Archive for May, 2012
Just finished reading the new IBM CEO survey, Leading Through Connections. There is alot of great information about how CEOs see the world, particularly the new workforce. Instead of the usual command and control state of affairs, CEOs now realize that they will be building their company reputations on their employee intelligence networks and shared values. As the report says about CEOs, “they are arming the people who represent their brands to the world.” Without knowing what the values, mission and purpose of an organization is, there is little hope that reputations can be steadied and differentiated in the present sea of information chaos and overload. ”For organizations to operate effectively in this environment, employees must internalize and embody the organization’s values and mission.” Companies with the best reputations will have employees who help build and safeguard their companies reputation every minute of every day because they understand what the company stands for. They will guard their company reputation as their own because they will implicitly understand the character of the organization. It is now the CEO’s job to arm them with the tools to understand how best to represent their brands no matter where they are or what time zone they are in. Shared beliefs, up and down the ladder, will create winning cultures and winning companies.
The survey touched a teeny bit on CEOs and social media. Here is what they said. “Though CEOs frequently mentioned dipping their toes into social media waters, few claim to be personally immersed. This arms-length involvement puts CEOs in a precarious position.They are making critical judgements about a disruptive technology without much firsthand knowledge.” A few weeks ago, I had a discussion with a corp communications officer for a major global companywho told me that he knew little about social media and depended totally on a younger guy in his department to handle it. The time is ripe now for CEOs and other company officers to take the leap forward and get to understand social media more deeply. That’s where the future is headed and headed at light-speed. In fact, in the survey, the most startling stat for me was how social media was the least utilized customer interaction method today. Yet, CEOs predict that in three to five years, social media will become one of the top two ways to engage customers. They expect a 256% increase in usage! The number one way to engage in the future was face to face and sales interactions, as it is now. But social media is going to ramp up quickly as the best way to engage with customers and CEOs know it. They just have to get their companies in gear for 2015 when social media reaches its full potential. Unfortunately, the study shows that traditional media will lose out (CEOs predict a 61% decrease in three to five years) as social media gains acceptance.
(The IBM study talks about “future-proof” employees. I borrowed it here for my title. I like the phrase! Also really like the infographic. )
I have been trying to figure out why Jamie Dimon has not received as much reputation mud as you’d expect considering the fiasco over the trading loss JPMorganChase recently revealed. I am also trying to figure out how Ina Drew, the chief investment officer who resigned over the debacle, managed to keep such a low profile. I don’t recall her ever having made it to the Fortune’s Most Powerful List and yet she certainly had a big job. These two enigmas baffle me.
On the one count re Dimon, I think that his immediate response to the crisis saved him. He immediately owned the problem, publicly agreed that it was outrageous and took the blame personally. His response was in keeping with our public understanding of what kind of person he is — blunt, decisive and unequivocal. But I have to admit that he has managed to do what few others have managed in a crisis……evoke sympathy. There was an article I read last week about how he could not sleep, how he told his wife he had screwed up big and how he felt terrible having to let Ina Drew go (something like she was practically a sister). I actually felt bad for him. The other reason I think that he has managed to have his reputation stained but not decimated is that there are no customer stories where individuals are shown having lost their entire retirement savings or otherwise. When we watched those stories about what people lost with Bernie Madoff or people who lost their lives with the BP oil spill at Deep Horizon, it was crushingly real. I guess that’s the advantage of the CIO loss, it’s the bank’s money!
As for Ina Drew, in 2011, there were 21 mentions of her when I searched on Google. Just in the first five months of 2012, there are 7,570. Quite the uptick! She managed to keep such a low profile for such a powerful woman. And when I looked closer at those 21 mentions, only one had to do with her and that was about her compensation. Otherwise the mentions had to do with Ina’s or Drew’s or the Immigration and Nationality Act (INA). So basically, she had NO profile which is hard to believe. How did she do that? Not either a best dressed executive headline! (Did you see yesterday’s Best Dressed CEOs?)
I have no doubt that Dimon’s and JPMorganChase’s reputation have been hurt. But now is the time for them to “recover.” I hope they read my book. The first step after the spotlight somewhat ebbs is to focus internally and reassure employees that the future is ahead.
