Tài liệu Corporate Reputations, Branding and People Management 7 pdf

44 Corporate Reputations, Branding and People Management Compelling place to invest Compelling place to shop Compelling place to work Customer retention Customer impression Merchandise selection Merchandise returns Image Attitudes to work Managers’ knowledge and behaviour Work structure Teamwork Training Attitudes to company Job context Ethical context Promotion Pay etc. Value for money Associates’ behaviour Turnover Revenue growth Profit contribution Figure 2.1 The employee–customer–profit chain at Sears (adapted from Kaplan and Norton, 2001). Further support for the central nature of the service encounter came from a Gallup poll in the USA of six major sectors on the factors influencing brand performance; it found that, for all sectors, the single most important factor in building brand loy- alty was employee behaviour (McEwen and Buckingham, 2001). In the case of the airline industry, interaction with employees was three times more powerful than any other factor, including product performance. On the negative side, poor employee performance was also important in customer dissatisfaction, particularly when there were no other features to differentiate among products or services. Nevertheless, the direct evidence in support of this service–profit chain is not all that convincing. Read the summary of a banking study in Box 2.1. Chapter 2 Managing corporate brands and reputations 45 Box 2.1 The service–profit chain in the UK retail banking industry Garry Gelade and Stephen Young, two psychologists working for major international consultants, have access to enormous data sets in the British retail banking sector that allowed them to conduct a rigorous study of the service–profit chain in four banks. Data were collected on the attitudes of 37 000 employees to the jobs and organizations; they also had access to customer satisfaction surveys and sales performance at bank branch level. These data allowed them to test the simple proposition of the serv- ice–profit chain that ‘satisfied and motivated employees produce satisfied customers, and satisfied customers tend to purchase more, increasing the revenues and profits of the organization’ (Gelade and Young, 2005, p. 2). The key link here is customer satisfaction being the mediating variable between employee attitudes and organizational performance (see Figure 2.1). The model Gelade and Young used involved a causal relationship linking positive employee perceptions of team working, job enablers and job support to organizational climate and commitment. These people management variables were thought to be the lead indicators of sales achievement, though mediated by customer satisfaction. Their data provided high levels of support for positive correlations of employee attitudes and climate evaluations with customer satisfaction and sales performance at the business unit level of analysis, i.e. the banks. From these data, they concluded that, in theory at least, an improvement As you can see from this discussion on the RBV and related ideas such as the service–profit chain, brands and reputations are dynamically linked to HRM. However, we need to be a little clearer about what brands, branding and reputations mean and how they are linked. We shall now discuss this question in a little more detail. Developments in branding and definitions Proponents of branding view brands as the central organizing principle for good management of a business and the most important intangible asset that an organization can possess. By and large, most big organizations with well-known brands, whether in the for-profit or not-for-profit sectors, offer com- modity products or services that can be relatively easily substi- tuted by others. One only need examine the competitive offerings of high profile brands such as Coca-Cola, Heinz, HSBC, Wal-Mart, McDonald’s, Nokia, Ford or even Cancer Research, and premium brands such as BMW and Moet- Chandon to see this. What they do share, however, are three attributes that distinguish them from their rivals: an attempt to create a compelling idea, supporting core values and a role in the organization that places brand positioning, purpose and values 46 Corporate Reputations, Branding and People Management in one standard deviation from the mean of scores in employee commit- ment would lead to an average 6% increase in bank sales. So if banks worked very hard to achieve such improvements in attitudes by raising average levels of commitment to at least the level of the most committed top third of employees, they would reap significant benefits. However, their data provided little support for the mediation effects of customer satisfaction and, thus, the role it plays in the theory of the service–profit chain. Though this should not be interpreted as meaning customer satisfaction is irrelevant to the links between employee atti- tudes and sales performance, other branding research also questions the idea that customer satisfaction is closely associated with customers buy- ing more or remaining loyal to the firm (Miller and Muir, 