There is no reality, only perception,” says Dr Phillip McGraw or Dr Phil as he is popularly known, post his eponymous psychology TV show. The statement, as much as the subject reality versus perception, has led to much philosophical debate historically, with no immediate resolution in sight. But, step out of the realms of psychology, into the everyday transactional world of business and there is a definite ring of truth to it.
A few weeks back, the NDTV-Nielsen lawsuit grabbed headlines. The media group accused Nielsen’s local television rating arm, TAM, of fudging the rating data. Damning enough, but not as much as the accusation of its employees being open to accepting bribes in order to swing the data in favour of the bribing party. The lawsuit opened the floodgates. There was silence about the bribery claims as the matter is sub judice. But the industry unanimously echoed the NDTV voice of discontentment over the ratings process. Stories about similar scandals that hit TAM in the past, general unhappiness with Nielsen research started circulating, putting at stake the research major’s entire credibility — the key driver of its success, far more important than any other, given that it operates in the knowledge space.
A similar controversy — this time the information provider is not the damned but the one that is accusing another party — has also been much in the news lately. Veritas, the Canadian research agency, has been churning out reports on accounting malpractices and other gaps in data provided by Indian companies like DLF, Kingfisher, Reliance Communications, IndiaBulls regularly for the past few months, raising some serious questions about the corporate governance practices in India.
A common element between the two is the media interest and coverage. And the length and breadth of this coverage has rendered the belief, any publicity (implying even negative) is good publicity useless, building the case for corporate reputation management.
“At another time, companies looked good by simply doing what they did. Back then business media wasn’t evolved like it has today. A company’s interaction with the press was mostly restricted to product launches and may be financial results. But that is hardly the case anymore,” says Madhurima Bhatia, image manager at market research agency, Ipsos. The instant any news about a company is reported in any medium, there is a cascade of follow-ups from other media. Fresher ‘angles’ are found to the stories, newer details are dug out and before you know it, what began as a trickle transforms into a full blown avalanche. Especially in this age of social media, when reaching out to a global audience feels like a stroll in the park. “Now anything that happens in India has an impact even on the global audiences and vice versa. The world is watching, quite literally,” says Bhatia.
The next question is where is the need to “manage” reputation? If the companies ensure they play by the rules and are ethical in their transactions, is there really a case for actively managing their “reputation”? Well, there is.
For reputation management goes beyond crisis communication.
Rajiv Desai, founder of IPAN and Comma Consulting, prefers the term “communication management”. He says, “Communication is the currency of corporate reputation management. Companies need to speak not just externally to the consumers and media but also internally to their employees and the shareholders. Communicate effectively with your employees and you have a substantive base of brand ambassadors.”(Click for graph)
Communicating right is also very critical in the face of prejudices, or more recently activism. Reputation enjoyed by a company in its home country doesn’t naturally extend to a host country when it hopes to expand beyond national borders. As an example of the prejudices, Desai cites the case of Pepsi. In May 1985, PepsiCo joined hands with RPG Group to form Agro Product Export Limited. The plan was to import cola concentrate, in return for the export of juice concentrate from Punjab, and sell soft drinks under the Pepsi label. The government rejected the proposal citing regulatory issues.
PepsiCo tried again sometime later, this time adding positives to the company’s proposal. The company agreed to set up fruit and vegetable processing plants, agriculture research stations, franchised bottling operations and snack-food factories using local potatoes and tomatoes, providing an impetus to the agricultural industry in the state in lieu of the permission to operate its soft drinks business in India. The move helped it win over the farmers lobby and allay fears of the ‘multinational monster’. It was also a strategic move given that the now prosperous north Indian state was torn by militant insurgency in the mid and late eighties. The MNC argued that its operations in the state would help create jobs and possibly restore peace.
The Pepsi Foods Ltd venture was cleared in the end of 1988 and Pepsi, a joint venture between PepsiCo (36.89 per cent), Punjab Agro Industries (36.11 per cent), and Voltas (24 per cent), a subsidiary of the Tata Group, was formed. The company launched its soft drinks business in 1989.
“We (India) as a country don’t look upon MNCs favourably,” says Harsimron Sandhu, CEO, India Infomedia, a perception management firm. “An ‘outsider’ treatment meted out to these companies. In order to sidestep such antagonism and be accepted, companies need to engage with the people where they operate, where the factories are located, with their consumers and be part of the larger community.” He cites the example of Hindustan Unilever Ltd, the Indian arm of Anglo-Dutch fast moving consumer goods company Unilever. In its earlier avatar the company was known as Hindustan Lever Limited (HLL), giving people the impression that it is an Indian company. “Necessary since it came to India in the pre-Independence era, when the Swadeshi fervour ruled the people of the country and any allusions to the company’s parentage may not have sat well in Indians. The company also undertook several initiatives to connect with the rural markets and be one with the community,” he adds.
