Archive for September, 2008

Intel’s CEO Paul Otellini remarks on Intel’s resurgence in today's WSJ.  He makes a good point that “A CEO’s main job, because you have access to all of the information, is to see the need to change before anyone else does.” In light of today’s catastrophic economic meltdown, I would add that a CEO’s primary job is to also see the early warning signs on the horizon.  Another way to say this is that a CEO’s first and second job is to use his or her peripheral vision in addition to strategic vision.

Otellini’s remarks on how he pulled off change at the mighty and revered semiconductor company. “You won’t believe how long it takes for the change you've started to work its way all of the way through the rank and file. As a result, I was upbeat, but nobody else was yet. So I made it my job to communicate, communicate, communicate the positive message. I did open forums, I did Webcasts, I told the employees to send me any question via email and I'd answer them. I wasn't trying to sell them on the idea -- when half of your 80,000 employees are engineers, if you try to put sales into it you're dead. You have to convince them, through reasoning and logic, the accuracy of your claims."

Again, communicating change is critical to success. Otellini who is the first Intel CEO with a marketing bent understands the importance of communications. As more companies stumble (WaMu this week), reputation recovery should be at the top of management agendas. And the first bullet point should read: “Communicate communicate communicate.” No joke.

Since the economic news has taken over messaging for the past several weeks, I found an interesting piece of information regarding CEO pay. It was buried deep in an article in the WSJ (9.22.08). CEO compensation is always a reputation  loss trigger but especially nowadays. As you already know, the federal government is bailing out AIG (or most of it). However, Robert Willumstad, CEO of AIG since June, turned down an exit package of $22 million despite the contract guarantee. The short-lived CEO said that it would not be right to be given this sum when so many investors and employees are losing money. Something to be said for doing the right thing.

There is so much to absorb in the news today. I am thinking eitherabout the financial industry meltdown, the leadership vacuum in Washington (how could the president wait 3-4 days to say something about Wall Street and Main Street imploding!), brands Obama and McCain, and tainted baby milk in China. When it comes to crisis, the first rule is to take the heat and speak up. Not sure I can excuse our president from taking his time getting to the podium as Americans lost sleep over massive savings and retirement losses. If the CEO of a company was missing in action for several days, we’d hear plenty about booting the officer out. What is especially surprising is that Bush’s reputation was so sorely hurt after Hurricane Katrina’s inaction. The 1000+ point free fall deserves more than 1000 words from the rose garden in a timely fashion. On another subject. I enjoyed this week’s (9.16.08) article by Adam Nagourney this week in The New York Times on how candidates are trying to build their brands and get their messages out in the unprecedented media infosmog. As Nagourney discussed how frustrating it was for the candidates to be heard, he made some very apt points that also apply to companies trying to bolster their reputations and articulate their strategies. “…the ways in which the proliferation of communications channels, the fracturing of mass media and the relentless political competition to own each news cycle are combining to reorder the way voters follow campaigns and decide how to vote. It has reached a point where senior campaign aides say they are no longer sure what works, as they stumble through what has become a daily campaign fog, struggling to figure out what voters are paying attention to and , not incidentally, what they are even believing.” Reputation building seems to also struggle as events surprise us and the business environment implodes. Matthew Dowd, chief strategist for President Bush in 2004, was quoted in the article as saying, “At this point, the ability to create and drive a message narrative is all but impossible. There’s just so much stuff. The average person has 90 channels. They all get dot-coms. They all get a newspaper. There is so much flow of information that they just begin to discount it all.” Media trust is at an all time low which rubs off negatively on company messages too. Dowd went on to say that McCain and Obama should not waste their money on TV advertisements and spend their time getting ready for the debates. “Those encounters are likely to be the only chance the candidates have at capturing the undivided attention of the public.” Thought that was a fairly dire statement but one with some truth in it. With so many conflicting messages from the two political brands, it is hard to make sense of who said what and why. Perhaps this is why the election is in such a dead heat and the two presidential brands are almost becoming caricatures of themselves.