2004). Source: Based on Gelade and Young, 2005 at the heart of all key decisions (Brymer, 2003; Sherry, 2005). Many branding specialists share these ideas but offer additional attributes as their own contributions to the meaning and value of branding (see Box 2.2). They would also have little difficulty in subscribing to a definition of brands that suggests more than a name or symbol used to sell products and services, the usual impression held by non-specialists. We offer our own variation of a well-known definition by Kristin Zhivage as a working one for this book. This incorporates the people management dimension with the external view of marketers. A brand is a promise made and kept in every strategic, marketing and human resource activity, every action, every corporate decision and every customer and employee interaction intended to deliver strategic value to an organization. Chapter 2 Managing corporate brands and reputations 47 Box 2.2 Brands and business success Jon Miller and David Muir (2004) are consultants who argue cogently that brands and branding are, or should be, at the heart of business and treated as a key approach to creating shareholder value. They have identified five themes that are fundamental to understanding brands: ■ Brands enhance the value of a product or service beyond its func- tional value, so enabling organizations to gain by selling more and/or charging higher prices. By generating better cash flows, they help create shareholder value. ■ Brands are the source of alignment between an organization and its stakeholders, providing the basis for continuity and trust. Trust and loyalty, not just satisfied customers, are what generate revenues and long-term sales performances. ■ Brands are the outcomes of behaviour – every action taken by mem- bers of an organization has the potential to influence a brand repu- tation, for good or bad. Brand promises create expectations that are judged by the behaviour of organizational decisions and actions; promises have to be matched by delivery in every action, decision and customer interaction. The value of brands As noted in Chapter 1, the economic and social value of brands to organizations is increasing significantly. Studies by academics and consultants have shown that the contribution of brands to the top-branded companies can contribute between 20 and 70% 48 Corporate Reputations, Branding and People Management Box 2.3 Evian: an exceptional case that proves the rule? We have made the claims that brands and reputations are usually driven from the inside and that many brands are built on commodity products which are easily substituted. Evian demonstrates how powerful market- ing and branding can be in creating a brand from a commodity like water; however HR and people management seem to have no part to play in this success. But is this case unique and the exception that proves the rule that ‘it all stems from people’? Evian water began life as a medicinal product in the 19th century sourced in Evian-les-Bains on the shores of Lake Geneva, overlooked by the Alps. Matt Haig (2004) points out that the success of this prod- uct, sold in 120 countries and brand leader in the increasingly popular mineral water market, is remarkable, because it costs many times more than ordinary and free tap water, which is sometimes more pure than bottled water, and tastes little or no different. So what is behind its suc- cess? Clearly not price and product quality. According to Haig, it is the purity of its branding that has driven Evian into its leading position. Evian is marketed as a pure water, filtered many times, ‘untouched by man’, in an idyllic Alpine setting. It is also pure in the sense that there have been no attempts to extend the brand into other water products, such as fruit-flavours or sparkling water. In these senses, its success seems to be driven by marketing and image-making, which bene- fits from its chilly Alpine associations and from health and lifestyle advice that tells us to drink more water. ■ Brands only exist in the minds of people – they are perceptions held by consumers and are therefore public objects, not only assets of the organization. It is in this sense that people can be said to ‘own’ brands. ■ Brands can provide organizations with purpose and direction, helping align stakeholders behind the brand. In this sense, brand- ing should be part of the vision and mission of the organization. to the market capitalization of the parent companies, and that companies with strong brands consistently outperform those with weaker brands (Lindeman, 2003). The key message here is that brands matter a great deal in the valuation of companies and in helping those companies outperform their competitors. As a result, the valuation of brands on the balance sheet is becoming much more widely accepted in most advanced coun- tries. National accounting standards are changing to follow the early lead of the UK, Australia, New Zealand and France in allowing brand values to appear on balance sheets, with the expectation that most countries will follow American Generally Accepted Accounting