Management Communication

50% grade: 50% reproduction of knowledge + 50% transformation of knowledge (case)

 During this course you will:
o Improve understanding of management communications, both on a corporate as well as on an individual
level
o Learn how companies use communications to implement strategy and achieve competitive advantage
o Develop a broad array of negotiation skills experientially
o Explore the major concepts and theories of bargaining and negotiation

1. Introduction and overview of corporate communications

1.1. The corporate communication strategy framework

 The corporation…
o What does the corporation want each constituency to do?
 Customers: loyal, price premium, word of mouth
 Suppliers: reliable and good quality
 Employees: loyal and committed
 Stakeholders/financial market: low interest rates, mortgages
 Politics: support
 …communicates through messages…
o How should the corporation structure the message?
 Deny, excuse or accept & apologize
 If there’s a crisis with lives lost, the CEO has to speak
 …to its constituencies…
 o Who are the corporation’s constituencies?
 Customers, suppliers, employees, stakeholders/financial market, politics
 …who then respond to… the corporation
1.2. Functions included in corporate communications department: aside from internal/external communications, in which
of these areas do you involve your PR counsel?
 Corporate reputation
 Recruiting top talent (people want purpose of work)
 Product launches
 Strategy development
 Engagement with community leaders
 CSR
 Financial/investor relations
 Retaining top talent
 Green/sustainability/environmental issues
 Crisis management
 Brand communications
1.3. Corporate communications
 Corporate communications as a managerial function is “an instrument of management by means of which all
consciously (in a deliberate and intentional way) used forms of internal and external communication are
harmonized as effectively and efficiently as possible, with the overall objective of creating a favorable basis for
relationships with groups upon which the company is dependent.”
 “make a firm transparent enable shareholders to appreciate the firm’s operations better, and so facilitate ascribing
it a better reputation.”
1.4. Focal sub-functions of corporate communications
 Reputation management as the most critical part of any corporate communications function (corporate immune
system, like a vaccine, prepare for it)
 Corporate social responsibility as 91% of Americans have a more positive image of a product or a company when it
supports a cause
 Crisis management as legal dominance is shortsighted and potentially costly…organizations must reconcile (make
consistent) the often contradictory counsel of public relations and legal professionals and take more collaborative
approach to crisis communication

2. Reputation management
2.1. Facts are not sufficient – communication is essential
2.2. A company’s market value can hardly be derived from tangible assets

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 2.3. The central intangible asset is a company’s corporate reputation because reputation has a positive influence on all
stakeholder groups
 Reputation: general evaluation of a company by its various stakeholders. Incorporates both, cognitive and
emotional components. An assessment of reputation is based on factual experiences as well as on perceptions
relying on communicated messages.

2.4. Reputation drives financial performance and reputation leaders outperform the index substantially at similar risk
 Regression analysis using reputation and stock data show:
o “Investment Effect”: Investments in reputation-building activities over a longer period show a positive
impact on the shareholder value (market value)

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 o “Performance Effect”: The overall reputation depends on innovative and communicative capabilities as
well as on finance based influence. (share price increase  reputation increases)

2.5. Managing reputation is favorable:

 Corresponding to Porter’s five forces, companies increase loyalty, build barriers and strengthen their strategic
position in their competitive environment by fostering their reputation
 Building up reputation leads to an increased shareholder value
 Reputation is like an airbag: if you already have positive impression of a company, you’ll think toward positive
possibility when the company did something.
2.6. Corporate reputation management:

 There is no lack of measurement concepts, but existing concepts exhibit substantial deficits:
o Jury votes/experts interviews:
 Inside and outside directors are not a stakeholder group of major importance
 Experts’ opinions hardly driven by corporate communications
o Flaws in operationalization:
 Lack of reliability
 No distinction between drivers and outcomes of corporate reputation
o Emotional aspects undervalued:
 Only in Fombrun’s RQ, but only 3 out of 20 items
 n/a in AMAC and some other rankings
 but important, as hard to imitate by competitors
o No management implications:

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  Pure measurement approaches do not allow driver analysis and therefore cannot provide
recommendations for effective management
 So new reputation model based on a multinational study, and corporate reputation management ideally includes
the flowing 4 steps:
o 1). Measuring reputation: monitoring reputation

 Measurement result: Reputation portfolio: perception of likeability and competence of one

selected stakeholder group

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  Measurement result: target group monitor: reputation of a company in all surveyed stakeholder

group
o 2). Analyzing reputation drivers: in all important stakeholder groups with the respectively relevant targets
 4 dimensions cover the main stakeholder groups:

