Balancing private interest with public expectations
Tom Vesey is founder and chief executive officer of reputational risk consultancy RiiЯ (Risk to Reputation). His career has encompassed management roles in leading businesses in advertising, public relations and brand management. He set up the international news analysis firm CARMA Europe. Given the increasing importance of Reputation in assessing corporate risks, he created RiiЯ (Risk to Reputation) in 2010.
Ethical Corporation: Reputation clearly plays a key role in risk strategies, but its value is often hard to define. How do you address this in conversations with your corporate clients?
Tom Vesey: There are two aspects to this. We have developed a methodology that has been validated by one of the world's leading oil and gas companies. This integrates killer risk analysis with the quality of a firm's reputation to deliver an actual financial value of a reputation.
The other aspect when talking to organisations is [helping them] to understand the importance of stakeholder perspectives. This requires at an operational level collaboration between risk management and finance, as well as the communications department. Building those sorts of networks within major organisations is challenging.
Ethical Corporation: The financial sector clearly has suffered a major hit to its reputation in recent years. Are the banks themselves to blame for this?
Tom Vesey: We've done a huge amount of work on this and published quite a lot of papers on it. Financial institutions is they are the lifeblood of the world. If the banks today were to evaporate, the world as we know it would cease to function.
Yet, the major banks saw the world's reliance on them as dependence and this encouraged them to behave in absolutely unacceptable ways. So the whole thrust of the banking sector was a complete ignorance of outside-in perspectives.
You can sustain this perspective for a certain amount of time, but then you run into a brick wall because society defines acceptability, it defines risk limits and it provides permissions. Without these permissions, without that acceptability, organisations can't function.
Essentially, the behaviour of banks has been their downfall and their complete lack of focus on what their true role is. They bring huge value to society, but they never focus on that.
Ethical Corporation: What advice would you give to the financial services sector to rebuild trust?
Tom Vesey: What banks need to do is realise that they are interconnected with everyone around them. Unless they understand, and adapt to, the eco-system within which they function, they will fail.
Of course, they need their missions and their strategies, but, before they take action on these, they need to understand the opinions of their stakeholders. True sustainability organisations must derive a balance between their ambitions and perspectives, and those of the outside world.
Companies often don't analyse who their stakeholders are [and] which stakeholders can really impact cash flow in their businesses. It [stakeholder management] is done like CSR is done; i.e. in a very shallow way. It's not core to the business.
If a business is going to survive in the long-term, it has to exist in this interconnected world. That requires factoring in other elements into their plans.
Ethical Corporation: How do you go about helping companies to map out a reputation management strategy?
Tom Vesey: We start by working with the firm to really understand its Inside-Out perspective. So we talk to a range of leaders in the organisation. We ask what they see as their desired dimensions of reputation and what they want to be known and admired for.
And then we go through top leadership functions in the company one by one [and question] to pinpoint, from their functional perspective, the dangers to the firm’s long term reputation and business strategy.
You can go and explore the Arctic, but the dangers from that strategy might be to lose your reputation forever. Similarly, actions taken elsewhere (a spill in the Gulf of Mexico), might threaten that strategy.
We then issue a Discovery report that we share with the company. This defines what we think are the most important stakeholders.
Often companies miss these. We were recently dealing with one of the world's largest pension funds, for example.
They went through all their stakeholders and it was only when talking to the director of HR that we realised that this organisation could only recruit from other state agencies within that state. Yet they had no idea of the perspective of the other state agencies. We go back to the organisation and question this.
Ethical Corporation: In terms of stakeholder engagement, do you feel social media has a key role to play?
Tom Vesey: I speak a lot about this at conferences and it's something that I find intensely irritating as a theme. Like anything new, when it comes out people get highly energised by it. Social media is very important but it's not overridingly important.
At an influencer level, there are rarely more than 200-500 people in this area blogging. What we do is we say to organisations, “We're going to build a database of people who really are important. Then for a three-month period, [we’ll] analyse their opinions really carefully so one can really begin to engage.”
We then add in the whole background picture – the ‘long tail’ of social media. This isn't irrelevant but it’s certainly not vitally important either. People spend too much of their time analysing this huge backwash from social media.
This only really needs analysing from a macro perspective. Why, for example, is there a huge spike all of a sudden? It's because people in social media react like sheep. The really careful analysis needs to be generated on who really does the influencing.
Ethical Corporation: Some might argue that we live in an age of increased public scepticism in which businesses will never be fully trusted. Do you agree?
Tom Vesey: Business has never been held in such low regard. Just look at Occupy Wall Street. Not all this is the fault of business. There are certain expectations that are arising, perhaps unreasonably. Politicians, for instance, can’t seem to do anything any more.
The influence of lobby groups is arising too due to communications technology. But the basic route out of this is for organisations to get a clear 360 degree view on how they can further their interests in a way that are acceptable to broader society and their stakeholders.
And I think the only way to do that is through the techniques that I’ve mentioned. These provide organisations with a proper compass that enables them to navigate their way through this very challenging environment.
Ethical Corporation: If you had to pick one example of how a company had won back its reputation, which would you choose?
Tom Vesey: A major historic example of where people have done this well is right back in the early 1980s, when Johnson & Johnson withdrew one of their key treatments [Tylenol]. They understood that Johnson & Johnson had the trust of their stakeholders and they realised that to sustain this in the future they had to look deeply into the company’s values. The recall cost them millions of dollars but within 18 months or so their sales were back to where they were prior to the crisis.
Ethical Corporation: If we could finish with some quick binary questions: Climate change - adaptation or mitigation?
Tom Vesey: Adaptation
Ethical Corporation: Name a government to watch on sustainability?
Tom Vesey: China, because it's dawning on them now that the sandstorms are going into Beijing. Then Norway and Sweden too, because they have a more flexible capacity in their style of government.
Ethical Corporation: Corporation tax higher or lower?
Tom Vesey: I think in the UK, we strike a good balance as it is.
Ethical Corporation: Corporate responsibility impact: Obama or Xi Jinping?
Tom Vesey: Potentially Xi Jinping, but in all likelihood Obama.
Ethical Corporation: Shared value or sustainability?
Tom Vesey: Sustainability in a really hard-nosed sense, which means balancing the different short-term interests of the various players with long-term co-existence.
Tom Vesey will be speaking at the Responsible Business Summit in London on 7/8th May 2013. He will be discussing the need for collaboration in the new economy and what a greener, sustainable recovery might look like.communications reporting Risk to Reputation spotlight