Are you appropriately managing your Organisation's Brand?

As an expert in integrated risk thinking, I assist Boards and Executives to help prioritise their focus and management activities. That is, to focus on the big stuff and don’t sweat or overdo the small stuff. By the way, don’t forget that we all need to be good corporation citizens and do the right thing for all our stakeholders (both within and outside our organisations)....

So, how can we utilise and consider risk management thinking in the way we do business?
I will use a recent case study to elaborate on this further.

Today, I want to talk about Brand and Reputation and how management decisions to outsource and not effectively manage this situation can affect your organisation’s 'Reputation' risk and your stakeholders.  One recent example that occured in Australia relates to a wholesome and well established homeland brand: ‘Nannas’, famous for its frozen foods - in particular, frozen berries.  Similar to most Western economy organisations, Nanna’s outsourced its manufacturing operations (ie, growth, production and packaging) of berries to a manufacturer (in the Shandong province, China) to reduce its' manufacturing costs.

Unbeknown to most Australians, and recently reported in our local media, Nanna’s berries were grown in heavily polluted waters where, on a weekly basis, one person in this community dies of a cancer related illness due mainly to the environmental pollution. Recently, in Australia, some of Nanna’s ‘frozen berries’ consumers contracted Hepatitis A immediately after consuming the product.  Given the health scare and number of Hepatitis A cases, all Nanna’s frozen berries’ products were removed from supermarket shelves and our home freezers. 

Nannas’ Board and Executive were silent throughout the media and community outfall and it is unsure whether the organisation will ever fully recover from the reputational damage from this incident.  The Regulator was also questioned given they could have seen this coming as similar incidents had occurred in North America before this Australian incident?!

So, what can we learn from this case?  Hindsight is a wonderful thing! As a good corporate citizen, Nanna’s like all organisations should be meeting the acceptable levels of risk appetite and tolerance that its stakeholders and customers would expect of this organisation.  That is, at the very least, good reliable systems and services, quality products, no harm to the community and meeting the required health and safety standards. In this case, outsourcing the services to a Chinese manufacturer, did not outsource the risk to Nannas.  However, in the operational cost reduction drive to secure growth, profits and shareholder expectations, the company had inadvertently not ensured the consumer expectations for the highest product quality and health & safety standards.

Warren Buffet, a Global Authority on risk and investing once said: 

"It takes 20 years to build a reputation and 5 minutes to ruin it and if you understand this you will do things differently"  

So, my question to you is.... learning from this recent incident what would you do differently in your organisation?  Also, if you were in the same situation as Nanna’s Board and Executive, what would you do now?

The reason that I raise this is because, in this current environment there is a significant Organisational risk appetite  to amplify cost cutting and seek major operational efficiencies for profits and/or financial survival. In fact, we have seen over the past 15 years widespread and exponential growth of outsourced services to cheaper alternative suppliers, mainly in other countries.  The risk here is that some other part of your organisation is affected and compromised. Cutting out an operation does not mean a change in the operating model of ensuring health and safety, quality, reliability of the productions, products and services. Management and effective monitoring of outsourced services needs to ensure that there is a high standard of quality of service, product and standards for employees, consumers and stakeholders.  Also, in the outsourced servicing countries, your organisation should ensure it is a good corporate social citizen by ensuring that the health and safety of suppliers’ employees and communities are met as well.

What New Gen Consulting do and how we help organisations is having Board directors and Executives periodically reflect on their business by undertaking a ‘reality’ health check on  the organisation’s strategic and operational areas by walking through an environmental scan of the organisation's business (using the traditional SWOT, PESTL approaches). We also take into account the risk tolerance expectations of each key stakeholder of the organisation, ranging from external regulators, competitors, shareholders, consumers, standard setter directions, industry associations, partners and internally in terms of the board, management, employees and suppliers. 

Sometimes, as Board directors and Executives of our organisations we get into ‘group think’, ‘blind sided’ thinking without taking a real fresh look of what are the things that matter to all our stakeholders and what our expected outcomes and associated risks in getting there are.  We tend to get hooked into fad programs (such as cost cutting, transformational change and outsourcing) without calculated risk consideration of the compromises that are made and whether they would be tolerated or not tolerated by our key stakeholders. And on top of this, we are trying to figure out how we navigate in a world of fast changing technology, big data, social media communications and security without understanding what real upside and downside risks we need to effectively manage and who we are really managing for. Let’s not forget our Customers, our Shareholders, our Regulators, our People, Suppliers and our Industries. It’s a risk balancing act which requires Boards and Executives to understand what they are really there for and that each decision or non-decision made has a consequence with a big or small unacceptable risk attached. 

Regular ‘reality’ health checks assist in fleshing out what areas are compromised or managed to an unacceptable risk level. The key is to work out what needs to be done and it all depends on whether it is the big stuff (ie, not tolerable and needs to be fixed urgently) or it is the small stuff (ie, is tolerated by all stakeholders and would not impact on all strategic outcomes of the organisation).  It is only by objectively understanding our business and stakeholder context that this can be done.

I hope that this blog reinforces some of the responsibilities of boards and management and also the importance of considering each key stakeholders’ risk appetite and tolerance for all aspects of your organisation. Regular reality checks from a helicopter and objective view will facilitate fleshing out the not negotiable big stuff from the small stuff. This is so that your Board and Executive can confidently make better decisions and improve management actions to achieve better outcomes.

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Thank you for taking the time to read this.....

This is a transcript from my recent video log (on 1 March 2015)