I had heard of a new CEO listening tour but to me, this was a first. JCPenny is running a social media Apology tour. We’ve all heard CEOs apologize for one thing or another and we’ve all worked in companies where a new CEO visits different employee facilities to meet and greet and hear what is on people’s minds. But JCPenny now has a new campaign on TV that apologizes for letting customers down and thanks them for coming back. If you recall, the former CEO Ron Johnson from Apple fame was booted out when his plan failed, possibly because of the elimination of coupons which drove customers into the store. The former CEO, Myron Ullman, was asked to return and now they are in recovery mode. The two ads say:
“It’s no secret. Recently, J.C. Penney changed. Some changes you liked, and some you didn’t. But what matters with mistakes is what we learn. We learned a very simple thing: to listen to you. To hear what you need to make your life more beautiful. Come back to J.C. Penney. We heard you. Now we’d love to see you.”
“At J.C. Penney, we never stop being amazed by you. How you work so hard without looking like you do. How you make every dollar stretch so far and keep your family so close. So we brought back the things you like about J.C. Penney, gave you new things to explore and now, we’re happy to say, you’ve come back to us. We’re speechless, except for two little words. Thank you.”
But back to social media….using the hashtag #jcplistens, JCPenny is in response overdrive from what I saw on Twitter today. They are in constant contact with its Twitter-ites. Every customer or tweet seems to get a personal and speedy response asking to help out, mentioning they will share the feedback with the team if something was amiss and thanking customers for comments. As pointed out on Business Insider, they even told people when they were retiring for the evening. On its Facebook page, JCPenny is polling fans about their favorite brands that they want back after having been cut by the former CEO. And it looks like they are bringing back St. John’s Bay, a favorite. So they are listening hard.
You’ve got to hand to them. They’re trying. And social apology tours are a smart redemption move.
I could tell that it must have been the one year anniversary of the Costa Concordia because I started hearing about the shipliner crash in the past few days. Reputations keep rolling along throughout the year but especially hit home one year later. Whereas they might be fleeting memories at first, they all come together on the year one anniversary to make us take notice. Today I started hearing more about the memorial service for survivors and families of those who lost their 32 dear ones in Giglio, Italy and it started to stick more than two days ago. There were 846,000 mentions on Google when I searched for Costa Concordia anniversary today.
For reputation, one year anniversaries are part of the reputation process. It is almost like it fits into the five stages of grief. The one year anniversay is a day of reflection and return to the reputation demise that caused the loss in the first place. All the pictures of the cruise ship on its side off the shores of the little Tuscan city are back in view. Debates over raising the ship and removing it are back in the news. Anniversaries are important because they remind us that reputations should not restored overnight. The bigger the loss (especially when lives are lost), the longer reputation takes to repair. That should be law.
I especially remember the Costa Concordia because we were launching our survey on how corporate and brand reputations have become nearly indivisible. The parent company of the cruise liner pushed media requests over to the Costa Concordia CEO — the brand leader — in an effort to disentangle the corporate reputation from the brand reputation. Due to the ease of information flow and the Internet’s reach, much of the media coverage mentioned the parent company in the coverage which only proved that corporate and brand reputations have definitely converged. Because the entire incident happened just as we launched the survey, it is forever lodged in my mind.
Talking about reputation, tomorrow’s Oprah Winfrey interview with cyclist Lance Armstrong will be another one for the record books. I am not sure how Lance’s confession that he used drugs to help him win the Tour de France several times will go over. My sense is that an apology might not curb his rapid reputation decline and Lance’s reputation might not just keep rolling along but might face a hard stop for awhile. No telling where it will be, however, in three or four years. I will be interested to tune in and watch.
I had heard alittle about some reputation problems (tax avoidance) that Starbucks had encountered in the U.K. over the past couple of months and just read this story about how they are working to counter their dip in reputational equity with a little frothy promotional offering. Now until mid-February, they are discounting coffees on Mondays to earn back customers’ trust and show that they are sorry. I was particularly enamored of this advertising campaign which is fun, clever, positive and should definitely help. It qualifies as a reputation recovery uplift.
I was pleased to be alerted to a copy of Reputation Review 2012 by Rory Knight, chairman of Oxford Metrica. Years ago I used some of their research in my book on CEOs and particularly on how CEOs can build their reputation or kill it when crisis strikes. Knight just completed his annual reputation review for AON, the global risk management, insurance and reinsurance company, and as I expected, the report has insightful and timely information for those seeking to better understand the impact of crisis on a company and its bottom line.
