I wanted to read the chapter in Trust Inc. by Linda Locke on “Trust, Emotion and Corporate Reputation.” I bought the book because Barbara Brooks Kimmel has done such a terrific job building Trust Across America-Trust Around the World, an organization focused on the fundamental element of trust. Linda is the founder of Reputare Consulting which is a reputation management consulting firm. I know Linda from events at Reputation Institute and her work leading reputation management at MasterCard. She really knows the field, is a thought leader on reputation, has powerful insights, and I follow her regularly on Twitter (@reputationista)…love that handle.
In the chapter, Linda mentions that facts are often not enough. It is a good starting place to build trust but if that’s all a company has to provide in a crisis situation, it is not going to work today. She says: “To earn trust, a company must go beyond the requirements, beyond the simple facts of the situation, and demonstrate that it understands the concerns of the stakeholders.” Showing empathy, care and concern are necessary ingredients to rebuilding trust, protecting reputation for the long-term and beginning to repair the reputation tear. What caught my attention was her recommended breakdown of communications content when a company’s reputation is under the glare of spotlights:
- 50% of a company’s external communciations should express care and concern
- 25% should express the company’s commitment to fixing the situation (what are you going to do, when and how)
- 25% should focus on the facts (again, facts have to be there but it is not all there is).
These are very helpful proportions to use when explaining to companies what they need to do about the content of their risk communications. What fascinates me the most, however, is how companies today have to show their “softer side” when they are in the middle of a brewing crisis and be more vulnerable and empathic. This is a major change in how companies are expected to communicate when they have done wrong in the public’s view.
Linda provides some case studies in her chapter that truly intrigued me. She provides a social-pyschological framework to understanding the public’s emotions to losing trust in institutions. Here’s one to share. She gave an example of a financial services firm managing their reputation during the horrific and unprecedented financial recession of 2007-2008. The firm analysed what people were saying about how they felt during this period. As she describes it, the firm found that three emotions were most evident in the public discussions about the financial downslide that was causing a real sense of fear and loss of trust. They were: irreversibility (consumers fear that what was happening was irreversible and would be permanent); unfamiliarity (consumers having never experienced anything like this economic uncertainty before) and involuntariness (consumers had no control over what was happening to them and could not influence the outcome whatsoever). The consuming public was paralyzed by fear and what could companies do to assuage their loss of trust. For companies faced with these raw emotions, Linda recommends explaining in everyday language (certainly not corporate speak) how the situation happened, how it is similar to a familiar experience they may have encountered in the past, the role of the responsible parties to fix the situation so it does not happen again and how the company will do whatever it takes to repair that broken bond of trust. And certainly empathisize with those affected and show you care if you want to keep your reputation from cratering.
Building trust is the bedrock of reputation. If your company is not trusted and credible, it is going to fail fast and I mean really fast.
Reputation resilience is a topic I often think about because it should be on all leaders’ minds. How can I build the most resilient culture so that we can withstand a crisis that risks our hard fought for reputation? A new report from Schillings in the U.K. examined UK FTSE 350 and leading private companies about reputation risk and resilience. Respondents were Communications, Legal and Risk executives. Here are some of the findings:
- All executives surveyed are spending more time on reputation risk management than they did two years ago — 80% say more time (among risk managers), 68% (among communications heads), and 53% (among legal executives). No one said less time.
- Only 17% say that there is formal reporting to the board of directors on reputation risk. Clearly, not good enough.
- The top five threats to their company’s reputation are (in rank order): business underperformance, information risk, operational risk, health and safety incidents, and employee behavior. Social media comes in at 6th place.
- When asked what was the biggest obstacle to making reputation risk management top of mind at the company they work for, 37% of respondents said “CEO/Board removed from reputation risk: lack of focus without a crisis and too much reporting.” That is unfortunate. Companies should not need a real crisis to get them to pay attention to risk management.
- Fortunately, communciations and legal executives are onto it. They know that their jobs require them to take charge of their company’s reputation and any associated risks. A full 72% of communications executives said they feel directly responsible and 63% of legal executives are responsible for their company’s reputation.
