The news story about the CEO held hostage in China by employees has me thinking about the potential next new uprising — employees. We’ve seen leaderless revolutions spring up everywhere around the world recently but we have not really seen employees take matters into their own hands like this. Of course we have labor unions that strike and protest but they usually have contracts with employers and have set rules for negotiations. Employee preceptions are such an important driver of reputation that any mishandling or media attention (offline and online) related to dissatisfaction can seriously damage a company’s reputation.
Going back to the hostage American CEO, Chip Starnes, of the specialty medical supply company based in Florida — he was held hostage in his office for several days because employees were worried he would not pay severance as the company laid off some workers to move their functions to India where labor is less expensive. The CEO bought the factory 10 years ago so this was not a new relationship although it is hard to tell what the relationship between employer and employee actually was. As hostage, Starnes spent some time being kept awake and hungry, all under less than ideal conditions. Starnes sent an alarming cellphone video of the situation to his brother showing employees gathered around an executive-like chair in the middle of a hand-drawn circle on the pavement outside his office cell. Once compensation for employees was properly negotiated, he was set free although he has not left China as employees await a check clearing for their employment packages.
On one hand, the CEO and his company’s reputation for doing business in China was damaged (perhaps not damaged but certainly placed in doubt) but I’d add that the reputation of the business environment in China was also placed in harm’s way. And all of this was inflicted by employees who rose up and took matters in their own hands. We’ve seen other employee-instigated anger at employers such as confidential leaks, badmouthing online and boycotts but rarely something this drastic. Employee as activist could unfortunately be the next reputation-damaging trend.
On my travels, I met with the CEO of Ocean Park (disclosure: a client) in Hong Kong. Ocean Park is a theme park that promises to connect people with nature and provide memorable experiences for all. Although I had several memorable experiences seeing my first Panda and getting a personal behind the scenes tour of how Pandas are taken care of, I also had an unplanned memorable experience that had simply to do with people. After my presentation on Social CEOs to the executive team, Ocean Park’s CEO Tom Merhrmann joined us outside as we started our tour. Tom is a very social CEO as you can see in his discussion of the Halloween bash with Marketing Magazine or impersonating Elvis, let alone his presence on Facebook and LinkedIn.
When we were outside the meeting room, we quickly ran into two Ocean Park visitors who were enjoying the park. Within seconds, I saw Tom offering to take their picture with one of the girl’s cameras. I had no doubt that the visitors had no idea who he was but were only glad to have their picture taken together to create their own memories of the day. It was nice to see that how observant he was of his customers’ concerns. A few seconds later, I turned around to see him picking up some litter that had fallen to the ground. Between watching a CEO connecting with customers and picking up a speck of garbage to keep a park pristine as it could be, he reminded me that being socially-media savvy is just one element of leadership.
Totally fascinating to me that China releases a list of its wealthiest citizens, similar to the Forbes 400. The list, Hurun Report, had some amazing facts worth sharing and which I learned about reading The Economist. The leading source of wealth came from individuals making their living off of manufacturing and not real estate as it was one year ago. There were also interesting correlations between wealth and zodiac signs with those born in the year of the Rabbit outranking those born in the year of the Snake (2nd) and year of the Dragon (3rd). At the bottom of China’s wealthiest 1000 individuals are those born in the year of the Ox. The reputation of the Ox is in danger.
But most interesting was the downfall of some of those who make the Hurun or the Forbes Wealthiest people list. There is greater scrutiny from tax collectors, regulators and the public. There is even a book titled “The Curse of Forbes” which describes the problems that surface when being lauded as one of the nation’s richest. In a report that the article cites, researchers found that those companies headed by entrepreneurs who make the list find that their market value declines sharply three years afterwards. Clearly, being on a rich list in China brings the bad with the good and puts reputations in jeopardy. The Economist title was “To Get Rich Is Not Always Glorious.” An apt headline.
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.
Globalization. Everything is different and everything is the same.
In an interview with the Dean of Harvard Business School, Nitrin Nohria noted: “When I came to Harvard Business School in the 1980s, the vast majority of people were interested in studying America, because this is where they hoped to have job opportunities. As late as 1988, when I joined, less than 5% of our case [studies] were outside of the United States. Last year more than a third of our cases were global.” Similarly, Fortune‘s Most Admired Companies survey used to be broken into the America’s Most Admired and World’s Most Admired lists as if they were two different beasts. Fortune now combines them into one big list of the World’s Most Admired and rightfully so. As we are seeing with the ups and downs of the stock market, we are all interconnected. The reputation of UBS or Sony or Procter & Gamble matters the world over.
Global everything is on my mind because I am off to Asia to give a speech on reputation and how to build it, safeguard it and defend it. I’ve been catching up on how reputation plays out in Asia Pacific so that I can be a bit more relevant to my audience. As I am preparing, an article I found struck me as a good example of how things are the same and yet different.
