Bringing Business Home by Portland

BRINGING BUSINESS HOME

CONTENT 04

Introduction

Business matters

The battlegrounds

Great expectations

What is business for? Business in the media: reflections and perceptions

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Businesses and their employees: the hardest sell?

Leaders and business: the personal challenge

Going beyond “doing well by doing good”

Business’s communication trouble: how bad is it?

Conclusions: businesses and the new reality

Tim Allan /

Managing Director, Portland

INTRODUCT Welcome to Portland’s guide exploring how businesses can tackle the increasingly vocal and strategic threats to their reputation — and their ability to operate

ime was, corporate communication was relatively straightforward. The chief audiences for public companies were shareholders and equity analysts. There was a relatively formulaic way of getting out a message to them through the financial media. This has fundamentally changed. Technology has transformed the media landscape on which businesses communicate. There is now an ability – and a need – to communicate through owned and social media channels as well as through traditional media. More importantly, the audiences that care about business communications – and affect businesses fortunes - are much broader and significantly more hostile than was once the case. The financial crisis brought into sharp relief the negative externalities that businesses could create, and this has understandably led to a higher level of scrutiny of the activities of all businesses. Combined with a technological revolution which allows criticisms of business to be rapidly amplified and disseminated, this has meant that businesses face unprecedented communication challenges. The value of business to society – something that used to be taken for granted – is now under severe /4

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scrutiny. Many businesses feel that they are having to justify their licence to operate. So reputation management matters more than ever. And this collection of essays and analysis seeks to identify the challenges and opportunities that come along with that, and point us to how businesses can do better. Marc Sidwell of City AM communicates about business everyday. He gives us an overview of what he believes can be, and should still be, a mutually beneficial relationship between business and society. Two people with their own experiences of dealing with strongly felt attitudes and a highly contested media environment are Alastair Campbell and James O’Shaughnessy. Each has given us his own take on the way attitudes to business seems to have shifted. To give us an outside view, we have invited Stephen Howard from Business in the Community to talk about the value of leadership in business and the difference it can make to reputation. Claire McCartney from the Chartered Institute of Personnel and Development then discusses the way businesses must first get the internal story

TION right: if you cannot convince your own employees, the outside world will be too much of a stretch. Beth Rigby from the Financial Times has seen media attitudes to business reporting change both to reflect public attitudes but also to shape them. She gives us her take on how that process has unfolded and what it means for business today.

“This presents a picture of a nation which values business but is not entirely at ease with it”

We are also pleased to present the thoughts of Dorothee D’Herde of McKinsey, who has a personal take on whether the business motives for doing the right thing are the real reasons for business doing good.

I hope all of this gives you a flavour of the work we do with clients every day. If you would like to discuss any of the issues this document covers, please don’t hesitate to get in touch. Good business communication has never been more challenging, or more vital.

To get a view of the general public’s mood, our partners ComRes have carried out extensive polling to understand the sort of factors that influence British attitudes. Their findings point to where the points of connection might be and the factors that make a difference. Finally, to sketch out the map of where this takes us, Portland Partner Oliver Pauley gives his diagnosis, and outlines Portland’s rules for constructing a strategy.

info@portland-communications.com www.portland-communications.com @PortlandComms +44 (0)20 7842 0123

Marc Sidwell /

Managing Editor, City AM

BUSINESS M H

ow we talk about business matters. As the economic historian Deirdre McCloskey says, “When in the eighteenth century the British became a polite and commercial people, the modern world began.” In other words, while economic growth needs entrepreneurial individuals and the right government policies, it also requires a culture that celebrates commercial activity. The industrial revolution was made possible by a positive shift in British attitudes to business. Today, China’s rocketing economic success is built upon the slogan, commonly associated with Deng Xiaoping, that even in communist China “to get rich is glorious”. That makes this report essential reading. The range of its contributors, from different fields and shades of political opinion, shows a consensus as to the scale of the problem in Britain today. It is cleareyed not only about the reputational difficulties businesses currently face, but also recognises that a slowly-improving economy will not be enough to change this in the near future. But this report is not a counsel of despair. It offers a clear account of where we are now and thoughts on the way forward. As such it is a vital contribution to the debate.