 Explaining reputation: PLS analysis allows calculating a “driver ranking”

o 3). Deducting and implementing measures: steering committee decides on the level of integration of
corporate communications
 Derive recommended actions from driver rankings and competitive positions…
 Dimension1 = impact on outcome
 Dimension2 = position in the strategic benchmark group

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  Indicator has high influence on customer loyalty via reputation and is less developed
than the other benchmarks, this driver has to be worked on
 Analyze risks, develop strategic communication guidelines and implement them creatively
 Identify risks: bad performance, legal issues, board member deviance, product flops,
environmental scandal, communication disaster…
o 4). Checking measures: from case to case
 Pretest – media resonance analysis – posttest
2.7. Reputation as a management concept:
 Consolidation: Getting a common linchpin for all studies, capturing all relevant aspects of corporate reputation
 Management: Best possible driver analysis for each relevant stakeholder group
 Operations & communication: Derive best possible activities and communicate them
 Control: Tool for measuring the effectiveness of single activities regarding corporate reputation

3. Corporate social responsibility

3.1. CSR – The hierarchy of CSR
1) Economic responsibilities: “to product an acceptable return on its owners’ investment”
2) Legal responsibilities: “is a duty to act within the legal framework”
3) Ethical responsibilities: “responsibility to do no harm to its stakeholders and within its operating environment”
4) Discretionary responsibilities: “more proactive, strategic behaviors that can benefit the firm and society, or both”
3.2. CSR – Definition
 “broadly defined, CSR is a company’s activities and status related to its perceived societal or stakeholder
obligations”
 “Ideally. Leaders should address stakeholder concerns in ways that carry strategic benefits for the firm. CSR is not
about saving the whales or ending poverty or other worthwhile goals that are unrelated to a firm’s operations and
are better left to government or nonprofits. Instead, CSR is about the economic, legal, ethical, and discretionary
issues stakeholders view as affecting the firm’s plans and actions.”
3.3. CSR – relevant stakeholders

3.4. CSR – related concepts

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  Corporate sustainability: “business operations that can be continued over the long term without degrading the
ecological environment”
 Corporate citizenship/business citizenship: “social-oriented actions by firms seeking to be seen by their
stakeholders as constructive members of society.”
3.5. CSR – Arguments for CSR
 Moral argument: CSR broadly represents the relationship between a company and the principles expected by the
wider society within it operates. It assumes businesses recognize that for – profit entitles do not exist in a vacuum
and that a large part of their success comes as much from actions that are congruent with a societal values as from
factors internal to the company
 Rational argument: CSR is a rational argument for business seeking to maximize their performance by minimizing
restrictions on operations. In today’s globalizing world, where individuals and activist organizations feel
empowered to enact change. CSR represents a means of anticipating and reflecting societal concerns to minimize
operational and financial limitations on business.
 Economic argument: CSR is an argument of economic self-interest for business. CSR adds value because it allows
companies to reflect the needs and concerns of their various stakeholder groups. By doing so, a company is more
likely to retain its societal legltimacy, and maximize its financial viability, over the long term. Simply put, CSR is a
way of matching corporate operations with societal values at a time when these parameters can change rapidly.
 For a shareholder value perspective: there has to be positive financial return
3.6. CSR – Conceptual framework

3.7. CSR – Examples

3.8. Basic hypotheses on the association between CSR and firm performance (FP)

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  basic hypotheses: simple linear relations between CSR and firm performance
 Causality of relationship: CSR or firm performance as independent or dependent variable
 Direct of association: hypothesized positive or negative relationship

 Social impact hypothesis (+)

o Higher (lower) levels of CSR lead to higher (lower) levels of firm performance
o Business case of CSR: “sound ethics is good business”, “corporate morality pays”, “doing good by doing
well”
o CSR as a source of competitive advantages: resource based view, reputation building, higher levels of trust
may decrease costs of contracts and controls
 Tradeoff hypothesis (-)
o Higher (lower) levels of CSR lead to lower (higher) levels of firm performance
o CSR is costly and ignoring CSR increases profits
 To behave ethically can cost dearly. In other words, ethics and interests can and do conflict
 Reap substantial profits from a callous disregard of their highly proclaimed interest in the
consumer, the public, and the environment.
 Most managers continue to view profitability and responsibility as tradeoff
o CSR constrains courses of corporate action
 Exclusion of profitable projects
 Expenses for CSR measures
 Available funds hypothesis (+)
o Higher (lower) levels of firm performance lead to higher (lower) level of CSR
o Shares the tradeoff view that CSR is costly
 A company that can reach the level of profits required to balance properly the interests focused
on its operations is in a position to take social actions
 Without adequate income the firm cannot perform any activity, economic or social
 Mangers can only give that which a firm’s resources permit
o Various conceptual substantiations
 Slack resource theory
 Theories of corporate crime (poor performance as a driver of illegality)

