Less than a third of companies today use social media to support their corporate strategy and risk management practices, according to new research conducted by Stanford University’s Rock Center for Corporate Governance, the Center for Leadership Development and Research at the Stanford Graduate School of Business, and The Conference Board.
What Do Corporate Directors and Senior Managers Know about Social Media? details the results of a survey of more than 180 senior executives and corporate directors of North American public and private companies. The findings reveal a disconnect between companies’ understanding of social media and how they apply it to their business. The report appears in the latest Directors Notes published by The Conference Board.
“Companies appreciate the potential that social media can have to transform all aspects of their business: branding, reputation, communication, outreach, and identifying strategic risks,” says Professor David F. Larcker of the Stanford Graduate School of Business and lead author of the study. “They also realize the serious threats that it can pose. They’re just not doing very much about it.”
“The world has changed, and consumers, employees, and stakeholders now expect to engage with companies and their brands through social media,” says Matteo Tonello, managing director of corporate leadership at The Conference Board. “That is why we are so pleased to be partnering with Stanford to support this research and help our membership better understand these evolving platforms.”
Conducted this summer, the survey included CEOs, senior executives, and directors across all major industries in the United States and Canada. Unlike most surveys on social media, which rely on a demographic of mostly young practitioners, the survey sample included only representatives from the highest levels of their respective organizations, with the average age of survey respondents in their mid-50s.
Key findings include:
- While 90% of respondents claim to understand the impact that social media can have on their organization, only 32% of their companies monitor social media to detect risks to their business activities and only 14% use metrics from social media to measure corporate performance.
- Only 24% of senior managers and 8% of directors surveyed receive reports containing summary information and metrics from social media. About half of the companies do not collect this information at all.
- Nearly two-thirds of respondents use social media for personal and business purposes. Of those who do, 80% have LinkedIn and 68% have Facebook accounts, so executives and board members are familiar with social media.
- Still, only 59% of companies in the survey use social media to interact with customers, 49% to advertise, and 35% to research customers. Approximately 30% use social media to research competitors, research new products and services, or communicate with employees and other stakeholders.
Executives and directors seem to lack the knowledge necessary to set up a system to collect and distill information from social media into a useable form. As quoted in their press release and in correspondence with Corporate Governance, Larcker noted:
We know that executives and board members are using social media. However, familiarity with social media is just not translating into systemic use at their companies. The majority of those we surveyed don’t have social media guidelines in place at their companies, haven’t had a social media expert consult with their company, and don’t have systems in place for gathering key information. They are putting themselves at serious risk by not taking action.
Do they have a document outlining the appropriate ways to use social media? If I remember correctly about 50% do not have such internal guidelines. Which means they have not discussed this at all! Clearly there are a variety of risk and reputation metrics that should be reviewed. At a minimum, the board should ask something about the process for social media and what is the company doing with these data. So far — I think the answer is not much — seems like a real concern to me (at least for companies that are susceptible to customer issues that can go viral).
The study’s authors recommend that companies take the following steps to implement a social media strategy that integrates with their corporate strategy and risk management program:
- Assess their current capabilities with social media
- Determine how social media fits with their strategy and business model
- Map their companies’ key performance indicators and risk factors to information available through social media
- Implement a “listening” system to capture social media data and transform it into metrics
- Develop formal policies and guidelines for employees, executives, and directors
- Consider the legal and behavioral ramifications that could be involved if the company’s board receives summary data about social media
- The ability for companies to gather market information on stakeholders, competitors, and industry dynamics from an unfiltered environment.
- The rapid dissemination of information on company and its products.
- A low-cost source of information for companies to collect on its stakeholders and the market.
- Possible loss of control of product branding.
- Possible loss of control of corporate reputation.
- Possible loss of control of proprietary information.
- Potential for misinformation in the market. Information shared among social media users is not verified.
- Potential for misinformation for corporate decision makers. Users of social media represent only a subsample of stakeholders, and their actions and opinions might not be reflective of stakeholders in general or even core stakeholders.
Personally I was floored by the fact that 75% of respondents said that their companies do not have social media guidelines for their board of directors. Most boards (71%) neither make use of restricted social networks (board portals) for interactions with other board members nor do they use them for remote meetings. I was writing about “extranets” like BoardVantage.com ten years ago (June 2002).
Yes, boards need improvement in this area but I also look at the findings as additional proof that we need an influx of new blood on boards and proxy access seems like the best way to bring that about.
Press release. See also, How technology can help you build an effective board of directors, which discusses the use of social networking in board recruitment.
Complement the “who do you know” conversation with social networks. Your search does not have to revolve around the connections of your executives and fellow board members. Elevate your networks and your recruitment process into the 21st century to find the best available talent for your board.
See also the Conference Board Governance Center Blog, “What Do Corporate Directors and Senior Managers Know about Social Media?” and their promise of a new series of posts related to social media governanceand how it integrates to the various functions. Also, Engaging the Boardroom: Social Media for Corporate Directors at Risk4Good.
Another driver for bringing boards into the modern age will be the roll-out of Sharegate.com in 2013. When shareowners can gather and easily take collective action, companies will need to monitor and be responsive. Sharegate’s social media tools, at least with regard to impacting corporations, are much more powerful than Facebook, Twitter and LinkedIn that were the focus of the above research. Companies that don’t pay attention may just be run over.