Archive for October, 2006
Early warning systems are increasingly important to companies who want to safeguard their reputations. An email from Nathan Gilliatt in response to our survey (Safeguarding Reputation) alerted me to a telling example of the benefits of early warning systems that went beyond the usual Kryptonite one that has circulated widely. On his blog he mentions a tragic incident with a Hasbro toy that first appeared on an amazon.com product review and luckily was noticed by an employee. The incident generated a recall from Hasbro before it made headlines. Gilliatt blogs:
“As we saw in the Hasbro example, a crisis may not be an ‘Internet’ problem, but online sources may provide the company’s first warning. Other high-profile bad-hair days have migrated from the online conversation to media that those executives do notice. Why would you voluntarily miss out on the opportunity to catch it before it’s a front-page crisis? You can decide whether it makes sense to engage bloggers in a crisis. It might make more sense to stay out of the conversation sometimes; it would certainly be harder to engage them once the crisis starts. But we’ve seen the examples of PR crises that started online before moving to a broader audience. Whether you choose to engage bloggers or not, you need to pay attention to what happens to your brand online.”
As we mention in the survey, only a minority of companies monitor the Internet for how they are being portrayed online. Gilliatt writes about the wisdom of “micro and macro monitoring” to help companies see emerging problems before they turn into catastrophes. He makes a good point and I am going to brush up on his advice.
We just launched our new global survey on safeguarding reputation. You can find the press release here as well as the executive summary that provides greater depth. The survey, Safeguarding Reputation™, examines the full range of reputation issues and covers such topics as what drives corporate reputation, how reputation is protected, what triggers reputation damage and how reputation is recovered after a crisis. Also examined is corporate reputation’s role in setting a company’s market value, the link between CEOs and their company’s reputation, and the time needed to recover reputation once damage has occurred. Releases will be distributed through next year showcasing the survey’s findings and trends.
We embarked on this research because of the shifting business landscape that has led to a growing trend in damaged company reputations. For good reason, 66% of global business executives tell us that recovery is the hardest phase of reputation management. Our research revealed successful and unsuccessful strategies for reputation recovery post-crisis:
What Does Not Work
Keeping the CEO out of the media (least effective)
CEO apologies (less effective than other strategies)
Responding to bloggers (not considered very effective)
Good financial performance (not a sure-fire way out of trouble)
Announcing specific actions company will take to fix the problem (most effective)
Setting up an early warning system and being prepared
Safeguarding reputation, protecting reputation, repairing reputation, CEO apologies, responding to bloggers, reputation recovery, Weber Shandwick, acting responsibly, early warning signs
Are Sony’s Battery Woes Bound for Court? That was the headline in a recent BusinessWeek (October 16, 2006). What particularly interested me was that Toshiba and Fujitsu are considering suing Sony for damage to their respective “brand images.” Sony’s faulty battery flap created a recall of Toshiba and Fujitsu computers. Although Toshiba and Fujitsu have not gone as far as formally demanding compensation, they are apparently considering it. Reputation on trial.
The Financial Times (October 16, 2006) also covered the news. In an interview with an UBS analyst in Tokyo, the pink newspaper quotes him as saying, “Suing Sony could be difficult since it would be hard for companies to prove loss of business or damage to their brands were due to the battery problem alone.” I am not sure that is the case. Good research can determine whether the Sony battery problem had an effect on purchase decisions and eroding perceptions of Toshiba and Fujitsu. There is more science behind research today than there is in stock selection. Research can isolate cause and effect effectively today.
Interesting to find out how this story develops and whether reputation loss can be taken to court.
I am speaking on CEO transitions at an industry event tomorrow. As a way of getting my mind wrapped around CEOdom, I went through my library of CEO and reputation quotes that I collect and cite from time to time. Since CEO transitions always involve someone’s first 100 days, I thought I would highlight what GE’s CEO Jeff Immelt said upon being handed the baton:
“The one thing you can’t get until you actually have the job is understanding context and how your company fits into the world. Until you do the job, you’re not aware of the true breadth of the assignment. That’s something that I’ve learned a ton about.”
Immelt sure has it right. The gravitas of the position is daunting. I imagine that no one is ever quite prepared. The short answer is: Only optimists need apply!
