Bringing Business Home


Conclusions: businesses and the new reality

Conclusions: businesses and the new reality

BUSINESSES’ ACTIONS ARE JUDGED ON THE BASIS OF THEIR REPUTATION, NOT THE OTHER WAY ROUND

For those charged with protecting businesses’ reputations, the world has changed permanently. The combination of the financial crisis and the explosion of social media has created a new landscape where corporate narratives are harder to define and control and reputation matters more than ever.

What we’ve tried to establish with our partners ComRes is not how bad things are, but what the underlying changes in the external environment really are – and how to adapt.

The results are interesting in several ways, but one of the major themes that emerges is that regardless of people’s own opinions, everyone gets the sense that all around them, attitudes to business are at rock bottom. MPs believe their constituents are angry; newspaper editors assume their readers are angry.

In some areas, notably executive pay, there appears to be an unbridgeable gap: there is simply not currently a societal consensus on what level of pay is reasonable or how it can be justified. But in other areas, there appears to be an appetite for business to play a more active role in society, and an innate understanding in personal experience of the complex web of relationships that connect businesses to their societies.

HOW WE GOT HERE

The excesses of the mid-nineties to the early noughties drew a range of criticisms about how business conducted itself. However, their effect on the business community was limited for two reasons.

First, major protests against specific businesses or against globalisation were limited to a fringe of public opinion – the rock-throwing turtles in Seattle never threatened to generate a broad base of support.

Second, the elements of corporate behaviour which were most criticised were environmental, or when they spilled over into economics, were those that impacted on the developing world.

In terms of the general political mood, from the doorstep to the Commons Committee Room, business could get on with business. This changed with the crash. From 2008-09 businesses, which previously would only have been impacted if a major scandal struck, have struggled to rise above the fray.

The old issues still matter – climate change and developing world labour standards are still real concerns for many. But inevitably at moments of economic contraction the focus falls most harshly on the fundamentals of what business does and how it does it. The crash brought the externalities that businesses can create much closer to home, which has understandably led to increased scrutiny and a higher profile for business issues.

This particular economic dip has been unusually bad for business’s standing. The UK has avoided the mass unemployment, high inflation and interest rate spikes of previous recessions, but has experienced a gradual tightening in living standards. This has exacerbated the focus on the value offered by businesses and the fairness with which they treat customers.

Meanwhile, the Coalition’s emphasis on reducing the deficit has drawn corporations into the spotlight, with government ministers quite happy to question whether they are paying not just their legal obligation but their ‘fair’ share. And while they are doing so, they are expected to help build the road back to prosperity. So people are looking to businesses to demonstrate long term investment and commitment and are unforgiving of anything that looks like short term profiteering. 

THE SITUATION TODAY

What this adds up to is a loss of business’s licence to operate.

The past year has seen major brands having to face difficult questions from the public, media and parliamentarians. The reaction can quite quickly slip from distrust or criticism into genuine anger.

It is this anger that is most difficult to deal with. Politicians are well used to their efforts being greeted with jeers of derision, and plan their communications strategy accordingly. Business has not yet made that transition.

In short, then, the environment both for business as a sector of society, and for individual businesses, is harder than it has ever been. But we can see a few pointers to the way forward.

THE WAY FORWARD

Reputation lives in narrative

In the media and in general public opinion, businesses’ actions are judged according to their reputation, rather than the other way round.

This is a truth familiar to politicians. In the depths of Opposition, the Conservative Party famously found that focus groups would approve of policies in principle but reverse their position when they found out that they were Conservative policies – voters were judging policies based on which party promoted them, not judging parties on the basis of the policies they promoted.

In the same way, audiences can completely discount events for some businesses that would have plunged others into reputational crisis – and whether businesses ‘get away with it’ when they fall short is not a matter of dumb luck – it depends on whether they are in control of their narrative. And this has real impacts: an organisation whose standing is gradually undermined will one day find itself too vulnerable to stand up to a competitive or regulatory threat.

Tell the right story

One of the big findings from the ComRes research was that people are generally better disposed towards their own employer than they were business in general and intriguingly they felt even more favourably towards businesses that employed their friends or family. It may of course be that this is entirely down to the wage packet. But this seems unlikely.

Every business, even with the most rudimentary internal communications strategy, must ensure its employees are willing and eager to work for it. Unless the sole means of achieving this motivation is payment (and undoubtedly in some cases it will be), then workers must have some understanding of their place in a broader mission.

The sort of narrative that works for this internal audience will often be based around investment in people, development of careers, opportunities for growth and the web of relationships that exist with the world beyond. At its best it goes beyond a simple description of what the business does (or what it sells) and says something more about what the business stands for.

Many businesses have invested heavily in their external brand, but as Claire McCartney of the CIPD points out in this document, the employer brand needs its own development and nurturing. Good employees ultimately make a successful company, and this is who will assist in framing the right story to the wider world.

Communicate through a network, not a megaphone

The fact that people react better to businesses they hear about from friends and family than businesses in general – and indeed their own employer – tells us something about the way reputations spread and are magnified. Social media has taken word of mouth and magnified its effect exponentially.

So a business communication strategy needs to harness advocates and friends to provide the right sort of endorsement.

It also needs to have a realistic digital strategy: very ambitious plans for viral distribution of positive messages often fall well short of the intended effect. But rapid, honest tailored responses to people’s concerns go a long way to demonstrating that a business that cares what people say, even if they disagree.

Authenticity matters, and you can’t fake it

The most successful brands stand for an ideal or purpose beyond the physical product or direct service. The same is true of a corporate reputation. A business must stand for something in the minds of people it seeks to influence.

But there is more to this than picking a few aspirational values and constructing a strategy to convince the world that you live up to them (try Googling Enron values). There are communications strategies that work with the truth of what a business is about, and there are PR efforts that try to present a positive story to cover over the real nature of the people behind it. The latter seldom work. Where they do, they tend to be very short lived.

For that reason, businesses looking to convince the world of their value need first to be clear they can convince themselves. If a quick straw poll of colleagues as to the purpose or values of the organisation does not elicit the answer you are looking to promote, it probably needs more work.

Leadership matters

Businesses need a human face, a leader to articulate values, ambitions and strategy, who is prepared to stand up when things go wrong. That person can’t have ‘communications’ on their card – but they need trusted comms professionals to help them plan and execute the strategies that will help them get control of their narrative and connect with their audiences.