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  Managerial opportunism hypothesis (-)
o Higher (lower) levels of firm performance lead to lower (higher) levels of CSR
o Illusion of successful managers to stand above social ties
o CSR to distract from or to hide poor management
o Various conceptual substantiations:
 Agency theory
 Attribution theory
 Depth psychological leadership theories
3.9. CSR – measures of CSR
 Fortune: America’s most admired companies
 Kinder, Lydenbery & Domini (KLD): social choice investment rating agency
 Other measures
3.10. CSR – What to do?
 1) Improve Business Practices: derive value from your CR practices
o Take a stance on issues
o Play an active role in the CR conversation
o Drive stakeholder engagement

 2) exceed standards: produce respected CR reports

o Elicit and include stakeholder feedback
o Establish tangible goals
o Report progress, failures and improvement strategies

 3) Interact with stakeholders: maximize stakeholder relationships

o Provide SRI (sustainable & responsible investment) funds with data driven content
o Capitalize on employees’ interest to advance CR goals
o Communicate CR efforts and opportunities to job seekers
3.11. CSR – cause related marketing/advertising with a social dimension
 Two directions of research:
o One assesses the effectiveness of the advertising and its various aspects on the basis of consumer
response
o The other explores consumer processing of social ideas in advertising

 Company advertising with a social dimension appears to be well received among consumers
 Similar concepts: corporate, issue promotion, corporate social marketing, social issues marketing, mission
marketing, or passion branding

4. Crisis communications
4.1. Characteristics and types of crises
 What is a crisis?
o A crisis is a major, unpredictable event that has potentially negative results. The event and its aftermath
may significantly damage an organization and its employees, products, services, financial conditions and
reputation

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 o A crisis is a major catastrophe that may occur either naturally or as a result of human error, intervention
or even malicious intent. It can include tangible devastation, such as the destruction of lives or assets, or
intangible devastation, such as the loss of an organization’s credibility or other reputational damage.
 Types of crises:

 Crisis characteristics:
o Element of surprise: leads to a loss of control; hard to think strategically
o Insufficient information: lack of information; demand of explanations
o The quick pace of events: rapid escalation; require immediate attention
o Media frenzy: intense scrutiny, media spotlight; siege mentality
4.2. Crisis management life cycle:
 Crisis management comprises more than unpredictable events

 Precrisis – signal detection

o Develop signal detection mechanisms:
 Identify sources of warning signals
 Collect information
 Analyze information
 E.g. daily media clipping; social media monitoring; quality management; complaint management
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 o Avoid the MUM effect:
 Be open
 Trust
 “Don’t shoot the messenger”
 Precrisis – prevention
o Issues management: scan the environment for potential threats
o Risk management: examine internal sources of defects
o Reputation management: determine the effect on constituencies

 Precrisis – preparation: action plan components

o You cannot be prepared for all possible scenarios but at least for each crisis type! Conduct rehearsals once
a year!
o Cover page, introduction, reheartsal datas page, first action sheet, risk aeeseement section, team contact
sheet, risk assessment section, incident report sheet, communication strategy worksheet, secondary
contact sheet
 Crisis – crisis communication
o 1) Get control of the situation
 Defining the real problem with the use of reliable information
 Setting measurable communication objectives
 Contact the respective crisis team
o 2) Gather as much information as possible
 Understanding the problem at hand
 Managing information from many sources
 If it is going to take longer to get the right information, communicate this (let people know how
long it will take)
o 3) Set up a centralized crisis management center
 Platform for all communications during the crisis
 Provide the media with a comfortable location
 All communications about the crisis should come from this one, centralized location
 (know what is said to media)
o 4) Communicate early and often
 Say whatever you can as soon as possible
 State that the crisis center will issue updates at regular intervals
 Avoid silence and delayed response
o 5) Understand the media’s mission in a crisis
 Competitive environment to get the first story
 Media is looking for sensational elements (victims, villains, etc..)
o 6) Communicate directly with affected constituents
 Contact internal as well as external stakeholders directly
 Set priorities, which constituencies are more important
 Use all available technologies resp. channels

