PROJECT TOPIC- EFFECTIVENESS OF CORPORATE REPUTATION MANAGEMENT STRATEGIES IN SELECTED OIL & GAS COMPANIES IN NIGERIA
Corporate Reputation Management (CRM), a multi-disciplinary concept in Public Relations practice, is an important management function in the oil and gas industry in Nigeria. Its five major strategies namely strategic communications, stakeholder engagement, corporate social responsibility (CSR), events & protocols management, as well as issues & crisis management have been employed in building, sustaining, promoting, projecting and repairing the reputation of selected oil and gas companies since the middle 1990s. However, the companies have continued to suffer from hostile community agitations, bitter public complaints, sabotage of oil facilities, negative media publicity and other reputational defects despite huge budgets to these areas. This has prompted the need to evaluate the effectiveness of the CRM strategies. The study had the objectives to: (i) ascertain if international oil companies operating in Nigeria have significantly adopted CRM strategies, (ii) find out whether the CRM strategies identified were effective in building and sustaining the reputation of the selected oil companies, (iii) assess if evaluative research about the effectiveness of CRM strategies was usually carried out in the Public Relations operations of the selected oil companies in Nigeria, (iv) ascertain the level of knowledge of the culture of CRM in the selected oil companies and (v) determine the level of relationship between CRM and successful business operations in the oil and gas industry in Nigeria. This study adopted a survey design methodology. The five hypotheses formulated in the study were tested appropriately. The findings show that the CRM strategies are highly effective but they have been poorly applied in the selected oil and gas companies namely Shell Petroleum development Corporation (SPDC), Chevron Nigeria Limited, ExxonMobil Corporation and Nigeria Agip Oil Company Limited. The findings also show that CRM is not strategically positioned in top management hierarchy of the companies to participate in policy formulation and playing its leading role in building positive image for the organisations. The study has made various recommendations to address and redress these anomalies so that the oil and gas industry in Nigeria would build better relationships with critical stakeholders based on mutual understanding and benefits. Most importantly, the study recommended full and optimal application of the five CRM strategies, and a new model in stakeholder engagement called “Partnership and Participation in Community Relations and Development (PPCRD)” while corporate reputation management should be located in the top management hierarchy so that it could be given the attention it deserves in the oil and gas industry in Nigeria.
1.1 Background Of The Study
The crises in the oil and gas industry, nationally and globally, have necessitated this study. The crises emanating from pipeline vandalisation, oil spillages, devastation of the environmental, restiveness in the host communities and kidnapping of oil workers, have called to question, the effectiveness of Corporate Reputation Management (CRM) strategies deployed by oil companies to address the problem.
CRM, a multi-disciplinary concept is avery strong practise, in Public Relations (Fombrun and Van-Riel, 1997). In the past decade, it has become the subject of many studies (Fombrun, Gardberg and Sever, 1999; Gotsi and Wilson, 2001; Mahon, 2002). Today, the establishment of the Reputation Institute (RI) and Corporate Reputation Review (an academic and professional journal) in the United States of America stand as major pillars supporting the growth of the concept of CRM worldwide (Barnett, Jermier and Lafferty, 2006).
Today, CRM has become the most acceptable Public Relations practice in world-class organisations — the banking industry, the telecommunications industry, manufacturing sector, government establishments, tertiary educational institutions, the professions, security services, and indeed, the oil and gas industry used for building and sustaining organisational reputation (Fombrun and Van-Riel, 1997; Regester and Larkin, 2002; Nwosu and Uffoh, 2005). It combines integrity with consistency (Kottsz, 2000; Joep, 2004 and Dalton, 2005). However, many practitioners of CRM do not have a clear idea about the concept and its application (Barnett et al 2006). Knowledge of various strategies, models, tools and techniques required to achieve results are indeed needed at both academic and practitioner levels.
How does this subject relate to the Nigerian scene? Preliminary researches (Haastrup 1997, Nwosu&Uffor 2005, Ogedengbe 2007, Azaiki 2008, Obeta 2008, and Orukari, 2010) have shown that CRM is also practised as Public relations in many blue-chip organisations in Nigeria, including the oil and gas industry, which is the focus of this study. International oil companies (IOCs) operating in Nigeria’s oil and gas industry employ various strategies in CRM to address and redress reputation issues, challenges and crises that arise in the course of their operations – exploration, exploitation and distribution of petroleum and gas products.
