Value Creation through Communication Controlling
View From: Gabriella Skala
Last updated: 4-8-2010
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Value Creation, Integrated Communication, Strategy, Controlling, Measurement, Value Based Communications Management, KPIs, Strategy Maps
Table of Contents
1. Management Summary
2. Problem and Research Statement
3. Contexts of the Communications Environment
3.1 Environment of the Company
3.2 Stakeholders and target groups of the Company
4. Communication Models, Structures and Role of Communication in Companies
4.1 Relationship between Strategy and Communication
4.2 Relationship between Management and Communication
4.3 The Crisis and Potential of Corporate Communication
4.4 The Change in Paradigm in Communications
5. Value Based Communications Management
5.1 Why measuring Communications Processes
5.2 Basic principles of communications controlling
5.3 Intellectual Capital – Measurement and evaluation principles
5.3.1 Measurement of Intangible Assets
5.3.2 Measurement of Communications
5.3.3 Investment in communications processes
6. Strategy of Value Based Communications Model
6.1 Proposal of organizational and process model
6.1.1 The 7 phases of the model
6.2 Evaluation of potential key performance indicators
6.2.1. Non-Financial evaluation – Balanced Score Card
Quantitative & Qualitative
Number of articles appeared -> positive vs negative articles
Assessed promotion of messages
Number of key words published in line with corporate philosophy/strategy
Reputation and brand image
Customer Networks & Blogs
6.2.2 Financial evaluation
Efficiency (costs / degree of audience)
Effectiveness (key opinion leaders, number of journalists, number of analysis recommending, “buy”
Saving time/management attention through firm communication processes
6.2.3 Implicit and explicit measurement
Value for company to sponsor event
Value for company to have C-level attending event (salary costs, missed opportunity costs)
6.3 Organisational bonus system and employee commitment
6.4 Optimising Return on Communications Investment (ROCI)
6.5 Contribution to Company Success through Communications
6.6 Conducting Communications Audits
7. Case Examples
8. Conclusions and Recommendations
1. MANAGEMENT SUMMARY
Industry professionals agree that communications play a huge role in corporate success. Even if communication generates no earnings per se, in cooperation with other functions such as human capital, corporate development, marketing, and finance, etc., it increases the necessary basis for generating revenues with the company's image, products and services. Thus, as this thesis argues, communication is a key driver of corporate success. But a significant question remains; how to measure the effectiveness of communications?
Proving that communications objectives exist is one side of the measurement argument , but demonstrating that communication helps a business achieve its overall aims a difficult task on the other side. Therefore, strategic communications controlling is an important process to measure the extent to which communication itself contributes to the achievement of strategic and financial objectives. In 2008 investments European in corporate communications increased by 14% while the classical advertising market stagnated. John Wanamaker (1838-1922), the Philadelphia department store owner’s famous quote:
“Half the money I spend on advertising is wasted; the trouble is I don't know which half.” still rings true today. Even though the effect of advertising is still not thoroughly measurable, should we accept the same destiny for communication expenditures?
Measurement and evaluation in the public relations and communication fields is not a topic that has suddenly emerged in the past few years. It has been widely discussed, grown, and evolved over the past 60 years. And it is still a `hot issue’ as the European Communication Monitor 2008, ranks it in a transnational survey in 37 countries on future trends in communication management and public relations. Communications evaluation and measurement remains number two of the most important and enduring issues in public relations and communication management.
The main focus of this thesis is that Value-Based Communications Management (VBCoM) develops, oversees, and monitors all internal and external communication processes and relationships with corporate programs. This is the basis for an adequate communications controlling which can be qualitatively and quantitatively measured with KPI’s and integrated into companywide reporting.
Thus, corporate strategy must be aligned with communications strategy to demonstrate and evaluate explicit cause-effect relationships and the company’s generic value-creation processes. The focus of communications professionals must be to move from the operative to the strategic level where they can be part of the executive team to link business strategy with effective communication.
A major challenge will remain for professionals to define key performance indicators (KPI’s) and represent them – if not in the balance sheet as intangible assets – as value drivers in an existing approach to strategic management. The strategic model introduced in Chapter 6 is based on an integrated approach of the Strategy Map and Balance Score Card (BSC), two frameworks which view the company as a social organization whose development is tied to effective management of communication in its totality and as an important component of overall corporate strategy. Although both frameworks have gained international recognition as a reference points in strategic management and control, they are used here to develop key performance indicators (KPIs) for the management of communication.
Finally, two company cases underline the benefits of the model and provide insight in how companies can use this approach to measure and control communications activities. An important conclusion is that value-based communication can generate measurable growth and contribute to success and significant value generation in the eyes of the customer.
2. PROBLEM AND RESEARCH STATEMENT
The increasing complexity in communication relations, by way of example the communication on capital market, competition for the best on the human capital market or brand equities of corporations (with focus on shareholders, employees, customers and the public) requires a holistic approach of the communications management. Besides of the complexity of stakeholder relations there are further changes resulting from the medial and legal environment of companies.
Basically the understanding of the effect of communication is academically as well as practically deficient. Basically communications needs to be restructured in regard to its costs and return as well as its profitability. In regard to raising communications budgets in comparison to the total company budgets board members request rightly the proof of efficiency and the efficacy of the investments.
This requests the following: 1. The evaluation and measurement of the costs for communications
2. The possibility to report costs and revenues for communications
3. The requirement of efficient return on the communications investment into (ROCI)
Communication has developed to an important growth factor and revenue driver in the last years. Companies are challenged to differentiate over brands, image, and reputation from their competitors. From the side of the target groups there is a shift in the perception from product oriented to image oriented awareness. Summarizing the status of a company, its reputation and trust among its stakeholders it is fair to speak about the “Social Capital” as central intangible asset. Social Capital is in the sum the generated capital resulting from information and communication. It includes intangible company values as shown in Figure 1. These intangibles can account for up to 90% of the value of company assets.