Mind the perception gap

6 January 2020

January is the month of prognostication. Inboxes overflow with divination previewing the year and decade ahead. So here’s my tuppenceworth: The 20s will see the death of compliance. Not because of an impending bonfire of regulation, rather that the concept of ‘compliance’ will be replaced by the much more proactive need for business to respond to (already) rapidly changing expectations of corporate behaviour.

But, crucially, these new expectations won’t be set by regulators or governments but by the mobilisation of public opinion. This perception gap – the difference between what is expected and what is required – is the space in which reputations can be made or ruined.

For many businesses this perception gap is also a blind-spot. ‘It’s what everyone does’ is an increasingly flimsy excuse with the public and politicians increasingly demanding a different standard.

Take the recent arms race in the Banking sector to recruit legions of compliance officers to meet the requirements of new Financial Crime regulations. Across the sector, £GBP billions have been spent on people and systems to strengthen the system from abuse. Or perhaps more accurately, to protect the Banks from breaches of the rules. Government, though, is not content. Its expectation is for the Banks to play a more positive role in law-enforcement and help use their estimable resources to tackle the underlying criminal acts, not simply to avoid sanction. In the 20’s even a ‘compliant’ business may not be safe from censure.

Or look at the campaign against climate change, where arguably government action is lagging far behind public sentiment. #activism, Greta Thunberg and co – are doing far more than raising awareness, they are moving the dial when it comes to consumer behaviour as well as encouraging industries and sectors to take the initiative. At a time when international commitment to the Sustainable Development Goals feels at best patchy, such global activism, and the use of social media to name and shame corporate and government failings becomes increasingly influential, as will the power of consumer choice. People are increasingly choosing to buy from and work for companies with whose values they identify.

Albeit on a small scale, the campaign against single-use plastics may be the shape of things to come, where the time between changing consumer attitudes and legislative action was unusually brief. That small but important victory surely just the first skirmish in a what promises to be a much bigger set of public-driven environmental actions in coming years. Businesses that are not on the bow-wave of this growing sentiment – environmentally and socially aware, sensitive to shifts in the public and political context – may quickly find themselves beyond the pale. We’re not talking adopting the token bit of ‘CSR’ of yesteryear – but ensuring that businesses understand how they are perceived externally and internally, and are alive to the vulnerabilities and opportunities this presents.

The Government too will have to adapt to this perception gap. Not satisfied with Brexit, Boris Johnson’s senior advisor, Dominic Cummings, is setting his sights on speeding up and transforming how Government runs – and fulfilling [at least some of] the promises made during GE2019 to the new Tory voters.

The frustration with every PM in every age is that they pull the levers but the machine doesn’t budge. Even Tony Blair, blessed with money to burn, a majority that nudged 180 and a civil service crying out for new direction was frustrated by institutional inertia.

Today we have an emboldened government, its own chunky majority and in Cummings an iconoclast who revels in challenging the status quo. At the very least this means the ability to pass legislation and change regulation – and potentially quickly.

So, my prediction for the decade ahead is that we’ll see the death of compliance, and that a much broader discipline of reputation management will mature and take its place. An approach that integrates an understanding of both what regulation requires and the public expects.

Whether you’re in Banking, manufacturing, retail or oil – doing what is asked of you isn’t necessarily enough. In the meantime, mind the perception gap.

Duncan Fulton is a Partner at DRD Partnership in London, UK.