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And there are reasons for hope in the accompanying research from ComRes. While two thirds of the public think trust in business is on the decline, only 18 per cent of the public say that businesses in their local area are too focused on making big profits. And around three quarters of people have a higher opinion of their own employer or the employers of their friends and family than of business in the abstract. That suggests that when people engage with a business, and feel the direct benefits it brings to their lives, it regains their trust. Too often, consumer-facing businesses have squandered this goodwill with a neglect of customer service or insufficient focus on value for money. And in the end, the things that people value in business today remain pretty straightforward: 94 per cent of the public say customer service matters and 73 per cent cite value for money. To restore trust in business, firms cannot simply wait for the national conversation to turn in their favour. They need to rebuild relationships of trust with their customers, who still want to see the traditional virtue of capitalist firms: their power to offer better goods and services for less money.

MATTERS And for all the technological changes and their new challenges, the heart of business remains a very human interaction: a mutually-beneficial exchange. When firms forget the deal they must always strike, even the sleepiest of customers will eventually be roused against them.

“The heart of business remains a very human interaction: a mutuallybeneficial exchange”

Business has always been a moral pursuit. The words of a great Christian scholar of the twelfth century, Hugh of Saint Victor, remain true: “The pursuit of commerce reconciles nations, calms wars, strengthens peace, and commutes the private good of individuals into the common benefit of all.” For their own good, and the good of society, firms need to help us all remember that.

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THE BATTLEGROUNDS

Businessâ&#x20AC;&#x2122;s struggle to find a receptive audience is taking place in several arenas

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POLITICS With politicians so keen to find the solutions for the fallout from the economic crisis, businesses have often taken the blame. A need to please voters has made demands for higher taxes and more regulation more vocal. Parliamentary Select Committees have recently taken a tough line against perceived bad business practice. The reform of Select Committees, and the election of their Chairs grant them more influence and higher media profile than ever before. Many Committees are now very eager to call business representatives to give evidence under intense public scrutiny, most notably the Public Accounts Committee’s grillings of corporations and tax advisers.

Indeed Corporation Tax has become a key talking point in Parliament, shown by the fact that in 2011 there were 588 mentions of the Tax and another 507 in 2012, with 574 in 2013. The 2013 party conference season saw a substantial ratcheting-up of anti-business sentiment, with Ed Miliband finally getting to set the pace by casting himself on the side of the people against energy providers and other ‘vested interests’. The interesting thing was the Government’s response: initially focussed on dismissing the Labour attack as misguided, the coalition soon generated its own counter-proposals that seemed to accept the overall sentiment.

MEDIA Newspapers and broadcasters are of course businesses themselves, and indeed have sustained their own massive reputational damage in the past few years. Yet their coverage of business has been gleeful in reporting parliamentary criticism, and they are happy to publish and re-publish estimates of tax avoided or whatever the latest scandal is. In 2007 there were 1,349 articles mentioning corporation tax in the national press; by 2012 this had more doubled to 2,715. In 2013 the number stood at nearly 3,800.

For the popular right-of-centre press, scrutinising corporate tax arrangements has allowed them to chime with public discontent with austerity whilst broadly backing the Government’s policy. In left-leaning titles, big business and accusations of an out-of-touch government are being combined to encourage perceptions of a class that is actively indifferent to the impact of austerity on families. Even strongly free market titles such as the Financial Times now carry comment pieces discerning between the legal obligation of companies to pay tax, and the societal norms that they ought to observe.

LOCAL One of the side effects of the decline in UK regional manufacturing has been the loss of the type of town where the presence of a local employer was felt not just by the employees but by the members of the social club, the supporters of the sports team and the local housing tenants. This relationship created an intrinsic link between the town’s biggest employer and its residents. Some businesses are still very closely associated with local areas with a long history – think heavy industry in Barrow, Dagenham and Derby – while others represent more recent developments, such as the high-tech and telecoms cluster in the Thames Valley. But as high streets are perceived as becoming less locally distinctive, and the grand patrician experiments of Bournville and Port Sunlight are consigned to history, fewer businesses are immediately identifiable with a particular locality.

The difficulty, though, is this comes at a time when Government policy places localism at the centre of decisions over planning and the development of services. This places businesses under greater scrutiny, and perceptions of their ‘localness’ matter a great deal at pinch points such as planning applications. Beyond this, though, the lack of a natural constituency or sense of groundedness can affect the overall perception of a business and remove any instinctive sense of support that people might feel. The challenge for business is to create a compelling story around local engagement, and use that in a way that works beyond the boundaries of that locality.

