Jun 24 2021
Perception Eats Reality for Breakfast

On the Value of Public Relations for European and Japanese Corporations

“Nothing but the truth” is a nice concept and also the title of a number of books and movies. But it is actually far more important how reality and truth are perceived.

Just look at the results of the Kekst CNC Covid-19 Opinion Tracker and how the people of different countries perceived the performance of their governments last year. The six-country survey showed that Japanese rated the actual measures of their government in handling the Covid-19 crisis far more negatively than the people in the UK, Germany, France, Sweden and even the U.S. did throughout all of 2020.

But does this reflect reality? Until today, Japan has been seeing only a fraction of infections and Covid-19 related deaths per capita compared to the other five countries. But right from the start, the Japanese government has been perceived very negatively by its own people. Only very recently, the slow vaccination progress in Japan is actually justifying that harsh view.

The potential divide between reality and perception is even more of a concern for corporations than governments. Multinational corporations face intense global competition. It’s crucially important how they are perceived by customers, investors, regulators, employees and other stakeholders – in absolute terms and in comparison, to their international peers.

This is where strategic communications and the concept and discipline of public relations (PR) comes into play. Good public relations is first of all strategic in nature. It is a comprehensive, targeted and long-term approach to shaping reputation.

Interestingly, it can be broken down to the simple 5W/1H concept, which each reporter is taught on the first day on the job when covering a story. Ask the questions What, When, Who, Where, Why and How. Let us first look at the “Why” and the value of public relations.

Why: The answer is obvious. Global competition is fierce. Differentiation by product and service alone has become increasingly difficult. In addition, global corporations fiercely compete for talent. They face growing environmental and shareholder activism. International trade and investments have become more stringently regulated.

Never before has the stakeholder universe been more complex. And even more importantly, never before have individual stakeholders been more outspoken. There is no effective reputation building and protection without a strategic, proactive approach to all stakeholders simultaneously.

What: It is not only about communicating facts and figures or a new service offering. Rather, stakeholders are looking for a narrative about a company and for its purpose. Investors in particular demand a convincing equity story.

When: Likewise, companies must communicate all year long and not only on certain dates, such as product launches or quarterly results announcements. Otherwise, the narrative will not stick.

Who: This automatically leads us to who speaks about the company. Yes, it should start with the CEO as the principal spokesperson, but ideally, he or she is complemented by more than other subject matter experts from senior management. It’s even more important to enable employees, business partners, customers and others to also speak for the company and contribute to its narrative. This approach helps to foster another critical aspect of a company’s reputation and credibility with stakeholders-authenticity.

Where: Strategically communicating companies thus use a wide array of channels along the entire paid-owned-earned spectrum. A special emphasis lies on the earned axis, where digital and social media have rapidly gained impact on shaping the perception of any company.

The very concept of public relations was developed by Ivy Lee and Edward Bernays in the U.S. in the early 20th century when strategically turning around the Rockefeller name and image. Since then, many practitioners have further refined it in the U.S. The first strategic financial communications firm started exactly 50 years ago in New York.

European and Japanese companies started much later. In particular, Japanese firms have been hesitant to fully embrace the core idea of PR, which is shaping reputation by earning third-party media placements or endorsements versus owning or buying such exposure (marketing).

Many products and technologies of Japanese firms are ahead of their global competitors. Their service level is often impeccable and second to none. But their perception is clearly lagging this reality. Only two, Toyota and Bridgestone, have made it into the Fortune 100 list of the most admired companies in 2021, and none are listed among top global preferred employers.

Only a few Japanese firms display a strategic approach to public relations, i.e. communicating a clear narrative all year long as opposed to sharing facts and figures on set dates, be it in investor relations or when engaging with the wider public. One exception is SoftBank, which maintained an intensive dialogue with its shareholders and other stakeholders even throughout the difficult year that was 2020, and which uses its CEO Son in a strategic way as a very visible and active spokesperson.

But even a good strategy needs good tactics. There is no efficient PR strategy without the employment of the right PR tactics. This leads us directly to the “How”.

Let us look at what are probably the two most critical situations a corporation can face: the announcement of a major M&A deal and the response to an attack by a shareholder activist. Ideally, communications with the capital markets will be consistent and follow the principle of 5W. At the same time, specific PR tactics and tools are of immense importance.

For starters, there is the press release. In Japan, most firms still rely on issuing only compulsory timely-disclosure statements, but not a narrative press release. Narrative releases clearly stress key messages and outline specific benefits or objectives in plain and understandable English to an international audience. They shape the discussion at its very outset.

The same applies to the strategic placement of key terms, e.g. references to corporate governance or ESG, or even sound bites in press releases, speeches or other documents and materials.

Similarly, many Japanese firms still hesitate to provide background briefings to influential opinion media outlets that shape the perception of investors and shareholders, such as FT`s Lex Column, Breakingviews of Thomson Reuters or Bloomberg Opinion. It has been a longstanding practice among their Western peers, with the help of financial and PR advisors, to target those important opinion shaping columns prior, during and after an important financial announcement.

If you do not speak, others will speak for you. And the others – who may be counterparties in a transaction, unhappy shareholders or competitors – increasingly know how to use public relations in a strategic way to broadcast messages and serve their own goals.

Whether “Culture eats strategy for breakfast” is correctly attributed to Peter Drucker or not does not matter, it is still true. Likewise, companies from Europe, and in particular Japan, better acknowledge that “Perception eats reality for breakfast” might be true as well. It is for certain that PR has become a critical factor for their future.

Smart companies around the world give their chief communications officer a seat and a voice at the board table to present themselves with the best chance of prevailing in the perception game.

The original version of this article was published in May 2021 by the 3rd EU-Japan EPA Forum, which focused in particular on the value of strategic PR for European and Japanese firms.