Exploring Strategic Risk, a report by Deloitte, showed how traditional approaches have become inadequate in today’s socially driven world.
public relations with Lenox Mhlanga
Last week’s column revealed that while managing risk tended to focus on monitoring financial indicators, new technologies have emerged that disrupt old business models.
The key findings of Magna Carta Reputation Management Consultant’s inaugural Africa Reputation Index (ARI) that explores reputational drivers and attributes across key industries in South Africa, highlights the crucial need for executives to harness effective reputation management strategies to improve their understanding of consumer behaviour and chances of success when a crisis strikes.
Companies in similar sectors in Zimbabwe can draw important lessons from the study, though its roll out to the rest of the continent is planned in the near future.
Magna Carta’s Index, which was undertaken in collaboration with leading marketing strategy consultancy, Yellowwood, found that good governance is the top reputational attribute for telecommunications companies, while consumers want to see improved working conditions for government employees.
Banks, meanwhile, should distinguish themselves more in terms of their customer service offering. In food retail services people really want exceptional customer service, while with cars quality stands out as the most important reputational attribute.
“Detailed sectoral and comparative analysis is needed to enable companies to plan ahead of a crisis to improve outcomes and protect and enhance profits. If the impact of reputation is not well enough understood growth prospects will suffer,” says Katherine du Plessis, data analyst at Magna Carta.
The index enables high-level planning to limit reputational damage and provide companies in Africa with the tools needed to create an effective reputational management strategy that is a vital component of business sustainability.
The index ranks companies in five separate industries – car manufacturers, food retailers, financial services, public services and telecommunications companies — in terms of their key reputational drivers. Each company received a reputation score out of 100. 1,306 South African consumers were surveyed.
It shows that in the telecommunications and motor vehicle sectors, word of mouth is the most important driver of reputation.
“In telecommunications, recommendation is essential because people have such an affinity to their mobile devices; whereas with cars it is because of the pride that flows from choosing and paying for a desired and expensive asset. For both cell phones and cars, people aspire to make a choice that reflects their personal identity,” explains Du Plessis.
What stands out in the public sector is that a good working environment is seen as a key differentiator — this indicator shows that consumers want a clean, more efficient and pleasant experience.
“Frustration increases when dealing with government is a negative experience, or when strikes halt delivery of much-needed services. The counter to this is to improve internal working conditions by creating an environment which improves staff morale and happiness, as this will then filter through to service delivery and improved experiences,” says Du Plessis.
The survey finds that with vehicles, quality is most important reputational attribute followed by customer service. This is because consumers are likely to spend a lot of time selecting the right car to invest in and interaction with salespeople will be minimal and infrequent.
“It is unlikely a consumer will select a new car based solely on service, especially when a new, high quality vehicle resonates with his or her personal image or they have spent a lot of time researching the best car they can afford”, says Du Plessis.
In food retail services, which is known for visibility, people really want exceptional customer service.
“People in South Africa are used to shopping where it is convenient, but food stores are complacent in not driving customer service. If they were to differentiate themselves in their service offering, customers will travel further resulting in more business,” she says.
The top financial service providers are recognised for customer service, but they do not necessarily stand out from each other on their service offering.
“Customer service is the top reputational attribute, particularly being available and responsive to client needs, but not one bank stands out. The second most important attribute is integrity, an area where banks have experienced some reputational damage in the past year,” says Du Plessis.
Another important finding is that corporate social investment (CSI) had the lowest ranking out of the reputational attributes across all industries. This is not to say that CSI is unimportant, but other attributes have more weight regarding to corporate reputation.
The ranking of reputational drivers seems to follow reputation crises in various industries. For example, governance in telecommunications follows recent high-profile scandals in the sector.
“All measured attributes are important and so it follows that if a sector messes up on something like CSI in the future, you would probably find CSI jumping to the top of the queue as an industry reputational driver,” says Du Plessis.
What the study says, which is line with the global survey discussed in last week, is that reputational risk is on the rise.
“It is clear that in the digital age of rapid information flow and consumption, effective crisis management is quickly emerging as a vital component of business sustainability. The best of breed in measurement and analytics is needed to ensure reputation plays an ever-increasing role in corporate strategy and ultimately benefits, rather than damages, the bottom line,” says Sechaba Motsieloa, newly appointed CEO of Magna Carta Reputation Management Consultants.
Magna Carta will expand the index to other sectors and into other African countries, including Zimbabwe.
Lenox Mhlanga is an associate with Magna Carta Reputation Management Consultants. He has worked with World Bank Group and lectured in public relations at the National University of Science and Technology. He is a communications specialist with over 16 years’ experience. He can be reached at firstname.lastname@example.org