Another piece of advice, more universal in nature, from Sandhu, “If you change policies or discontinue any practices, explain your rationale to your stakeholders. Communicate the new policies clearly to them before any charges of foul play are levied against you.”
In a fascinating turn of events, the sentiments the MNCs faced in India when they tentatively stepped foot in a freshly liberalised country are similar to what many Indian companies are facing today as they pursue their global ambitions. The prejudices of stealing jobs, not being compliant with local business and social practices and its culture will all follow. The tables may have turned but the rules remain the same. “When companies step outside their country’s boundaries, they must build a whole new reputation for themselves. How? Engage with the locals, understand them, don’t just communicate, actually talk to them, listen to them. Make them feel that you are there to be a part of their community and not to take anything away from them,” says Desai.
Easier said than done. One way would be to go the traditional way of connecting with locally respectable publications, making formal announcements, keeping the stream of communication and conversation flowing, making ‘relevant’ noise. Another could be, taking a cue from the Pepsi case, incorporating solutions to local problems in your strategic plan or tying up with reputed brands/partners (as Pepsi did by joining hands with the Tatas). And yet another may be to bringing on board a team that is well respected in the community, heard in the media and enjoys the confidence of the local administration. Speaking of whom, having the local leaders empanelled with your cause will only aid your purpose.
Reputation management is not only about the pull effect (as demanded by stakeholders) but often about the push effect. Especially if you operate in one of those industries that are collectively held in low esteem in the stakeholders’ consciousness. Like banking and insurance, considered to be rife with hidden costs that range from deliberate mis-selling to more minor irritants like incessant customer service calls at odd hours. You must then make a conscious effort to say it loud and clear that you are different. Consider Max Life Insurance (earlier Max New York Life), harping on about its honesty in selling an insurance plan through its latest television campaign.
You may say it repeatedly and loudly, but what if you aren’t different and your agents continue to mis-sell? Or for other industries, your employees are dishonest, potentially giving you a bad name. Does the Citibank wealth manager fraud case from around two years back ring a bell? Rajeev Sethi, Professor of Economics, Barnard College, Columbia University, in a blog post links a company’s reputational capital with incentives. He writes, “One could hire individuals who are predisposed to behave in a principled manner even in the face of incentives not to do so, or one could design compensation schemes that adequately reward actions that preserve or enhance reputation.”
But that’s the long-term game plan. If a crisis seems to loom, dive headlong into crisis management mode as an immediate measure — responsibility, compensate affected parties fairly, communicate updates on the matter regularly to all stakeholders and take corrective steps to avoid future mishaps.
The internet can serve as an early warning system to the CEO: Harold Burson
Harold Burson, founding chairman, Burson-Marsteller, talks about the importance of reputation management in a networked world
What role does the internet play in influencing a company’s reputation? This is something that is not as easy to ‘control’.
The internet has both positive and negative aspects. The internet makes it easier for disgruntled employees to complain publicly about a grievance. On the other hand, it can also serve as an early warning system to the CEO and those who are responsible for compliance. So I think a company must constantly monitor the internet and take seriously the statements and claims that are made to find out whether or not there is any truth in them. This is burdensome but if there is a violation and if it transpires that the CEO is warned about it by some anonymous person on the internet and he did not act, there could be trouble.
Isn’t it harder to figure out who your stake holder is in a networked world?
The internet is context- and character-neutral. You never know if the person who is on it is a good character or a bad character. It is a transmission device, and it can be used for good or for bad. It’s a bit like anonymous letters — in the pre-internet days people would send a letter on a sheet of paper that was typed, no signature, sometimes posted from another town. Complaints on the internet are often like that.
Do you think CEOs are taking the internet seriously enough as a reputation-building and protection tool?
Some are and some aren’t. Many are still in the learning process. But the medium is still so young and immature that we are just learning about the impact it has on recipients. We do know that it is powerful. I am a big believer in Marshall McLuhan’s maxim that the medium is the message. The internet has yet to establish how much credibility it will have in future.
Some CEOs seem to consider blogs a popular way of communicating. What would you say are the risks and dividends of CEO blogs?
The blog is a form of communication. The important element is the content. If the content is considered relevant by the recipient it will have an impact. If it is not considered relevant it will have little impact. It’s no point for a CEO to say, I’m going to have a blog if he has nothing to say. A blogger is like a newspaper columnist or an editorial writer. The success of that editorial writer and his readership is dependent on what he says. The one great differentiation is that the blog automatically provides a method to react. It is much more difficult to get a reaction in a magazine or a newspaper. The blog is instantaneous. This makes it easy to gauge opinion very quickly. You don’t have to wait until 1,000 people respond. Over a period of time you can find out from the first 10 or 20 responses. Usually there’s a predictability. You know if the first three responses are negative, that the overall reaction is going to be negative. It gives CEOs writing a blog an opportunity to know whether their policies, statements, beliefs or vision have an acceptance or not.
Founding chairman, Burson-Marsteller
With permission from Genesis Burson-Marsteller