IN THE TILLS Numerous ethical consumerism campaigns have sprung up in the past few years, urging boycotts or direct action against businesses. UK Uncut, 38 degrees and others provide a focal point for annoyed citizens, rallying activists to generate more attention for their causes. These short term campaigns can create moments of crisis for businesses. More seriously, perceptions of

business behaviour can affect general buying habits in a quieter and long term way. Specific data on the commercial impact of consumer issues-led behaviour is difficult to discern, but at the height of Starbucks’ travails over tax, Whitbread (which as owners of Costa were perceived by some to have a more ethical tax strategy) reported a 7.1% uplift in likefor-like sales at Costa.

THE FOUR GEARS OF DIGITAL Hardly a day now goes by without new evidence of the way social media is driving increased transparency and accountability in the corporate world. It’s a lesson that everyone from the Daily Mail to Asda and Virgin Media have been taught recently. When the Mail criticised Ed Miliband’s late father, it was the twittersphere which amplified the Labour leader’s angry complaints. The jokey hashtag #myfatherhatedbritain started trending and an Alastair Campbell-inspired online petition got tens of thousands of signatures to put the Mail’s behaviour and culture under the public spotlight. As heated debate about the new press watchdog continued, the Sun’s Jane Moore declared “Twitter is the new regulator”. When Asda advertised one of its Halloween costumes as “Mental Health Patient”, one tweet sparked an avalanche of protest which prompted the supermarket to pull the product within hours.

Companies like Asda and Virgin Media react quickly, not just because it’s the right thing to do, but because it’s good for business. In the old world, the PR industry advised businesses to save face, by not telling more than they have to. Now, companies are embracing both transparency and authenticity. Transparent businesses will be more financially successful and valuable; they will innovate and provide better service to their customers, and people who work within these firms will be happier.

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It used to be the case that corporate messages went from management to media, via a PR team which used their relationship with individual journalists. Communication could be controlled and audiences segmented. Nowadays, increased transparency means you daren’t try to give one message to shareholders and another to customers or employees. Nor is communication any longer a one-way street. People expect every organisation to be ready to explain and respond.

“ I believe that, going forward, transparent businesses will be more financially successful and valuable...”

Jim Boyden posted a photograph on Facebook of a bill from Virgin Media for his recently deceased father in-law which included a fine for late payment. The post was shared more than 53,000 times, forcing the company to apologise to the family.

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The digital age also needs new forms of engagement. We are not just communicating to an audience anymore – but communicating to an audience that has an audience of its own.

More and more, this means that business itself needs to change – culturally and structurally. As David Jones, author of Who Cares Wins: Why good business is better business puts it “the price of doing well is doing good.”

Consumers increasingly want to spend money with companies they feel are authentic and care about their consumers and their impact on the world. Ignore complaints on social media about poor service, and corporate reputations, sales and share price can be hit. Act badly in one part of the world and you can expect a damaging consumer reaction in markets thousands of miles away. Reputation matters more than ever before. Protecting it has to be put front and centre of your communication efforts. This requires combining the traditional skills of strategy and messaging with a fresh approach to engagement and transparency. We at Portland have developed a model called ‘The Four Gears of Digital’ to help you organise your thinking.

It should start with STRATEGY and the development of an overall narrative and message. The approach to digital is to bring the business goals and values to life and then engage around it. Proper strategic thinking comes before tactics which then allow you to use a variety of formats to deliver the message. People expect every organisation, corporate and government, to ENGAGE around the messaging, to explain and respond. It doesn’t matter whether there’s any legal imperative for an organisation to respond; audiences now expect it.

How do you then DELIVER the message? For this you’ll need an understanding of different formats, different social media platforms, as well as SEO and writing for the web. Socialising of the content is likely to involve an approach to devolved and shared responsibility within the organisation. Underlying all of this is an understanding of which platforms your audience uses and the type of content that engages them. In this new era of TRANSPARENCY, the notion of corporate and government privacy is dissolving. People expect data, expect to see behind the scenes and expect to hear direct from the CEO. There’s an assumption that a much bigger array of tools will be used to deliver a far more detailed and nuanced picture. Messages

Planning

Narrative

The approach to digital is to bring the business goals and values to life and then engage around it.

Context

Explain

Blogging

ATEGY STR

Data

Infographics

The 4 gears of

GAGEMENT

Respond

Two way

DELIVERY

People expect data, expect to see behind the scenes, expect to hear direct from the CEO.

Rebut

ANSPARENCY TR

Tools

People expect every organisation, corporate and government, to engage around the messaging, to explain and respond.

