corporate reputation

Reputation Institute came out this week with their RepTrak Pulse survey for the US. It measures the reputation of 150 largest US public companies among consumers.  In addition to the usual who's up and who's down, RI reveals some interesting stats that confirm our research results on Companies Behind the Brand. I was delighted. As RI says in its press release, "Since 2009, U.S. companies have been competing in a new Reputation Economy, where WHO THEY ARE matters even more than WHAT THEY PRODUCE, according to general public sentiment. Framing this in the context of critical consumer behaviors, including purchase consideration, loyalty and recommendation–company or “enterprise” perceptions explain 60% of these behaviors, with product perceptions only accounting for 40%." This is a big shift which we agree with. In addition, RI asked Chief Reputation Officers (CEO, CMO and CCO) several questions and learned that 51% name the CEO as the person with the responsibility to set reputation strategy. Fascinating results.

I am in Florida now about to speak on a panel about Corporate America and how it can restore its reputation. The panel is being convened at the annual summit of National Association of Manufacturers (NAM).  Getting ready to talk about reputation and how we can repair America's reputation for good business.  A few things are on my mind right now as I was preparing for my remarks. First, has anyone noticed that all the candidates for president this year are always speaking in front of large machinery at manufacturing sites? The manufacturing industry definitely has the wind at its back and should capitalize on this momentum of favorability (and free publicity from the candidates).  Also, in a Harris Interactive survey this year, when Americans were asked about the reputation of corporate America, understandably the numbers were not great. Only about one quarter had a positive perception (with only 2% saying very good, UGH) and barely 10% saying it had improved since 2011. What I found particularly interesting was that when Americans were asked which industries would be part of the solution to the problem of a poor corporate America reputation....they answered that the technology, manufacturing and retail industries were most likely to help improve perceptions. Least likely places to expect help were the governmental and the financial sectors, not surprising. Anyhow, thought I would share these reputation findings as I figure out how to talk about combating the reputation of corporate greed that seems to follow us around these days.

There’s no avoiding the bad odds of maintaining a coveted top shelf reputation spot in one’s industry. Each year Weber Shandwick measures the rate at which companies lose their #1 most admired position in their respective industries on the Fortune World’s Most Admired Companies survey. We call this the “stumble rate.” Between 2011 and 2012, 49% of the world’s largest companies experienced a stumble, up from last year’s 43% but exactly the same as 2010’s rate.  With 1-in-2 companies losing their enviable industry position during the past year, the stumble rate highlights just how difficult a good name is to keep.  Looking at this finding another way, #2’s have good odds of becoming #1’s in their industry. Either way, reputational equilibrium is hard to keep. Companies have to continually manage their reputations and watch out for vulnerabilities. Perhaps companies should apply "stress tests" in the same way they are applied in medicine -- determining how the organization's core equity responds to external stress or crisis in a controlled environment. Very much like scenario planning.

2012 Reputation Stumble Rate from

Fortune's Most Admired Companies Survey

 

The industries that have the same #1 this year as last year are:  Aerospace & Defense, Beverages, Computers, Consumer Food Products, Delivery, Electric & Gas Utilities, Electronics, Entertainment, Food Services, Health Care: Insurance & Managed Care, Health Care: Medical Facilities, Health Care: Pharmacy & Other Services, Home Equipment & Furnishings, Information Technology Services, Insurance - Property & Casualty, Internet Services & Retailing, Mining, Crude Oil Production, Network Communications, Pharmaceuticals, Securities, Semiconductors, Soaps & Cosmetics, Specialty Retailers: Apparel, Specialty Retailers: Diversified, Superregional Banks, Trucking, Transportation & Logistics, Wholesalers: Diversified, and Wholesalers: Office Equipment & Electronics. Seven industries have had a new number one each year since 2009. The industries with the most churn are Airlines, Energy, Food & Drug Stores, Life & Health Insurance, Motor Vehicle Parts, Telecom and Tobacco. During the past three years, a total of 40 industries have seen at least one stumble, so with nearly 60 industries represented on the ranking each year (it varies year to year), few are immune to reputational stumbling. We also looked at the rankings within each of the nine reputation drivers that survey respondents assess companies on to help understand why companies stumbled. Of the stumblers between 2011 and 2012, we learned that...