Principles (GAAP) in capitalizing ‘good- will’ on company balance sheets and depreciating it according to its useful life, normally a much longer period than technol- ogy or other capital investments. These changes in capitalization have led some companies that once owned factories and other forms of physical, but depreci- ating, assets to divest themselves of these tangible assets and invest more heavily in intangibles such as brands that have a much longer useful life. Thus we are witnessing the develop- ment of companies that are little more than a collection of brands; ‘manufacturers without factories’ reliant on outsourcing production and services to developing economies such as India and China. Nike is a good example of this approach to doing business. However, as we can see in Box 2.4, these developing countries also recognize the importance of brands to the future of their economies and their major organizations. Chapter 2 Managing corporate brands and reputations 49 Box 2.4 The re-branding of Taiwan The Economist (2005a, 2005b) reported on the critical importance of branding strategy to Taiwan, which, according to the World Economic Forum in 2005, is the world’s 5th most competitive economy. In 2000, Taiwan made three-quarters of the world’s notebook computers. It also makes two-thirds of LCD monitors and four-fifths of PDAs. Now, apart from some high quality products, manufacturing is moving to China, in line with global trends in developed economies to shift manufactur- ing offshore. A few years ago no one would have heard of Taiwanese brands such as BenQ; now the Taiwan government sees branding of its companies 50 Corporate Reputations, Branding and People Management as the only way to compete. Previously, many of its companies made a living, just like BenQ, by making IT products for other companies that sell them under their own brands. This process is known as original design manufacturing (ODM) or original equipment manufacturing (OEM), depending on the amount of design and development con- tent. Taiwanese companies, however, are facing increased competition from China, which is developing ODM business too. At the same time, the number of big IT brands is consolidating, thus reducing the num- ber of potential customers for ODM manufacturers. Since IT manufacturing accounts for 15% of the island’s output, Taiwan’s government has long seen its mission to be to help guide these companies in new directions. In 2003, it created a development plan known as ‘Challenge 2008’, which set out a vision for Taiwanese companies being based on building world-class brands and concen- trating on cutting-edge technologies. ‘It called for an increase in total R&D spending from just over 2% of GDP to 3% within six years’ (Economist, 2005b). This would bring Taiwan up to the current level of the United States and Japan. The government would do its bit by pro- viding low interest loans and launching new transport infrastructure projects. BenQ was among the first of Taiwan’s big ODM firms to rise to this challenge of brand-building, when it was spun off from its parent, Acer, BenQ in 2001. Since then its branded business has increased from 25% to 35–40%. In 2005, it announced its intentions to buy an established brand – the mobile hand-set business of Siemens. Similarly, Acer was by 2005 the fifth-biggest producer in the world of personal computers and is one of the top sellers of notebook computers in Europe. Taiwan is also developing the flat-screen markets and those of computer games. One of the articles concludes by reflecting on the need for China to adopt a similar strategy, noting how some Chinese companies are spending heavily on building brands. This process is already evident following the purchase by Chinese companies of famous brand names, such as IBM’s computing division and Rover cars in the UK. Corporate social responsibility (CSR) The social value of brands is less clear but no less important. We have touched on the arguments that the global brands are a threat to governments and to ordinary people, again with Nike and Gap being a good example during the 1990s, when they were accused of exploiting workers in ‘sweatshops’ in Indonesia, Thailand and other parts of South-East Asia. A report from the San Francisco Global Exchange revealed that Nike workers in Indonesia were being paid 80 US cents a day, and asked the company to double this rate, the cost of which would have been around $20 million, the amount that Michael Jordan was being paid annually to endorse the brand (Haig, 2004). The consequences of this nega- tive publicity placed pressure on Nike and similar companies to champion the cause of exploitative working conditions and human rights abuses in these countries (Hilton, 2003) by raising wages and proposing codes of practice for working overseas. It is due to cases such as this one that companies have begun to take a genuine interest in CSR to minimize the risk to their brands asso- ciated with their social and environmental performance. CSR, discussed more extensively in Chapter 9, is sometimes seen as a cynical attempt by business