Knight reviews the top crises of 2011 such as TEPCO, Dexia, Olympus, Research in Motion, Sony, UBS and News Corp, among others. His company looks at the recovery of shareholder value following crisis. Among 10 crisis-ridden companies in 2011, only News Corp found itself in positive terrain afterwards. In fact, what they found was that 7 of the top 10 lost more than one third of their value. Two companies lost nearly 90% of their value. These companies clearly had to put big restoration processes in place afterwards and I would suspect paid good dollars to firms to restore their good names and overlooked other everyday business to move forward. Oxford Metrica says: “Managing the restoration and rebuilding of reputation equity is an essential part of the value recovery process following a crisis. Reputation equity is a significant source of value for many companies and a coherent reputation strategy can be the difference between recovery and failure.”
The big takeaway from the report, or at least what seems to resonant with me, is that there is an “80% chance of a company losing at least 20% of its value (over and above the market) in any single month, in a given five-year period.” Those odds are not good and as Knight says, screams for having a careful and well thought out reputation strategy in place before a minor event turns into a raging crisis and monopolizes headlines, offline and online. A solid reputation strategy will also help guide the reputation recovery process which is often too hurried. This is the kind of advice that I write about in my book on reputation recovery and underscores having a strategy so you do not find yourself in this situation in the first place. Additionally, Weber Shandwick’s stumble rate of 43% for the world’s most admired companies tracks with Knight’s high rate of expectant reputational downfalls. It is not good at either rate.
The report outlines a process for managing a company’s reputational equity. They are 1) Measure your reputation through benchmarking and vis a vis your peers; 2) Identify the drivers of your company’s reputation in order to allocate resources properly; 3) Prepare a strategy for recovering your company’s reputation; and 4) monitor your reputational equity often and respond accordingly when risk emerges.
The report analyzes the reputational losses of Olympus and Research in Motion after their reputation-damaging events. It is worth reviewing. It also takes a look at the financial results from TEPCO after the tsunami hit Japan. Apparently, 90% of TEPCO’s value was lost, over $US37 billion. Oxford Metrica estimates that events associated with mass fatalities have double the impact on shareholder value than do reputation crises in general. I believe they are right. BP’s Gulf of Mexico tragedy which involved over two dozen deaths wiped off substantial shareholder value off their books.
Where I wholeheartedly agree with Knight is when he talks in the report about the impact of senior management on crisis and the need for that management to lead with transparency and openness.
“For mass fatality events particularly, the sensitivity and compassion with which the Chief Executive responds to victims’ families, and the logistical care and efficiency with which response teams carry out their work, become paramount. Irrespective of the cause of a mass fatality event, a sensitive managerial response is critical to the maintenance and creation of shareholder value.” One of the takeaways from the report is that winners and losers, reputationally, can be determined by how the CEO responds to the crisis.
The report contains an article by Spencer Livermore, Director of Strategy, at Blue Rubicon, a reputation consultancy. He quotes a stat that is dear to my heart, “Oxford Metrica’s analysis shows that companies which open up more following a crisis and tell a richer, deeper story are valued more highly, increasing share price by 10 per cent on average over a year.” He calls it the communications dividend which comes from investing in communications. Years ago I wrote an article for Ernst & Young’s Center for Business Innovation called Communications Capital and the idea was similar – the right communications can increase market value and strengthen reputation. As Livermore says, “We can make communications worth hundreds of millions more simply by making them better understood.” Having the right compelling narrative built on a well thought out reputation strategy is worth its weight in gold today.
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.
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.
Just was forwarded an interesting study out of Northwestern’s Kellogg school. It found that the share price of a company that is being boycotted drops nearly one percent for EACH day of national print media coverage. Ever wondered what happens when those protesters zero in on your company and tell people not to buy your products? Often I will hear the response, “The boycott is not affecting our sales so let’s not worry too much about this.” However, the research uncovered that perhaps your sales are not being affected, but watch out for your reputation and stock price. Assistant Professor Brayden King found that Day One may not be as much a problem (decline of one half of one percent in share price) but there is an average decline in share price of 0.7 percent for EACH day afterwards that the company remains in the national print media spotlight. After looking at 177 firms who were boycotted over several years (1990 to 2005), King concludes that there is a clear link between reputation and media coverage. And when you think of today with the Internet, whoah.
I liked this fact — about 25% of those companies generated a concession from the targeted company. What does that say about the other 75%? Perhaps there are some behind the scenes negotiations that we are not privy to. And clearly companies stuck to their position if they felt they were right.
Also liked this fact. King used the Fortune Most Admired Companies ranking (one of my favorites) and found that boycotted firms with a high reputation ranking generated 4.4 times the coverage generated by boycotted firms that were unranked, three times the coverage of those in the lower quartile and six times those in the middle ranking group. Essentially, the bigger you are and the more admired, the greater the coverage when boycotts land on your door. Like I often say, when you make it to the top of your industry in the Most Admired, you might as well paint a bulls eye on your back (or logo).