- How resilient are companies to facing challenges to their reputation? There is a surprising (to me) fair amount of confidence. 55% are “confident enough,” 29% are “very or extremely confident” and 16% are “not at all confident or unsure.” Although this bodes well for many companies, I would be wary – essentially 84% of top executives are confident. If you ask me, they are not worrying enough about all the possibilities that could befall their reputations. Risks to reputation seem to be coming from all directions today and being over-confident is the wrong stance.
Another interesting aspect of this newly issued report is that Schillings is a law firm. They have rebranded themselves to be all about managing reputation risk. Their tag line is “Law at the speed of reputation.” Serious business. What would compell a law firm to switch to focusing on reputation? Here is what they say about their transformation: “To continue to lead at a time of such extensive change, we’ve fundamentally changed our own offering. By combining our unrivalled expertise in reputation law with new risk consulting and IT security expertise, we have been able to create an integrated offer that continues to safeguard the successful businesses and individuals we represent whilst living up to the promise that underpinned our business from day one.” It would be hard to name many law firms that have done the same. Reputation is changing the face of organizations all across the globe and some firms see the opportunity ahead. Maybe Schillings sees the risks down the road for them as a law firm and are taking their risk by the horns. Interesting approach.
None of us want to ever underestimate the importance of corporate culture and the impact of employee satisfaction on performance. It is not just window dressing. A study by Professor Alex Edmans at London Business School found that when a company makes it onto the Fortune 100 Best Companies to Work For list, it generates 3.5% higher stock returns per year compared to its peers. To be exact, it found that companies listed in the “100 Best Companies to Work For in America” generated 2.3% to 3.8% higher stock returns per year than their peers from 1984 through 2011. Management journal, strategy + business says this about this effect of employee satisfaction,”There is money to be made from employee satisfaction. Let’s all get rich and happy, but not necessarily in that order.” I might have to argue with that but anyhow…here are the facts from the research. A great stat for demonstrating that it pays to build a terrific culture:
The results clearly point out that job satisfaction is beneficial for firm value and ultimately, reputation.
Read about it here.
I was delighted to learn yesterday that The Holmes Report included me in its list of 25 Top PR Innovators. This new listing, the In2 Innovator 25, calls attention to the importance of innovation and ideas in the public relations field. The 25 of us were honored for breaking boundaries, challenging the industry and pushing PR onto the wider stage that it so deserves. Not bad.
One of the questions Holmes asked in a mini-survey of the Innovators was “Who most influences a brand’s PR/marketing innovations?” The top influences were CMO, receiving 10 votes, and CEO, which received 6 votes. I answered CEO. In my world, the CEO sets the guardrails for and shapes the corporate culture that allows ideas and experimentation to ferment and that also allows fear of failure to fade away. Without such a culture, imagination and risk-taking would never have enough air to breath so as to grow and flourish.
During my career I have benefited from just such an expanse of breathing space. My former agency CEO Chris Komisarjevsky encouraged me to ideate when I began one of my first research projects on CEO reputation. Today at Weber Shandwick, I have had the full support and encouragement of our CEO, Andy Polansky. Without Andy’s support, without the amazingly collaborative culture that he has fostered, I would have found it nearly impossible to think divergently and follow my instincts. I am fortunate and grateful that my boss and my colleagues have created an accepting, nurturing environment for ideas. My thanks to you all.
I have been thinking lately about how the world of reputation has been changing or not. One of my constant thoughts is about how companies now seem in greater control of their own reputation narratives. Whereas we used to be so dependent on the media to report a company’s coming and goings, companies now seem to be in the driver’s seat of storytelling. This was confirmed to me the other day when I came across it from a different perspective. In an interview with former Wall Street Journal Deputy Editor and Executive Editor Alan Murray and now president of the Pew Research Center (an organization I dearly value), he said: “In the 2012 race for the White House, journalists played a decreasing role in what voters heard about the presidential candidates. Only about a quarter of the statements in the media about the character and record of Barack Obama and Mitt Romney came directly from journalists, while about half come from political partisans. In the 2000 election, half the statements came from journalists and only about one-third from partisans.” Of course, 2000 was before the Internet took off, Facebook appeared and Twitter surfaced.
Yet, the same can be said about companies’ character and record today. I bet that about half of the information we hear about companies’ comings and goings comes from stories we find online, stories our friends and family share with us and search engines that filter information by popularity or some sort of algorithm I cannot explain. And I’d bet that only one-quarter or less of a company’s story or reputation-telling comes from in-depth reporting from the media. This newfound advantage gives companies a greater opportunity than ever before to build or re-build their reputations. And because CEOs can use their websites, video or social media without having to win the media’s seal of approval, leaders have a home court advantage that is unassailable.
