December 10, 2010; 1205 hrs, Nigerian Institute of International Affairs, Lagos, Nigeria

  

Introduction

 

It was with great delight and pleasure that I accepted the invitation to say a few words at this public presentation of Demola Akinbola’s book, Built To Endure: How Purpose-Driven Organisations Use Reputational Capital to Achieve Strong Brand Equity. I find the subject of the book not only relevant and topical, but of great interest in the light of its multi-dimensional implications for management, marketing, organizational values and the achievement of larger corporate objectives. I’ll like to start by congratulating the author on his achievement. 

 

Akinbola brings to his treatment of the subject, passion, knowledge and the kind of insights that every corporate player should find useful and instructive. Reputational capital touches the epicentre of businesses; it is at the very core of the making of capital and the management of enterprise, for without reputation in a market that is driven by competition and technology, the affected business is bound to lose its winning edge and equity.

 

Donald Sull in his book “Why Good Companies Go Bad and How Great Managers Remake Them”makes the intriguing point that businesses like individuals also suffer hubris; they can rise and fall, and no corporate hubris can be worse than a company placing itself at risk due to its own inertia and failure to reinvent.The investment in reputational capital is the clearest antidote against such inertia; the centrality of reputation capital means that companies have to constantly evaluate and innovate, in order to remain consistently successful.

 

For drawing our attention to some of these issues, Demola Akinbola’s book is worth reading. This however is not a commentary on his book. My task is to share with this audience a few thoughts on how corporate Nigeria can reposition itself by learning a few lessons in corporate reputation management. I intend to do this as briefly as possible by highlighting a number of case studies as the basis for more extended analysis.

 

Beyond Dogma

The classic traditional idea had been that companies build reputation and identity by producing good quality products and services which are then pushed in the market and well-positioned through aggressive marketing and publicity. There can be no doubt that organizations need to create identities through strong brands and such market reputation that can promote organizational goals. Strong brands grant companies a competitive advantage. That advantage comes from the particular company being able to differentiate its goods and services, projecting them as the best and the first in the market, and aligning customer values to the values of the product.

 

Ten years ago, I presented a position paper to ACAMB – The Association of Corporate Affairs Managers of Banks in Nigeria – titled – “Moving from image management to reputation management” at its Akodo Retreat, I surmised that the Corporate Affairs Management function and the manager as we knew it would not be relevant in 10 years time.

 

Why? Because the rate of change from the outside was far higher than the rate of internal change needed to respond to the changing dynamics in the market place.

 

In effect, a change in the redefinition of expectations, engagement imperatives, performance measures and platforms meant that methods, skills and competencies required to deliver a sound reputation management service within corporate Nigeria had been altered.

 

As a base measurement of this hypothesis, it is a fact that no less that 90% of those present at that session are no longer engaged in the jobs they had then or enjoy the dizzying heights at which they operated then.

 

In subsequent commentaries and engagements, particularly pre-2006 banking consolidation exercise; the question was asked – “Is corporate Nigeria prepared for the inevitable crisis to come?“

 

Increasingly in the 21^st century and the future, businesses must learn to be adaptive and customer-centric. Reputation management has become all-important because the scope of competition has expanded and it continues to do so. Companies that fail to respond to the trend can only be left behind. However, the traditional conception that publicity and communication promote reputation is increasingly becoming inadequate; reputation management is a function of far more complex processes requiring greater dynamism on the part of businesses.

 

Even for established, highly reputable organisations, the threat to reputation could come from the most unlikely source, and when “it hits the fan”, as Michael Bland expresses it, only those businesses that are prepared will be in a position to turn “crisis into opportunity.”

 

 

Examples of Corporate Reputation failure

Today, one of the most important lessons learnt from the series of developments that has happened is just how few companies are prepared for a crisis. Second must be the almost lethargic manner in which our firms are embracing the shift towards the combined imperative of alternative platforms and technology.

 

The story of the US ENRON Corporation is perhaps a classic example of a how a seemingly successful business can lose its reputation overnight and become a by-word for corporate failure. In October 2001, it took only a whistle-blower within to drag the reputation of this foremost US energy company in the mud, through sordid revelations that resulted in bankruptcy, resignations and suicide, and the dissolution of Arthur Andersen, one of the world’s leading accounting firms at the time. ENRON and Arthur Andersen which had both been good corporate brands suddenly got mired in accounting fraud, carefully orchestrated over the years by managers who had acquired bad habits which soon got both they and their organizations into trouble.

