Riku Ruokolahti: Compensation and Goals
“Winning ideas are stillborn if they aren’t genuinely welcomed.”
Context determines the objectives
It would be nice to set a clear, numerical goal that works for everyone. However, we simply cannot do that. Setting reputation goals is contingent on the business context and the company’s strategy—or, to use a term that everyone understands in the same way, the success plan.
This makes it difficult to break down goal-setting into concrete terms. The answer depends on this and that. This is a surefire recipe for success in business schools, but in real life, goals really need to be set in stone. Otherwise, they don’t exist, and you can never achieve them or fail to achieve them. In this sense, setting goals is a daunting task. That is precisely why numerical support is often needed to hold onto. We need empirical evidence to show that the goal is actually achievable or that it won’t just happen on its own without any real effort, like that legendary dinner at Manu’s. That’s exactly what we’ll explore in this chapter.
Are you an attacker or a defender?
Before we delve into the actual industry, it is important to define your company’s role in the market. Many of the pioneering reputation management organizations that have influenced the content of this book find themselves in a defensive position when it comes to reputation. Such companies have often cared about their reputation before—even before any actual methodology existed. And, as is often the case, it is precisely these pioneers who are the first to adopt new methodologies. These companies are defenders by nature. Typically, they already have a very strong reputation—perhaps the strongest in their industry.
Competitors often have a one-sided view of these companies: “They have it easier because they’re so well-known and their reputation is so strong.” From the inside, however, the situation is quite different. A strong reputation is based on a strong track record, which must be lived out in the organization every single day. Otherwise, it will crumble. The inner world is best revealed by the question: “Would you want to be the leader on whose watch the reputation of a historical hero crumbles?” Of course you wouldn’t. The responsibility weighs heavily on the shoulders of those involved. How can you really win this game if the best outcome is that nothing happens? It certainly isn’t worth taking risks! But if the organization does nothing and participates in nothing, that is a risk in itself. The company could become irrelevant. Something must be done, but what?
In our experience, defenders need all the impact analytics they can get to identify areas that need patching. The focus is constantly on risks, rather than on new gains. People are working tirelessly on every front to ensure that the organization meets constantly changing expectations and maintains its historic standing as a reputable company. New metrics are awaited with a mixture of fear and trepidation. After all, the reputation has held up, hasn’t it?
The previous section outlined the common thread running through the defenders’ goal-setting: maintaining their position in the market. Let’s break this down in a bit more detail. In order to assess their position in the market, they must understand not only their own reputation but also the market itself. We previously discussed in detail the process by which an organization’s reputation is formed and updated. An organization’s reputation arises as a synthesis of its own actions and public expectations. Public expectations of the organization, in turn, arise as a result of the external operating environment. In practice, this means that organizations’ measured reputations fluctuate, even if their performance remains stable—and, of course, performance is not stable either. The reputation market is therefore by no means stable.
If a defending organization wants to maintain its position in the market, it must focus its goals on market fluctuations rather than on its own reputation. It must observe how the market is changing and defend its position in relation to it. The adjacent page provides an example of changes in reputation in Finland over the past seven years.
The trend data shown in the figure is based on an annual survey of the reputation of 60 different organizations. This sample of companies is structured so that half of them—30 organizations—are fixed. The fixed organizations remain the same in every survey year. The other half of the sample is selected at random. This allows us to build a diverse and stable sample that is representative of the times. T Media has been tracking the development of the reputations of companies and organizations in Finland in this standardized manner, using Reputation&Trust, since 2013. This is the market data mentioned earlier, against which a defender could measure their goals.
Let’s take employer image as an example. Market data clearly shows that, on average, organizations have succeeded in improving their employer image. The trend line is pointing upward. If the employer brand of an organization defending its reputation has remained at exactly the same level throughout the entire measurement history, the situation is that the overall market has caught up with the defender’s position. The situation remains the same if the defender has improved its employer brand less than the market average. To maintain its position relative to the market, the defender would have had to develop its own employer image at the same pace as the market average has improved. If, on the other hand, the improvement were faster, the defender’s position relative to the market would strengthen. And hypothetically speaking: if employer images were to decline sharply on average next year but the defending organization itself managed to keep its employer image nearly at the same level, this would result in the defender’s situation relative to the market improving, even if its own measured employer image declined slightly.
We discussed the employer brand merely as an example to illustrate the mechanics of how a defensive organization might set its goals in relation to the market. In the example, we used the Finnish market without specifying the industry further. In many cases, it makes sense to consider only one’s own industry as the market and compare one’s own performance directly to the industry’s average figures.
A defender can also link its reputation goals to overall market trends. In practice, this would mean that the goals would be set using the mechanism described above, but the focus would be on changes in overall reputation. However, we often suggest examining individual reputation components in addition to overall reputation, as in the employer image example above. The reason for this is either the exceptional impact of the selected component in statistical analyses or simply that success in that area—or maintaining a distinction from the rest of the market—is particularly aligned with the company’s business strategy, i.e., its roadmap to success.
At this point, I’m sure we all agree that a defense attorney’s job isn’t about sitting back passively and having a bed of roses. At least not if reputation goals and management incentive schemes are tied to the overall market. A company must live up to its reputation every single day of the year, preferably without a single misstep, and at the same time, it must figure out how on earth to maintain the lead it has achieved over its competitors. Reputation metrics don’t fluctuate much, and every measured moment when the relative level is maintained is, for the current management—and in the best case, for the entire staff and company owners—a success, a veritable lucky day, on which reputation-linked bonuses are more than earned.