Social

Socialising of the content is likely to involve an approach to devolved and shared responsibility within the organisation.

Capability

Empowerment

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Alastair Campbell

GREAT EXPECTA Portlandâ&#x20AC;&#x2122;s Chief Strategy Adviser on the shift in public perception of business

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ATIONS

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oday’s media environment can be an unforgiving place. They have never been shrinking violets, but Britain’s journalists nowadays pursue bad news with an aggression they can never quite summon for positive stories. The ratio of good news:bad news stories is at an all-time low (perhaps as much as 1:17, according to the most frequently-quoted statistic) and the overall picture you might gather from the news is of a country and a world in a constant state of doom. When it comes to business it is clear what leads the news. Scandals, excesses and corporate disasters - of which there have been plenty - occupy the business pages, and are almost invariably the only reason business stories ever make it onto the front page. The journalists writing the story will say they are simply giving readers what they want. There is an interesting debate to be had about whether the media lead or follow public opinion, but on this view of changed attitudes to business, they may for once have a point. The anti-business turn taken by the media in many ways reflects a change in how we, as people who read the papers and watch TV, feel about business. The collapse in trust of the banks was the climax of this change, rather than a whole new chapter. And underpinning it all are changed expectations of both public and private sectors over the last 25 years or so. Back in the 80s, the divide seemed quite clear. We saw the public sector’s role as collecting the taxes needed to provide the health, education and other

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services we relied on as a country. Because of this, citizens tended to be more appreciative of what they got and more forgiving of failures. We applied different standards, though, to the private sector. Customers expected business to be focused on making money but, because of this, believed they had a right to expect good value and service.

“Corporate reputations which have taken decades to build can be destroyed in hours” Provided these expectations were met, no one worried too much about the level of their profits. It is an exaggeration to say the division was as clear cut as public sector good, private sector bad. But there was certainly a large element of public sector selfless and private sector selfish. In the last 25 years, this divide has disappeared. We now view public services as customers rather than as grateful recipients. Our expectations are higher and our complaints louder. The public services that could once take public support for granted are now under the same pressure to deliver as the private sector. At the same time, we have become more demanding of business. Milton Friedman’s belief that the only social responsibility of a company was to increase profits now seems to belong to

a very different age. Values always mattered in the public sector. Now they matter in the private sector too and businesses, from banks to oil companies, pharma to newspaper groups, have found what happens when the public mood settles around the notion that the values fall short of the carefully crafted image. They are all discovering that once a reputational fall occurs, it is hard to regain the lost reputational capital. So now instead of huge profit margins bringing praise, they now bring suspicion. There is anger about big bonuses. The demands that businesses demonstrate they care about the environment or human rights or the communities where they operate are no longer fringe concerns but mainstream. The mistakes and greed which led to the global financial crisis have certainly accelerated this change and lack of trust in the private sector. But the shift in attitudes was already well under way. Both private and public sector have to deal with a harsher and faster media environment which reflects – and to some extent leads – these higher expectations. Twitter and other social media enable instant judgements to be shared widely. What happens in one country now affects how a company is viewed around the world. Corporate reputations which have taken decades to build can be destroyed, or the seeds of such destruction sewn, in hours.

attempts to defend the indefensible, and present policies aimed at dealing with a failing energy market as some kind of return to Marxism, it is apparently not one that all businesses or media yet accept. Indeed, the reaction to Ed Miliband’s conference speech suggests that some people in business have yet to recognise that economics alone cannot erase people’s sense of fairness. The more nuanced reaction of government ministers suggests the politicians are ahead of many business voices in understanding the shift described above. Tempting as it may be, there is no point in businesses complaining that these expectations are unrealistic or the level of scrutiny is unfair. It just is. Companies have to accept this new accountability and recognise that demonstrating, every day, the social value of what you do is now fundamental to long-term strategic success.

“Values always mattered in the public sector - now they matter in the private sector too”

One of the central tenets of New Labour was that there was a strong two-way relationship between social justice and economic efficiency. We argued that one could not be had without the other. It is a truth which remains, if anything, more compelling today than when we were in power. But from their

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James O’ Shaughnessy

WHAT IS BUSINESS FOR? Portland’s Chief Policy Adviser examines a surprisingly difficult question

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“Businesses are just another form of social institution, created by people in order to further human flourishing”

f you are a conservative, what are businesses for? The answer to that rather innocuous, even naïve, question isn’t quite as simple as one might think. And finding an answer that chimed with the views of voters, particularly swing voters, was an essential challenge for the new Conservative leader in 2005 as he sought to modernise the Party and lead it out of the electoral wilderness.