 

The ENRON scandal resulted in investigations by the authorities, and the enactment of the Sarbanes-Oxley Act by the US Congress which seeks to protect shareholders from being defrauded by smart-alec corporate figures. Before then, ENRON had been praised for its excellent financial records and Arthur Andersen as a global accounting and auditing brand.

 

In 2010, it was the turn of Toyota. Observed accelerator and brake master defects in a number of popular Toyota brands resulted in a reputation crisis for one of the world’s leading automobile companies. The Toyota leadership had been accused of submitting to a dangerous “echo effect”, the failed assumption by managers that because a brand is strong, it is almost untouchable by a reputation crisis, thus talking themselves into the adoption of poor strategies which merely complicate a situation that could have been managed differently. The Toyota Corporation did not respond on time, and thus allowed the crisis to fester, but it soon woke up from its lethargy to embark on massive vehicle recalls, and worldwide reassurance of its customers. Toyota had to eat the humble pie, even if it took it six months to do so. It was a classic case of customers’ expectations driving corporate choices and values.

 

There was also in 2010, the BP Oil Spill or the Gulf of Mexico Oil Spill, which lasted for three months and was adjudged “the largest accidental marine oil spill in the history of the petroleum industry.” BP almost had its reputation in tatters, even if the original accident was partly due to lapses by its contractor-agents including industry aristocrats: Transocean and Halliburton. It found itself admitting responsibility and co-operating with the US authorities to clear the mess that had resulted from its operations. The BP brand was threatened; it faced the clear danger of being rebranded as a threat to marine ecological life, and as a company for which profit was more important than the health of the environment.

 

 The company’s struggle to avoid such label underscores the importance of reputation management, albeit the verdict on the Deep Water Horizon Oil Spill was that the accident was avoidable and that BP was guilty of failing to manage the lapses in its operations. In its own report on the accident, however BP tried to demonstrate further good faith by admitting that there were indeed errors of human judgement, engineering design and operational implementation.”

 

Closer home in Nigeria, the bribe-for-contract cases involving Halliburton, Siemens, and Wilbros and Nigerian government officials has dealt much blow to the reputation of multinational companies doing business in developing countries where there are weak accountability frameworks in the public system. Officials of the multinational companies have been indicted in their home countries, and whereas the Nigerian authorities are mismanaging the process of bringing all the collaborators to book, the damage to corporate reputation is well advertised. By the same token, Shell’s travails in the Niger Delta and its running battles with the communities and the militants in the area have resulted in such reputation deficit which casts the oil exploration company in the mould of the main villain in the Niger Delta.

 

Reforms in the banking sector by the current leadership of the Central Bank of Nigeria has also raised issues of reputation with brands that were hitherto considered strong within the Nigerian banking industry revealing such corporate governance crisis and individual failures that have led to more concerted regulatory control.

 

So, why aren’t more companies prepared?

 

Although crisis events are unpredictable, they are not unexpected. During the next five years,according to Oxford-Metrica, 83 percent of companies will face a crisis that will negatively impact their share price by 20 to 30 percent.

 

We in Nigeria are already expecting not a few, yet the reality is that our level of organisational response continues to be elementary in the least and farcical at best.

 

Michael Novak has advanced the convincing argument that business is not only about capital, but that it is a moral calling and where businesses and businesses leaders fail the moral test, the business is ultimately injured. He drives home his point about reputation and moral wrong as seen in the banking industry crisis in Nigeria when he writes inter alia that

 

“It is possible for people in business to do moral wrong, even though such wrongdoing sooner or later injures both the business in question and the moral reputation of the profession as a whole. Immoral acts do occur in business. But to behave immorally is neither necessary to nor conducive to business success. One may get away with immoral behaviour for a while, but sooner or later it is highly likely to catch up with the perpetrator and the firm…Virtually everyone would be embarrassed to have splashed across the front pages of major newspapers every wrong they ever did. Accordingly, more than one business leader has announced to his workforce: Anything you would be ashamed to see in the newspapers, just don’t do.”

 

Need we add any other comment on the lessons of the scandals in the Nigerian banking industry?

 

Reputation can be easily lost – and in Corporate Nigeria’s case – reputation is indeed threatened – but it’s highly unlikely the firms involved will collapse completely. 

 

Indeed, this may be one of the biggest lessons for firms in Nigeria as we study how we emerge from this crisis.

 

The reality is that these new market mantra provides for Corporate Nigeria to reposition itself for recovery about as well as it could be – owing, in large measure, to the reputation for products, services and corporate responsibility it has developed in the past.

 

 

What Are the Issues?