• One stumbler experienced a ding to just one of its drivers. Sometimes it just doesn’t take much when you have strong reputational competition.
• Two stumblers lost ranking across all nine drivers.
• The most pervasive loss of reputation was in the areas of Use of Corporate Assets and Social Responsibility. Nineteen stumblers’ rankings went down on these two drivers, followed closely by Management Quality with 18 stumblers losing rank on this driver.
• What may have degraded perceptions of these drivers? A 2011 media analysis of the largest drops suggest that survey takers may have been sensitive to management changes (e.g., one CEO step-down announcement considered by analysts to be too far in advance of his intended departure date and one long-term CEO retiring) and management of assets (e.g., property spin-offs and failed asset funding). As for social responsibility, no stumbler experienced particularly steep drops on this driver so nothing reported in the media popped as a clear reason for the dings. Perhaps CSR activities are once again being more closely scutinized by peer survey takers as CSR becomes expected behavior.
• The driver least damaged was Global Competitiveness with 12 stumblers losing position.

 

While I am on the subject of Social CEOs (see my last post), I wanted to mention a study that was released by BRANDfog, a firm that helps executives get social.  Survey respondents report that more than 80% of respondents believe that CEOs who engage on social media are better equipped than their peers to lead companies in a Web 2.0 world. What’s more, 93% of respondents believe that CEO engagement on social media helps communicate company values, and grow and evolve corporate leadership in times of crisis.  Similarly, 82 percent of survey respondents said they were more likely to trust a company whose CEO and leadership team engage in social media. Since reputation is all about trust, it sounds like the demand is there....we've just got to supply it with examples and role models.

CEOs get the importance of corporate responsibility. At the recent Board of Boards CEO Conference in New York where heavyweight CEOs from around the world meet annually, the discussion on doing well by doing good was front and center. In an article on that meeting in Barron's, the attending author said,

"How the times have changed. Whether investors like it or not, this era’s consumers do care deeply that the products they purchase are both cheap and do no harm to the environment, or, better yet, positively contribute to the state of the world. A full 59% of the queried CEOs felt consumers were “demanding greater levels of transparency regarding their companies’ community engagement initiatives;” 69% claimed such efforts on their part were “rewarded by consumers.” Because consumers care, investors should care. Fact is, when a company’s cool and progressive spirit—it’s intangible goodwill— is undermined by the firm’s community-damaging business practices, investors often wind up paying the price."

I was glad that CEOs noted that consumers care because that is what we found in our recent The Company Behind the Brand: In Reputation We Trust. Consumers are no longer passive about the companies that make the products they buy. They care and do not like being surprised if they find that the product they adore is made by a company they detest. At the meeting, CEOs were asked whether their company's community and social engagement was "rewarded" by its shareholders and I agree with the author that the response was positive. More than one-half (56%) believe shareholders reward firms for their corporate citizenship. And yes, we all know that it comes down to having the right metrics. It is awfully hard to pin down. What is most interesting to me over the next 12 months is seeing how Apple's reputation fares as the Foxconn issue of employee mistreatment stays in the news. I believe that companies get just so many chances to soar above the damaging reputational news and then it reaches the tipping point where it surely matters. I often refer to the BP Effect. BP had three chances to make their reputation right -- the Texas City refinery episode, the Alaskan pipeline debacle and then the Gulf of Mexico oil spill. The third one did them in.

An interesting study appeared this week from Willis Group Holdings on reputation risk. They examined 600 publicly-held companies.  Here are some of the more interesting details:

• 95% (a lot) of major companies have suffered at least one reputational crisis in the past 20 years
• Major companies suffer a "significant" reversal of fortune every seven years
• One out of two (50%) of these reputational failures were tied to having the wrong business strategy or model; 15% from lawsuits; 10% from merger and acquisition issues. Interestingly, the CEO of Willis Global Solutions Consulting Group said that none of the crises were related to natural disasters until 2011. That is hard to believe since there have been plenty of natural catastrophes over the past 20 years that should have impacted companies such as floods, hurricanes, droughts, food shortages, cyclones, earthquakes, SARS, etc.