For many years, when the ideas of the Austrian School of economics were dominant, if you’d asked a Conservative MP the answer to the question he (and they are still largely he) would have said, “It is to produce things and services, to provide jobs, deliver growth and make profits”. But is that is that really the limit of firms’ role in society? It wasn’t until David Cameron became leader of the Party that it became possible for the centreright to articulate a wider vision of the social value of business. This is, in fact, a reversion to a more classical conservative vision, derived from the Adam Smith of The Theory of Moral Sentiments rather than the author of The Wealth of Nations. In this alternative vision, the role of business is primarily economic, but it does not stop there. Businesses are just another form of social institution, created by people in order to further human flourishing. They have a moral role that is an inescapable consequence of the fact that they are simply collections of humans and human knowledge. The ethical dimension of their activity is fundamental to their identity. This rediscovery among conservatives of the wider contribution of businesses to society is by no means complete. Scour David Cameron’s speeches between 2005 and 2008 and you will find many references to the importance of firms

showing social responsibility and contributing to the creation of a Big Society.

That refrain is much less frequent over the last five years because, inevitably, the financial crisis changed almost everything. The focus for all politicians, understandably, switched to the narrower and more urgent task of keeping businesses alive and jobs in place. However, in place of social value has been an equally important rediscovery of ideas of enterprise and entrepreneurialism as a counterpoint to widespread popular concerns about big business and corporate greed. The debate raging over tax avoidance, whether from major multinational corporations or political donors, shows that even in hard times the ways in which business contribute to the social fabric of the nation is not understood simply in economic terms. This is undoubtedly territory that the left finds more comfortable; their activists and politicians have always found it easier to justify a vision of business that goes beyond the pure bottom line, and have been prepared to use both the bully pulpit and regulatory cudgel to make them recognise their social responsibilities. But the priority given by both the Prime Minister and the Chancellor, George Osborne, in the domestic and international forums to clamping down on tax avoidance – where some drastic changes, previously unthinkable just 5 years ago, have been made in recent years – shows that there really has been a paradigm shift. The consensus has changed. Yes, firms should be hiring, creating, innovating, growing and paying tax. But more than that businesses should be setting themselves wider goals so that, in pursuing their economic imperatives, they are contributing to broader set of social objectives that citizens value.

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Elizabeth Rigby /

Deputy Political Editor, Financial Times

BUSINESS IN THE MEDIA:

REFLECTIONS AND PERCEPTIONS

d Miliband seemed to hit paydirt in September when he pitched himself as the politician who was on the side of the little guy with a promise to freeze fuel bills and tax big business more heavily in his efforts to “stand up to the strong”.

“Ordinary people are now demanding that their politicians make sure the wealthy pay their dues”

While his Conservative rivals denounced him as an anti-business socialist, they also scrambled to respond. Less than month after the Labour leader delivered his pledge to the British people, David Cameron had put the coalition’s “green taxes” under review as he too sought to cut bills. It is the latest salvo in a running battle between politicians and business that began in the wake of the 2008 financial crisis. Mr Miliband captured the mood in 2011 when he sketched out his own version of “responsible capitalism” that set “predators” against “producers”. The presentation was clumsy but his political instinct was spot on: Ordinary people struggling to cope with a decade of austerity are now demanding that their politicians make sure the wealthy pay their dues. This is a battle that has seen several corporate casualties. The City has faced extra taxation, chief executives of several major companies have been forced out, and politicians have taken to naming and shaming global firms for their tax affairs. The growing hostility between the corporate class and the ordinary worker is in part an inevitable consequence of recession as the spoils of capitalism dwindle, reminding a struggling

“squeezed middle” of the acute disparities of wealth between a corporate elite and the rest. But those tensions have also been fuelled by the media. The emergence of social media has created a forum for resentments to gather steam – note the #boycottstarbucks campaign – while the public bail-out of Royal Bank of Scotland and Lloyds TSB in 2008 catapulted finance from the business pages of newspapers into the mainstream. The scrutiny of banks and other big corporations by lobby journalists has been brutal for business. Financial journalists assessing the performance of the big utility firms, banks or consumer goods companies are sympathetic to the notion of shareholder returns, dividend payouts and heady incentive packages to attract and retain the best talent. Their colleagues on the political news pages are far less forgiving, and business has been slow to adapt to that. Big companies are kidding themselves if they think this anti-business rhetoric will dissipate now green shoots are poking through the soil. 2015 has already been dubbed the “Living Standards” election, and politicians are now in competition for policies that appeal to voters struggling in a postcredit crunch world, with Labour having thrown the first blow and even the Tories launching an assault on ‘Rip-off Britain’ as they set down lines of attack in what is set to be a bitter fight. This time around business would do better to prepare a pre-emptive strike.