The New York Times had a very interesting article yesterday for a variety of reasons. But one reason that hit the spot was about how consumers make decisions and how the author went about choosing the right baby formula for his infant. After he and his wife researched every possible formula on the market and found that they were all basically the same, he came to this conclusion:
“Despite knowing this, I still insist on paying twice as much for Enfamil, which its maker claims is “scientifically designed.” (Aren’t they all?) I splurge because Mead Johnson is a 107-year-old company that has been promoting a single baby-formula brand for more than 50 years. I figure that it’s less likely to squander its name by skirting the rules or engaging in shoddy manufacturing than a company with less to lose. This peace of mind costs me about $7 per day.”
This is emblematic of our research on how the company behind the brand matters more than ever. The author was reassured in his purchase of Enfamil because he learned that the company behind it, Mead Johnson, had been around long enough that they were not going to risk their century-old reputation by messing around with the manufacturing and production of its baby formula. The parent company made a significant difference in a confirming to the writer that this was the better buy, even at a premium. And not only did this infant get to taste Enfamil but the writer blasted his choice around the world. There you go for serendipity public relations.
After reading this gem which was fairly upfront in the article, I kept reading. The Enfamil example led into the article’s main message which is that information overload is plaguing us all and making it increasingly hard to find what we are looking for unless we want to devote days to researching. ”Too much information, it turns out, is a lot like no information.” Therefore to deal with this information smog, people need guides orsherpas to guide their way through the data chaos. According to the author, “economists have a name for these cues that companies employ to convey their hidden strength: signaling.”
Reputation-building uses the strategy of signaling. Good reputations serve as a shorthand to identify whom you want to buy from. A company that is a best place to work for or most sustainable or trains its leaders best helps to narrow the choices between products. Do I want to buy my infant formula from a company that treats its people right? You bet. The thinking goes like this: if they treat their employees well,you can make the leap that they turn out safe products. In our research on parent brands, we had an open-ended question on why the parent company mattered when buying a product brand. Over and over, consumers mentioned that knowing the parent brand helped them sort out which products to buy. For example, one consumer said: “The integrity of a company will ultimately show in its products.”
The article also made me think about anniversary celebrations. Many companies make a big deal about how long they have been in busines — 50, 100 or 200 years. It turns out that it is good to do so in order to remind consumers and other stakeholders that there’s alot of reputational equity behind those promises.
I feel like I have read this article before. The title in USA Today yesterday was “CEOs stumble over ethics violations, mismanagement.” Is it 2002 over again when Enron, WorldCom and Adelphia made headlines over ethical transgressions and wrongdoing? I agree that there seems to be a rush of these events recently but I am not sure it is vastly different than it has always been. The Internet has certainly added to the scrutiny of corporate executives but the spotlights were just as glaring and intense as they were years ago. In fact, I tend to think that wrongdoing on the part of CEOs stayed in the news for a longer period of time than they do now. I am waiting for headlines about JPMorganChase CEO Jamie Dimon to be replaced soon. Not sure what will substitute for him in the days ahead but I can bet $5 that something will surface in the next week to knock Dimon off the front pages (so to speak). And whistleblowers have been around for a long time. It is not the first time I have heard about a note being sent to a board member about an executive transgression.
The real difference is that there is zero tolerance for these missteps and for a simple reason — “reputation.” It was interesting to me that the word “reputation” did not appear once in the USA Today article. Boards are making split-second decisions about CEO tenures because they know the downside of having their reputations tarnished, trashed, torn and tattered. Not only are their own personal reputations at risk but that of the companies on whose boards they sit (and that impacts their compensation which is often in stock). As Lucian Bebchuk, director of corporate governance at Harvard Law School said in the article, “Boards do seem to move faster to deal with scandals and public failings that attract shareholder and media attention.” Being in the headlines and chatted about online about reputation failure is the new scarlet letter. I hope that next time an article appears, the reputation damage that brings down share prices, dampens employee morale, attracts headlines and invites investor activists gets mentioned. The cost of reputation failings are higher than ever and the stain can be very deep. In fact, it takes years to wash out.