Believe me, I was surprised. We analyzed the turnover rate of Fortune 500 CEOs and found that the departure rate declined 16 percent since 2005. Check out the press release on on www.webershandwick.com. Big change from the soaring CEO churn we are all used over the past several years. We also found:
CEO Turnover – In the first three quarters of 2006, 49 CEOs departed in the 500 largest revenue-producing U.S. companies, compared to 58 CEOs in the same period in 2005 – a 16 percent decline.
Interim CEOs – Of the new CEOs announced in the first three quarters of 2006, 18 percent were Interim CEOs (9 out of 49 new CEO announcements). By comparison, nine interim CEOs were announced in all of 2005, and only two Interim CEOs were named in 2004. This growing trend of Interim or Acting CEOs was first identified by Weber Shandwick earlier this year.
Insider vs. Outsider Executives – For the first three quarters of 2005 and 2006, insider executives continued to outnumber outsider executives in being selected as new CEOs in the largest U.S. companies. However, 2006 had an even greater percentage of insider CEO successions than 2005 (69 vs. 59 percent, respectively).
CEO Five Year Club – One-third (33 percent) of Fortune 500 CEOs made the “Five Year Club,” namely CEOs who held the title from 2000 to 2005. Industries with the most CEOs in the “Five Year Club” are commercial banks, insurance-property/casualty companies and utility companies.
Here are my comments which are in the press release: “The revolving door in the corner office of our largest U.S. companies appears to be slowing down. Stringent regulatory restrictions, greater board oversight and a higher caliber CEO may finally be having a dampening effect on CEO churn. CEO stability can only be good news since CEO departures tend to increase customer concerns, employee uncertainty, investor anxiety and company paralysis.”
Lets hope that the revolving door in the corner office begins to truly slow. However, when I picked up the paper today in Detroit, I heard that there was a mass exodus of top level execs at McAfee and CNet due to backdated options. Perhaps the numbers are back on their way up already.
CEO departures, Interim CEOs, Insider CEOs, outsider CEOs, Five Year Club, Fortune 500 CEOs, CEO churn, reputation, CEO reputation, board oversight, higher caliber CEO, http://www.technorati.com/tag/www.webershandwick.com
For PR firms and communications departments at public companies large and small, the weeks after the Labor Day holiday symbolize so much more than summer’s close. It marks the starting point for when they take those important first steps toward producing what is perhaps one of the company’s most important publications – its annual report. As the planning process gets underway, annual report team members may want to consider how the hard-won result of their months-long effort can grow in relevance to their ever-evolving audience of readers.
Despite the many hours and dollars spent on annual reports since 1934 when the Securities Exchange Act first required them, annual reports have barely changed over the years. The vast majority amount to little more than one-way communications from a company to shareholders and other stakeholders.
Annual reports do not invite the two-way dialogue that many have come to expect in this digital age and that most of the public now associate with greater company transparency. In this dizzying decade of always-on communications, companies are failing to keep up with the times. Companies can make their communications more informative and relevant by transforming elements of their traditional annual reports into “living” dialogues.
Since the first comprehensive audited annual report was issued by U.S. Steel Corporation in 1903, annual reports have been providing audiences with a financial snapshot of the company at a given point in time. They are designed to promote transparency and accountability so that shareholders might validate their investments at the close of each fiscal year. Annual reports provide investors with audited information on a company’s income, balance sheet and cash flow, accompanied by a critical management appraisal on the past year and outlook for the future. As they have for decades, the yearly roundup of facts and figures dutifully complies with SEC requirements for publicly held companies.
Although annual reports have clung to most of their traditional roots, they have evolved somewhat. Many, for instance, can now be found on the company’s Web site and, as a result, are more accessible to shareholders and others than they have been in the past. But why limit the Internet’s use to little more than an electronic bulletin board for the traditionally bound document?
Many annual report sections could go “live.” It is not unrealistic to envision a future where shareholders will go to a company’s annual report online for clarification or additional information on a particular point in an annual report. Currently, shareholders can submit questions to a company’s Investor Relations Department by mail, e-mail or telephone. However, a hyperlinked query area of an annual report would facilitate stronger communication with shareholders. In the near future, shareholders will increasingly push to express concerns to designated company representatives electronically rather than investing time and resources traveling to an often out-of-the-way location to ask a question at the company’s annual shareholder meeting.