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Claire McCartney /

Adviser, Chartered Institute of Personnel and Development

BUSINESSES AND THEIR EMPLOYEES:

THE HARDEST SELL?

f as a leader of any sort of organisation your employees don’t share your organisation’s purpose and sense of value then you might as well forget any meaningful attempt to communicate it externally. All too often employees perceive a mismatch between their own values and those of the organisations in which they are working. This has real implications for work performance and commitment. Indeed recent research from the CIPD’s quarterly Employee Outlook (2011) showed that 40% of employees don’t believe organisation’s values are worth the paper they’re written on. But those organisations that manage to create a shared sense of purpose and understanding around the social value of their businesses outperform organisations that don’t, on both soft and hard measures (CIPD, 2010: Shared purpose: the golden thread?). An employer brand is a set of attributes and qualities – often intangible – that makes an organisation distinctive, promises a particular kind of employment experience, and appeals to those people who will thrive and perform to their best in its culture. Every organisation has an employer brand, because it has a reputation as an employer. A strong employer brand should connect an organisation’s values, people strategy and HR policies and be linked to the company brand. The CIPD Guide - Employer branding: a no nonsense approach (2007) identifies the four most important stages of building an employer brand as: DISCOVERY Involves research to understand how the employer brand is perceived by various stakeholders. ANALYSIS, INTERPRETATION AND CREATION Involves using research to help build a clear picture of what the organisation stands for, offers and requires as an employer - its distinctive ‘value proposition’. IMPLEMENTATION AND COMMUNICATION Sees the brand being applied for the first time in the organisation. MEASUREMENT, MAINTENANCE AND OPTIMISATION Concerned with checking progress and maintaining momentum.

Businesses which can follow these steps and not only define but live a shared purpose and employer brand will stand a much greater chance of communicating their social value to both employees and the wider world. / 20

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Stephen Howard /

Chief Executive, Business in the Community

LEADERS AND BUSINESS:

THE PERSONAL CHALLENGE

lmost 80% of Chief Financial Officers agree that environmental, social and governance programmes add value to their business by maintaining good corporate reputation and/or brand equity.

Integrating responsible business practice into a company can create a happy and engaged workforce, improved operational effectiveness, organisational growth and new business opportunities. The companies we work with at Business in the Community approach these issues in myriad ways, based around what makes sense for their businesses. But there are some general principles we would always recommend to leaders:

“Integrating responsible business practice into a company can create a happy and engaged workforce...”

IDENTIFY YOUR UNIQUE CONTRIBUTION

LEAD FROM THE FRONT AND GET THE GOVERNANCE RIGHT

BE PREPARED FOR THE FUTURE

Businesses do best when they can demonstrate their unique expertise in ways that chime with their brand and stand out.

Chief executives who have a personal passion for this agenda are more likely to build it into the corporate culture.

Marks & Spencer is demonstrating its commitment to ‘circular economics’ by asking customers to bring unwanted clothes back to stores so they can be resold, reused or recycled – its ultimate ambition is to collect as many clothes as it sells.

Leaders must find a way to balance planning responsibly for the long term with addressing short-term issues and stakeholder demands. Issues of values and ethics must be addressed and company cultures built that promote responsibility and positive impact.

B&Q’s Street Club programme has seen the retailer suggest people share lawn mowers and drills with their neighbours, rather than each person purchasing their own. This is a scheme built around selling less – a clear demonstration to the public that the company shares its priorities.

You also need a clear governance structure – while 93% of CEOs believe boards should discuss and act on social and environmental issues, only 75% feel their boards are doing so, according to a recent report Business in the Community published with Cranfield School of Management.

By 2050, the world’s population will be 9 billion. Is your business thinking in the right way about long-term issues like this and others, such as increasing resource constraints and changing weather patterns? These are challenges, but also massive opportunities. All companies have short-term priorities and concerns, but those which don’t make the time to consider how to build a sustainable future risk seeing their business model becoming obsolete or untenable. Corporate responsibility is an ongoing journey, not a destination. There is always more a business can do – and ultimately it will be to the benefit of the business to do so.

