reputation matters

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Reputation Matters

Reputation creates competitive advantage.

You need a strategy to claim the reputation you have earned.

Reputation risk is the risk of risks.

REPUTATION MATTERS

”Your opponent’s job is to define your reputation for you. Your job is to claim the reputation you have earned, and to define your own reputation.”

Many companies in the Canadian oil and gas industry protect and manage their reputations

continuously, on many fronts, in order to thrive. They recognize that reputation is not just a communica-tion problem, but a business prob-lem since earning a good reputation (or a bad reputation) with clients, shareholders, partners, stakeholders or employees has a direct impact on the health and even the viability of the company.

WHY REPUTATION MATTERSThe Economist Magazine’s Intelli-gence Unit asked 269 senior risk managers and executives, including a large sample of energy executives, to rate “how significant a threat do the following risks pose to your company’s global business oper-ation today” on a 100 point scale. They published the results in “Rep-utation: Risk of Risks.” Out of 13 top tier risks, the top three risks they identified were reputational risk, regulatory risk and human capital risk: reputational risk outstripped regulatory and capital risk by more than 10 points.

In order to do business, we must persuade others that we will do what we promise. But the first step in persuasion is earned trust, which is what I mean by reputation. If our audience does not trust us, then skillful branding and polished messages are more or less worth-less. Reputation is critical because it shows why someone should do business with us and why we should have a hearing.

Reputation goes to the outcome of regulatory processes, to the cost and availability of capital, to attract-ing and retaining talent, and to a host of other bottom line issues.

One reason why managing repu-tation is crucial is that it’s relatively easy to earn a bad reputation quickly, and it’s long, hard work to earn a good reputation. A quick, partial list of possible triggers for reputation risk: an earnings report; a public attack on management; an environmental or safety incident; a regulatory review; misinformation targeted at stakeholders; service interruption; and falling short on performance or schedule expecta-tions.

Then there is the elephant in the room right now. It is no secret that the Canadian oil and gas indus-

NO PRESSUREBut everyone is watching what you do.

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AUTHORDR. MARK T. MEALEYSENIOR COMMUNICATONS ADVISORSTRATEGIC THINKING COMMUNICATIONS

PUBLISHEDOILWEEK MAGAZINE JANUARY 2014

try has a great big target sign painted on its back by a wide variety of political and economic activists.

Opponents from around the world openly focus on prevent-ing Canadian petroleum from gaining access to tidewater, or on making the cost prohibitive through taxes and regulation. The past few months have demonstrated how serious the battle for the reputation of Cana-da’s industry truly is. Keystone, Northern Gateway, and the European Union’s proposed Fuel Quality Directive are each exam-ples of regulatory and legal wars that are being fought through battles over reputation.

In a fascinating and infor-mative article that appeared in the Financial Post in December, Vivian Krause documents 27 payments totalling $3.2 million made in August and September of 2013 by a single American foundation to about 25 activist organizations. These payments are explicitly earmarked to fund activities aimed at attacking the reputation of the Canadian oil and gas industry, to change provincial and federal policies, and to prevent regulatory ap-proval for projects like Northern Gateway and Keystone XL.

The Pembina Institute received the highest payment during these two months: $225,000 on August 9, 2013. These dollars are intended “to advance policy improvements, the narrative that oilsands ex-pansion is problematic, land use decisions that slow expansion, and improved climate policy” and to raise awareness of the “negative impacts of the tar sands on the economy,” among other goals.

As Krause’s article demon-strates in detail, activists don’t just attack the reputation of the Canadian industry in general. They have individual companies in their sights. And sophisticat-ed communication campaigns directly target local communities in our own backyard at up-stream, midstream and down-stream choke points.

For these and many other reasons, reputation matters.

WHAT, OR WHO, WILL DEFINE YOU?It can be tempting to try to earn a good reputation with spin. Re-cent news stories give us some pretty spectacular examples of this temptation in the political world. Canada is supposed to be a place with dull politics. But po-liticos at every level have been outdoing themselves lately, to make things more interesting for the spectators.

Some spin is less than convincing: yes, I have smoked crack while in office, but I was in a drunken stupor, and this is a conspiracy. Some spin convinces many people for a long time, un-til it finally stops working: if you like your plan, you can keep it.

Spin can sometimes work for a very long time. But at the very least it is a risky strategy to bet the firm’s reputation on spin. Spin can only stray so far from reality, and only for so long. Reality always bats last.

In addition to legal and moral issues, there are hard limits to the effectiveness of spin for a business when it sets out to per-suade someone who has skin in the outcome. People with money and resources on the line—like potential clients, shareholders and partners, stakeholders and employees—quickly see past words and graphics to under-stand whether what you propose will benefit them, and whether they should believe you or not.