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 o 7) Remember that business must continue (try to save what can be saved)
 Replacements should cover for members of the crisis team
 Anticipate the effects of the crisis on other parts of the business
o 8) Make plans to avoid another crisis immediately
 However, stop running advertising campaigns
 Severe crisis is not the best time to promote your company
 Postcrisis – recovery and learning
o Continuation of crisis communication
o Cooperate with investigations
o Hold your promises
o Reputation repair
o Make plans to avoid another crisis immediately:
 Ensure that the organization will be even better prepared the next time
 Preparation is one key to handling crisis successfully
 Postcrisis – Brand recovery
o 50% recovery takes about 6 months
o 100% recovery might take about 24 years
4.3. Crisis management in the social media age
 Incorporate social media in risk and crisis communication:
o Determine social media engagement as part of the risk and crisis management policies and approaches
o Social media as a tool for crisis monitoring
o Engage social media in daily communication activities
o Join the conversation, including rumor management, and determine best channels to reach segment
publics
o Understand the responsibility of social media
o Build a social media crisis toolkit
o Know where to respond
o Be honest and transparent
o Social listening
4.4. Discussion
 Crisis communication – lessons learned
o Know and understand crisis: knowing common crisis characteristics as well as fundamental variables and
key questions to ask when dealing with specific types of crises can strengthen an organization’s abiolity to
manage crisis
o Prepare for crisis: assessing the risk for the organization, analyzing the effects of crisis on several
stakeholders and finally setting up formal plans for crisis management are a strong basis for organizations
actually facing a crisis
o Use guidelines to communicate during crisis: every crisis is different, but one can adopt the presented
suggestions to meet the respective needs. Furthermore, crisis have enough in common for this eight step
prescription to be a good starting point
 Critical issues – lessons learned
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 o Set the right expectations:
o Avoid finger pointing and set up concrete communication strategy:
o Be sensitive with messages and train spokesperson
4.5. Case study BP
4.6. Case study Nokia
4.7. Counterexample: how not to handle crisis – Singer/Kleinfeld case

5. Introduction and overview negotiation analysis

5.1. Perspectives on decision making

5.2. Fundamentals of joint decision making

 The cooperative perspective of joint decision making focuses on decisions that are rational when measured against
a group, rather than an individual, benchmark. It can be seen as a cooperative interactive game theory perspective.
 Benefits of cooperation:
o Possibility to make mutually agreed-upon joint decisions
o Payoffs depend either on the consequences of the joint decisions or on each party’s go-it-alone
alternatives
o Possibility of communication
o Creative decision making is possible
5.3. Negotiation basics
 Distributive vs integrative negotiation:
 Claiming value in a negotiation: distributive bargaining model

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  Creating value in a negotiation: Pateto optimality

 The negotiator’s dilemma

o The process of creating and claiming value are not separable. Approaches that are effective for creating
value can be ineffective for claiming value
o Create a large pie jointly  getting a large slice of the pie
o The negotiator’s dilemma: attempting to expand the pie often affect its final division, while each side’s
efforts to get a larger share often prevent its expansion
o Tension between creation of joint value and claiming individual value is required  partial, open, truthful
exchange
 Negotiation positions:
o Hard meets hard
o Hard meets soft
o Soft meets soft
o There is a third way to negotiate, neither hard nor soft, but rather both hard and soft  the method of
principled negotiation
5.4. Positional bargaining and the Harvard concept
 Harvard concept:
o the method of principled negotiation: strategy that is a contrary concept to the bargaining over positions
o Problem of positional negotiations:
 Inefficiency and unwise agreements
 Endangering of an ongoing relationship

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 o Four principles for negotiations:
 1) People: separate the problems from the people
 2) Interests: focus on interests, not on positions
 3) Options: generate a variety of possibilities before you decide. Invent options for mutual gain
(e.g. look for shared interests)
 4) Criteria: insist that the results are based on some objective criteria
  concentration on issue-related negotiation
  the method is soft on the people and hard on the merits

o Principled negotiation method focusing on basic interests, mutually satisfying options, and fair standards
typically results in a wise agreement
5.5. Summary: lessons learned:
 Plan and prepare negotiation  a negotiation is more likely successful when it is arranged, thoughtout and
elaborated in every phase of the process. E.g. by analyzing you and your opponent’s negotiation position, needs
and aspired outcomes
 Know about decision traps, fallacies and bargaining tricks  don’t be a victim
 Understand the basic concepts of negotiation and act in a more principled manner  know the value claiming and
value creating concept and apply negotiation strategies like the Harvard concept to come to a wise agreement
6. Negotiation styles:
6.1. Who’s a negotiator?
6.2. The three key dimensions of bargaining style:
6.2.1. Motivation

 What are your goals? Your motivational drive?

 Individualistic: self-interest
 Competitive: group competition

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  Cooperative: joint welfare
 Risks for the overly competitive or cooperative
6.2.2. Approach

 What’s the packaging of your negotiation?

 Interests: learn about others
 Rights: apply standards of fairness, rules, law
 Power: use status and rank threats/contests
6.2.3. Use of emotions
 How is your negotiation delivered?
 Are you rational, positive or negative feeling?
 The role of entrainment in showing emotions
6.3. Lessons learned
6.4. Discussion
7. Communication skills
7.1.
8. Wrap-up

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