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Tough and getting tougher: managing reputation for Icelandic companies
18. nóvember 2002

Icelandic companies are operating in an increasingly dynamic and complex environment. The year 2002 has certainly been challenging for many companies as an usual amount of them have been involved in crisis or semi-crisis this year. However, there is reason to believe that Icelandic companies will become even more sensitive to external forces as the trends affecting the Icelandic society and economy for the past decade continue to accelerate. These seem to include (in no particular order):  

• Liberalisation of the economy and privatisation. For most of the past decade Iceland has been a part of the European Economic Area and has the same basic laws and regulations concerning economic mattes as the EU countries. Furthermore, the previously state run banks have now been privatised along with other important Icelandic companies. The financial sector has been liberalised and now privatised.
• Consolidation and mergers. Mergers and consolidation has characterised the small Icelandic marketplace for the few past years. Critics blame this for high prices of goods compared to Europe and North America.  
• Competition policy has been ramped up in line with the European Economic Area, resulting in tough action against some larger companies and subsequent controversy
• A stock market has emerged but investor confidence seems to be somewhat low after the technology sector imploded and a general economic slowdown replaced an economic boom. The market is heavily influenced by few large players who contend for the ownership and control of important companies
• The media has become more independent. Political parties no longer control the print media and the advent of the Internet has not only fuelled a dot. boom (and the inevitable dot bust) but also created a largely unregulated media space. Competition between the different media serving the Icelandic market is fierce
• Since the Icelandic market is small, many companies have grown through acquisitions abroad and aggressive marketing. Thus world leading companies in their respective niches have been created.
• Growing affluence, globalisation* and increasing education has contributed to consumers being more demanding and informed
• The linkage between politics and business has traditionally been strong, frequently resulting in companies (and sometimes their management) being drawn into political debate

A few examples of the crisis and near crisis that have shook individual companies and the Icelandic corporate world:  

• A world famous television programme depicts the company’s employers in an unfavourable light. This draws attention to a marketing campaign conducted abroad
• Conviction in court and heavy fines for illegal anticompetitive behaviour.
• Many company had their headquarters searched by the competitive authorities as a part of an investigation and inquiry into their practices
• Search by the police at company headquarters by the police following allegations made by a  business partner abroad which disrupted a major international business deal
• A sharp drop of share prices and layoff of the third of a company’s workforce

The part with the jargon and the diagram

Varey (1997)*** describes public relations as the “management of reputation” with the purpose of developing understanding in all parties to a situation or a issue.”. As Varey (1997) points out managers “must have a positive dialogue with other groups if they are to retain the ´licence to operate as a business.“ (p. 90).

These groups are called stakeholders**, they are “key groups of people or ´publics´ whose attitudes and decisions can affect your ability to do what you want to do in your business enterprise.” (p. 91).

Varey adds that once some interests of the organisation and the people external to the organisation coincide there is an identifiable stakeholder. Varey points out that most stakeholders are passive but those who are or become more aware of an issue or a problem are publics.

Companies do not choose their publics, rather it is the other way around. They form when people face a similar problem, recognise that there is a problem exists, and organise to do something about. Publics organise around issues and seek out those organisations that create the issues … As publics move from being latent  to active, organisations have no choice to communicate with them … active publics are the only ones that generate consequence for them.” (p 94). Publics are mainly defined from the way they are involved, affected and perceive the situation.

There may be a great overlap of membership between some groups and that communication with one group may well “spill” over into another group. A employer may also be a stockholder or member of a professional association relevant to the organisation in question.  

One way to work out who these stakeholders and publics is to create and update regularly the stakeholder map for the organisation in question.

Varey believes that there are many ways to develop a stakeholder map which identifies all stakeholders through environmental scanning research, As Varey points out, “the public relations practitioner must think through the consequences of the [actions or inaction of the ] organisation on people and those people may have for the organisation.” (p. 97). Various methods can be combined to create a stakeholder map (see p. 97 – 98):

• Public opinion polls
• Examination of the media
• Conference with political and community leaders
• Expert advice

This research should, according to Varey include ongoing issue forecasting. This involves the study of how the organisation and its publics might react to a “future event, trend or controversy (p. 89).” It should also include ways to rank the relative importance of stakeholder publics and identify who are active or passive on issues.

Varey stresses that the public relations function must monitor its public and their environments to:

• Identify issues
• Analyse opinion
• Build or rebuild relationships
• Measure effectiveness in business terms

 A rough sketch of how such a stakeholder map may look like is shown below. The relative importance of each stakeholder is, of course, different depending on the situation at hand. And it is also important to note that a company is rarely at the centre of the complex interactions that take place between the other stakeholders.

 
The magic ingredient in your communication mix
This is all well and good, any organisation wishing to survive in today’s open and competitive market should have a map of its environment and a solid knowledge of what individuals, groups and organisations need to have a thorough understanding and at least tolerance of the organisation in question.

But the author feels that by itself this not enough. The knowledge and insights gathered from a stakeholder map, environmental scanning and issue forecasting are only means to an end, namely gaining competive advantage and the trust of the critical stakeholder publics (which can be banked on in a time of difficulty). In today’s interdepent world competitive advantage and trust is achieved by demonstrating sensitivity to the concerns, needs and wants of the organisation´s publics. This will be increasingly required by Icelandic companies if the trends affecting them will continue as seems likely. These are difficult (and exciting times) for Icelandic companies. Some of the companies who have experienced difficulties have displayed a flair for good public relations while others have not. It will be interesting which will prosper or fail in the 21^st century. There seems to be no middle ground anymore. 

 * For example more Icelanders have lived abroad (for work and or study) than ever before and Internet use is widespread.

** This term is not synomonous with the terms “markets” or even audiences. The former concept refers a segment of the populations for which a product is or could be in demand. The latter term implies that the organisations puts on an act or a performance for their stakeholders, usually a rather ineffective way of doing things.

*** Varey, Richard, (1997). The Public Relations: The External Publics Context. In (1997). Public Relations: Principles and Practice. (pp 89 - 108). Kitchen, P.J. (ED). International Thomson Business Press. London