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The Conversation - June edition

Jun

Welcome

Welcome to the June edition of The Conversation.

In this edition, we examine integrity, the second of six themes that we expect to define corporate behaviour in 2016.

We have some exciting Sermelo news to update you on, as well as hearing from Julia Faurschou at Investment Advisor and Daphne Demetri from the Oxford University Centre for Corporate Reputation. Both will be answering some pressing questions around 'integrity' in our regular Forum section. 

We will also hear from Michele Terraneo, a director at SRI Consulting in Lugano, Switzerland. Michele will be examining how integrity has become more of a cultural challenge, rather than a communications challenge. 

As always, we love to hear your feedback so please do get in touch with us at info@sermelo.com with your thoughts and comments.

A word from our founder

Warren Buffet, one of the most successful investors in the world, is known to look for integrity in the companies he invests in. His advice is clear, “in looking for people to hire, look for three qualities: integrity, intelligence, and energy.  And if they don’t have the first one, the other two will kill you.”

Integrity is a vital part of the culture and values of any organisation, and it is commonly agreed that it is not possible to achieve sustainable success without it. Having the right measures to ensure it remains a prevailing force throughout an organisation, and the ecosystem it influences, is increasingly important. While reputation is subject to many factors and is a measure of what you do, integrity is the bedrock that defines who you are and the behaviour we can expect.    

Revelations such as the Panama Papers represent huge reputational challenges for the organisations involved or implicated, as it only adds fuel to the growing trust deficit between society, businesses and government. At the most basic level, all business relationships are built on trust, and integrity is key to build trust with your employees, your customers and the wider society. Integrity is crucial to long-term business success and in a hyper-transparent world, its value cannot be underestimated.

Sermelo news

We are delighted to announce the promotion of Tom Clive, who will be joining the management team as Associate Partner. Tom joined Sermelo over four years ago and has contributed to the growth of the company throughout this time. In addition to his excellent writing and media relations skills, he has demonstrated his ability to lead teams and develop the capabilities of his colleagues.  He is also very adept at finding creative solutions to challenges set by clients and is a natural communicator – all in all, he’s a very good fit with Sermelo!

We are also pleased to welcome Alexander Kallman to our team. Alexander joined Sermelo as a Consultant in May 2016.  He is a responsible for conducting insight and analysis in sectors ranging from financial, property and retail, which draw upon his knowledge of the media, as well as international politics. He has previous experience working with non-profit organisations and non-governmental organisations (NGOs) in the United Kingdom and Sweden.

Alexander has an MA in International Peace & Security from King’s College London and a BA in Middle Eastern Studies from Lund’s University, Sweden, where he was a key member of the Supplemental instructions program. He speaks English, Swedish, Norwegian and Danish.

Elsewhere in Semelo news, the team will be climbing Scafell Pike in July, as a pre-training exercise before attempting the ’Three Peaks Challenge’ in 2017. The Three Peaks Challenge is to climb the highest peaks in Scotland (Ben Nevis), England (Scafell Pike) and Wales (Snowdon) in ‘one go’!

Client news

Alcoa
We are pleased to share that we have begun working with Alcoa, the global leader in lightweight metals technology, engineering and manufacturing. Alcoa’s products are used worldwide in aircraft, automobiles, commercial transportation, packaging, building and construction, oil and gas, defence, and industrial applications. 

BLP
We have also recently completed several projects with Berwin Leighton Paisner (BLP), an international law firm providing services in real estatefinancelitigation and corporate risk, private wealth and tax.  The Sermelo team developed their partner reports covering all financial and CSR aspects of their business.

FM Global
We recently launched the Resilience Index, developed by FM Global, which is the only study in the world to rank 130 countries by their overall resilience; combining economic, risk and supply chain qualities to form an overall global ranking. Generating coverage across national and trade publications – from The Times and BBC World Service to trade publications such as Enterprise Risk – the index and its content have been well received, and will continue to form a core part of FM Global’s communications over the coming months.

Michele Terraneo, Director at SRI Consulting

Sermelo insight

The importance of integrity in today’s world

The way that organisations demonstrate integrity has changed a lot over the past few years. In the old world, organisations would carry out ad-hoc activity that was deemed as ethical, and then look to promote these actions as much as they could to all relevant stakeholders. Following this, it was back to every day operations.

In other words, integrity represented targeted activity that could help drive a better reputation.

Now though, integrity has to be a fundamental part of business – i.e. – it’s about doing the right thing ‘even when nobody is looking.’ The digital age has compounded this, where companies are constantly under the spotlight from all stakeholders, even their own employees in the form of ‘whistle-blowers.’

The reputational fallout when companies are caught acting in a way that is unethical has become enormous. The Panama Papers earlier this year is a good demonstration of this, where 11.5m files were leaked from the database of the world’s fourth biggest offshore law firm, Mossack Fonseca. Numerous international leaders have been caught up in the scandal, from David Cameron to Vladimir Putin. In fact, it is not just individuals and companies that have had their reputations’ tarnished, entire countries (such as New Zealand that was mentioned nearly 61,000 times) has suffered as well.

So with this in mind, how can companies today build a culture of integrity that can withstand the increasingly glaring spotlight of today’s world?

The answer lies in effective employee engagement.

Employees (as brand ambassadors) have to be motivated and inspired to act in a particular way on a day to day basis. It’s about much more than simply reading up on their company’s CSR initiatives – the integrity of a company defines the way that all of its people engage with all stakeholders, including fellow employees, customers, suppliers and the general public.