 

I have offered the foregoing descriptions in order to provide real-life illustrations of the extent to which a reputation crisis impact negatively on company image and identity and business equity and in the foregoing can be found both the worst and best examples of crisis management. But there are a number of issues that today’s manager must take to heart as he or she reflects on the value of reputation in business.

  

First, in today’s business terrain, the benchmark for reputation is much higher than it has previously been. The publics and the stakeholders have become more sophisticated. This sophistication is in part a function of the electronic and information age. The average consumer has more access to a wider range of choices which are brought to his or her doorstep through the television and e-channels. Businesses sill adopting traditional, old methods may find that their methods have since ossified, and that many of their publics would be excluded. 

 

Reputation is a major asset, but in a more sophisticated market, it is a very volatile asset which may evaporate, even on account of sheer serendipity. It is therefore now the responsibility of business managers to adopt such internal mechanisms that can track changes in the business environment, anticipate accidents and build the human resource bank for dealing with emergencies.

 

Second, a corollary realization is how businesses have become generally competitive. In the age of globalization and neo-liberal capitalism, the old monopolies of old have crashed creating a much wider market and greater consumer choice. People have alternatives in terms of what to do or not to do: today’s consumer is less at the mercy of any service provider than he or she had ever been at any other time in history. That consumer is much harder to please, or impress, because his horizon has since expanded, his knowledge of quality and processes have changed.

 

Third, a new regime of regulatory mechanism is abroad, and the dimensions are both local and international. Anyone dealing with reputation management would have to be mindful of regulators who are becoming more important. The transition from military dictatorship in Nigerian to civilian rule in the last decade has resulted not just in transformations in the business arena but also a stronger emphasis on regulatory frameworks particularly with the shift from government monopolies to trade liberalization and privatization. Nothing damages a company’s reputation more than the wilful breach of regulations and having to be sanctioned for same. 

 

Fourth, the manner in which corporate leaders have betrayed trust in the last four years, confirmed at a global level in the CEO irresponsibility that accounted in part for the lingering global financial meltdown, and the crash of markets, has resulted in such backlash in terms of new expectations about standards of corporate conduct. 

 

The public now expects a higher level of transparency in company operations, shareholders have become more vigilant, and there is a greater distrust of auditors and published company accounts. By 2002, the New York Stock Exchange was already in the aftermath of the ENRON scandal, calling for a new corporate governance proposal. The same situation has occurred in less than a decade in other markets.

 

Fifth, there have since emerged more active influencers of reputation than hitherto existed. Social and non-governmental organizations now have an increasingly critical role to play. Where they exist, such movements as the GreenPeace Movement and gender rights groups as well as consumer rights associations insist on higher standards of corporate operation. Much of the trouble that Shell has had to manage in the Niger Delta has come mainly not from the Nigerian authorities, but from militant civil rights and community groups in the area hose activities have had far more impact on Shell’s image and operations in the Niger Delta in more than a decade.

 

Sixth, today’s managers have to contend with the rise of online media and social networking sites which have since graduated into very strong advocacy units with a capacity to influence public opinion quickly and effectively and with maximum devastating impact. In the absence of a strong regulatory framework for cyber crime, this new development has also been open to much abuse as it can be deployed easily for de-marketing purposes by unseen rivals seeking an advantage in the market. In managing a recent crisis, the makers of Indomie noodles had protested that their product was the target of a malicious de-marketing assault on its reputation.

 

But the lesson lies in being pro-active, and in developing the internal capacity for reputation challenges in cyberspace. British Airways in an incident involving a Nigerian passenger who was banned for life from flying the airline due to alleged unruly behaviour aboard a BA flight from London, found itself having to manage an untidy assault on its reputation by the online Nigerian community which took up the passengers’ fight and called for a boycott of BA by all Nigerians.

 

Seventh, the reputation of businesses now also depends greatly on the quality of their internal processes and their management of human resource assets. The scope of what the company is responsible for has expanded. Organisations under a new international dispensation are expected not merely to make profit but to be good corporate citizens, and to be socially responsible. The idea of the corporate entity as a community member is a reinvention of the classical conception of capitalism and a realignment of capital with the democratic imperative and the achievement of a good society.

 

A company with impressive balance sheets but whose workers are treated worse than slaves, and whose commitments to safety and environment issues are nearly nil invariably ends up with a reputation crisis among its many publics with the disenchantment among the workforce posing perhaps the biggest threat to organizational culture. 

