MONDAY 18 MAY 2015 1:35 PM

AHEAD OF THE PACK

The communications industry is pushing for the inclusion of comms professionals in company-wide leadership roles. Have companies recognised the value of reputation management at the strategic level? Ruth Wyatt evaluates corporate leadership

Household penetration of toilet paper in the UK currently stands at 93.7%, which begs the question: What the hell do the rest use? And do you even want to think about it? Stats for the number of serious UK companies without senior communications counsel in-house provoke a similar response.

According to research released earlier this year by headhunters Watson Helsby, almost a quarter of FTSE 100 companies do not employ a group communications or group corporate affairs director. To some, that’s more disturbing than pondering alternatives to loo roll, not least because when the shit hits the fan all companies need a strong presence in the communications function to deal with its consequences. Indeed one might argue that those with a heavy hitter in the corporate affairs chair are more likely to anticipate and avert a full blown crisis than firms that consider the function a luxury.

And presumably organisations that lack the resource in house buy it in on a needs-must basis and thus continue to understand the bottom line cost of communications without appreciating its true value.

The research indicates that there are 22 FTSE 100 companies without senior comms representation (there was one “don’t know”). One had made the function redundant and not replaced it – more of that later. The rest are either headquartered outside the UK or B2B companies operating in markets with low regulatory or political scrutiny with straightforward audience priorities – investors, analysts and customers. These firms are described as having a reasonably low profile. They treat communications as a more junior level activity, sometimes fulfilled by those from another discipline (often law) and reporting to another discipline leader rather than the CEO. And if they have much responsibility, it is likely to be the execution of the communications part of the corporate strategy rather than the opportunity to inform, let alone author, even ‘their’ part.

Steven Day, a former communications director in the telecommunications sector with many years of experience, thinks these corporates are crazy. “Everyone – every company – has a story to tell and needs to be able to tell it. It doesn’t matter if you’re in mining or retail or widget production, everyone needs to manage their relationships and reputation,” he says. “Those that don’t recognise that are lunatics.”

Probably not lunatics, more likely sociopaths, but then an above average percentage of corporate leaders are, and not just those who believe communications is an indulgence not a necessity.

Institute of Directors (IoD) director general Simon Walker, himself a former comms man both in- and out-of-house, says, “If your company is well and truly below the radar by virtue of its sector or activity, you probably can get away with not having a communications specialist at board level. For anyone else it’s dangerous.”

Hang on. Board level? No, no, those stats are far worse.

The survey shows that just 43% of FTSE 100s have their director of communications (or whatever nomenclature is applied to the function) on their executive committees. There aren’t any on main boards. And where are the non-executive directors from a communications background?

“Everyone – every company – has a story to tell and needs to be able to tell it. It doesn’t matter if you’re in mining or retail or widget production, everyone needs to manage their relationships and reputation. Those that don’t recognise that are lunatics”

There has been talk in the business for longer than any of us care to remember about the importance of the communications remit and the need for its recognition as a central business discipline at board level. “Oh bore off,” groaned one former comms chief, clearly in need of a little less conversation and a lot more action.

Comms folk generally are fond of saying that the discipline is finally gaining the status it deserves and every elevation of the function or the individual functionary is embraced as evidence – accentuating the positive comes with the territory. But the numbers don’t stack up: the percentage of FTSE 100 excos that don’t have comms specialists as members is actually up from 54% in 2012 to 57% in 2014.

Some argue that you don’t need to be a member of the exco for communications to play a vital role or operate at the heart of the organisation. Director of communications and reputation at O2 Nicola Green is one, indeed she argues that she prefers it that way.

“I am not officially on the exco, I sit with it and I am able to influence strategy at an early stage. I am there when decisions are being made and our board is very open to guidance on strategy because it understands the importance of reputation and relationships,” she says. “Being with it rather than on it enables me to retain a degree of independence that helps me do my job. I need to be able to look at things as an outsider to be better able to judge how external audiences will respond, to be the conscience of the business and to help it build better relationships.”

Pushed as to whether she aspires to boardroom status, she responds, “Not necessarily, no. What I need is access to the right people at the right time. That’s what I have here because the business understands what communications can do. It depends on the organisation, of course, but in some companies a seat on the exco wouldn’t be a mandate to create strategy and might have less access to the right people.”

Green’s view is not uncommon, possibly by virtue of the current status of the comms majority, but met with some derision from other quarters. “Cobblers,” says Day. “Most boards thrive on differing opinions and their members don’t have problems retaining their intellectual independence. And board level status is important – it signals to [stakeholders] and senior managers that the business takes communications seriously.”

Geraldine Davies, chairman of recruitment and comms consultancy Ellwood Atfield and a former corp comms chief at Lloyds and Prudential, however, echoes Green, “One of the most important aspects of the job and where it can add most value is in being like an external pair of eyes and understanding the wider impact of business decisions. Once you get inside the bunker there is a danger that gets compromised and you lose part of that value.”

