Strategy/Value Creation
Investment in communication is justified only if it makes its mark in the short term or long term on the target system of the respective organization. It is of existential importance to address this issue convincingly, especially as the role of PR increases and budgets go up.
Convergence of corporate strategy and communication
Successful communication must be geared systematically to corporate strategy and must contribute to value creation (Steyn 2007, Zerfaß 2007 and 2004, Bentele / Nothhaft 2007, Will 2007, Grunig et al. 2007, Argenti 2006). To ensure that these aspirations are met, multidimensional methods for the control and monitoring of communication strategy are necessary. Another essential element is to provide evidence of the economic value added (EVA). To this end, communicative assets such as brands, corporate cultural and reputation are evaluated.
Controlling communication strategy
The starting point of value addition is to determine which values a specific organization wishes to raise. The usual benchmark in business is shareholder value. For organizations listed on the stock exchange, shareholder value can be calculated as the market capitalization of all shares issued. However, a one-sided emphasis on economic values does not suffice, as business organizations - like any organizations – are not natural entities, but owe their legitimation primarily to social and political decisions (market economy order, property rights, freedom to make contracts, cultural acceptance of specific product-market strategies). Hence, a suitable model for today is stakeholder value, which not only addresses economic parameters but also takes legitimation and acceptance among relevant stakeholder groups into account (Karmasin 2007, Zerfaß 2007, Rolke 2002).
- Approaches for value creation through communication (A. Zerfaß 2007)
Communication creates competitive advantages and safeguards a company's "licence to operate"
This differentiation enables two value-creating approaches to be identified. Communication / PR can create competitive advantages, profitability and liquidity (economic dimension) and at the same time safeguard an organization's "licence to operate" (social political dimension). These microeconomic objectives enable a more precise understanding of communication in terms of individual stakeholder groups and provide a basis for shaping communication in accordance with its strategic relevance (Rolke 2002, Zerfass 2004).
Communication supports service performance and creates intangible assets
These approaches intersect with a third and a fourth value-addition approach. These two approaches come to the fore when analysis focuses on internal relationships of cause and effect more so than on content and stakeholder groups (Zerfass/Pfannenberg 2005). Communication / PR acts firstly by supporting ongoing performance and hence contributing to the success of the organization. As an enabling function, communication supports ongoing performance (products and/or services) and the marketing of performance plus the necessary management processes required to achieve that aim. Communication creates preferences at the point of sale, motivates employees, and enlarges an organization's room for action, e.g. through lobbying and corporate citizenship programs. Understood thus, communication is a supportive activity that is brought to bear in all phases of the value chain, ultimately producing higher sales or lower costs and hence improving the company's operating result (profit and loss account, cost accounting).
Beyond that, communication also creates intangible assets such as reputation, corporate brands, trust and credibility, as well as innovation-friendly corporate cultures. This helps to build up success potentials for future action. The models available today for identifying these values are inadequate (the best being Intangible Capital Reports or knowledge reports, and investment reports) (Will 2007, Piwinger/Porák 2005). Nevertheless, they are of key importance because an organization can feed on them for a sustained period and convert them to concrete advantages time and again.
Methods for determining and controlling value creation
Specific procedures for this area of communication control are only starting to be explored in theory and practice. However, a study conducted at the University of Leipzig among communication, finance and marketing directors of German stock corporations shows that many decision-makers are barely aware of them (Sommer 2007).
There are basically two kinds of approaches:
1) Indicator systems such as the Reputation Quotient (Wiedmann/Fombrun/van Riel 2007) and the Communication Control Cockpit (Rolke 2004) attempt to quantify the success of communication measures and correlate them to economic variables, e.g., a link between communication spending and an increase in economic value added. However, more investigation is required in terms of evaluating the extent to which the undisputed connection between communication and organizational goals can be generalized, and the extent to which interactions with other variables such as product quality, delivery compliance, and employee motivation can be controlled for. Moreover, though image and reputation are important, they are not the only factors determining value creation, and not always the most significant ones.
2) Scorecards and other multidimensional control systems used for value based management (Hering/Schuppener/Sommerhalder 2004, Zerfass 2005, Pfannenberg 2005, Rolke/Koss 2005) model the interactions involving communication from a number of perspectives (e.g. in respect of finance, customers, employees, societal stakeholders and processes) and define suitable Key Performance Indicators (KPIs) on the basis of central value links. This produces an organization-specific framework for holistic control of corporate communications that links strategic targets with the results of evaluation of PR and communication measures. Scorecards must not be misunderstood as mechanistic calculation tools. On the contrary, they serve to provide a transparent representation of the knowledge and expertise of those in charge of communication, thereby creating a joint basis for target-oriented action.
References
Texts available in English
Argenti, Paul A. (2006): Corporate Communication. 4th edition. New York: McGraw Hill Higher Education.
Grunig, Larissa A./Grunig, James E./Dozier, David M. (2002): Excellent Public Relations and Effective Organizations. A Study of Communication Management in Three Countries. Mahwah (NJ): Routledge.
Steyn, Benita (2007): Contribution of Public Relations to Organizational Strategy Formulation. In: Toth, Elizabeth L. (Ed.): The Future of Excellence in Public Relations and Communication Management, Mahwah (NJ): Lawrence Erlbaum Associates, pp 137-172.
Zerfass, Ansgar (2008): Corporate Communication Revisited: Integrating Business Strategy and Strategic Communication. In Zerfass, Ansgar/Van Ruler, Betteke/Sriramesh, Krishnamurthy (Eds.), Public Relations Research. European and International Perspectives and Innovations. Wiesbaden: VS Verlag für Sozialwissenschaften, pp. 65-96.
Selected texts in German
Möller, Klaus/Piwinger, Manfred/Zerfaß, Ansgar (Eds.) (2009): Immaterielle Vermögenswerte. Bewertung, Berichterstattung und Kommunikation. [Immaterial Assets: Evaluation, reporting and communication]. Stuttgart: Schaeffer-Poeschel.
Pfannenberg, Jörg/Zerfaß, Ansgar (Eds.) (2010): Wertschöpfung durch Kommunikation: Strategisches Kommunikations-Controlling in der Unternehmenspraxis, 2. völlig überarbeitete Auflage [Adding value through communication. Strategic communication controlling in business, 2nd completely updated edition]. Frankfurt/Main: Frankfurter Allgemeine Buch.
Wiedmann, Klaus-Peter/Fombrun, Charles J./Van Riel, Cees B. M. (2007): Reputationsanalyse mit dem Reputation Quotient. In: Piwinger, Manfred/Zerfaß, Ansgar (Eds.): Handbuch Unternehmenskommunikation. [Handbook of corporate communication]. Wiesbaden: Gabler, pp. 321-337.
Zerfass, Ansgar (2010): Unternehmensführung und Öffentlichkeitsarbeit. Grundlegung einer Theorie der Unternehmenskommunikation und Public Relations (3rd rev. ed.) [Strategic management and public relations. Developing a theory of corporate communication and public relations]. Wiesbaden: VS Verlag für Sozialwissenschaften.
Zerfass, Ansgar (2007): Unternehmenskommunikation und Kommunikationsmanagement. In: Piwinger, Manfred/Zerfass, Ansgar (Eds.): Handbuch Unternehmenskommunikation
[Handbook of corporate communication]. Wiesbaden: Gabler, pp. 21-70.