Clearly, a company would need to avoid disclosure of confidential proprietary information and SEC-prohibited selective disclosure of material information. To manage the dialogue well, companies would have to identify the topics they can respond to as many corporate blogs do now. For example, General Motors’ FastLane blog limits dialogue to cars and trucks. It is imaginable that “Living” CEO Letters to Shareholders and “Living” Corporate Responsibility Reports could become standard operating procedure. In today’s rapidly evolving wired marketplace, where companies are being held to increasingly higher standards of transparency, company leadership should consider taking advantage of the opportunity to engage in online dialogue with shareholders.
Leaders should make use of the Internet’s immense capacity to provide meaning and a common purpose. The time for the wired living annual report has arrived.
I came across a fascinating survey in Knowledge at Wharton‘s most recent newsletter. The survey by Families and Work Institute, a non-profit organization, found fewer people interested in reaching the top rungs of corporate America. Most of the research that I have done over the past few years also found many rising executives losing interest in pursuing the corner office. Continual corporate scandals and heightened public cynicism about business leaders has not helped make the corner office any more attractive either. This trend is disturbing. The global economy that we can all benefit from depends on having the right generation of leaders. What are we to do?
In FWI’s research titled “Generation & Gender,” they found that the following:
In 1992, nearly seven out of 10 (68%) college-educated Gen Y, Gen X and boomer men wanted to move into higher responsible jobs. In 2002, the figure was only one out of two (52%).
In 1992, nearly six out of 10 (57%) college-educated Gen Y, Gen X and boomer women wanted to move into higher responsible jobs. In 2002, the figure was only one out of of three (36%), a considerable decline and much lower than the 52% found among the male sample.
When FWI did further research into whether this trend existed among executives of the very top multinational companies, a similar pattern surfaced. According to FWI’s VP Lois Backon and quoted in the Wharton newsletter: “Of those leaders, 34% of the women and 21% of the men said that they have reduced their career aspirations.” Reasons put forth included the “negative spillover from their jobs to their homes.” Balance is getting to be near impossible.
While I am on the subject, Fortune recently profiled Pepsi’s new CEO Indra Nooyi, an amazingly talented woman, in its 50 Most Powerful Women In Business issue and I was struck by the following: “The only thing that Nooyi, a mother of two daughters, does not pursue with gusto may be balance. ‘I work hard or work harder,’ she has said, classifying the concept of balance, at least as it applies to her, as ‘for the birds.’”
Sounds like work/family balance is going to be the greatest barrier in the war for talent over the next several decades. Since I am writing this on Sunday evening instead of relaxing with my family, reading the newspaper and cooking dinner, I feel I know what Indra is talking about.
Families and Work Institute, corner office, aspirations, work/family balance, Fortune, 50 Most Powerful Women, Pepsi, Indra Nooyi, next generation of leaders, global economy, Lois Bradon, Knowledge at Wharton
Nearly one-third of CEOs (31 percent) in NYSE listed companies report that they spend more time on media relations compared to three years ago. In contrast, they spend only 22 percent more time on customer relations. These findings from an Opinion Research Corporation study conducted for NYSE magazine provides valuable insights into corporate governance, risks and opportunities, talent, reputation, and globalization. CEOs are quick to admit that customer relations and day-t0-day management get the short end of the stick these days. CEO days are now spent tending to compliance issues, board activities and shareholder relations.
Not surprisingly, two-thirds of CEOs report that they are having less fun.
Two items clashed for me last week. In a Fortune survey of 1000 CEOs (November 3, 2002) conducted by Clark, Martire & Bartolomeo, 32% of chief executives said that they have an assistant manage all or most of their e-mail. Even though the world has changed enormously, I venture to guess that this figure of email-challenged CEOs could not have changed all that drastically. So maybe the figure is 16%!
I then came across “If You Want to Lead, Blog” (November 2005) in Harvard Business Review by Sun Microsystems’ CEO Jonathan Schwartz. Schwartz writes: “But it’s riskier not to have a blog. Remember when, not long ago, CEOs would ask their assistants to print out their e-mails for them, and they’d dictate responses to be typewritten and sent via snail mail? Where are those leaders now? (The last of my contacts of that breed just retired.)”
Reality is usually somewhere in-between.
“I remember my three core constituencies by my title, CEO, and that’s customers, employees and owners. “
Office Depot CEO Steve Odland