As a keen observer on how reputations get damaged in a crisis, I am always on the lookout for estimates of that damage. A recent article provided me with some valuable information on how Chinese companies perform when scandal touches them. Scandal plays out slightly differently in China and on their balance sheets than it does in the US and Europe/EMEA. An academic study examined hundreds of scandals linked to companies traded on the Shanghai and Shenzhen stock exchanges between 1997 and 2005. Revelations of financial fraud and various other similar crimes, such as embezzlement and kickbacks, definitely impacted share price as it does in the US. The researchers found, however, that to really create a cataclysmic collapse of a company’s stock among Chinese companies, there had to be an additional element. “The study found that companies caught up in mere accounting scandals saw their shares drop by an average of 8.8% over the six months on either side of the incident. In those involving the bribery of government officials or theft of state assets, on the other hand, the stock fell by almost a third.” As they conclude, “In China and other less developed markets….business is done on the basis of political and social relationships, not numbers.” Companies are all impacted by financial scandal but if you undermine the government in China or any of its officials, expect that your financial damage will be compounded by losing discounted financing, access to trusted suppliers, loss of customers, land acquisitions and other benefits that can come with good government relations. Thus, being on good terms with government is critical to success in China. In many ways, this is also becoming the norm in the US as government plays a more visible hand in business affairs.
Good news. Corporate responsibility makes it through the recession. Hurrah. An article in the Financial Times by Michael Skapinker supports his argument by citing that despite the recession where people are cutting down on premium foods, only about 10% have cut back on ethical produce. And Marks and Spencer (M&S) who made a big bet on sustainability with its Plan A (there is no Plan B!), is saving money on its CSR practices. So that’s all good news for those of us who believe that corporate responsibility is an integral component of reputation and one that has not let us down (nor have we let it down). The last paragraph of Skapinker’s article says it well:
“This [saving money] is the key to companies’ stubborn adherence to corporate social responsibility. They have worked out how to make it pay. Many of their initiatives help to cut costs or sustain supplies. They allow customers to continue to regard themselves as ethical during difficult times. They also help the companies to improve their public reputations at a time when business is widely held to be responsible for the downturn.”
Not surprisingly when I first read this paragraph, I read public reputations as public relations. In a way, this confirms why I am in the public relations field – to improve public reputations. Since there is no such thing anymore as an UNpublic reputation (everything internal is external today), I can really say that I am in the field of public reputations. I like this twist.
On another but somewhat importantly-related subject, I was reading about last year’s Sichuan Earthquake in a newsletter published by knowledge@wharton (you should subscribe if you don’t already). I was in China weeks after the earthquake and wrote about it on my blog at the time. In fact, a lot of the media coverage I received was in response to whether I thought companies were doing enough. The recent article does an excellent job of explaining what I experienced about the fiercely negative images of some multinationals (MNCs) in terms of corporate giving perceptions. I saw that some MNCs were on these shame lists that were being circulated online and inciting boycotts and negative opinion. The general consensus in China was that MNCs were not contributing enough and not in a timely manner to the 70,000 earthquake victims who lost their lives and five million left homeless. At the time, I did not know that there was a term for these maligned MNCs but the article references them as “international iron roosters” – that is, birds that do not give up one single feather. In other words, tightfisted. Being sensitive to negative public sentiment, many of these MNCs increased their charitable donations and met with the Chinese Ministry of Commerce to understand what was expected of them in China. I should note, and so does the Wharton authors, that even Chinese companies were criticized for insufficient donations to earthquake victims.
The article points out three must-dos when it comes to China and maintaining your reputation in challenging times. These should be on every company’s What to Do list if something like this happens again and you want to keep your reputation intact. They are:
1. Get Straight to the Top or Distribute Decision-Making. Since many MNCs have multi-layered levels of management and multi-faceted reporting lines, companies need to have a clear, direct lines to the top when decisions are urgent and reputations are at stake. Companies should prepare processes for determining when a decision is urgent. Much of the problems that beset MNCs were the bureaucracy that needed to be hacked through to get a decision made about how much could be contributed. If this is too hard, companies should give local managers the necessary decision-making authority.
2. Decide Fast and Make Visible. Some companies were criticized because their contributions came late or they did not make their donations known. When Hurricane Katrina hit New Orleans, some U.S. companies kept their donations quiet because they did not want it to look like they were only donating to improve their public images. In addition, many companies in the U.S. are torn between being humble or vocal when it comes to corporate responsibility. But in China during an incident of such horrific magnitude, those companies that kept quiet were seen as non-contributors and blamed for being insensitive and profit-mongers. So speak up.