to escape their responsi- bilities or as the latest in a long list of management fads; but it has at least two important justifications. The first is the com- mercial incentive to enhance brand reputations by being seen as a trustworthy business, good employer, good place to work and good neighbour in the community. As we shall see, becom- ing an employer of choice and securing a high rating in the various benchmarking exercises that rate companies on these issues has a major impact on their ability to attract and retain top talent. The second is the more defensive reason, which is to enforce companies that ‘breach the rules’ to adapt their prac- tices to meet ever-changing societal expectations. McDonald’s introduction of healthy meals to its menu is a good example of company responding to criticisms and legal challenge over its impact on rising obesity levels in the USA and UK. During 2002 it experienced its first drop in profits as consumers reacted to almost epidemic levels of obesity, associated in part with the high-fat fast foods McDonald’s and other fast food chains offered (Economist, 2005c). These chains began to compete on price, which was a sign that their brands were beginning to lose relevance to consumers. McDonald’s and other fast food com- panies responded by introducing new, healthier food lines, though whether this strategy will convince consumers that the Chapter 2 Managing corporate brands and reputations 51 companies have their interests at heart is another thing. Another example is British American Tobacco (BAT), which published its CSR policy in 2005 as a response to the public concern about its products (Arkin, 2005). Its senior managers argue that the health risks associated with smoking make it all the more imperative to act responsibly. In addition to the CSR arguments, social value is also associ- ated with extra investment needed by branded companies to improve products and services continuously and to keep them relevant. Again, research into this aspect of branding showed that less-branded companies launched fewer products and spent less on R&D than their more heavily branded counterparts. Indeed, economists who have looked into the effects of advertis- ing support this line of reasoning (Kay, 2004). Modern advertis- ing contains very little information about the nature of products and services on offer, especially commodity products and serv- ices. What they do contain is information that the company is able and willing to invest in the product/service and in develop- ing a relationship with consumers. And because most marketing people understand this ‘theory’, advertisers are drawn into ever more costly (some would say wasteful) advertising campaigns. Brand equity As the above theory of advertising implies, understanding strong brands requires a measure of relative value. For example, when comparing the brands of British Airways with Singapore Airlines or Virgin, or Dell with Acer and IBM, on what basis can we say that one is stronger than the other? The usual measurement is brand equity, which identifies the potential of a brand to add value: a set of assets (and liabilities) linked to a brand’s name and symbol that adds to … the value provided by a product or service to a firm and/or that firm’s customers. (Aker, 2004) Brand equity comprises four components, set out below in Table 2.1. We shall develop these ideas in Chapter 8, which deals with employer branding in more detail. 52 Corporate Reputations, Branding and People Management Linking brands and branding to HRM Branding research and the importance of people From this discussion of brands, it should now be apparent that there is a trend in the marketing literature towards recognition Chapter 2 Managing corporate brands and reputations 53 Table 2.1 Brand equity. Components What is it? Creates value by: Loyalty An emotional link Reduced costs of gaining between the brand new customers and customers that Loyalty creates brand cause them to ‘ambassadors’ repeat purchases Gives breathing space when changes are made Awareness Consumers’ familiarity People prefer the familiar with brand over the unknown Enables people to compose a quick mental shortlist of potential purchases Perceived quality Assessment of People more likely to pay Brand equity expected quality that for what they believe to a brand will deliver be high quality Associated organizations, e.g. retailers, more likely to ‘rent’ brand by stocking, networking, etc. Launch-pad for brand extensions Associations The images and ideas Creates interest and connected with the relevance to customers brand – what it Helps differentiate from means to customers competitors Sends signals to customers’ significant others – says something about purchaser to others Source: Based on Miller and Muir, 2004, p. 210 . employer branding in more detail. 52 Corporate Reputations, Branding and People Management Linking brands and branding to HRM Branding research and the. values and a role in the organization that places brand positioning, purpose and values 46 Corporate Reputations, Branding and People Management in one standard