WHAT PRICE REPUTATION:
An investigation into corporate reputation management in the FTSE250
3. REPUTATION MATTERS
FTSE250 Corporate Affairs Director
Do FTSE250 CEOs fully appreciate the value of corporate communications in managing reputations?
In today’s 24-hour, seven day a week news cycle, corporate reputation is in the spotlight as never before. But despite the evidence of impact on market cap, and notwithstanding the raft of reputational risks that our research uncovered, it appears that few CEOs wholly embrace the notion of actively managing business reputation. While the overwhelming majority of FTSE250 companies (98%) employ some inhouse or agency resource to help manage identified reputational risks (see chapter 5), there’s a clear disconnect between what communications leaders think could be done by corporate communications to deliver corporate objectives and what they perceive their CEOs understand.
In the turbulent landscape of COVID-19, the distinction between the CEOs who ‘get it’ and those who don’t may prove critical. Early indications are that corporate reputations will be won and lost on a gamut of issues – from treatment of employees to ingenuity in production – and while these case studies will surely be picked over in business school modules for decades to come, today’s leaders are in uncharted waters.
The message from the interviews in our pre-shut down research is that building relationships and reputation takes time, budget and experience. Now is surely the moment for all FTSE250 CEOs to ‘get it’.
73% OF CEOS DON’T GET IT
Just over half – 54% – of FTSE250 companies employ a group corporate communications leader. Given that the decision to hire this role normally comes from the chair or CEO, it might be expected that those companies understand the function’s role. But 73% of the communications leaders we interviewed believe that their CEO does not appreciate what good corporate reputation management is nor understand the crucial role it can play in delivering an organisation’s strategic objectives.
Whilst much depends on the maturity of the company and the experience of the CEO and board, our interviews highlighted several interlinked factors that explain this disconnect:
- CEOs don’t know what they don’t know.Unlike their FTSE100 peers, many FTSE250 CEOs do not have first-hand experience of working with group corporate communications teams and so don’t know what they’re missing. This can be common amongst first time plc CEOs, particularly those that have come up via the operational or engineering route and where communications is often relegated to ‘product PR’. They’re attuned to a focus on tactical activities such as press releases and event management, rather than any strategic, reputational oversight.
- It takes a crisis.Whilst CEOs that have previously interacted with the City and markets tend to understand financial communications, many still don’t see the value of broader corporate communications until they have tried to steer their company through a crisis. By then it’s often too late.
- No seat at the table. It is very hard to promote the benefits of strategic reputation management from a distance, so if the group corporate communications function doesn’t have a seat or advocate at the top table it’s more likely that the CEO’s lack of awareness will go unchallenged. Around 43% of FTSE250 communications leaders are members of the executive committee (ExCom) and the larger the company, the more likely this is. But their seat is sometimes viewed as ‘junior’, with a perception that their opinions are not valued as much as their colleagues in finance or operations, for example.
“I’m on the Executive Committee now but I was in my role for around eight months before getting on to the committee. Communications was a new function for the group, so I had to prove its worth before I sat at the top table.”
FTSE250 Communications Leader - Outsourcing. In nearly half FTSE250 companies, communications capability is being delivered by a PR agency with no inhouse communications resource, making it hard to state the case for effective corporate reputation management. The difficulty is compounded by the scarcity of reputation management skills on FTSE250 boards. Very few (less than 10%) of communications directors interviewed sit on boards2 and most are pro-bono NED roles for small companies or NGOs. The further down the FTSE index the company is, the less experience NEDs are likely to have of effective corporate reputation management.
- No clear structure. Corporate communications functions often have ambiguous roles, making it more difficult for the CEO to see a coherent, overarching benefit. For example, media relations and financial PR can sit in separate functions or be delivered via a network of overlapping or competing agencies.
- No objective data. Many CEOs use their own personal experience (such as phone calls with key customers and city contacts, or what they read in their favourite newspaper) to inform their opinion on how their company is perceived rather than use objective data. This means that they can quickly become out of touch with wider public opinion. (chapter 7 explores measurement in more detail).
“We’re our own worst enemies. We don’t talk about the benefits of what we do, many of us don’t have effective KPIs nor do we educate the company enough about the risks of losing reputation”.
FTSE250 Head of Communications
“My CEO totally gets what I do. His reaction when dealing with the tricky stuff is ideal. He knows that communications isn’t at fault when the media write negative stories and understands the political minefield in which I operate.
FTSE250 Director of Communications
Just 27% of the communications leaders interviewed believe their CEO is an advocate of their function and fully aware of the value it brings. Many of these CEOs have put corporate communications on the executive committee; if the most senior communications person sits at the top table, by definition, the company takes corporate reputation seriously.
Illustrating just how seriously the role can be taken, as well as being members of the executive committee, some communications leaders also sit on other committees such as the RemCo and corporate governance bodies.
Interestingly, our research suggests that having a supportive CEO can have significant impact on the success of both roles. Several FTSE CEOs commented that their role can be lonely, particularly when the nature of their business means that they can’t talk about what they do to the outside world. And the pressure on a CEO when a business is failing can be immense. This is when a strong relationship between the CEO and communications leaders can be invaluable. The communications leader is perhaps the one person around the executive table that doesn’t want (or is highly unlikely to be considered for) the CEO role. As a result, they can be an invaluable and supportive source of objective counsel and advice.
As one CEO explained:
From a communications leader perspective, working with a boss who understands the corporate reputation management role can make all the difference. CEOs that work in partnership with their communications teams, making themselves readily available to stakeholders, particularly the media, make a tangible difference to the success of the communications role. In a virtuous circle, communications directors benefit from the credibility of CEO endorsement, enabling access and influence amongst other leadership team members, so helping reputation become a company-wide responsibility rather than the sole concern of the corporate communications function.
FTSE250 Communications Leader
2Beyond Corporate Affairs Report, www.cayhillpartners.com