When I travel to speak in different countries , I spend a good deal of time investigating the reputation of the country I am traveling to and any recent reputational problems they are experiencing. I always want to know what the biggest business scandal, best example of a reputation recovery and what were the most widely covered social media assaults on a business. I usually get asked to comment on these types of questions one way or another during a media interview or in a Q&A session and I like to be prepared.
On my last trip, I was all prepared to talk about Turkey’s issues with the protests in Gezi Park. But everywhere I turned, I was also asked what I thought about the reputation of the United States in light of the government shutdown? Did I think its reputation was being harmed? I have to say that I was somewhat startled by the question because I am always so focused on the country that I am visiting that I forget that it goes both ways. But this time, I realized without any doubt that the reputation of America was being seriously damaged abroad by the incivility and absurdity of the standoff. It felt awful.
This week, we saw something I have posted about before….how companies are increasingly becoming involved in political issues, sometimes against their own will. And this week we saw first hand another form of Starbucks Diplomacy. The CEO of Starbucks, Howard Schultz, posted a note on his company website deploring the shutdown — “Please join me in pleading for civility and a respectful, honest discourse among politicians to bring a solution to the current stalemate.” And today, another note about Americans coming together for the collective good and signing a petition demanding that Congress put an end to the shutdown. Since I really want to get our reputation back on track, I’m all for this.
It has been a crazy few weeks — traveling to Berlin, San Francisco and Istanbul. But I am back in the USA. So here are a few observations about things I’ve read and learned that I wanted to share:
1. Deloitte Touche Tohmatsu just issued a new report on reputation risk. Reputation risk was the top strategic risk among 300 global C-suite executives surveyed. The survey found 40% of respondents listed reputation as their top risk concern today, with their business model second at 32% and economic trends/competition third at 27%. In 2010, reputation risk was at 26% so we can see that it has moved to the very top of the C-suite agenda. Henry Ristuccia, global leader of governance, risk and compliance at Deloitte had this to say (love this quote): “Reputation risk is going to always be the meta of all risks…how you manage the underlying factors that could affect the organization’s reputation or brand…how resilient are the people, the culture?” The meta of all risks!
2. In Istanbul, I spoke about Reputation Warfare, the theme of my Harvard Business Review article. The occasion was the 2nd International Reputation Management Conference at Kadir Has University. It was very impressive because there are not many reputation management conferences in this world (Reputation Institute holds one annually) and here I was in Istanbul. Very forward-looking of the university. The summer protests in Turkey at Gezi Park was an interesting backdrop to my discussion on using social media as an opportunity to defend one’s reputation in addition to the risk. Additionally, there was discussion about how the protests had affected the reputation of the country. Tourism took a hit in July but from the looks of it, it was pretty healthy this week. I am going to keep a watch out for how Turkey repairs its reputation and what types of reputation recovery strategies are employed. All very interesting and doable. I also experienced some of the Turkish hospitality that they are so well-known for.
3. Just this past week, I read two articles on how Goldman Sachs and JPMorgan are repairing their reputations. All in one week. Clearly this is a topic that has grown exponentially and particularly in the financial sector. The Economist article on Goldman Sachs was fascinating because it described the scenario setting that is being used to train vice presidents to better understand their responsibilities to the firm when faced with ambiguous and complex challenges to doing business today. The case study is preceded by a film that is described this way: “…an emotive documentary on the history of Goldman Sachs, filled with interviews of luminaries and former executives, each hammering home the virtues that supposedly make the firm distinctive—teamwork, personal accountability and the legendary exhortation by Gus Levy, a former leader of the firm, to be ‘long-term greedy’, by which he meant it should forgo short-term profits if they came at the expense of client relationships.” I mentioned in a previous post how Goldman Sachs is super-engaging in training which included their CEO from the start. In addition, incentives have been revampedd and tied more to collaboration and teamwork. The WSJ article on JPMorgan’s CEO Jamie Dimon focuses on how he is converying “business as usual” as he faces an imminent federal lawsuit, another revealing reputation recovery strategy. He has been touring midsize cities such as Cleveland, Oklahoma City and St. Louis meeting with local businesses and community leaders that are supported by JPMorgan’s philantrophy. According to the article, Dimon’s message are fine-tuned, upbeat and focused on the customer.