It's more fun to be on offense
The attackers’ job is more fun in the sense that the goal this time isn’t to maintain the status quo forever. Heck, in this game you can take risks and win! Whereas a defensive organization identifies risks through impact analyses, an offensive organization looks for ways to stand out and make an impact. Particularly delicious attack plans emerge, for example, around the issues and phenomena described in the following sections.
A fictional organization, referred to as Food Industry Inc., has long worked with its customers. Management has been troubled by the fact that the company interacts with its customers only indirectly, through retailers. The company has only indirect control over how customers encounter the company and its products in the store. Various options for improving customer engagement have long been considered, and many have also been tried. There are product-related clubs, recipe banks, contests, and so on.
This issue has recently gained further traction based on analytical data. According to Reputation&Trust, Elintarvikealan Oyj’s weakest reputation dimension is specifically interaction. The general public has a measurable perception that Elintarvikealan Oyj does not really listen to or understand its stakeholders.
“Do they think we’re arrogant? – Damn it.”
To top it all off, data analysis, in all its ruthlessness, shows that it is precisely this interaction and the associated perceptions of Food Industry Plc that influence the stakeholder support we enjoy and even directly affect purchasing intentions, just as much as perceptions of our products and services.
What conclusions should be drawn from the situation described above? The conclusion is that Food Industry Plc had correctly identified its focus areas even before the measurements and data analytics, but the measures taken have not yielded the desired results. The situation calls for significant improvement, which is unlikely to be achieved with current resources and operating methods. The issue could be summarized as follows: management’s strategic analysis and analytics based on collected data align and point in the same clear direction, yet progress remains stagnant.
At this point, it’s clear that we need to do things differently than before. We need new ideas, and management needs the courage to embrace them—otherwise, nothing will change. Of course, it would be tempting to keep up the “good work” that’s been done, hope for the best, and blame retailers and consumers for not understanding if, once again, nothing changes. However, this isn’t a suitable game plan for an attacker.
Now is the time to strike
It is difficult to draw out ideas, resources, and performance from an organization if the goals are not clear or if they are presented merely as vague aspirations for the organization.
It would be extremely important to make changes to our assessments of the interaction dimension —that kind of approach is not the approach of a successful attacker. What kind of change are we looking for? How can we determine that we have succeeded in our work? How much is enough? Those are a few questions that need to be answered.
Goal-setting and rewards are the topic at hand, which is why we are returning to the measured findings. At this stage, we should know how much reputation-related assessments have fluctuated among companies throughout history, and, on the other hand, how much assessments of interaction specifically have changed over time. Fortunately, we have exactly that data at our disposal.
The chart below provides a fairly comprehensive overview of the track record of success in the field of reputation management. This data is ideal for organizations that aim to actively improve their measured reputation through specific actions. The table shows that if an organization increases its reputation—as measured Reputation&Trust—by 0.15 units (on a 1–5 scale), its performance ranks in the top quartile of all successful organizations. In plain language, such a measurement result means that the organization didn’t just succeed—it succeeded brilliantly. Now, by the way, the bonuses are well-deserved. Cheers!
This kind of summary of empirical observations regarding changes in reputation provides a framework for the discussion of goals. We now understand what constitutes a good performance and, conversely, what constitutes an excellent one. A context has been established for setting goals. This is of paramount importance from the attacker’s perspective. Of course, goals can be pulled out of thin air, but is that really responsible toward effective leadership? Admittedly, leadership often sets its own goals. Be that as it may, whoever sets the goals must understand the scale of the challenge they’ve set, or the whole effort will fall apart.
What kind of goal would be appropriate for Food Industry Plc? It would be easy to hide behind the excuse that “it depends on the circumstances” (It depends on what resources we have at our disposal… and so on.) But we boldly propose that, in addition to overall reputation, Elintarvikealan Oyj set as its goal the development of interaction identified through strategy and data analytics. For this dimension of reputation, there is data exactly like the example data above regarding overall reputation. Although we do not publish this data in this book, in the case of Food Industry Plc, we can see just how much the interaction dimension has historically fluctuated among successful companies. And since interaction is precisely Elintarvikealan Oyj’s strategic spearhead, we propose that its development should be at a championship level.
The company wants to see genuine change in its operations—and immediately reflected in the metrics—rather than just excuses. This requires appropriate resources, a clear timeline, and commensurate rewards. This is precisely what leadership and rewards are all about when the goal is to genuinely support the implementation of the strategy and achieve success.
Many people were surely left wondering what Elintarvikealan Oyj could actually do. What would it take to elevate our interactions to a world-class level in the future? This brings us to the next challenge: the creative aspect of reputation management. Because that’s exactly what it is. By doing exactly the same things as everyone else, it’s hard to stand out.
When I say “the next problem,” I really mean it. The first problem is creating an organizational culture that is completely open to new, industry-transforming ideas. Winning ideas are dead on arrival if they aren’t genuinely welcomed. Now, Elintarvikealan Oyj is in a situation where winning ideas are more valuable to management than gold, because there is a genuine desire to implement them and achieve success. Of course, this does not automatically mean that every idea generated at Elintarvikealan Oyj from now on will be a nugget of gold. Nor does it mean that even if a nugget of gold were found, it would even be recognized. But now the pressure is on, and the question going forward is whether the company and its management will succeed in the task set before them. If they do, they deserve to be rewarded!
Riku Ruokolahti has written a handbook on corporate reputation and reputation management. The chapter published here, “Rewards and Goals,” is found in the second section of the handbook: “Systematic Reputation Management.”
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