 

 

Of Nigeria and Other Matters

 

Whereas there may be a theoretical awareness of the foregoing issues in corporate Nigeria, the level of their observance and fidelity to international best practices remains comparatively low. The root of this can be traced among other things to the cynicism that drives corporate Nigeria’s culture. There is almost an unwritten but pervasive assumption in many Nigerian organizations that Nigeria as one public official once put it is “a country where anything goes.” This is a comment on the vigilance of the security and regulatory agencies hose duty it is to enforce breaches of established rules and regulations and to ensure a corresponding cost in terms of loss of face and reputation for the offender. Many organizations for example exploit the weak, labour laws in the country to exploit their workforce, who trapped in a contracted job market, are constrained to give up their rights and not seek appropriate redress. 

 

Contrary to extant labour laws, many Nigerian organizations expressly forbid the formation of labour unions by their staff. Such infraction ought to have strong implications for reputation but that can only happen if the regulatory agencies are strengthened, and they wake up to their statutory responsibilities. Many Nigerian providers of goods and services deserve heavy penalties for the sub-standard goods and services that they provide, but the reality is that many of these guilty businesses parade ISO certification duly awarded by the Nigerian authorities.  

 

Massive distortions within the Nigerian economy and disturbing patterns of policy flip flops has produced massive de-industrialization and low capacity utilization such that the scope of competition in many sectors of the Nigerian economy is severely limited, the consumers’ choice is also invariably limited. Many businesses explain away their failures on the grounds that Nigeria is a difficult place to do business, on account of massive leakages, corruption in official corridors, and lack of infrastructure: what would constitute a reputation challenge in other countries is easily excused away on the grounds of the inchoateness of the Nigerian industrial environment. 

 

Corruption is of course a major issue. A BBC Global survey has indicated that corruption is the most talked about issue in Nigeria for it circumscribes both corporate and governmental life, and in many ways is taken for granted. Not enough effort is being made to tackle the scourge of corruption, particularly corporate Nigeria corruption given its implications for sovereign reputation. Nigeria instructively is one of the poorest countries in the world for doing business.

 

Many organizations lack the capacity to handle reputation issues. They are non-challant or they act too late or rely too heavily on the services of PR agencies that in reality can only be as effective as the quality of their briefs, and the attentiveness of internal corporate managers.

 

The misconception that corporate reputation can be managed through publicity, propaganda and corrupt relationship management processes is indicative of a gross knowledge deficit in this area of engagement in corporate Nigeria. The extant order must yield way to new processes and a renewed commitment to adopt a knowledge and competence driven strategy to reputation management and brand identity promotion.

 

 

Last words

I have taken so much of your time already and since there are other businesses to be taken care of today, I will like to bring this to a close by drawing attention to a number of additional issues:

 

One, the responsibility for reputation management rests with everyone in an organization, from the office assistant who delivers mails to the CEO

 

Two, companies must take greater responsibilities for the effect of their operations on the environment as this could have implications for their reputation

 

Three, the ethics and values of organizations are more becoming more closely linked to societal expectations. Organizations are increasingly seen as producers of moral effects; hence the arguments about the moral dimension of business.       

 

Four, a company’s operations as ell as reputation is dictated by strategy and unless processes are informed by strategy, inefficiency and failures result.

 

Five, investments in customer loyalty can help build reputation.

 

Six, the World Wide Web is increasingly being used to build reputation and also to destroy it. Every company must learn the game and seek to own it for its benefits.

 

Seven, business to business companies can only ignore reputation matters at their own peril.

 

Most importantly, it is clear that if we build corporate Nigeria’s brand – an equitable brand that has gone regional if not fully international yet; we stand a chance of building brand Nigeria on a sustainable basis and in doing so challenge those values, cultures and precedents that have held us down as a people.

 

With this thinking, it is now clear that what and how corporate Nigeria’s reputation is being built and sustained is no longer a matter for one department or function in an organisation but a direct Board of Directors and CEO responsibility.

 

Building enduring brands and reputational capital demands much more than engaging in perception management or image laundering – the new market demands an experiential engagement; one that has an in-built marketing leverage sown into it.

 

In the next 5 – 10 years, only companies that are able to create a personal/public experience for its users and consuming public will survive.

 

The good thing about this new market I see is that it will reward those who embrace the responsibility and deploy people and platforms to create this service proposition.

 

This experiential reputation management approach saves cost as it delivers a reputation that immediately creates new customer and market segments – it is integrating Investors relations, media relations, trade and brand communications, government and community relations, protocol & hospitality and CEO/Corporate communications into a front desk team, not a back office function.

 

If building enduring institutions is what corporate Nigeria seeks, then this new reputation management imperative is what it needs.

 

I thank you all for listening.

 

 

Olufemi AWOYEMI, FCA

Founder/CEO Proshare Nigeria Limited