The reputation you earn with these people through your achievements and outcomes, as opposed to the words that you use, has a powerful influence for better or for worse. It makes persuasion more likely in some cases, and it makes persuasion more difficult or even impossible in others.

Unfortunately, spin might work for an activist even when it will not work for you. Your opponent’s leverage might rest on generational opportunities that can be lost permanently after a relatively short time, with

minimal risk or downside for the opponent. You have to protect your reputation for the long term, while your opponent may only need to persuade over a short term.

Your opponent’s job is to de-fine your reputation for you. Your job is to claim the reputation you have earned and to define your own reputation. Your oppo-nent will have an easier time if you have not already done the work that is necessary to claim the reputation and trust that you have already earned.

With just a few words, Abra-ham Lincoln shines a light on the most important thing to remem-ber about reputation: “Character is like a tree and reputation like a shadow; the shadow is what we think of it; the tree is the real thing.” Lincoln also said that “every man over forty is responsible for his face,” which might be another way to say the same thing.

At the end of the day, we earn our reputation as persons or as companies by who we are, which gets defined in turn by the value we create and by the benefits we produce.

WHAT YOU CAN DO ABOUT IT In a future column I will explore specific strategies and tactics that can be effective in order to establish, protect and restore a good corporate reputation. I will point to several Canadi-an companies that I think are doing a good job building their reputations.

We have a tighter focus here: why reputation is crucial and what reputation is. Reputation is earned trust that flows from the organizational identity or charac-ter of the company, and from the things it does to create value.

This insight does lead us to recognize at least three practical and powerful truths which ought to guide any reputational strat-egy or tactics. First, it tells us where a good reputation comes from: it comes from what we do, which comes from who we are.

Second, it tells us how to establish and protect a good

reputation: by projecting a clear, accurate and persuasive picture of who we are and what we have done, and the benefits that derive from what we are doing now.

Third, it tells us how to restore a tarnished reputation: change our behaviour so it matches the reputation we seek to earn and claim.

Jon Iwata, Senior Vice Presi-dent, Marketing and Communica-tions at IBM, recently explained that IBM does not define itself by its products, but by its charac-ter. “We don’t try to manage the IBM brand. We try to manage our character as a business.”

A recent article by Grahame Dowling and Peter Moran, pub-lished in the Harvard Business Review, labels the same insight by comparing two approaches to corporate reputation: the built-in and the bolted-on approach. A company with an ad hoc, shotgun approach to building and defending reputation tacks its reputation strategies onto its business. Its approach is bolted on rather than built in.

On the other hand, companies that recognize reputation as in-tegral to their success integrate reputation-building into their whole operation, beginning with C-suite managers who take ownership for the corporate rep-utation. These companies know which stakeholders have priority, and they work to demonstrate how they create value for those stakeholders. They read their reputation goals off of their busi-ness objectives; they focus their reputational efforts narrowly to achieve those objectives. Their managers believe that reputation creates competitive advantage, and every person in the company recognizes respon-sibility to protect and maintain the company’s reputation.

They do it because reputation matters. ST

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EARNED TRUST Persuasion requires trust, whether your audience is inside or outside of your company. And trust doesn’t come from a silver-bullet message or a perfectly executed communication strategy.

You earn trust from consistent actions over time. Trust flows from what you are as a company and who you are as a person.

The foundation for trust: the value you have already created and continue to create for your clients, shareholders and stakeholders.

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MISSION ACCOMPLISHEDSome recent Strategic Thinking projects that achieved mission-critical objectives for our clients.

Natural Gas industy whitepaper that is changing the way industry leaders think about accomplishing major facility projects.

Highly rated, provocative expert presentation package at a prominent natural gas industry conference. Deliverables included speech coaching, editing, and Powerpoint production.

Comprehensive corporate resume for an international oil and gas engineering and fabrication company. Effective statement of the corporate value proposition. Profiles of five business units, including case studies and major project profiles. Exceeded expectations and met their schedule: 9 weeks from sanction to delivery of English version. Project management of Russian and Chinese versions.

Global Petroleum Show tradeshow package for a 600 ft2 display. Included delivery of 7 video presentations, print materials, and all graphic displays on a super-tight schedule. Company recognition: this was the best, most effective tradeshow they had ever done.

Complete website re-do. Delivered a complete re-write of the website for a small, rapidly growing designer and fabricator of oil and gas processing facilities, meeting the objective of projecting brand quality to match the achievements and capabilities of the company.

Comprehensive overhaul of the marketing packages for a sales organization. Client evaluation: “These marketing materials are easily equal or better than those of our best compeitors.”