CEO SURVEY: The chief encounter - Rob Gray checks out the finer details of PR Week's debut CEO survey and discovers there is a lot at stake, not least the reputations of most chief executive officers

This year, for the first time ever, PR Week has commissioned a substantial piece of research among UK chief executive officers at client companies.

This year, for the first time ever, PR Week has commissioned a substantial piece of research among UK chief executive officers at client companies.

The aim was to shed light on their perceptions of key communications issues ranging from corporate reputation through to crisis management, the internet and corporate social responsibility.

The survey, which is sponsored by Countrywide Porter Novelli, was carried out by market research specialist ORC International and took as its sample 100 CEOs spread across four levels of company: small, medium, large and dot.coms (see panel on Methodology, p16).

The findings tell us a good deal about the standing of PR in the eyes of business leaders. They paint a clear picture that corporate reputation has become more important than ever before and that the majority of CEOs take a personal interest in how their companies communicate with their stakeholders.

When questioned, CEOs across the board rated their corporate reputation as a marginally more critical asset than their brand. The vast majority of respondents (81 per cent) indicated their brand was either important or very important. Large companies and dot.coms (both 80 per cent) gave the highest rating to brand being very important. But the fact that companies of all kinds considered their brands to be a big asset shows that the concept of powerful corporate branding - as opposed to branding just for products - has really taken root in the business world.

But even more striking was the fact that 100 per cent of CEOs felt their reputation was either important or very important, with 92 per cent deeming it very important. The fact that reputation is seen as more of an asset than brand may to a degree be explained by the fact that some companies simply do not consider themselves to have a strong brand, corporate or otherwise. But even if this is so, it does not disguise the fact that to today's client company heads, reputation is perceived as all-important.

Which can only be good news for the PR industry.

But although the CEO survey reveals that PR is gaining credibility in the boardroom, it also shows there is still a long way to go. Less than half of the CEOs interviewed said their companies had a structured approach to crisis management in place.

And when asked which external advisers they would turn to first if their company faced a serious threat to its reputation, twice as many plumped for law firms as for PR consultancies.

'We fervently believe that there are not enough CEOs who own the communications issues in their businesses,' says Countrywide Porter Novelli UK chief executive UK Neil Backwith. 'Managing corporate reputation is critical and the tools available to manage it are communications tools.'

So what exactly do UK CEOs believe are the most important factors in managing their companies' reputations? Perhaps not surprisingly, products and services were highlighted as the strongest factor overall, followed by a strong management team, internal communications, PR, social accountability, change management and the CEO's personal reputation.

It should be noted, however, that there was a major variation in the responses between small and large companies. Products and services were felt to have the most important bearing on reputation so far as small companies were concerned - cited by 69 per cent of small company CEOs.

For the heads of larger corporations, however, a strong management team and internal communications were the most important factors in managing their reputations, ahead of products and services, which tied for third place with PR.

This may be explained by the fact that staff in small firms are close to the leadership, making it easier for them to become steeped in the nature of the firm whereas in large companies, scale and distance mean that managers have to deal with internal communications systematically. Hence the greater emphasis larger corporations place on management teams and internal communications processes.

Yet clearly processes alone are not enough to safeguard and enhance reputation.

There needs to be a focus on what Edelman UK managing director John Mahony succinctly describes as 'image-drivers'. For example, taking a leadership stance on key business sector issues or stressing corporate commitment to investment in the workforce.

All the dot.com CEOs questioned as part of the survey selected their company's products and services as an important factor in managing reputation - with only 20 per cent mentioning PR.

There could be several reasons lying behind this. For a start, in common with new businesses of every kind, much of the initial focus for dot.coms has to be on establishing and promoting what the business offers and how it delivers on that offer.

This is especially true for businesses whose prime channel to market is the internet, where many brands are vying to establish themselves and where fulfilment is key. Those companies that let down the consumer stand the very real risk of losing that consumer's business forever.

However, with venture capitalists placing so much importance on PR as part of a dot.com's business plan, it is surprising that CEOs in this sector did not rate PR more highly.

One point on which all were agreed however, was that CEOs do have a major contribution to make to the reputation of their companies as individuals.

As part of the survey, we asked respondents to rate their peers: which CEO did they consider to have been most successful recently in managing the reputation of their company?

Only one person was named more than once, receiving 12 mentions. No prizes for guessing that the man in question was Virgin supremo Richard Branson.

Among the reasons given for choosing Branson were: 'He promotes his brands very well as all CEOs should do' and 'He is in an extremely competitive market yet manages to retain moral standards and effective operations.'