Have Asia on my mind as I am soon airborn. A few facts and stories I just learned as I am preparing to go and talk about reputation trends. These are all China-based for now….
- In four years, more than 700 million people in China will be watching online video sites. Youku, similar to our YouTube, is one such leading site. (McKinsey Quarterly, 2011). Pretty dazzling if you ask me.
- Even during the global recession, sales of luxury goods in China rose by 16%. (McKinsey Quarterly, 2011).
- An interesting incident that caught my attention. Apparently the CEO of DangDang (China’s Amazon) exploded at his bankers in a profanity-filled tirade blaming them for an IPO that undervalued his firm. The language was so profane that when reported there were alot of ****s. This all appeared on Sina Weibo, China’s Twitter. Apparently some employees of the bankers fired back on Weibo although now there are reports saying they were not employees. Whatever the story, what I found interesting is that we focus so much on social media guidelines for employees and perhaps its time to develop them for CEOs too! Not exactly a reputation-building story.
The trading scandal at UBS brings to mind the long journey that companies undertake to recover and restore reputations. UBS is now back at square one as they deal with the recently revealed $2.3 billion rogue trading. This reputation disaster brought me back to the days of the Societe Generale SA rogue-trading incident three years ago. If you recall, Jerome Kerviel managed to lose $7.2 billion on his derivatives scheme. The reputation drag on SocGen’s reputation today and on UBS tomorrow is quite real. The SocGen scandal has not entirely faded in the past three years. In fact, everytime one reads about what happened last week at UBS, the SocGen scandal gets replayed. This is unfortunate for those who go down the path of reputation recovery like SocGen. SocGen’s recovery program was quite extensive when you look at it from a three year vantage point – they dismissed Kerviel’s bosses, demanded that the bank move slower as new security systems were put into place and launched an internal controls program called “Fighting Back.” In addition, other measures were set forth such as spending on new IT security, starting a newly independent accounting group, beginning a SAFE (Security and Anti-Fraud Expertise) program to oversee financial operations and training 7,800 employees about fraud. Ultimately the CEO and chairman stepped down one year later. All these remedies for recovering reputation came from an article in yesterday’s WSJ and I was glad to be able to list these steps for other companies contemplating what to do when faced with sky rocket type scandals.
Yesterday morning started off with an email to me from Netflix’s CEO Reed Hastings. I immediately went to the Netflix‘s CEO apology on the blog. What confused me however was the tone of the video. Although I am a loyal customer and fierce advocate of what Netflix has done for delivering movies to my home, I thought that the video apology was abit too cheery (outdoors in sunny California. albeit a parking lot) and efficient. Maybe too rehearsed is the right word. I did not get the sense that this was a very repentent CEO who had seen his stock value decline 52% since the change in pricing occurred. But what really threw me was that he did not share the stage alone. In the video, CEO Reed Hastings had the new head of the DVD spinoff, Qwikster, Andy Rendich, joining him. I always say that CEOs get all the credit when things go right but all the blame when things go wrong. Why did Hastings deflect some of that blame on this poor soul. I cannot remember the last time (if ever) I witnessed a CEO apology tied to the announcement of a new spinoff. I sincerely doubt that was a good launch plan for Qwikster. My sense is that there’s more apologizing to come. This poor guy Andy looked like he too was somehow responsible for the communciations debacle.
Despite these ramblings, the article on the Netflix problem in today’s New York Times made me smile. The authors wrote, “But in the short term, the risk to corporate reputations is palpable.” It is not often that I even see the words “corporate reputation” in a top tier publication. Usually it is referred to as brand health or brand reputation or positioning. It is fairly rare to see corporate reputation used as a commonly understood concept. My two cents is that short term feels like long term these days when you are in the spotlight. As someone said to me, it’s like a nuclear assault whether it is 6 days, 6 weeks or 6 months. Ultimately, Netflix will be forgiven but like the SocGen example above, reputation damage takes its toll and lingers longer than most CEOs care to imagine.
Twitterologies. Is there such a word? I doubt it. The CEO of Vodacom, Pieter Uys, apologized for outages via Twitter (@uyspj). Despite the inconvenience to Vodacom subscribers, the CEO is getting good marks for his simple apology. While it was happening, Uys was tweeting to customers about what he could do for them and kept in continuous contact. He tweeted the following:
“I do care for every one of our customers. What happened today was not acceptable. I’ll work hard to make you smile again.”
“Words can’t express how sorry I am about today’s problem. Flat out working at making sure all is 100%. Pieter.”
“At the network switch with the engineers. All looks OK now. If you still have a problem, please switch phone off and on.”
Fairly simple way to tell your customers you care. And that you are there. Helps to keep your company reputation intact.