Others lend their skills to the community in appropriate ways – such as accounting firms encouraging staff to volunteer in roles which help community groups. 21 /

Dorothée D’Herde /

McKinsey & Company

GOING BEYOND “DOING WELL BY DOING GOOD”

“Doing the right thing requires real leadership and a perspective, starting from the top, that is broader than maximizing shareholder value”

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t’s becoming a cliché. Corporations can succeed in “doing well” by “doing good.” There is no contradiction between being responsible and being profitable. In fact, rather the opposite: being good is not only a great way to win hearts and minds (and headlines), but it can also unlock shareholder value. One problem with this idea is that the catchiness of the phrase makes it sound easy – and it isn’t. A second is that the phrase implies that the reason to do good is to do well.

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Honeywell decided to institute furloughs during the 2008-09 recession, rather than make massive layoffs. As CEO Dave Cote told the Harvard Business Review, not only did many employees naturally prefer temporary unpaid leave to unemployment, but the company kept its human expertise. Recent research suggests that companies that were the most aggressive in cutting jobs reported lower returns than their peers.

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Mining giant Anglo American began a comprehensive AIDS prevention and treatment program in South Africa a decade ago that may be the largest such corporate effort in the world. Anglo American reports it has benefited in the form of lower absenteeism due to sickness. But the larger benefit is surely that it has built trust between company and community by saving lives that help to knit together the social fabric.

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Novo Nordisk is a large Danish health-care company whose business mission is “to help patients lead better lives”. The company sets and monitors measurable environmental and social targets, such as reaching 40 million diabetes patients by 2020, or reducing wastewater. In 2012, Forbes called it the “most sustainable company on earth.” And its financial performance part has also been solid: revenues have more than doubled over the past decade.

Even in the absence of regulations, consumer pressure, or a business case, I believe that companies should seek to do the right thing simply because it is right. “Doing the right thing” requires real leadership and a perspective, starting from the top, that is broader than maximising shareholder value. Companies are institutions in society; people shouldn’t leave their citizenship at the door when they go to work. That’s not a complicated idea; nor is it a new one. “When the happiness or misery of others depends in any respect upon our conduct,” wrote Adam Smith in 1759, “we dare not, as self–love might suggest to us, prefer the interest of one to that of many.” Our own managing director, Dominic Barton, puts it in this way: “Business needs a community’s licence to operate within it, and it will only get this licence if its operations benefit that community.” This kind of orientation requires taking a longterm view. In practice, that means that companies must steward their resources, rather than simply extracting value from them; foster a sense of citizenship and loyalty that attracts quality people; and scrutinize practices and policies that might encourage people to take ethical short cuts for the sake of the bottom line.

The idea that companies can do well by doing good strikes me as commendable, but limited. It sounds too transactional, almost clinical. It’s wiser to accept that virtue is often its own, and only, reward. When it does bring tangible returns, that’s a particularly satisfying bonus.

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BUSINESSâ&#x20AC;&#x2122;S COMMUN TROUBLE: HOW BAD ComRes has conducted extensive research across Britain citizens and MPs to gauge feeling about how people see the value of business today. Three findings stand out: Regardless of their own views, people feel like the mood around them is worsening

People feel they ought to think about a businessâ&#x20AC;&#x2122;s work for the environment and charity more than they actually do

Both MPs and the public express a range of nuanced views about different sectors or businesses, but they tend to report that, in their view, the general mood in the UK is getting more negative. 72% of MPs report their constituents are a little or a lot less trusting towards business than they used to be; 67% of the public say trust has declined in the last five years.

Classic CSR policies get a polite reception when people are confronted by them - from a list including charitable donations and environmental policies people will cite them as important. But very few people will say that these issues matter without being prompted.

There is a sense that MPs feel less angry than they believe their constituents do, and the public feel that their friends and neighbours are more negative than they are themselves. Clearly such a statement cannot be true for everyone, but it demonstrates how the overall atmosphere makes it difficult for business to move opinion on a broad scale, even if individuals can be persuaded.

This is important because so much corporate resource is put into CSR, an investment often if not always sold internally on the basis of external reputation (along with the commendable desire to support worthy causes). What the data suggests at the very least is that businesses need to think more about whether support for good causes on their own, outside a broader narrative, can bring them any reputational benefit.