Branson is frequently held up as a paragon of the PR-friendly corporate boss. That the survey threw up no obvious challengers speaks volumes about the relative lack of profile of UK chief executives. This may be bad news given that we are now living in a global economy. Moreover, it squares with the findings of Burson-Marsteller's recent CEO Reputation Study.

B-M's study showed that CEOs from the ten largest European revenue producers had a markedly lower awareness level among US opinion formers than US CEOs. Only 14 per cent of respondents said they had never heard of the heads of the ten largest US companies, while 41 per cent of respondents said they had never heard of European CEOs from companies of comparable size and global reach.

Conversely, 41 per cent of respondents said they 'knew a lot' about the US CEOs while only 18 per cent said they 'knew a lot' about the European chiefs.

'Being well-known in your own country will not suffice in today's business world, where corporate and personal reputations in key capital markets count for a great deal among investors and can so easily be neglected or damaged to the detriment of a company's share price,' says Burson-Marsteller London president and chief executive Allan Biggar.

Our sample was also asked which CEO they felt had been the least successful in managing the reputation of their company recently. Former British Airways chief Bob Ayling has the dubious honour of being the most popular choice in this category.

The reasons given for picking Ayling are quite revealing. 'He didn't understand the impact that decisions such as changing the design on the planes would have on the company's reputation,' said one of our survey participants.

Another said: 'It started with the tail-fins cock-up and went downhill from there. He was involved in losers, such as the Dome. You don't get involved in something that will fail.' A third compared removing the British flag from the tails of the BA fleet as a PR gaffe to rival Gerald Ratner's infamous admission that his company's products were 'crap'.

However, when looking at this issue it is important to differentiate between those companies that are run by a figurehead, as is the case with Virgin and Branson, and the more usual corporate model where the company has a set of values and ethics that go beyond the individual.

Figurehead companies take higher risks than more faceless corporations but in so doing may stand to gain more. In other words, they are gambling with their own reputation. Meanwhile, the case of Ayling paying for the damage to BA's reputation through the loss of his job illustrates the increasing power of public opinion.

The relationship between the profile and perceived abilities of a CEO and the reputation of his or her company is a fascinating one. The profile of most UK CEOs is miserably low but the situation is no better in the rest of Europe. In the US, however, the picture is somewhat different.

CEOs are seen as more of the personification of the organisations they lead. The larger the organisation the more the CEO needs to stand for in the eyes of its employees, customers, investors and regulators. Consequently they need to be media savvy.

Seldom is a positive corporate image as necessary as in the wake of a merger or acquisition. Especially as some statistics show that 70 per cent of M&As don't really work in that they dilute shareholder value.

With this in mind we asked our sample what they felt was the primary communications issue to be tackled in an M&A situation.

Overwhelmingly (53 per cent) said they chose communications with staff.

Only 12 per cent went for communications with customers, while ten per cent picked communications with shareholders.

The fact that so many CEOs picked staff communications highlights the fact that for a merger to succeed staff have to be integrated. So clearly CEOs have a vested interest in making sure staff are kept in the loop.

However, legal compliance issues often mean that staff cannot be informed of what is going on early in the process. The best course of action in such situations is to let the PR team in alongside the M&A advisers from early on, so that as soon as something can be announced to the wider world staff do not feel as if they are the last to know. Regrettably this is a practice seldom seen.

As everyone in the PR business knows, a corporate crisis that is handled badly can have a disastrous impact on reputation. At its worst, it can finish off a company for good. Yet as our survey highlights once again, many companies are ill-prepared for such an eventuality.

Only 49 per cent of CEOs said there was a 'structured approach' to crisis management within their organisations. As one might expect, the proportion was higher among large corporations (85 per cent) and lower among smaller companies (29 per cent).

This would suggest that large companies have budgets set aside for the implementation of extensive crisis management scenarios whereas small companies exist on a more informal and reactive basis.

At dot.coms, 40 per cent of CEOs indicated that there was a structured approach to crisis management at their company. This fairly low figure may reflect the youth of such businesses, many of which are focused on a frantic quest to build their brands and attract customers rather than on developing a wider-ranging management plan.

As these companies increase in size and maturity one would expect issues such as crisis management to climb the corporate agenda. Especially in light of the fact that there are potential dangers in doing business on the internet, as illustrated by Barclays' recent online banking problems which saw some confidential customer account information displayed to a wider audience. While many companies have plans for dealing with a 'traditional' crisis, far fewer have much idea of how to deal with an online crisis - even though this could become a global problem instantly. There is no shortage of evidence to support the assertion that the reputation of a firm in a crisis is determined by the way in which it communicates rather than by the responsibility it bears for the crisis itself.