I don’t even have to do the math to figure this out. The increase in mentions about Jamie Dimon’s reputation is astronomical. Last year on May 14, there were nine mentions of Jamie Dimon with the word reputation. Fast forward one year and there are 3,160 mentions just today. The articles all have a similar ring to them… no surprise considering that the bank he leads lost over $2 billion on a trading error. Pretty soon, I expect they will be calling for his head.
“The reputation that Jamie Dimon honed for decades on Wall Street has been severely damaged in a matter of days.”
“…tainted the reputation of the bank’s high profile chief executive Jamie Dimon.”
“We made a terrible, egregious mistake,” said bank CEO Jamie Dimon, who had a reputation as a master of risk management.”
“So here you are Jamie Dimon. You have a sterling reputation. Why? Because people say he knows how to manage risk better than anybody.”
“A black mark for a survivor of the financial crisis.”
The one thing I can safely conclude is that the word reputation is firmly embedded in our lexicon. I used to notice the mention of reputation once in a while but in the past year “reputation” shows up everywhere. It has become ubiquitous. This is not because crises and scandals are skyrocketing which is how it feels every day but is not the case. We had as many scandals and crises just two or three years ago when the economy tanked. It is just clear to me that “reputation” is such an economic competitive asset, that it is its own form of currency today. Hence, it falls into the same rubric as dollars and cents. Reputation is definitely playing a larger role in what drives our economy. There is no doubt about it.
I have to say that the headline in today’s WSJ re the $2 billion trading loss at JPMorganChase strongly resonated with me. The title is “J.P. Morgan Trades in Its Crown.” In our research on safeguarding reputation, we start out by summing up reputation failures among the world’s most admired this way:
“The last decade has seen many of the world’s most admired companies descend from their once lofty positions. They were in a class by themselves — corporate reputation royalty whose invincibility was universally accepted by business executives around the globe. No one could have predicted that these companies would ever part with their crowns. How the world has changed!”
It looks like we now have another major kingpin to add to our Weber Shandwick “stumble rate” analysis that we calculate every year. You can find more about it in an earlier post. But…between 2011 and 2012, 49% of the world’s largest companies experienced a reputational stumble, up from last year’s 43% but exactly the same as 2010’s rate. There seems to be no more untouchables among the Fortune 500 with this recent news.
I was also intrigued by Jamie Dimon’s remarks about what he could have done differently to have caught this $2 billion blunder earlier. Dimon’s deadpan answer was paying more attention to the “newspapers” among other things. He was referring to earlier reports in the papers about the trading problem. Have to hand it to him for taking the blame and being brutally honest in his response. He’s been true to his reputation on that count.
“In hindsight, the new strategy was flawed, complex, poorly reviewed, poorly executed and poorly monitored. The portfolio has proven to be riskier, more volatile and less effective an economic hedge than we thought.”
Another side note of interest is that this reputation crisis did not start in social media. It has certainly taken off online but as far as we know now, there’s been no social media assault that instigated this crisis. No online cloak and dagger here.
Will be interesting to see how this pans out reputation-wise. Will this tarnish the bank’s reputation for the long-term or just be a stain? No doubt it will be headline news for a while. Dimon is eminently quotable –the WSJ has his most notable quotes already listed. I hate to have to say it but another one hits the dust.
I was thinking about my blog post this morning and figured I would write about the end of the reputation rankings season. It felt like the many reputation rankings that get released in the first couple of months of the year were coming to an end. However, in my google alerts, I found a new one from Brand Finance, a leading brand valuation consultancy. And I found a nice quote in the article about best brands from Philip Kotler, S C Johnson and Son Distinguished Professor of International Marketing at the Kellogg School of Management, Northwestern University:
“Unreported on most balance sheets, brand value and reputation yet remain the most important assets for a company in today’s hyper-competitive globalised marketplace. In this Marketing 3.0 world, successful modern brands need to reach out not only to the hearts and minds, but also the spirits of their target audience.”
Actually, the more I think about it, the more I realize it was foolish to think the season would be over. There’s a new ranking every week. I must have been overtaken by a week without some ranking or another. Never mind what I just said.