It’s vital that the right tools are in place to do this. Employees must be given clear guidelines on what integrity means to their organisation, and then the freedom to apply them to their day to day activity. Empowering employees to do this means more than simply ‘handing out’ corporate ethical guidelines. Workshops should be held where co-workers contribute to the definition of integrity within the company, and share ideas on how integrity can manifest itself in day to day activity. Creating this culture of inclusion will help employees feel part of the strategy, and motivate them to comply.

Aside from including employees in the development of the notion of ‘integrity’, the right tools must be put in place from the top down that reward employees for acting in the right way. Simple things like motivational plaques, performance graphs, monthly employee awards, as well as a structured CSR programmes can certainly help this.

As leadership no longer just comes from the very top, all senior executives and line managers must be trained to lead (and act) with integrity. Ultimately, this begins with the CEO, but organisations today are siloed into numerous different teams and departments which has created hundreds of leaders within many organisations. They are vital in building a culture of integrity and must be able to cascade information down from the very top.

Integrity today has become much more than endowing an organisation with good principles or an adopting standard – that is just communications. Building integrity today is a cultural challenge, having every single person really believe in it and act accordingly. The good news is that if organisations can do this, they will reap the benefits, building trust with customers, building their reputation, which will ultimately drive sales.

By Michele Terraneo, Director, SRI Management Consulting SA

The Forum

Looking specifically at the theme of integrity, we posed the following questions to our two guests on The Forum this month:

1. What are the most important characteristics to demonstrate integrity?

2. Is there a causal link between integirity and the financial performance of a company?

3. More generally, how has the digital age altered the dynamics of reputation management?

Julia Faurschou, Reporter at Investment Adviser

1. The most important characteristics for a business to demonstrate integrity are honesty, transparency and consistency. Companies must be honest with their customers or clients in order to gain and keep their trust. Transparency builds a client’s confidence in the business. Consistency shows customers that they can rely on a business to continue to deliver what it promises. It is important that these characteristics of integrity are found at all levels of the business, not just the consumer-facing side.

2. While it is impossible to say with certainty that there can be a causal link between integrity and the financial performance of a company, it often proves to be true. This is particularly important for companies that rely on the long term or repeat business of their clients. If a client suspects a lack of integrity in a company, they will often move to a competitor with a more reliable reputation.

3. The digital age has made it easier than ever for customers to share their experience with a company to a wider audience. Review websites give consumers the opportunity to share both good and bad experiences, which can drastically influence a prospective client’s decision when choosing between competing companies. It also allows companies to share more about their business online, which helps build their reputations and lets consumers make a more informed choice.

Daphne Demetry, Research Associate, University of Oxford

1. Two characteristics have become increasingly important in conveying a sense of moral authenticity. The first is the founder's values that created the organisation's "philosophy." Here, integrity is linked to the chosen values of the entrepreneur, owners, or members. A great example of this is Ben and Jerry's ice cream, a company that is intimately associated with the founder's principles for social responsibility (over sheer profits). Second, transparency is key in demonstrating integrity. By transparency I mean (most often) showing consumers more of the production process, giving them a glimpse of organisational life.

2. The recent shifts in consumer culture towards alternative consumption practices indicate that issues of integrity are a growing concern for business stakeholders. Consumers are increasingly seeking out unique and distinctive goods from what they judge as morally sincere firms. In these cases, buyers place value not on the sheer product itself, but instead the more on the abstract representation of what the product and company stands for. An example of this is the recent rise of microbreweries, despite zero differences in blind taste tests with mass-brewers consumers have been propelling the craft brew movement based on the identity of these small firms and what they stand for in contrast to mass consumption.

3. The digital age has certainly changed the dynamics of reputation management - for better or worse. One benefit to the rise in social media outlets is that it enables companies to engage with their consumers in a personal way. Moreover, buyers can interact with other buyers in meaningful conversations over a product or brand, what academics call "brand communities," and promotes loyalty to a company. However, there are dangers to this constant accessibility; most notable is leaving the door open for increased scrutiny from consumers. Sustaining a sense of authenticity in these online engagements is a new balance that organisations will need to develop.

Out and about

Fintech and the future of cash

Last month, we attended a breakfast briefing hosted by BritishAmericanBusiness. Janine Hirt from Innovate Finance provided an overview of the areas in which fintech is changing financial infrastructure – namely payments, alternative finance, personal wealth management and challenger banks – and how it is also playing a role in reaching the 2 million unbanked or under banked UK citizens.

Alain Falys, CEO of YoYo Wallet, a mobile payment and loyalty app, provided a first-person view of the sector. An interesting takeaway from the session was about why London has become the world’s fintech hub. Compared with America where Silicon Valley is hours away from the financial capital of the country, New York, London has the talent and stakeholders neatly grouped in one place. And the regulatory environment – notably the FCA – is far more favourable towards innovation than in the States. Not to be dismissed as a fad, fintech is definitely here for the long-haul.

Diversity as a business strategy

As recent members of the Norwegian British Chamber of Commerce, we attended an event at Statoil’s headquarters which saw diversity put firmly at the centre of the agenda. A panel of speakers – from law firm Dorsey & Whitney, Google, Statoil and Henley Business School –discussed the progress being made at their own companies, and identified areas for improvement. All were agreed on the importance of diversity for businesses, and none more so than Google’s Cassiano Mecchi (Diversity Programs Manager) who argued that the business must reflect the diversity of its customers in order to serve them as best they can. A fascinating evening.

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