Home Retail Group’s director of corporate affairs Chris Wermann sees a danger in becoming “Too strategic, being taken away from the detail of the business.” But Wermann believes his place on the exco gives him the right amount of exposure across the business to deliver the greatest value. “The corporate [affairs] role has broad resonance across the piece and I spend as much time with managing directors of our operational units as I do with fellow directors. I am involved in the strategic debate and influence strategic decisions.”

But Dominick Moxon-Tritsch, ex-head of European public policy for Uber and former director of government affairs for the International Fur Trade Association, argues that there is a lacuna higher up the food chain at main board level. “It is a corporate necessity to manage reputation, but at main board level general counsel often steers this, usually taking a very conservative approach. Lawyers look at it from a downside risk point of view rather than from the potential benefits of public engagement. You need someone with a specific mandate to manage reputation,” he says. “If you are in a knowledge economy business, the most valuable asset you have is your reputation, in which case it would be bonkers not to have someone on the board to proactively manage it.”

The IoD’s Walker is more forthright. “BP is an obvious example of where having a proper reputational specialist on the main board would’ve made a huge difference. Tesco has faced ruinous issues because of the uniformity of its board’s decision making – which could be more wrongheaded. HSBC would not have suffered repeated disasters had it had someone in there at the level that strategic business decisions are taken. If you are going to buy a Mexican bank, there’s likely to be some drug money in there. Again with the subsidiary in Switzerland, the board should’ve been clear about the reputational risks and been advised accordingly. Reputation should be the first thought given to any business decision,” he says.

Walker asserts that most board positions are filled by default. “Look, if you put forward a finance director for a non-exec role, he’s assumed to be qualified for it. It’s always a safe play, but it leads to homogenous boards that get mired in groupthink. We need other voices and we bloody well need communications people to be among them. Headhunters must be braver in putting forward other candidates and boards must be braver in hiring them,” he says.

Both Davies and Wermann point to skills that communications professionals have by the bucket load that make for great non-execs. “A two hour board meeting is not where the decisions are made, it’s where they’re ratified. Ahead of that there is a lot of influencing, networking, getting people to respect your opinion and buy in to the idea,” Wermann says.

Davies adds, “Who’s used to being diplomatic under the most trying of circumstances? Who understands other people’s agendas better? Who’s used asking the right questions, the difficult questions? Comms people can make ideal non-execs.”

Yet there really aren’t many opportunities around. One current comms head who has been looking for a non-exec position in addition to the day job found that top firms struggle to understand what a communications specialist would bring to the board usually, they say, as they already have specialists in that area on the payroll.

However, they don’t necessarily have those specialists in senior enough positions to be making an impact early enough on strategy because they haven’t seen fit to put said incumbent on the exco let alone the main board. The irony is not lost.

Catherine May, known for her corporate comms roles at Centrica and SAB Miller has a portfolio of non-exec directorships, as does Liz Hewitt, formerly of 3i and Smith & Nephew. They are in the vanguard. Coming up behind them will likely be the current generation of comms folk who have made it into general management, thus broadening their skills sufficiently to be seen as fully fledged business people and hence more attractive. Although it is their specific skillsets that makes them such potentially valuable assets in the first place.

Former Diageo corporate relations director Ian Wright, now director general of the Food and Drink Federation, takes a pragmatic stance, “You’re not going to get anywhere unless you have commercial clout. You’re not taken seriously on the exco without it, so you’re not going to be taken seriously anywhere else without it.”

There is a small number of comms people who have broken through to general management, notably that Cameron bloke, the ex-PR and PM. Also noteworthy are John Fallon, CEO of Pearson, Duncan Learmouth, senior vice president of GSK’s developing countries division, Mark Ware, executive vice president at Vivo Energy, Wright at the FDF, Walker at the IoD and Sue Clark, MD of SAB Miller Europe, among others.

The logical and traditional progression from specialism to the top job is to take the potential stars of tomorrow – and comms people have a unique opportunity to be talent spotted given they get so much direct attention from their CEOs by virtue of their position – and give them a business unit to run. Anecdotal evidence suggests that general managers in the making are being cycled through the communications function more often than communications people are being given operational responsibilities.

In a sense that suggests that UK public limited companies have a greater handle on what communications can do for business as it is a recognition that future leaders need good communication skills and a firm grasp on reputation husbandry.

A more worrying development suggests there’s a rather longer way to go before enlightenment as several significant corporates have gotten rid of the most senior communications people and not replaced them. “It’s like an orchestra without a conductor,” says Davies. “It can carry on playing but only so well and only for a while.” Eventually all have – or will – accept that they need someone in the top communications chair. And when they do, the job description and list of attributes and abilities they look for would make a demigod blanch.

It looks like British business still has some hard lessons to learn and school is far from out.