I wrote last week about the importance of understanding your current reputation. I even argued that a reputation that runs ahead of reality can be as much of a problem, as one that is lagging. You can find it here.
This prompted a couple of conversations with in-house corporate affairs directors about the growing idea of reputation audits. In just the past month I have seen at least half a dozen new and established consultancies launch reputation audit offers, claiming everything from assistance with navigating future legislative change to developing strategy to identifying commercial opportunities. They promise to deliver new forms of intelligence, but don’t say how.
I am not saying that there is anything fundamentally dangerous in this approach. Who would argue against more information, more knowledge, and time spent on research and analysis?
But, at a time when the financial audit sector is working through the very definition of an existential crisis, I find it somewhat ironic to think that the foundation offer for a nascent risk reputation function should be something as old-fashioned as an audit.
As a former Director of Corporate Affairs for KPMG UK I know first-hand the criticisms of audit, and what is known in the sector as the expectation gap. Defined in a variety of ways over the years, the expectation gap generally refers to the difference between what people think an audit delivers and what the auditing profession actually provides. The public misunderstands the auditor’s role, and worse still overestimates what auditors can do.
Now some would say that is a self-serving justification posited by audit firms found wanting time and again in recent years. And others that what we have is a delivery gap, a quality gap or a performance gap.
But whatever your view you can’t get away from the fact that an audit is always going to have limitations – it is by its very nature an historic analysis. It is an assessment taken at a single point in time, made whilst looking in a rear-view mirror. It isn’t and cannot be dynamic.
Let’s put it another way. You don’t invest in a company, let alone run a company, on the basis of the audit
What we really need is new management information (MI) that can make reputation value a meaningful boardroom discussion. Not by putting an arbitrary figure on it, but by creating a framework and language that delivers an active and tangible assessment of corporate reputation across all critical stakeholders.
CEOs want data that enables them to make decisions in the manner they do with other functions. Risk officers want to know they have captured all potential risks, and more than that, they want to be able to quantify and prioritise them. Boards want a comprehensive, but simple, way to assess external risks and challenges to corporate strategy and direction. And executives – in finance, HR, etc – want consistent and relevant reporting and something that helps them operationalise a strategy to address the challenges.
Consistent boardroom MI that is easily understood and respected at the most senior levels in a firm, informs decision making. It should also embrace corporate purpose, and crucially evaluate reputation against established ESG dimensions, gaining an unequivocal understanding of beliefs and opinions across shareholders, stakeholders, partners and customers.