Archive for August, 2008
I did not know this but a Dallas attorney named Steve Kardell makes predictions about the biggest scandals he foresees every year. He hit the nail on the head with last year’s prediction that subprime woes would be this year’s biggest headline. Predictions for the coming year are announced this coming week when he teaches a class at Southern Methodist University’s Dedman School of Law. In addition to his prediction that off-label marketing by pharma companies will reach scandalous heights over the next 12 months, he foresees companies coming down really hard on misbehaving middle managers, not just the “guys” at the top. Kardell notes that a Google search for “internal investigations” comes up with 2.6 million hits. No small number. Companies are getting serious. The writer of the article asked Kardell, “So what do you do if you feel your boss or company is pushing the ethical envelope?” Kardell responds: “You avoid taking it public at all costs. There are no happy endings [when you do that]. You ruin the reputation that you’ve spent a lifetime building. You’re radioactive.” Yikes. At least Kardell says he feels bad about offering such advice and counsels employees to try to work within the system when they spot something amiss. He raises a good point about keeping it all in the family if possible. That is a good first step. Yet, it seems to me that when you keep your whistle blowing internal and months drag into years, you’ve got a problem. My last posting was about a similar situation. There must be a better way to get boards and senior management to address issues coming from employees and take action . Kardell is right in predicting that employees are going to increasingly take to the “net waves” with complaints and revelations and make company reputation vulnerable in a way never before imagined. He also advises employees to keep awake during their company compliance training sessions. He makes a good point.
Although I wrote this post a few weeks back, I somehow deleted it so I am starting once again. The reason I can’t just let this one go is that it has to do with overlooked early warning signs that often bring companies to their knees. An article in The New York Times on Freddie Mac’s CEO Richard Syron not heeding billowing smoke signals bothered me. After spending many weekends writing my book on reputation recovery, I could not believe how often warning signs were dismissed by those at the top. Back to Freddie Mac. Apparently the CEO received a memo from Freddie Mac’s chief risk officer warning him about dubious loans. The CRO, David Andrukonis, told Syron that the company was purchasing bad loans “that would likely pose an enormous financial and reputational risk to the company and the country.” And this was 2004! They even sat in a conference room discussing this impending disaster. According to Andrukonis and many others, Syron refused to consider the options for reducing the institution’s risks. He felt that his options were extremely limited. Maybe that was the case but the CRO left in 2005 to become a teacher (smart man). Syron is quoted in the article as saying “If I had better foresight, maybe I could have improved things a little bit. But frankly if I had perfect foresight, I would never have taken this job in the first place.” This statement deflects the question without answering it. It is not an answer to say that no one has perfect foresight. A reasonably cautious executive would have taken steps given these many early warning signs. This is what CEOs get paid to do….make the big decisions. Ultimately they are the guardian of the company’s reputation and shareholders’ investments. The article ends with Syron’s quote: “I’ve had four other jobs as C.E.O and I came out of them all pretty well. What I’m working for right now is to save my reputation.” That’s a fact.
Am on vacation this week in the Berkshires and we went to the outlet shops in Lee, Massachusetts to buy a few things for my son who is on his way to Santiago, Chile to work with entrepreneurs through non-profit Endeavor Global. We wandered into J.Crew and three women at the counter were telling a fourth salesperson why she should stay working at J.Crew. I did not know the background behind their conversation but I decided to chime in. They all seemed nice enough. I mentioned that J.Crew had an excellent reputation not only for its fashionable cool and casual clothes but also because of the smashing turnaround strategy devised by their CEO Mickey Drexler. The woman who I suspected was the manager responded by saying how terrific and approachable Drexler was. She told me this story of how Drexler sometimes gets on an all-office loud speaker and asks salespeople how much they would pay for a particular item. She said that he is always asking employees for their opinions and actually listens to their advice. She made Drexler sound like fun and J.Crew as a good place to work. All within minutes. It was clear from this brief conversation that Drexler was on “hello, how are ya?” terms with his employees. As I left the store, I thought that I should post this on my blog and pass along some advice to companies looking to fuel a good reputation. Get your employees to spread positive word of mouth and add a story line as well. Let your employees create their own content (Drexler using the loud speaker) for customers (Of which I am happily one. So is my whole family in fact. ). Good reputations often get built employee-by-employee, advocate-by-advocate.
As I was perusing the Harris Interactive site for another survey on industry reputation which I will let you know about in my next posting, I found a mention in U.S. News & World Report on a survey on the most and least reputable careers. I can assure you that I knew ahead of time that my title “reputation strategist” would not appear on the list because it is one-of-a-kind. In fact, a journalist wrote me yesterday asking me what it was.
The Most Prestigious Careers poll was conducted by Harris Interactive in July among 1,000+ adults. Leading the list among the most prestigious careers are firefighter, scientist and teacher. According to the research, the reputation of teachers has risen 25 percentage points since 1977. As it should be. My oldest daughter is a principal in one of NYC Mayor Bloomberg’s innovative educational initiatives designed to replace large, impersonal and often chaotic high schools with “small schools.” These small schools foster supportive and personalized environments with fewer children around themes such as the arts, law, human rights, aerospace, architecture, etc. About 300 small schools have been created since 2002. All I can say from watching afar is that it is a job meant for angels. It requires an inner strength that most people never have to call upon in their life times. I also think that organizations such as Teach for America have positively impacted perceptions about teaching as a career choice. Good to see that reputation in the educational field is gaining respect. Of course, most of the careers of high repute on this list are “service” oriented and not known for being highly lucrative.
|Military officer (tie)||52|
Source: Harris Interactive
As for the less respected career rankings, the more highly-paid jobs top the list – real estate agent, actor and banker. No surprise that real-estate, bankers and business executives have taken reputational hits as the economy rapidly deteriorated over the past year and sectors collapsed. Athletes make the endangered list because of the past year’s doping scandals that have plagued the sports industry. I was surprised to see journalists on the list but hey, that is how Americans voted, not me. I still hold that profession in high esteem. Maybe I am missing something. [Sorry about the font change. After spending 30 minutes trying to fix, I gave up. WordPress has issues with fonts.]