I was very pleased when I saw that the WSJ covered our thought leadership survey Civility in America yesterday (mid day it was the 4th most popular on the site!). In their article on incivility at work, they mentioned our stat that one in four Americans (26%) have quit their job due to the unpleasantry and rudeness they have encountered at work.The rate of Americans who have quit a job because it was an uncivil workplace decreases with age. Interesting, right? This could be that younger people are less tolerant to incivility at work or that it is more acceptable in today’s society to quit a job.
There is no doubt about the fact that incivility is seeping into all aspects of our lives. According to our research with Powell Tate and KRC Research, the rise in uncivil workplaces has risen over the past 12 months, from 34% to 37%. This might be part of the reason that 75% of Americans think we should have civility training in schools today. What could be a better place to start. You might say a good place to start would be at home. Maybe so but the survey found that 30% of Americans say they experience incivility at home and 55% see it in their neighbors’ homes. Nothing like fingerpointing.
One of the questions we asked this year still intrigues me when it comes to this timely topic. We asked people in late Spring when we did the survey whether they would take a national civility pledge on July 4th. Well, a whopping 87% said they would. There was no disagreement here — men, women, all age and income groups and regions of the country were willing to spend an entire day being just plain civil. My sense is that the same high percentage would apply to this upcoming Labor Day. I am going to do my best as a party of one to be as civil as I can be, even if it surprises someone. All of our reputations in this country depend on it.
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.
Am on a tour of Asia to talk about our research on social CEOs. Obviously, social media is at different stages in various markets which is making my presentations very interesting to me (hopefully to others too!). When I was in Tokyo earlier this week, we found ourselves talking about how new social media was still new (only 10 years old at most) but how quickly it had grown in Japan recently. My Japanese colleagues told me how the reputation of social media or SNS (social networking systems), as they call it, has improved after the horrific earthquake and tsunami of two years ago. Since the telephone networks were not working, people turned to Twitter and Facebook to communicate. On the Twitter blog, they said that there was a 500% increase in Tweets from Japan when the earthquake hit. In turn, I told the story of how websites changed from static brochureware after 9-11 into two-way gateways when it became apparent that people wanted to be able to find out from company websites if people were okay, if financial transactions were still going through and what time to show up for work the next day in New York. Interesting parallels of how disasters can quickly change behavior and how social media’s reputation turned positive when emergencies are at hand.
For years I have been reading that the world has gone global. Countries and companies are all globally connected, at least that is what I thought. Globalness is a key driver of strong reputation and seriously sought after by the most admired. Well, I was wrong. According to the DHL Global Connectedness Index, we are not as connected we we thought. Connectiveness in DHL’s index is measured by both the depth of connectiveness (how internationalized a country’s economy is) and breadth (how many countries it connects with). Breadth is now 4% lower than it was in 2005 and depth is below what it was in 2007 but 10% higher than it was in 2005, having recently rebounded.
Why would that be? Certainly the global recession has had an effect by limiting global capital flows. That makes sense. And companies are also less likely than before to place their investment dollars in foreign countries. I guess so.
Europe is the most globally connected region. This is probably good except if economies in your union are tanking. Another fascinating finding is that distance and borders still matter, even online. The researchers behind this Index note that most international capital flows stay within region and the same goes for online connections — they stay closest to home and decrease with distance.
Here are some facts on which countries were the most and not so very connected out of the 140 countries in the Index. It shows that the world is not as flat as we thought. And it shows that companies still have their work cut out for themselves in terms of building global reputations and developing markets for their goods. We are more insular than I imagined.
Always good to learn something new. I learned that the reputation of emerging market multinationals needs tweaking and I too needed to have a better understanding of them. Emerging market companies are serious business engines to be reckoned with and will soon outnumber multinationals. These companies are not unsophisticated and poorly prepared to deal with this new technological era. They are the new global giants as the title of this new book implies — Emerging Markets Rule: Growth Strategies of the New Global Giants written by Wharton professors’ Mauro Guillen and Esteban Garcia-Canal.
The authors spell out seven basic leadership principles that emerging market multinationals can teach us: “executing before strategizing, catering to the niches, scaling to win, embracing chaos, acquiring smart, expanding with abandon and taking on the sacred cows.” Here are a few facts that I picked up in an interview with the authors:
1. The global playing field is now more level. Emerging markets have many things going for them such as cost advantages in their country of origin and know-how dealing with government regulations.
