The Reputation Imperative: Why North American Utilities Still Don’t Get It

by John Patterson, Reputation Institute

In the “2013 Global Reputation Leaders Study,” Reputation Institute spoke to more than 300 executives at some of the world’s largest, most influential companies and heard variations on this storyline: As much as reputation leaders (a diverse group, but most frequently the senior communicator, chief marketing officer or the head of business strategy) would like to tell the CEO and board that everything is under control, when it comes to stakeholder relationship management, everything is not under control.

Most companies agree reputation management is important, but few know what they should do about it.

Although 79 percent agree that we live in a reputation economy, an economy where who you are matters more than what you produce, only 20 percent say their company is ready to compete in it. Unfortunately, U.S. and Canadian utilities have not been able to store much reputation capital in recent years, as this is one industry that has weathered the global financial crisis better than most with the general public across North America.

Each spring since 2006, Reputation Institute conducts a syndicated quantitative research study across 34 countries and asks the general public to rate hundreds of organizations on the trust, admiration, good feeling and esteem they have for the largest companies in each market.

This Reputation Pulse score between 0 and 100 is a perception and an emotional response to a company’s ability to deliver on seven rational dimensions of reputation: products and services, innovation, workplace, governance, leadership, citizenship and financial performance.

This article analyzes 11 utilities on both sides of the 49th parallel and how they have been unable to build up enough reputation capital to get out the “sea of sameness” and remain a reputation-challenged industry in 2013. Southern Co. was the only North American utility to enjoy a strong reputation (70.32), and Manitoba Hydro at 62.68 was the only Canadian utility to score above 60, signifying an average reputation. In all, 10 of the 11 utilities included in this special report for Electric Light & Power scored in the average/weak category, with Hydro One at 49.80 bringing up the rear. Five other U.S. utilities—Duke Energy Corp., Exelon Corp., Florida Power & Light Co., Xcel Energy and Constellation Energy Resources LLC—scored within three points of one another in the low- to mid-60s, and the remaining three Canadian utilities—BC Hydro, Hydro-Quebec and Fortis Inc.—were all in the low 50s.

What Drives Corporate Reputation in the North American Industry?

The top three reputation drivers for the utility industry are governance, innovation and citizenship, composing just less than half (47.4 percent) of a utility’s reputation (see Figure 1).

figure 1

Because of the nature of the products and services they provide, utilities’ corporate reputations are influenced more by how they are run and what they give back to the communities where they operate, pushing governance and citizenship into dual prominence as reputation drivers for the industry. The utility industry is one of only a handful of global industries of the 25 studied by Reputation Institute in 2013 where products and services was not the No. 1 reputation driver for consumers; governance is most important largely because of a lingering BP/Macondo or Tokyo Electric Power Co. Inc./Fukushima effect, which places consumer expectations of the ethics and transparency of energy and utility companies on a higher level than other industries not tainted by recent scandal.

Each dimension alone accounts for more than 11 percent of reputation, and the difference between the leading driver (governance at 18 percent) and the lowest-rated one (financial performance at 11.8 percent) in 2013 is just more than 6 percentage points.

Compare today’s picture to the utility reputation dimension weights back in 2007, when TXU Energy Retail Co. LLC was involved in the largest leveraged buyout in history and most North American utilities were operating in a macro environment of strong economic growth and a bullish stock market. Back then, citizenship (20.5 percent), products and services (19 percent) and innovation (14 percent) were the top three drivers, followed by governance, workplace, leadership and financial performance.

Building a Strong Utility Reputation Through a Systematic Approach

During the past two decades of foundational work with some of the world’s most progressive companies, Reputation Institute has observed four elements that are core to a reputation management system’s rise to the top: business rationale, intelligence and strategy, management and accountability, and integration. Companies that manage their reputations well are working with these four elements in a structured way that brings clarity and focus to their efforts. In return, that tends to enable companies to develop more profitable and more highly respected businesses than companies that don’t.

How does your utility measure up when it comes to the following 16 elements of a world-class reputation management system?

Business Rationale

  • Integrated company purpose
  • Corporate reputation rationale
  • Defined stakeholder ecosystem
  • Leadership alignment

Intelligence and Strategy

  • Systematic evaluation
  • Priorities and success metrics
  • Corporate reputation strategy
  • Corporate narrative

Management and Accountability

  • Collaboration and relevance
  • Planning and simulation
  • Cross-functional management
  • Executive accountability

Integration

  • Corporate narrative activation
  • Corporate narrative embedded across touch points
  • Sustainable ambassador/advocacy
  • Transformational investments

    Conclusion

    Like re-engineering and total quality management (1990s) and leveraging enterprise resource planning investments in IT (2000s) before it, reputation management is coming of age as a boardroom issue in the 2010s. Coming out of the worst global recession in 80 years, Reputation Institute’s research shows that the companies that are winning license to operate and benefit of the doubt are the ones that understand the new normal where stakeholders rule. Customers, investors, regulators and potential employees all want to know what a company stands for. Making the grade is about trusting a company to do the right thing, and demand is at an all-time high in 2013 although only 15 percent of global organizations are Phase 4/5 companies (see Figure 2).

    fig 2

    The reputation journey continues, and North American utilities have a long way to go to escape the industry comparisons to big pharma and clueless telecom/wireless carriers when it comes to reputation management. It takes far more than research; rather, it involves taking a data-driven approach to managing all stakeholders—from associates to influencers to commercial audiences—because a one-size-fits-all strategy is doomed to repeat mistakes. It takes using the intelligence gained from stakeholder conversations in shaping strategies and initiatives that clearly demonstrate to the world who the company is and what it stands for. It also takes more than campaigns. It is about implementing the company’s promises and commitments into all touch points, and that takes a different kind of governance and co-creation than most utilities are used to. Is your organization ready to face the reputation imperative of the 2010s?

    John Patterson is a New York-based senior advisor at Reputation Institute. He has worked with clients and written about the global energy and utility industry for 20 years at Burson-Marsteller, Ernst & Young, Capgemini and Ketchum, and is an honors graduate of Harvard College. Reach him at jpatterson@reputationinstitute.com. For more information and a free report on your utility’s Reputation Journey, visit www.reputationinstitute.com/reputation-challenges/take-the-reputation-diagnostic.

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    The Clarion Energy Content Team is made up of editors from various publications, including POWERGRID International, Power Engineering, Renewable Energy World, Hydro Review, Smart Energy International, and Power Engineering International. Contact the content lead for this publication at Jennifer.Runyon@ClarionEvents.com.

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