ComRes interviewed 2,015 GB adults online between 29th and 30th May 2013. Data were weighted be gender, age and region to be representative of all GB adults aged 18+. A bespoke online qualitative group was hen conducted with 30-40 GB adults, between 4th and 10th June 2013. ComRes also conducted a snap poll of 50 MPs online (22 Labour, 21 Conservative, 4 Liberal Democrat and 3 from other parties) between 29th May 2013 and 5th June 2013. Due to the small sample size, the survey is not weighted to be representative of the House. ComRes is a member of the British Polling Council and abides by its rules. Full data tables can be found at www.comres.co.uk

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Social Value of Business /

Portland

NICATION IS IT?

Personal experiences of what a business is about matter more than anything We already knew that people form a view of businesses based on the products they consume and the service they receive. What the new data suggests is that people are more likely to hold a high opinion of their own employer than of business in general, and more likely to hold a favourable opinion of the businesses that employ their friends or family. There is an obvious explanation for why people feel better about the people that pay their wages, or those of people close to them. But there is almost certainly something more at play here. People inside an organisation tend to feel some sense of what that organisation is for and what it aims to achieve, beyond pursuit of profits. They also get to appreciate part of the sometimes unspoken value of a business, in that they experience personal investment and development that comes with work. And finally, this finding might be evidence of the power of advocacy â&#x20AC;&#x201C; word of mouth between real people, and representation with a human face.

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THE SITUATION IS POOR AND GETTING WORSE Dislike of business is consistent and largely uniform... Favourability by sector and gender

55% 36% 53% 63% 41%

Car manufacturing

Banks

Pharmaceuticals Supermarkets Mobile phone

64% 36% 53% 63% 42%

Think business is too focused on big profits

46% 49% PRIVATE

sector employees

PUBLIC

sector employees

33% 42% In the SOUTH EAST

In the NORTH EAST

Find large firms trustworthy

And everyone thinks things are getting worse

72%

67%

MPs

PUBLIC

Think levels of trust in business have decreased in the last five years

Perceived greed seems to be most common, but not the only explanation

“Without business we would have no economy”

Proportion of people who associate business with the following phrases:

49%

44%

“Businesses have no ‘role’ as such They don’t owe us anything”

14% “When businesses pay their taxes they also support the economy”

“I can’t emphasise enough that [businesses] are essential but in no way altruistic”

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Social Value of Business /

Portland

“Socially responsible”

“Good for Britain”

“Too much focus on making big profits” (to describe British business)

SOME FACTORS MAKE A DIFFERENCE TO HOW BUSINESS IS SEEN

64%

trust businesses with

36%

say the same about

fewer than 50 employees

1000+ people firms

Nationality

Size

Things you can’t easily change

“Big businesses… see profit margins as the driving force above all else”

28%

51%

say businesses which operate in the UK and other EU countries, are trustworthy

say businesses which operate worldwide and have their headquarters abroad, are trustworthy

say businesses which operate worldwide from a base in the UK are trustworthy

“The small businesses like ours… [are] created to serve a need in the community whilst making a living”

The fundamentals of your business

96%

94%

79%

of MPs say their experience as customer inform their views as a business

of the public say customer service is important in informing whether they trust a business

of the public say price or value for money is one of the top three factors in deciding whether to buy goods or services

51%

“Throughout its operations a business should be committed to ethical behavior and the contribution to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large”

43% of the public say reliability is in the top three factors

“I love small local business and try to support them. They offer personal service, offer better customer care and support our local economy”

The wider contribution

78%

70%

67%

78%

of the public say working conditions

of the public say how a business treats the environment

of the public say how a business treats its suppliers

of the public say how much tax a business pays in the UK

of MPs say how much tax a business pays in the UK

80%

of people aged 65 or over

60%

of 18-24 years old

Inform their views of a business

Believe tax is important to their view of a business

A sense of local presence

59%

of the public associate businesses in their local area with performing an important role by providing services

86% of MPs say the same of businesses in their constituency

18%

of the public say businesses in the local area are too focused on making big profits

27 /

Oliver Pauley /

Partner, Portland

CONCLUSIONS: BUSINESSES AND THE NEW REALITY

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Bringing Business Home /

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.

“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” 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. 29 /

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.

“Every business, even with the most rudimentary internal communications strategy, must ensure its employees are willing and eager to work for it” 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

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Bringing Business Home /

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. 31 /

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