Also wanted to mention a recent analysis that came from the 2012 Harris Interactive Reputation Quotient (RQ) and was reported in PRWeek. Harris Interactive reported that advertising has less of an impact on company reputation than social media or new stories. Research continues to show that word of mouth from news stories with negative information about companies drives perceptions more than we realize. We learned that in our Company Behind the Brand: In Reputation We Trust. Consumers are talking about more about company wrong doing than right doing and advertising may not be as able as it used to be in rehabilitating brand reputations. Enjoy the Oscars if you are watching tomorrow!    

2012 is the Year of the Dragon -- the ulimate sign of courage, prosperity and good fortune. Just saw this from the Hay Group. It's pretty cool. People are asked to make their predictions about who will top the Fortune Most Admired Companies survey in various countries and sectors as well as by the 9 drivers of reputation.  I love the dragon theme and design. It is a way to draw attention to the release of the survey on March 1.  The votes are already in from top executives, analysts and board members so here is a way for the "masses" to vote on who their choice for most admired corporate reputation is.  So if you are up to predictions, this might be fun. Definitely auspicious.

 

Today I was reading this article on there being no women on Facebook's board.  Only seven men. And many of Facebook's users are apparently women. Although I had heard this before, it was quite stunning to me considering their impending IPO. And I was also reading an article on young CEOs in the WSJ at the start of the week and noticed that the featured CEOs were all men.   Perhaps I am missing something but where are all the women or at least a few women of them or at least one? Is it me or is anyone else concerned about this? If you want to learn why women are important to business success and reputation, take a look at the special report from The Economist.....amen.

We have been very busy this month. We also released a survey on where the most powerful women in business spoke in 2011. Using the Fortune Most Powerful Women in business list that includes U.S. and non-U.S. professional executives, we audited where they spoke to determine how much they were in demand and what podiums they were invited to.  There were several interesting findings that are worth noting since one way to build professional reputation, get company messages across to important audiences as well as build corporate reputation is to leave those four walls of the C-suite.  In fact, I was speaking to someone at Forbes the other day who confirmed to me that the executive conference business was booming. As it were, women are in great demand.  

• These most powerful women spoke at 218 unique events in 2011.
• The leading speaking forums in 2011 for these top women executives included Fortune’s Most Powerful Women Summit, The World Economic Forum/Davos, India-US CEO Forum, Women Corporate Director’s Global Institute, the Paley Center for Media International Council Summit and the APEC Women and the Economy Summit.
• We also provided insights on what types of conference events they spoke at – from industry-specific events (e.g., World Food Prize Conference and FICCI-IBI Conference on Global Banking) and conferences geared toward job function (e.g., Techonomy and ANA Conference), followed by women’s leadership and academic forums.
• Our research also found that the digital category (e.g., Digital Life Design and South by Southwest) is starting to emerge and is crossing women business leaders’ radar screens.

We do this type of analysis every year and sometimes we analyze all CEOs and top level executives --men and women. However, we thought that looking at where executive women spoke was past due. So here we are.  

In a piece I wrote for The HuffingtonPost for 2012, I forecasted that reputation blackmail would show its hand this year. Lo and behold, a front page article in yesterday's paper headlined "Hackers-For-Hire Are Easy to Find."  The article had to do with two feuding brothers from Kuwaiti who were suing one another over business they held. One of the billionaire brothers found someone to hack into his brother's account and post online all his brother's personal emails including finances, legal affairs, pharmacy bills and everything else that you can imagine gets sent and received from one's personal account. The cost: $400. Hackers to hire are that cheap and apparently easy to find. One of the reasons there has not been much on this topic where reputations can be easily lost is that people do not want to report this type of reputation blackmail and generate even more attention. In this instance, the one brother hired Invisible Hacking Group located in China and here is how it works:

"It requested the target person's email address, the names of friends or colleagues, and examples of topics that interest them. The hackers would then send an email to the target that sounded as if it came from an acquaintance, but which actually installed malicious software on the target's computer. The software would let the hackers capture the target's email password."

You get the picture. Reputation blackmail presents a very scary scenario. Not only is privacy damaged but reputations which take a long time to rebuild get decimated.  Reputation protection can only go so far. Risk management and reputation warfare gets more complicated by the day.