But it is not just in times of crisis that corporations need to take a proactive approach to issues management. Increasingly, companies are being judged on criteria related to corporate social responsibility. This is no longer a superficial matter. Companies that profess a commitment to a good cause but have no depth to their relationship with that cause - for example, those that use cause related marketing in a short-term tactical way as a means of increasing sales - are being found out and in the worst cases may even find themselves the target of public disapproval.

Real corporate social responsibility needs to be deeply ingrained in the corporate body and manifests itself in policies that have a serious impact in the way the company operates - such as in areas such as environmental practices and ethical sourcing.

In light of the growing significance of this area, we asked our CEO sample how important social responsibility/corporate citizenship was to their companies. Almost a quarter (23 per cent) of smaller companies answered 'don't know' to the question. However, overall 76 per cent of CEOs felt that social responsibility/ corporate citizenship was either important or very important.

However, links with charities and local community involvement tied as the most popular forms of good corporate citizenship, ahead of a responsible environmental policy, schools involvement and ethical sourcing. The larger the company, the more likely it was to have links with charities either as part of a cause-related marketing programme or in a more philanthropic capacity.

Today it is becoming clear that a great deal of thought needs to be given to corporate social responsibility as the future of the business might even depend on the choices made. So how does PR fit into the overall scene, given the greater awareness of the need to manage reputation?

Our survey also found that 64 per cent of CEOs said they thought PR was more important to their company now than it was five years ago. Large company CEOs felt this most strongly - four out of five felt that PR was of greater significance now, compared to just under half of small company bosses.

One might argue that this points out that the larger an organisation the greater its visibility tends to be. And with visibility comes a host of PR issues.

Overall the leading reason given as to why PR is deemed to be more necessary now than five years ago was that corporate reputation had become a more important issue and companies needed to have the right image. Interestingly, among large companies the main reason was that competition had intensified and competitors were using PR to try and give them an edge. The increasing power of the media and a need to establish better contact and relations with customers were also given as reasons for the enhanced standing of PR.

'While it is great to see our importance grow, 64 per cent is a disappointing figure given the huge growth in corporate PR activity in recent years,' says Shandwick UK CEO Philip Dewhurst. 'It is clear that too many CEOs still do not fully recognise the contribution public relations makes to business.'

Looking forward, 67 per cent of CEOs think that PR will become more important to their companies in the next five years. Again large companies led the way, with 85 per cent of CEOs expecting PR to gain in significance as opposed to 68 per cent at medium-sized companies and 49 per cent at small companies.

Nine out of ten dot.com CEOs thought PR would grow in importance, which again indicates the breadth of PR issues facing e-commerce companies.

The most common reason given as to why PR was likely to become more important was that it was seen as a useful marketing tool that would help companies launch products and acquire customers. This was particularly the case for small companies, whereas medium and large companies gave more weight to PR as a means of maintaining profile and putting across the right image.

Further evidence that PR is being taken more seriously than ever before comes from the finding that 63 per cent of CEOs take 'direct responsibility' for briefing and liaison with PR consultancies and in-house PR departments.

It is revealing to note this is far more prevalent at large companies (85 per cent) than small ones (37 per cent), and the dot.coms have the highest figure of all at 90 per cent.

At research company ORC, divisional director of corporate brand management Milorad Ajder says: 'I found it amazing the number of CEOs of large or medium-sized companies who have a hands-on approach. It's indicative of a company culture that is becoming more and more taken with the need to communicate effectively and manage reputation.'

Our sample of CEOs was also asked how they preferred PR practitioners to present the results of their strategies and labours. Consumer surveys (27 per cent) was the top choice, followed by media analysis or press cuttings (26 per cent), advertising value equivalents (18 per cent), media reach (17 per cent), anecdotal gut feel (15 per cent), polling (13 per cent), focus groups (13 per cent) and interviews with target audience (12 per cent).

'I am delighted to see that surveys take first place - at last!' says GCI London chief executive Adrian Wheeler. But he added: 'I am sorry to see that the discredited AVEs are still listed at all.'

However, the CEOs' responses do reveal a glaring disparity between how top executives like to see PR activity evaluated and the methods preferred by PR practitioners. Last year PR Week undertook the Proof Survey, the most in-depth survey ever undertaken into the use of research and evaluation (R&E) by the UK PR industry. This was based on interviews with 200 PR practitioners representing a cross-section of both in-house and consultancy roles and disciplines.

