What price reputation executive summary

An investigation into corporate reputation management in the FTSE250

Even before COVID-19 shook the world, the perfect storm had been gathering for companies in the public eye. The days are now long gone when reputation was built on performance alone. Activist employees and shareholder revolts are focussing attention on corporate behaviour, with perception amplified by unprecedented levels of scrutiny from social and mainstream media. Add in climate change, geopolitical turmoil, a global pandemic, mounting regulatory controls and potential trade wars, and it’s no wonder many organisations are struggling to navigate in new waters.
Executive Summary for What Price Reputation report from Cayhill Partners
These increased threats are weighing heavily on the C-suite, compounded by awareness that the personal reputations of CEOs and their boards are now inextricably linked to the reputation of their organisations.

How are FTSE250 companies responding to these challenges? How many of them have the capability to manage their corporate reputations and what may be changing as COVID-19 pans out across the globe?

Reputation matters in the FTSE250 – but is not always understood. The vast majority (98%) of FTSE250 companies have some level of dedicated corporate communications provision, ranging from using a small financial PR agency on an ad hoc basis through to in-house setups akin to FTSE100 companies. However, employing resource doesn’t necessarily equate to understanding its potential. A remarkable 73% of the corporate communications professionals interviewed believe that their CEO (or client CEO) doesn’t appreciate what good corporate reputation management is, nor understand its role in delivering the organisation’s broad objectives. In a time of unprecedented uncertainty, it appears not all FTSE250s are controlling all that’s within their remit to control.

From the snapshot of this research, the clear indication is that there’s a gap in reputation management. The reputational risks identified by CEOs and communications leaders are widespread, ranging from activist employees to ‘chairman contagion’, but communications resource is largely focussed on what ‘financial PR’ can deliver. The opportunity to influence a broader perspective of corporate reputation is not widely understood, and for many companies, may continue to go unchallenged as fewer than half of the FTSE250 directors of communications are members of the executive committee. There is also limited communications expertise among NEDs.

This focus on investors is partially evolutionary. Many FTSE250 CEOs have come up the finance route themselves and most employ their first investor relations (IR) or communications resource for impending IPOs or acquisitions. And as the first seed sown, the IR capability often has the strongest roots. Nearly two thirds (68%) of FTSE250 firms employ inhouse IR compared with just over half that have a dedicated group-level inhouse communications resource.

For the 54% of companies that have a group corporate communications director, the responsibilities, seniority and extent of roles vary hugely, often heavily dependent on the CEO and their understanding of, or support for the discipline. The in-house communication directors with combined investor relations and corporate communications roles report greater internal credibility – dealing with the tangibility of ‘numbers’ clearly being of benefit in a corporate function which remains frustratingly difficult to measure.

The overwhelming majority of FTSE250 firms retain a PR consultancy, with just under half entirely reliant on their agency for corporate reputation management. The services and fees vary significantly, from around £30,000 to approximately £750,000 per year. Most PR consultancies provide their FTSE250 clients with group corporate & financial communications services, with around 17% also being responsible for investor relations activities.

In terms of assessing value for money of these activities, there is still no commonly agreed industry-wide metric to demonstrate the Return on Investment (ROI).

Around three fifths (62%) of FTSE250 firms interviewed have KPIs for their communications functions, ranging from loose objectives to highly structured externally measured goals. The criteria range from share price valuations, reputational risk assessments, the profile and reputation of the CEO and executive team, through to employee engagement statistics and investor and media satisfaction surveys.
For companies on the cusp of moving to the FTSE100, the basics of corporate communication are broadly similar but the role of a FTSE250 communications leader can differ quite substantially. Smaller and less specialised teams, more varied reporting lines, fewer senior staff, a less experienced executive committee and board, limited team succession plans, smaller budgets and a lower public profile means that FTSE250 communications leaders often need to work harder to generate interest in their organisation. But the flip side is that these communications heads can enjoy more autonomy, can have significantly wider remits and more responsibility, a better work life balance, less bureaucracy and a shorter line to decision makers.

What Price Reputation report from Cayhill Parnters
Looking to the future, the reputational pivot of ‘people, purpose and values’ has been thrust into the spotlight by COVID-19. It could well point to enhanced recognition for communications leaders. At a time of unprecedented uncertainty, expertise should be at a premium for those able to attune CEOs to the changing external tenor of expectations, whilst ensuring the comprehensively joined-up stakeholder communication required to support corporate objectives. The personal reputations of chairs and CEOs may be won or lost, alongside those of their companies. In uncharted waters, it should pay to look to an experienced navigator.