s reputation can be significantly damaged during a crisis. True, FIFA has never been a shining example of governance. Over the past few years, the charges of corruption against them have become so routine that we now simply roll our eyes and move on.
However, this latest scandal emanating from the very top of the organisation highlights the importance of adhering to the fundamental tenets of communications: engaging with external stakeholders and investing in an organisation’s external image when the spotlight is not on them. This investment ultimately ends up paying dividends by not only garnering support for an organisation’s brand today, but also in helping them deal with the criticism they may encounter during more challenging times.
Lord John Browne’s most recent book, Connect, expands on this concept, arguing that the challenge for companies is to better connect with society. Backed by McKinsey & Company research, Browne’s central premise is that there are potentially enormous gains for companies that choose to meet the current demand for increased transparency with “respect, authenticity and openness.” The research suggests that shares in companies who make “society’s needs part of their business model” outperform their competitors by more than 2 percent a year, a 20 percent outperformance over a 10-year period. Even more compelling, McKinsey estimates that the amount of value at stake for companies that successfully ‘connect’ could be as high as 30 percent of annual earnings.
It is clear that effective engagement is a valuable asset and often one that companies fail to invest in until disaster strikes. While it is true that no amount of communications can overcome severe mismanagement or illegal behaviour, the speed of recovery from a crisis can often be measured by the amount of time, energy and resources invested in communications in the years leading up to the event. Ultimately, it’s important to remember that businesses do not operate in a vacuum. The social contract between companies and external stakeholders has never been more essential than in today’s world of instant communication.
Cadbury, the British chocolate brand, for example, always placed great emphasis on developing relationships with its stakeholders as an integral part of its corporate strategy. Until it was bought by Kraft in 2010, Cadbury was one of the most respected British companies. However, that did not mean it was immune to challenge or criticism. In 2001, a child labour scandal associated with cocoa plantations in Cote d’Ivoire was linked to Cadbury and covered widely in the press. Consumers were outraged and national governments passed legislation demanding companies change their product sourcing strategies.
Despite the severity of the scandal, Cadbury’s reputation as an ethical company enabled it to overcome the criticism. Its efforts nearly 100 years prior to stamp out slavery in cocoa plantations off the coast of Angola were used as evidence of the company’s long-standing commitment to high moral standards, and Cadbury continued to be viewed as an industry leader following its response to the scandal. Academic papers were even written about its efforts to ensure the integrity of its supply chain as an ethical business.
Failure by business leaders to invest in their firm’s relationship with society has often come at a steep price. BP’s Tony Hayward, for example, remains one of the most commonly cited examples in recent times. However, even more dramatic was the plight of Arthur Andersen, whose association with Enron led to the demise of its entire business, despite the majority of the firm being devoid of any contact with the energy trader. In the years following, Arthur Andersen’s consulting business rebranded as Accenture and invested heavily in communicating its mission and values externally – a lesson learned from its near death experience.
So why do so many businesses still fall short when it comes to effective engagement? Browne sums it up in one word: overconfidence. Too often, the inherent belief that we will not repeat the mistakes of the past – or those of others – clouds the judgement of decision-makers and leads to businesses underinvesting in the relationships that are central to their very existence.
What is the solution? The first step is recognising the impact of wider society’s opinion on every business’s license to operate. The second is making engagement, or connecting with society, not just a job for PR professionals, but an inherent part of how businesses operate. Leaders must ask themselves not only, ‘What does my product offer customers?’ but also, ‘What does my company offer society?’ Once there is an answer to that, it is much easier to create a successful partnership.
By Dorothy Burwell, a Partner in Finsbury’s London office.
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