In some sense you could say that this is the Golden Age of Corporate Storytelling. However, the question I keep asking myself is how many stories does it take to build a positive reputation and bury the negative? What does it take for a company story to break through the clutter of facts, rumors, innuendos and misinformation online and offline? How do you hold stakeholders’ attention when they are so increasingly distracted? If everything matters today, what one thing should a company do well to build its reputation? Where do we start and where do we end?
One of the trends I talk about when it comes to reputation is how politics is no longer a strange bedfellow to companies. Companies and their leaders now find themselves taking sides on climate change, same-sex marriage, immigration, gun control and a host of other issues. Company reputation is far more politicized that it used to be. Years ago when I first got into public relations, it was made very clear to me that companies did not air their political leanings or take sides on political issues. Today, political issues are now the business of business.
That is why I was particularly interested in an article about a Starbucks in Newton Connecticut. I copied and pasted the newspaper photograph into a powerpoint slide for safekeeping. I’ll want to be able to remind myself when I need a good example of how politicized reputation has become and how tricky it is to walk a fine line.
Nothing is ever simple these days when companies live in glass houses. There’s always two sides to every coin. Here’s a snapshot of what happened. Two days ago, gunowners declared Friday “Starbucks Appreciation Day.” Unfortunately, this nationwide Appreciation Day was also being celebrated at a Starbucks in Newton, Connecticut, home to the mass killing of some two dozen children and teachers. Why appreciation day for Starbucks? Reason is that Starbucks has publically supported the Second Amendment in states where it is allowed and which grants people the right to keep and bear arms whether those guns are carried in public spaces such as the ubiquitous coffee chain or not. However, because of the glaring sensitivities surrounding the hideous Sandy Hook killings, Starbucks found themselves at ground zero for pro- and anti-gun supporters even though gun carrying is allowed in Connecticut.
What did they do? At the Newton Starbucks, they closed the store five hours early and put up this sign:
At Starbucks we are proud that our stores serve as gathering places for thousands of communities across the country and we appreciate that our customers share diverse points of view on issues that matter to them. We also believe in being sensitive to each community we serve.
Today, advocacy groups from different sides of the open carry debate announced plans to visit our Newtown, Connecticut store to bring attention to their points of view. We recognize that there is significant and genuine passion surrounding this topic, however out of respect for Newtown and everything the community has been through we decided to close our store early before the event started. Starbucks did not endorse or sponsor the event. We continue to encourage customers and advocacy groups from all sides of the debate to contact their elected officials, who make the open carry laws that our company follows. Our long-standing approach to this topic has been to comply with local laws and statutes in the communities we serve.
Thank you for your understanding and respect for the Newtown community.
executive vice president, U.S. Retail
For Starbucks, there’s no winning on this issue but I respect the fact that they behaved according to their conscience and in line with their corporate character . I also was impressed that the EVP of US Retail signed his name to the letter. There was no darting the issues. However, I think it is important to recognize that company reputations will find themselves regularly tangling with political issues and they need to shape their reputations with that in mind.
“While no one has found the formula that will bring old media into a profitable future, I’m guessing that Bezos understands an old truism: brands matter. The wonder and magic of institutions like the Post or The New Republic is their history—their stories track the American story. In many cases, they have made that very history through their reporting. No owner can brush aside these powerful legacies, regardless of his or her start-up bona fides. In fact, brands matter more now than when Don Graham’s grandfather bought the Post nearly a hundred years ago, particularly when they have established themselves so securely as the Post has.”
CFOs are not solely numbers-crazed, according to a survey by American Institute of CPAs (AICPA) and Chartered Institute of Management Accountants (CIMA). The survey among 1,300 CFOs and other finance executives in 61 countries found that corporate reputation topped the list of areas they are seeing their organizations place greater focus on. In fact, 76% put corporate reputation first. The reasons for this laser like focus on reputation, according to these financial experts, are greater demands for transparency by the marketplace, watching other companies experience reputational failure and the rise of social media. A fairly large 65% of these financially-minded executives also report that the financial implications of reputational risk are seriously considered by their organizations. Far fewer (20%) say that they use social media feedback enough to anticipate and monitor reputational risk. Since there are so many daily examples of companies losing reputational equity, it seems that CFOs are not monitoring enough so that they can be prepared and nimble should it happen to them.