Taking altogether, there is therefore the need to streamline the basic foundations of CRM by upholding a good working definition of the concept, and identifying its principles, models, methods, techniques and strategies employed in solving problems and achieving results. CRM in the oil and gas industry in Nigeria is expected to tackle the myriads of issues, problems or challenges facing the industry. The major problems have been identified hereunder by some Nigerian authors (Haastrup, 1997; Nwosu and Uffoh, 2005; Obeta, 2007; Orukari, 2010):
• Hostile communities and agitations
• Vandalisation of oil pipelines (sabotage)
• Oil spillages and pollution of environment
• Constant negative media publicity
Corporate reputation management (CRM) has been viewed from four basic concepts, namely “reputation”, “corporate reputation”, “corporate image and identity”, and “management”. Most definitions are therefore narrow. For instance, Oxford Advanced Learners’ Dictionary, (7th ed. 2010) defines reputation as “the opinion that people have about somebody or something based on what has happened in the past: to earn / establish / build a reputation — to have a good or bad reputation.” Reputation, therefore, is the accumulation of positive values, goodwill over time in the life of somebody or a corporate organisation.
Barnett et al (2006:34) defined corporate reputation as: “Observers’ collective judgements of a corporation based on assessment of the financial, social, and environmental impacts attributed to the corporation over time.”
Smaiziene and Jucevicius (2009:96) stated: “Corporate reputation can be defined as the evaluation of a company’s socially transmissible characteristics, practices, behaviour and results; settled over a period of time among stakeholders, that represents expectations for the company’s
actions, and levels of trustworthiness, favourability and acknowledgment compared to rivals”.
Kumar (1999) defines corporate reputation as the overall perception held by an organisation’s key stakeholders such as employees, customers, media, host communities, bankers or creditors, suppliers, and even competitors. What is missing in many definitions is the linkage of corporate reputation with management. This study is interested in both terms: corporate reputation and corporate reputation management.
Management as an organizational concept is involved in the effective and efficient planning, organizing, controlling, directing, leading, coordinating and allocation of human and material resources to achieve organizational goals and objectives (Akpala, 1993). It therefore follows that corporate reputation management deals with the effective planning, organizing, controlling and directing organizational resources to achieve a positive stakeholders’ assessment of a company in relation with its competitors.
Wikipedia (2010), the internet encyclopaedia,defines corporate reputation management as the process of tracking an organisation’s actions and policies in relation to its publics or stakeholders. This, it asserts, is usually done using the tool of communications.
Corporate reputation management is usually regarded as the livewire of any organisation. For instance, Sherman (1999) quoted the chief executive of a leading UK consumer goods manufacturing company as saying: “If we lost all our production facilities, we could rebuild the business. But if we lost our brand name and reputation, the business would collapse!” From the mid-90s to date, there has therefore been a conscious effort in blue-chip organisations to build, sustain, protect, project and maintain solid positive corporate reputation, which is now recognised as an invaluable corporate asset by many researchers (Mahon, 2002; Alsop, 2004, Fombrun, 1996, and Orukari, 2010). Besides, such organisations can now evaluate or measure their reputation quotient (RQ) on a reputation scale (RS) – (Fombrun& Foss, 2001).
In CRM circles, there is also the question whether image and reputation are the same.
Many people use them interchangeably. Are they right or wrong? Various researches (Bennet&Kottasz, 2000; Cornelissen, 2004; Dalton, 2005, etc) have shown that a company’s reputation is much bigger than mere image. It has a lot to do with corporate mission and vision, corporate character and culture, corporate values and virtues,corporate brand and corporate governance, and the effective communication of same to various internal and external stakeholders or publics.
From the preceding overview of the concept of CRM, and the crises in the oil and gas industry, especially in the Niger Delta region of Nigeria, there is need to carry out a comprehensive evaluation of the effectiveness of corporate reputation management strategies employed in selected oil companies in Nigeria.
Various authors (Fombrun, 1997; Lesly, 1998; Nwosu, 1996; Ajala, 2001; Wilson, 2004; Regester&Larkin, 2002; Orukari, 2010) have in different expositions identified various strategies in corporate reputation management (CRM). In this study, the dependent variables to be measured are the following major strategies of CRM:
(a) Strategic communication (b) Effective stakeholder engagement
(c) Corporate Social Responsibility (CSR)
(d) Issues & Crisis management
(e) Effective events management and protocol
PROJECT TOPIC- EFFECTIVENESS OF CORPORATE REPUTATION MANAGEMENT STRATEGIES IN SELECTED OIL & GAS COMPANIES IN NIGERIA
1.2 Statement of the Problem
As one can deduce from the definition of Corporate Reputation Management (CRM), it is supposed to reduce community hostility, achieve better stakeholders’ rating, reduce pipeline vandalisation and oil spillages, as well as engender positive publicity for oil and gas companies in Nigeria.
CRM is supposed to engender positive perception of the company from its critical publics namely employees, customers, distributors, suppliers, contractors, bankers, regulatory agencies, the media, the community, top government officials, opinion leaders, etc. This is why corporate reputation is regarded as an invaluable intangible company asset (Mahon, 2002; Alsop, 2004, and Fombrun, 1996).
