corporate reputation

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 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.

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.   .

Just read an article in The Economist (which I love) that questions the business of reputation management. The columnist attended a recent meeting in London held by the Reputation Institute (RI) on their new RepTrak results for British companies. The writer rightfully acknowledges that we are living in a "reputation economy" where institutions and individuals literally trade on the currency of reputation and this type of exchange makes "intuitive sense" in a society where Facebook is worth more than many Fortune 100 companies. Reputation Economy is the term used by RI and its professionals, led by Charles Fombrun, and continue to provide valuable, far-reaching insights to companies around the world. The writer, however, raises several interesting objections to the effectiveness of the reputation management industry as it stands today. First, he/she (have no clue) objects to the idea that many different factors as disparate as product quality and corporate citizenship are all rolled up into one understanding of what reputation means. That may be true, but I am not sure why that is bad in such a complex and fragmented world where every individual becomes an interest group. For us reputologists (I just made that up), the factors contributing to corporate reputation vary depending on the company’s history, industry and situation they are facing. For example, in the financial industry, unlike say the automotive industry, it is often difficult to distinguish one company from another by focusing only on their products and services. Their reputations are far more likely to be built on sheer trust in the perceived integrity of their leadership and governance.   The columnist’s second objection to reputation management today is the assumption that companies with positive reputations will find it easier to attract customers and withstand crises.  As evidence of the supposed weakness of this assumption, the columnist cites many companies with strong bottom lines despite terrible reputations: e.g., tobacco companies (harmful product), Ryanair (poor service) and Daily Mail (mean spirit). Yes, there are always companies that will make gobs of money despite wrong-doing and poor service. Nevertheless, these companies have and will continue to have a hard time attracting and retaining the best talent. But in this online world where advocates and fans matter more than ever, it will be harder to keep that bottom line as stable as it once was. But the greatest objection to the reputation industry, according to the columnist, is and I quote… "its central conceit: that the way to deal with potential threats to your reputation is to work harder at managing your reputation.” He/she continues with… “The opposite is more likely: the best strategy may be to think less about managing your reputation and concentrate more on producing the best products and services you can."  Here I agree at least in part with the columnist’s thinking.  The best way to build reputation is to “have a customer” as Peter Drucker always said. Without customers, there is no business to have a reputation worth building. The reputation industry, however, does not urge industries to ignore producing the best products and services in favor of managing reputation.  To the contrary, building the best products and services is part and parcel of a good reputation.   Also, however, today’s society is much more complicated and often it behooves a corporation to do more than just having great products and services. Apple, for example, may have the best products but if it does not give a damn about how it treats employees or contributes to society, it will face problems that if allowed to accumulate may well threaten its bottom line. We see that now with regard to questions about their handling of factories in China. I think that the columnist should rename the article to Why companies should worry MORE about their reputations or else.

 The Power of Reputation.  Chris Komisarjevsky’s new book, The Power of Reputation: Strengthen the Asset that Will Make or Break Your Career, is a must-read for anyone interested in understanding how to steer their reputation into a career worth having.  Chris provides practical, easy-to-apply advice, techniques, tips and best practices on how to build that reputation you always wished you had but maybe never planned with very much care. He covers all the many elements that make up an enduring personal and professional reputation (they are the same, you know) such as values, character, behavior, trust and communications.   I regard myself as an insider when it comes to Chris’ new book.  Chris was CEO of Burson-Marsteller when he hired me and throughout my time there, encouraged me to build the bank of reputation research we launched as a firm.  He also served as a role model for how CEOs should lead their organizations and build a best place to work.    There are so many great examples that I remember from his leadership and I got to experience up-close how the character of the person at the top sets the tone for the entire organization. There is no denying the inextricable link between the two. Perhaps for that reason, I was particularly drawn to the chapter on Values. Chris provides a list of values that can guide your career path. It seems that everyone should be given that list as an exercise when they start a new job so they can be regularly reminded to follow it. The Power of Reputation also provides terrific real-life examples and anecdotes from a wide variety of CEOs who have been faced with reputational issues and had to decide what was most important to the organization and its members.   Overall, if you are looking to better understand what you stand for, what your company should stand for, and how to build trust and an enduring career, this is a great book to read.    

P&G is announcing its new corporate campaign that is a "global serenade to mothers." It is covered in an article today. The reason this is big news to me (and I am not an Olympian's mother) is that it is part of the P&G initiative to focus on the corporate brand behind the products they sell. Our research on The Company behind the Brand: In Reputation We Trust is all about the increasing interdependence between corporate and product brand reputation. As the global CMO says, "P&G is in the business of helping moms." Or he could have said that P&G is in the business of building its corporate brand reputation. The new campaign is focused on the moms of athletes, particularly Olympians. Right on. As we learned in our recent survey, 87% of executives report that the corporate brand is as important as the product brand. And consumers also agree -- 70% of consumers in markets around the world say that they avoid buying products if they do not like the company behind the brand. We are releasing some more information shortly from the study on the link between CEO and reputation as well as the impact of leadership communications so check here soon.

Although I made a wholehearted attempt not to work on Sunday, I could not pass up musing on an article I read on Walmart's new partnership with the Environmental Defense Fund and a few stats on reputation recovery. Thought I could post it today. When companies ask how long it takes to recover and restore reputation, I usually say four years, give or take.  Back in 2005, Walmart's then CEO Lee Scott decided to behave differently and reclaim its reputation. It had a lot of work to do, certainly in the public's mind. One of the ways Scott decided to do that was by reducing its environmental footprint. Fast forward to 2012 (seven years later). In the article, it says that,  "About a quarter of Americans now have a favorable impression of Wal-Mart, about double the percentage that did in 2007 (the earliest available figure for Wal-Mart), according to the YouGov BrandIndex, which measures consumers’ impressions of companies and products." I think that it has been a steady build from 2005 and seven years later, Walmart is seeing the fruits of its reputation labor. [I am not sure why The New York Times refers to Walmart as Wal-Mart but it does. I checked the website and Walmart changed its name to Walmart, no dash and small M, a while ago. ]