2. Approximately 41% of new flows of foreign direct investment in the world comes from emerging economies.
3. About 30% of the 100,000 multinational firms worldwide come from emerging economies.
4. Many emerging market companies come from sectors outside low-tech and natural resources (which we tend to think of them as dominating, foolishly). Think Haier (China), Embraer (Brazil), Tenaris (Argentina), Infosys (India), to name a few.
5. They can have interesting new business models such as Cemex (Mexico) with good acquisition strategies.
6. The authors sum it up this way: “They have expanded globally without hesitating much about the sequence of countries to enter or whether they had all of the needed resources at their disposal. What they have done is make a virtue out of necessity.”
The reputation of emerging markets has shifted in my mind, all for the better.
I have been traveling in Brazil and Peru for business to talk about reputation. It was a terrific visit because I confirmed once again that reputation is on the agendas of most companies wherever they may be. One of the challenges I heard several times on my visit was how non-U.S. companies do not have to deal with government relations as much as LatAm companies do. This challenge to reputation-building came up as well in several media interviews I did prior to my trip. Each time it came up, I had to chuckle. The truth is that government involvement and regulations in US markets also feel very real and intrusive. I always talk about how government used to be an “invisible hand” but today plays a decidedly “visible hand” in business affairs. For many companies, it is literally like a new line of business. In fact, I have been asked several times nowadays how government affairs departments are being restructured to more effectively manage upcoming policy and government regulations.
I was in Sao Paulo and Rio de Janeiro for two seminars on reputation management. In our research on corporate reputation, 91% of executives in Brazil told us that they were increasing their efforts at reputation building. Much of the discussions in the Q&A period in addition to government intervention centered around culture, B2B reputation-building and dealing with social media threats. In one market, we also discussed social CEOs, a favorite new topic of mine. Apparently there are fewer socialized CEOs in LatAm than in the U.S. due to security issues I was told. I found that illuminating.
When I was in Lima this week at an evening reception, I had a discussion with two businessmen who told me how optimistic they were about business growth in Peru. They were noticeably ebullient. Considering their past history, they said they had never seen so many doors opening to them. There seemed to be no ceiling on their optimism about the future. Refreshing.
As always when I travel, I catch up on magazines because I find myself on planes. I caught an article in The Economist that ties into this post’s train of thought. One line particularly stood out…”…place matters more than ever in a globalized world.” The writer was making the point that in a global world where everything has become so homogenized (like “a universal airport lounge”), people crave a sense of place and the more distinctive, the better. While I was in Brazil and Peru, it felt like there was a definite pride in their “place “for being different than the U.S. and other regions and for the boundless opportunities ahead. That could only be a good thing for sparking innovation, building top flight reputations and surprising the global competition.
Timing is everything when it comes to reputation. There are several articles today about how London’s reputation for financial integrity has been damaged by recent events in their banking system. What’s more interesting to me besides the three banks whose reputations have been undercut for rigged interest rates and money laundering is the timing of these crises. All three bank debacles occurred within weeks of each other which is a collective reputation-killer for the city of London and the sector. I always say that you can err once, misstep again but the third time and you’re out! I think that is a baseball cliche of sorts. But it is true that three is the magic number when it comes to reputation. Companies and leaders fall, often trip a second time as they institute change but on the third try, you definitely lose investor and customer patience. After a third attempt or three sequential mishaps, your reputation gets a scarlet R. I think that is what is happening to the U.K. banking system. Not that this has not happened to us in the U.S. We have had our fair share of 1-2-3 and 4+ reputational fouls. In fact, enough for a lifetime. The saving grace for the U.K.’s financial sector is that the Olympics are stealing the show and its summer holiday time. People are also very worried about the economies around the world and leadership changes in the U.S. and China. As they say, timing is everything and the U.K. banks picked a good time to stumble (if they had a choice, very unlikely).
There was a line in one article about this reputational meltdown for the City of London which made me read it twice: …”the U.K. government had launched a public inquiry into banking culture — even bringing in a bishop to offer a moral perspective.” I am curious what the Bishop shared.
There are plenty of companies with excellent ethical programs and cultures that could serve as best practices for these wronged companies. I’d turn to them too. We’ve got to get these ethical violations straightened out to restore trust once again in our financial centers. Let’s do more than keep our fingers crossed. And let’s make sure we listen to the stories from the other side in case we’re not hearing the full story. That’s been known to happen!
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.