Weber Shandwick initiated an analysis of the “stumble rate” earlier this year. I found it very useful to discussing why reputation recovery is so important today. The stumble rate refers to the percentage of companies that have lost their number one industry status in a five year period. Needless to say, the numbers were staggering – nearly 70% have stumbled -- when you think about the world’s and America’s long time corporate royalty . So here I am on September 17th wondering if the term “stumble rate” is too kind a term. It feels as if our financial corporate royalty is falling off a cliff – Lehman Brothers, Bear Stearns, AIG, Merrill Lynch, Fannie Mae, Freddie Mac. Perhaps I should rename the trend I identified. How does the “plunge rate” sound or the “collapse rate” or the “cardiac arrest rate.” The latter term is how it feels to many.  The question of the day is not how it all began but how it is going to end.  Reputation matters most of the time. However in dire times like this, all the corporate responsibility and best place to work accolades and top notch bench strength pronouncements begin to pale. Although leadership at the top always counts, where are all those board members that were entrusted with shareholder rights and employee savings.  Although I almost never lose faith in what leaders can do to build great companies, I do wonder whether boards need greater scrutiny and even certification. The financial sector has changed immeasurably over the past several weeks. It will need an infusion of cash to stay alive but also wisdom and guidance to rebuild its once fine reputation. I have a lot of thinking to do on this subject.

Reputations are built quickly or given a nice boost when companies or CEOs make preferred lists.  And there are plenty of lists that have come out lately.  I just picked up Barron’s The World’s Most Respected Companies” for 2008 in the airport.  This is an annual survey among money managers on the 100 largest companies in the world.  The five most respected companies this year are J&J, P&G, Toyota, Berkshire Hathaway, and Apple.  When asked what makes a most respected company, the leading factor among these portfolio managers  was strong management.  See below. Again, we see the importance of the CEO and his/her senior team as a critical factor in reputation-building.  My argument all along.  With so many signposts to judge companies the way we used to, leadership still remains at the top in reputation-shaping. Barron’s also adds: “Interestingly, the stuff of most company conference calls and analyst reports – product rollouts, balance sheets and profit growth – was assigned relatively little weight.” Perhaps it is just getting harder and harder to discern corporate worth and value.

Most Important Factors
Strong management	27%
Sound business strategy	27
Ethical practices	20
Competitive edge	10

Wal-Mart went from #21 last year to #7 this year.  Clearly, the giant retailer is earning kudos for getting it right after its reputational skids of recent years.  It is also managing itself well as it navigates through the seas of this turbulent economy. As Barron’s reminds us, many of the financial companies have dropped out of the world’s top 100 as they have struggled with subprime losses, astronomical losses and CEO startovers.  The sector’s respect has diminished among this stakeholder group. Let’s hope that next year brings a better showing. Interestingly, many of the list newcomers are energy, chemical and agricultural companies such as EnCana, BG Group, Potash Corp. and Monsanto. The other list that I read on the plane this week was BusinessWeek’s Best Places to Launch a Career.  I truly enjoy this list because I think there is an art to attracting the best candidates out of college, vocational school or high school. Worth checking out as the talent wars start up again soon.

Here is a new wonderful design program that anyone can use. It is called wordle and it can visually represent your words and messages. I went to my blog and clicked on the create button on wordle and whoa....here it is. Glad to see that the word reputation is so prominent since this is the point of my blog. You should visit the site. "It's so fun" as my kids say.

 

The Societe Generale scandal where rogue trader Jerome Kerviel  lost billions for the firm continues to amaze me. Not only because of the 75 red flags or warnings that the company had before the scandalous affair was revealed. What interests me is how Kerivel has become a folk hero of sorts.  Reminds me of how head-butting soccer star player Zinedine Zidane defied first impressions and became a French hero too.  First, there are a number of adoring Kerviel T-shirts that are a hit in France. Second, I just read about a new book coming out titled The Diary of Jerome Kerviel. The fiction book ,which Kerviel did not contribute to, is in comic book style and 40 pages long. Apparently the style and length is expected to draw in young adults fascinated with the daring daredevil ‘s escapades at SocGen.  Reputations are a funny thing sometimes. Just when you think you understand them, they quickly defy you.