To be a CFO today, an understanding of how reputation impacts the bottom line is an imperative. The loss of reputation can surely impact financial performance, customer loyalty and recruiting. The results from this study make it very clear that CFOs are becoming increasinly cognizant of the perils of reputation loss on their company’s ability to compete and grow. They just need to speed up their social media oversight.
I often get asked how entrenched CSR/corporate social responsibility is in America. Afterall, CSR activities and behavior are an important driver of reputation. From my travels, I used to think that CSR was more deeply embedded in European company thinking but over the past few years, I’ve come to think that CSR has taken a greater hold in U.S. companies. Therefore I was particularly interested in hearing how CFOs regard the importance of CSR, the ones who have to sign the checks for embarking on this critical reputation-building initiative. With CSR, once companies start the process, there is no turning back. We gladly saw during the financial collapse of the past few years, that companies did not abandon their CSR efforts. They may not have grown their efforts but they certainly held steady. This speaks to the power of the commitment from the top, including CFOs.
A survey by Duke University’s Fuqua School of Business and CFO Magazine Global Business among senior finance executives across six continents recently reported that U.S. CFOs regard the importance of CSR to a lesser extent than their global peers. Nearly half rate CSR/sustainability (51%) as important in their business strategies compared to their counterparts in Europe (63%), Asia (67%), LatAm (76%) and Africa (83%). When asked why they engage in CSR activities, the top reasons according to the sample of U.S. chief financial officers are:
- It’s the right thing to do (66%)
- To improve external reputation, brand or image (61%)
- To improve internal good will, employee morale, employee hiring/retention (49%)
- In response to legal/regulatory requirements 27%)
- To improve cost efficiencies (14%)
- It increases customer demand (13%)
- Helps drive innovation (11%)
- To improve the bottom line (10%)
Interestingly, doing well by doing good and corporate reputation are at the top. CFOs in the U.S. are surely getting CSR religion. They are finally seeing that helping the world is the right thing to do and improves company reputation and also helps drive the best talent your way. I was a bit surprised that CFOs did not realize the growing relationship between what customers are now demanding from companies in the way of sustainable behavior and their own CSR initiatives. As we have repeatedly pointed out at Weber Shandwick, the link between customer expectations of responsible companies and their willingness to buy those companies’ products and services is stronger than ever. I am confident, however, that the interdependence between corporate responsibility and customer purchase decision-making will only grow in the years ahead.
The ongoing Duke University research provides good fodder for realizing that U.S. CFOs have a ways to go in realizing the importance of CSR and how it positively improves the bottom line. That’s where the BIG divide exists.
Graeme Trayner sent me an article he co-authored on how businesses can take lessons from the political campaign trail. He’s right in making the point that political campaign strategy has found its way into corporate business today. In many meetings today, I hear the words “pivot points,” “news cycles,” “opposition research,” and “opinion research.” Incorporation of these political-like strategies and tactics are increasingly important for companies to learn as they try to maintain their reputational footing while being broadsided by slings and arrows from pundits, opponents and errant employees. Trayner points out how the new environment requires company leaders to go beyond winning the news cycle and shift towards a more participatory style, greater stakeholder empowerment, concentration on the right tone, and an outside-in approach to communications. He highlights the need today to focus on winning the “big arguments” not all the arguments all the time.
Graeme and his co-author, Julie Andreeff Jensen, make an important point that I wanted to highlight here because it describes how companies must adapt to an empowered base of stakeholders to maintain their reputationanl balance:
“Brands are now very much seen as public property, with assertive consumers feeling a strong sense of sovereignty over what they can and can’t do.”
Like never before, the term “stakeholders” is in sharp relief. Stakeholders have a much clearer stake in the brands and reputations of the companies they support and are now the first to object to corporate misbehavior, unfairness or lack of transparency. And they can assert themselves whenever they want now, regardless of news cycle. Reputations are increasingly being torpedoed because consumers want their say in how companies behave and what they do. When that wish is not granted or they are not listened to, companies will regret it and pay the price. The political campaign trail definitely holds lessons for those of us safeguarding reputations today.