However, the oil companies selected for this study suffer so much reputation defects from constant negative media publicity. Various issues including hostile communities, environmental degradation, pollution, oil spillages, gas flaring, incessant labour unrests, alleged poor welfare packages, youth restiveness, kidnapping of oil workers, pipeline vandalisation, problems with regulatory agencies, etc have continued to generate
negative headlines in national newspapers and airwaves (Haastrup 1997, Nwosu&Uffoh 2005, Ogedengbe 2007, Azaiki 2008, Obeta 2008). In fact, Nwosu and Uffoh (2005) are of the opinion that the oil and gas companies have over the years failed to adequately address most of the issued identified above.
Two major incidents captured by two newspaper editorials highlight the failure of oil and gas companies in addressing issues that impact negatively on their reputation: “Shell’s latest oil spill — For reasons that are difficult to understand, the issue of oil spills in the Niger Delta has not
been receiving the kind of attention it deserves…The recent oil spill recorded by Shell Petroleum Development Company of Nigeria has been described as the worst in the last one decade.
Over 40,000 barrels of oil that was said to have leaked in the process of transferring the commodity from a floating platform onto a tanker, is certain to further increase the worry of the inhabitants of the oil-rich region (Punch, 11/1/12, pg 22)
“Chevron rig fire: A drama of insensitivity and suffering —- A January 16, 2012 explosion and fire aboard a drilling rig in Chevron’s Funiwa Field, 10 kilometres offshore, has become the latest in a string of environmental disasters resulting from oil and gas-related operations in the Niger Delta region.
The raging fire which caused massive destruction of fishes and other sea foods, has yet to receive due attention from the government and the multinational oil company, even as population in impacted communities face starvation and pollution-induced health challenges (Punch, 17/2/12, pg 18).
The IOCs have spent various sums on corporate social responsibility (CSR). For instance in 2010, Shell Petroleum Development Company (SPDC) spent a total of 65 million US Dollars in funding development projects in 244 communities in Nigeria (Shell in Nigeria,2011). Another company, Chevron, spent a total of 56.7 million US Dollars on 425 communities in six years to fund various developmental and social welfare programmes (Chevron: 2011 Nigeria Corporate Responsibility Report).
In the same vein, Exxonmobil affiliate companies in Nigeria invested about US$280 million over the last decade (2000 – 2010) on strategic and sustainable community investments in healthcare, education and capacity building initiatives (Vanguard, 2010 ).
As part of its corporate social responsibilities (CSR), the Nigerian Agip Oil Company (NAOC) also declared it has aided farmers’ cooperative societies, youths and women groups in its areas of operation with over N80 million as micro credit facility within the last four years (2005 – 2009)(Vanguard, 2009).
Azaiki (2008), Haastrup (1997) and Orukari (2010) affirm that the IOCs have adopted various strategies including Communication and community development. Despite the expenditures on CSR and communication, the companies still suffer community hostility, negative perceptions from the communities and bad press. The following newspaper headlines reflect the nature of bad press about oil companies in Nigeria:
o 10 Ijaw communities blame Shell for oil spill (Daily Champion, 13/7/09, pg. 26)
o Nigeria: Delta Assembly blasts Shell over oil spillages (Vanguard, 19/10/08,
o Oil spillage: Senate reads riot act to oil companies (Thisday, 7/11/2007
o Hundreds of protesters hold Shell workers hostage in Nembe (Sweet Crude, May 2012, pg. 102)
o Ikarama Community groans Under Oil Spills (Sweet Crude, December, 2009, pg. 52)
o Chevron Rig: Fire: A Drama of Insensitivity and Suffering (Punch editorial, 17/2/2012, pg. 18)
o Oil firms to face stiffer penalties for spillage (The Guardian, 6/10/2009, pg. 3)
o Oil industry ridden with corruption — NEITI (Punch, 7/5/2012, pg 21)
Host communities question the so-called “huge budget on CSR”. They ask: “What is the percentage of the budget on CSR in relation to total revenue of the oil companies? Is the budget equal to the devastation on the environment, or the harm to human, caused by the oil companies?” The hugeness or otherwise of CSR can only be measured using three main perspectives: (1) Legal / statutory requirement (2) Economic framework
(3) Ethical consideration.
The research problem is: Over the past five years (2007 – 2012), increasing expenses by the oil companies on Corporate Social Responsibility (CSR) has only succeeded in heightening restiveness in the host communities. Why? The CRM strategies deployed by the oil companies have not significantly achieved reduction in community hostility, pipeline vandalisation, oil spillages and bad publicity.
1.3 Research Objectives