Less than one-third of all respondents to the Proof Survey spontaneously mentioned surveys or polling as an R&E tool and alarmingly, less than one-third of consumer PR practitioners named consumer surveys as a possible measure. In addition, techniques such as focus groups were not widely popular - only 22 per cent of consumer PR people quoted focus groups as a possible tool for planning, with only 15 per cent actually making use of them. Such low usage by the industry is at odds with what CEOs want to see. And if this industry is to take advantage of the obvious opportunies for growth in influence this is a situation that many will need to address.



CHOOSING EXTERNAL ADVISERS

One of the most shocking statistics from the survey was the response to the question: If your company faced a major external threat to its reputation, to which external adviser would you turn first? While 21 per cent answered PR consultancy, exactly twice as many (42 per cent) would turn to a law firm first.

'PR consultancies don't do themselves any favours,' says Countrywide Porter Novelli CEO, UK Neil Backwith. 'We have failed dismally to get clients to understand that we are broad communications consultancies and not just media relations specialists. This has been an issue for many years.' GCI London chief executive Adrian Wheeler adds: 'Faced with a major threat to its reputation, a smart company gets its legal and PR advisors together in the same room as the leader of its non-execs, a representative of its employees, a representative of its sales and marketing or trade relations people, and any other major stakeholders in its business. This is its once-only chance to consult all who have a point of view and a serious interest in the outcome.

'We would all have to agree that PR has come a long way but still has a long way to go.'

Our sample of CEOs was also asked which external advisor they would turn to first in the event of an internal change management problem. 23 per cent opted for a human resources specialist, 21 per cent for a management consultancy, and five per cent for lawyers. Just nine per cent selected an internal communications specialist and one per cent, PR consultancies.



METHODOLOGY

ORC International interviewed 100 UK CEOs using Computer Aided Telephone Interviewing (CATI) in June and July 2000. The questionnaire was developed by PR Week, with input on market research issues by ORC.

Contacts were in the main identified using the Dun & Bradstreet Market Place UK database together with PR Week's own sample records. Of the participants in the survey, 35 were CEOs of small companies, a further 35 headed up medium-sized businesses and another 20 ran large corporations. The sample was completed by ten dot.com CEOs. These were sourced by ORC using desk research.

For the purposes of this research, small companies were defined as those with 49 employees or fewer, medium companies employed 50 to 499 staff, and large companies had over 500 employees. Dot.coms were simply described as companies trading on the internet.

Given that the bases for company size quotas are fairly small, figures should be viewed as indicative only.



IMPACT OF THE INTERNET

In February this year, PR Week published a series of guidelines on reputation and the internet as part of the CBI-supported Best Practice campaign that is now being managed by the IPR and PRCA. The clear sentiment among all the senior practitioners who contributed towards the debate that led to the framing of the guidelines was that the explosive growth of the internet, and the worldwide web in particular, was nothing short of a revolution in communications.

One of the guidelines that emerged from this Best Practice forum was: 'The immediacy of the internet means that organisations must be prepared to respond to issues and requests for comment/information faster than ever before. The reputations of organisations that are slow to respond to the demands of the cyber-world will suffer.'

The wording leaves little doubt that the internet has massive implications in terms of reputation management. Or at least that is the PR industry's take on it. What do CEOs think?

PR practitioners may be surprised or even horrified to learn that 44 per cent of CEOs don't think the internet has much impact on managing their company reputation. However, the bigger the company, the more importance is attached to the internet: while 60 per cent of small companies give it low importance, this isonly the case with 30 per cent of large companies.

'How many CEOs really know what's on the net,' wonders Visa International EU region senior vice-president, corporate communications Chris McLaughlin.

'How many know what's on the chat sites and the activist networks? The net is a critical place for forming future opinion. Shell has demonstrated that with its award-winning campaign last year, and the internet is ignored at companies' peril. Journalists search the sites looking for their reputation building stories. It must be watched and responded to.'

GCI London chief executive Adrian Wheeler is just as forthright, accusing those who doubt the internet's power to affect perceptions as 'living in cloud cuckoo land.' He adds: 'I would say two things to these happy people: watch out; and change your PR adviser.'

'With internet usage in Britain as low as 32 per cent, CEOs may well be lulled into a false sense of security, feeling little or no need to have an online e-communications strategy,' says Edelman UK managing director John Mahony. 'The online world is no longer about the national average e-usage and much more about vested interest groups who are increasingly becoming e-savvy. These key e-literate audiences are incredibly powerful influencers of reputation.'





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