3. Find your Advocates and Use Your Online Resources to the Max. Since such a large proportion of Chinese citizens are online, make sure you know what is being said about your company and its contributions. Your reputation matters and myths and rumors spread like wildfire. For all you know, you are on some boycott list and people are picketing your stores and products. Find your fans or advocates and make sure they are there to support your efforts or correct misunderstandings, online and offline.
Thanks to Skapinker and to knowledge@wharton for making this a good learning day when I should be outside.
On my second trip to Beijing this year, I come away again with admiration and awe at brand China. In fact, in a speech I gave at a conference, I commented on the rise of brand China and the ascendency of brand Obama. The two are intertwined in my mind and both passed extraordinary milestones with flying colors (the Olympics and the presidential election, respectively). Both changed perceptions and enhanced reputations of multitudes of people. And each is still at the beginning of their superpower status. As a reputation watcher, I can envision the many steps and stumbles ahead as their reputations build, deepen and get damaged over the years. Reputation damage is inevitable as leaders rise to power. However, failure is what leads to success.
One morning before a meeting I went to the Temple of Heaven, a large park where older people gather early in the day to meet and greet. All I could think of was the movie Cocoon where a group of elderly people were rejuvenated by aliens. There were hundreds of older people in small groups singing, dancing, exercising, playing cards, flying kites, fencing, singing, and on and on. What surprised me was how much fun everyone was having and could only wish that New Yorkers like myself would take the time to work at getting to this higher state of being. No one was in a rush to anywhere. No one cut me off because they had a more important place to go. No one looked each other up and down to judge their trappings. After seeing so many young people in Beijing on the streets, in meetings and in restaurants and shops, I had a deeper appreciation for brand China’s respect for elders. These elders were happy fellows and I look forward to visiting once again when I return to get a fix. It was a sight to behold.
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.
Now that I am back in the USA, I keep thinking about the recurrent questions I received during my many media interviews and internal staff Q&A while visiting Shanghai and Beijing. I was repeatedly asked my opinion about what I thought of companies and organizations who were not donating the proper amount of money for the Sichuan earthquake victims. Having read everything I could before arriving in China, I did not really come across anything that fully prepared me for the intensity surrounding this topic. Although I had an inkling that this was simmering because a journalist alluded to it before I arrived, I did not appreciate how much attention was being paid by the Chinese people to which companies had given in earthquake assistance. In fact, company individuals were often asked to publicly disclose the amount they had given in relief and they were not sure what the right amount should be. When this topic came up, the story of the CEO of a large real estate company also surfaced. Apparently the CEO was among the first to donate money and discuss his contribution on his blog. However, many people believed that the CEO had erred by not giving enough and stained his reputation. The CEO apologized under public pressure and announced he was contributing more to the natural disaster. It seems that people were aware of a list of the top 20 company donors, multinationals and non-multinationals alike.
I can’t recall the U.S. media covering who did not give funds during Hurricane Katrina. Instead I tend to recall the companies that did the right thing, not necessarily only financially but in kind provisions and volunteerism. Obviously a very interesting difference between Eastern and Western cultures when it comes to disaster relief and understanding of what corporate responsibility means. This experience made me realize how important it is to see the world through the eyes of different cultures and to recognize the power of civil society upon corporate behavior. The pressure from employees and the community were dramatically driving corporate giving.
I was also asked twice in Beijing what would happen if an earthquake occurred during the Olympics in August. This question reminded me of how I felt after the terrorist attack on in New York on September 11th which I witnessed up close. After 9-11, barely a day went by for nearly two years that I did not think that another attack was imminent in New York. For that very reason, I did not regard the question as strange although now that several years have passed, I do not think about it constantly. In response to that question, I believe that the Chinese government is as prepared as any country and learned a lot over the past six months to effectively handle such a crisis if it should strike. Hopefully the Olympics will be smooth sailing and triumphant for all.
I am visiting our office in Shanghai before heading to Beijing. I was particularly excited to come to Shanghai because my son studied here for six months recently during his semester abroad from college. He has been learning Mandarin since he was about 10 years old and has already spent two summers in Beijing. So I wanted to see Shanghai as he saw the city during his many months here.
Last night my gracious Weber Shandwick colleagues took me to a restaurant on the Bund that provided a view of the financial center and the old section of the city. The skyline is absolutely extraordinary — gleaming, tall, modern, flashy, whimsical, creative, and bold. My first reaction was that the financial center looked like Second Life in real life.
I am learning alot about the reputation of Shanghai and its cosmopolitaness. It is dynamic, energized and rushing to the future.
Just seeing the skyline caught my breathe. Beyond impressive.
Today I will be having lunch with clients, media interviews and even being interviewed on TV about my favorite topic. Reputation is certainly a hot topic here as China deals with the aftermath of the earthquake, the Olympics, globalization and building brand awareness and differentiation for its corporations and its country.
My son has lived in the future and his mom is just learning to understand what he saw. I have alot of catching up to do.