Years ago at my former job, the research we did caught fire due to one simple finding. In fact, I used to think of myself as the 50 percent woman. Our research on CEO reputation revealed that 50 percent of a company’s reputation was attributable to the CEO. For some reason, this one simple factoid traveled around the world like wild fire. People just found it incredibly memorable. Part of the reason that the “50%” was so radioactive was because CEOs had became better known (Jeff Bezos, Steve Jobs, John Chambers, Jack Welch, Bill Gates, Carly Fiorina) and no one had really asked the question. Reputation as a body of knowledge was still nascent (not like it is now) but it was just about to tip. And tip it did.
In our new survey on the corporate brand, we asked the question again. It’s been about 10 years since that earlier study. And despite all the ups and downs in the stock market, CEO compensation issues, scandals, Occupy Wall Street, celebrity CEOs, the Internet, etc etc, the executives in our study reported that 49% of a company’s reputation is due to the CEO’s reputation.
As interesting, when we asked consumers — the general public — 66% say that their perceptions of top leadership also affect their opinions of company reputations a great deal to a moderate degree. Only 7% say that there is no link between the two. So CEO reputations arenot going over their heads whatsoever.
Thus as much as it might be politically incorrect to admit that the reputation of the CEO plays a significant role in how companies are viewed, it does. Of course, product quality matters most but leadership from the top, how they behave and what they communicate is not to be ignored. A large 59% of consumers cite leadership communications as influencing company perceptions. It no longer pays to be silent.
Another exciting day (despite the clouds and threatening rain here in NY). Weber Shandwick’s research was covered in today’s WSJ. B8. In the print edition. Can’t send you a link (although here is one if you can get in) to the online version since you have to subscribe! But you can get all the relevant info here from the press release and the executive summary.
Back at the beginning of the year, we released a terrific study (I really feel an affinity for this one) about the growing indivisibility of reputation and product brand. We had so much great data that we figured we would release at intervals. So here we are with the second installment of the global research, The Company behind the Brand: In Reputation We Trust – CEO Spotlight which explores the importance of executive leadership and communications to helping reverse the tides of waning trust in companies and solidify reputation. Here are some big learnings from the survey with KRC Research among 1,950 consumers and executives in two developed (U.S. and U.K.) and two developing markets (China and Brazil) :
- A full two-thirds (66 percent) of consumers say that their perceptions of CEOs affect their opinions of company reputations. Executives, like consumers, don’t overlook the importance of a leader’s reputation – they attribute nearly one-half (49 percent) of a company’s overall reputation to the CEO’s reputation. Say goodbye to the days when purchases were made solely on product attributes. Today’s consumer is savvy, well-informed and privy to a wide array of purchase options. Decisions are now increasingly based on additional factors (yes siree) such as the company behind the brand, what the company stands for and now….even the standing of its senior leaders.
- Nearly three in 10 consumers (28 percent) report that they regularly or frequently talk about company leaders with others. When consumers are asked what influences their perception of companies, approximately six in 10 (59 percent) say they are influenced by what top leaders communicate. Things have radically changed when you can say that consumers — the public square — are reacting to what leaders say. Corporate leadership communications are important across the globe, but to an even greater extent in emerging markets. Nearly two-thirds of Chinese consumers (64 percent) and nearly three-quarters of Brazilian consumers (72 percent) rely on executive communications when learning more about a company. For those companies growing in emerging markets, this is important.
- Respect for corporate leaders – CEOs and other corporate leaders – has taken an especially large hit in developed markets – 72 percent of U.S. and 71 percent of U.K. consumers have lost respect in the past few years. Not such a surprise to me because the past few years have been hard on everyone. A bit different in developing markets however: Chinese consumers are evenly split on their changing opinions of corporate leadership (35 percent lost respect vs. 38 percent who increased respect). Brazilian consumers are more likely to have increased their respect for top executives than decreased their respect (33 percent vs. 21 percent, respectively).
Here’s the last word that holds a lot of punch in my book….a large 60 percent of a company’s market value is attributed to its reputation. Sixty percent. That’s no small change. Get those execs on the communications trail sooner than later.