Real estate broker
Source: Harris Interactive
I watched the opening ceremonies for the summer Olympics in China on TV last night. I was awestruck and exhilarated. The reputation of China and its people could only have been enhanced by the exquisite beauty and deep thought that went into the production. As a keen reputation watcher, I could not help but think about one of the clear sweeping trends — that is, the rise of nationalism and boundaries. Jack Welch, former CEO of GE, used to talk about boundarylessness as a strategy for expressing a world opening up to business in the 90s. Today he would have to choose his words more carefully and perhaps mention boundaryness instead. National borders are growing increasingly acute and walls – both visible and invisible – are being newly built and fiercely defended. Ascending nation reputations are being shaped with greater attention by governments. The reputation of China – with all its controversies and allure – dazzled last night. Thankfully I can watch the ceremony over and over again on YouTube and delight in its magnificence. China’s reputation (last night) was advanced for all to see. We will see how it translates over the course of the next few weeks.
I was wondering the other day whether CEOs and boards were paying too much attention to what was measurable and not enough to what mattered. As companies increasingly focused on complex financial instruments and sub-prime fast money, leaders seemed to have lost sight of what mattered. If boards spent more of their time asking questions such as how the company’s values were being followed each day and whether customers were satisfied enough, perhaps we would not be in the economic mess we are in now. Imagine how businesses might run if the bottom line was core values and net promoter scores (would you recommend this company to someone else). At least corporate responsibility is now part of the triple bottom line (economic, social and environmental).
As I was thinking about this blog post, I came across an interview by Maria Bartiromo who has a BusinessWeek column. She interviewed former Time Warner CEO Jerry Levin. Bartiromo was asking Levin about lessons learned since being the maestro behind the failed Time Warner-AOL merger. Levin says:
“First of all, I think I realize now that there was a rather parochial zone of interest where all of my relationships—maybe even my relationship with myself plus or minus—were based on Time Warner’s destiny. If something didn’t touch on any of the businesses of Time Warner, then I didn’t have any interest. The other thing is: There wasn’t a sufficient understanding that it’s O.K. to be open and vulnerable, to ask for help. To state it in different terms, it’s probably helpful to invoke the feminine principle and be compassionate, empathetic, understanding, give respect to everybody, don’t get deluded by the natural hierarchy. And don’t get too self-satisfied that you have all the answers.
I believe the importance of the capitalist system, the way it’s been structured. But there is such a focus on delivering those returns almost without any understanding that there are deeper issues that management is also about—humanism and respect for people in the company; serving the public interest; higher obligations to yourself and to the world. Very few mission statements take that into account.”
Levin helps me make my point. Maybe we need to figure out how to focus on what matters in addition to or (at least equally to) what we measure.
An interesting article appeared in Fortune at the end of May. Patty Sellers interviewed former CEOs of once-beloved brands’ JetBlue, Starbucks and Motorola on why they lost their jobs and what they would have done differently. All of these men’s reputations were singed by their stumbles but it should be said that they also faced incredibly difficult challenges that persist to this day. JetBlue is dealing with the rising price of oil, Starbucks is closing stores left and right as its performance continues to weaken and Motorola’s cell phone unit is still struggling. Neeleman was JetBlue’s founder whereas in the case of Starbucks, its founder Howard Schultz is back. For whatever their reasons for being dethroned, listening to what they would have done differently to keep their reputations in tact is interesting. Sellers’ title for the article is apt: Lessons of the fall.
David Neeleman (JetBlue) – “I realize it now that I’m a board member, looking at the company through this little hole once a quarter at a four-hour meeting – board members don’t know that much about the company. They really don’t. I would’ve been much more engaged with the board. ..I didn’t have time to update the board on everything. If you don’t, somebody else will. You have to be able to give them an accurate picture of what’s going on, or they develop their own perceptions and start creating their own stories. And then they make their decisions. How do you keep these people up to date and give them the whole picture.”
Ed Zander (Motorola) – “I go back and the big thing was people. I didn’t’ move fast enough on some people.”
Jim Donald (Starbucks) – “My worst decision was not investing earlier in international. The international markets don’t have as quick returns as the U.S. But if I’d known the U.S. economy was going to crash, I would have invested earlier.”
The reasons for their falls are common – not communicating one’s own narrative enough, making bets on the wrong people and slowly reacting to market warning signs. Reputations rise and fall on the first two over and over again. In all the work I have done over the years on building CEO reputation and managing CEO transitions, consistent communications and picking the right people are almost always at the top. The latter reason for stumbling – predicting market shifts — is often easy to detect but hard to act soon enough. Take a look at the sub prime mortgage failures that have brought down entire sectors and impacted global economies. The signs were there but few responded in time.
Reputation management at the top can be tricky business.