Always good practice to learn from crises or disasters. If they have to happen and tragedy occurs, at least we can try to apply lessons from them going forward. Crises, disasters or issues are sure to come to companies or organizations at one time or another. No one is immune — every company faces their 15 minutes of shame, not just their 15 minutes of fame.
The derailment of Metro-North Railroad in the Bronx one week ago today that killed four people and injured many is rightfully capturing a lot of attention on how to make trains safer.
I was reading this article about the derailment on my subway trip home Friday night and at its close, I came across this important best practice. “The railroad administration instructed the authority to adopt a confidential system to report ‘close call’ incidents.” Many companies could do a better job of understanding their close calls. Close calls are similar to “near misses” which are defined this way according to the National Safety Council:
A Near Miss is an unplanned event that did not result in injury, illness, or damage – but had the potential to do so. Only a fortunate break in the chain of events prevented an injury, fatality or damage; in other words, a miss that was nonetheless very near.
A faulty process or management system invariably is the root cause for the increased risk that leads to the near miss and should be the focus of improvement. Other familiar terms for these events are a “close call,” a “narrow escape,” or in the case of moving objects, “near collision” or a “near hit.”
If companies could include “close call” discussions on their internal monthly or quarterly calls, they’d be in far better shape to deal with disasters that do arise. Management could do better by discussing how they might handle near misses, how to make sure they do not happen, who else should be included in the discussion to prevent them and how to prepare should they actually happen. It could be an informal or formal hearing or process. A more formal best practice is sponsored by the American College of Physicians and the New York Chapter of the American College of Physicians — The Near Miss Registry. The online registry collects medical near misses before they actually occur with patients. The registry allows healthcare workers to voluntarily report medical “near miss” events” using a web based tool located at www.nearmiss.org and hosted by NYACP.
Unfortunately the tendency is to bury the near misses in the hopes that they do not reach top management. However, that’s exactly the point. If top management does not know how close a call they missed, they won’t be able to prevent them.
I think it is a good step that Metro-North is adopting this process.
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.
There are many ways to rebuild reputation but one way that companies might consider when recovering from a crisis is developing a Compliments page where employees and non-employees can anonymously thank those front line or other employees for doing their jobs well and conscientiously. I spoke to a company a short while ago as they were dealing with a reputation crisis and suggested that they start a Compliments page where community members could thank those front line people they encounter frequently for doing a honest day’s work. It could help. Of course, the site would attract uncivil types but there must be a way to delete them if they stray too far from the site’s purpose and goals.
Some universities have being doing this for a while. It started at Queen’s University in Ontario because the founders wanted to find a way to counteract bullying. University of Pennsylvania has a Compliments Facebook page as does Penn State. On the U of P site, people thank others for returning their lost wallet, for the sense of accomplishment they feel after doing nonprofit work, to a capella group for their beautiful sound and send support to a fellow classmate struggling with pain. The U of P Compliments page has the goal of “learning to do good and spread good.” Penn State’s site says that it is a social project to spread happiness.
Compliments pages are a wonderful idea considering that incivility that can sometimes surround and engulf us. In Weber Shandwick’s Civility in America 2013 study, we found that 70 percent of Americans believe incivility has reached crisis proportions. With Americans encountering incivility more than twice a day on average (2.4 times per day), and 43 percent expecting to experience incivility in the next 24 hours, dealing with incivility has become a way of life for many. Maybe it is time to turn this tide of negativity.
Compliment sites can be contagious and make people feel good despite their company’s blemished reputation. It could give an employee that extra boost they need to be productive and positive when they find everything uncertain. Hearing a compliment might keep an employee loyal to his or her company and make them feel they are doing their part in getting their company’s reputation back on its feet. Companies might consider trying this and seeing what happens. Reputations get repaired in the oddest ways.
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.
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.
When I first heard this story last weekend about AOL CEO Tim Armstrong publically firing the Patch creative director on a conference call, I was not sure what to think. It was quite the uncivil thing to do. At Weber Shandwick, we had just released our annual survey on Civility in America and I was troubled by the finding that one in four Americans (26%) had quit their jobs because of an uncivil workplace. This figure was higher than it was in 2010 (20%). When I heard that the public firing before 1,000 people was recorded and leaked to a web site, making its way across the world wide web, I thought that too was uncivil. All in all, not good news for Armstrong’s reputation.
I was wondering how this would all shake out or when an apology or statement would come from above and here it is. Unfortunately, the reputation of the workplace is highly impacted by the actions of the CEO and especially by how a CEO behaves during tough times which Patch is experiencing as they prepare for layoffs at the end of this week. His taking responsibility, regardless of the situation, and acknowledging his accountability was the right thing to do to bring some equilibrium back to the situation. You cannot explain away incivilty when it comes to CEO leadership because most people will regard it as just an excuse. Therefore, Armstrong’s apology does not dwell too much on why he fired Lenz the way he did. Since apologies are increasingly common among CEOs and leaders, I thought I would post below in case anyone is looking for an example in the weeks and months to come.
I am writing you to acknowledge the mistake I made last Friday during the Patch all-hands meeting when I publicly fired Abel Lenz. It was an emotional response at the start of a difficult discussion dealing with many people’s careers and livelihoods. I am the CEO and leader of the organization, and I take that responsibility seriously. We talk a lot about accountability and I am accountable for the way I handled the situation, and at a human level it was unfair to Abel. I’ve communicated to him directly and apologized for the way the matter was handled at the meeting.
My action was driven by the desire to openly communicate with over a thousand Patch employees across the U.S. The meeting on Friday was the second all-hands we had run that week and people came to Friday’s meeting knowing we would be openly discussing some of the potential changes needed at Patch. As you know, I am a firm believer in open meetings, open Q&A, and this level of transparency requires trust across AOL. Internal meetings of a confidential nature should not be filmed or recorded so that our employees can feel free to discuss all topics openly. Abel had been told previously not to record a confidential meeting, and he repeated that behavior on Friday, which drove my actions.
We have been through many difficult situations in turning around AOL and I have done my best to make the best decisions in the long-term interest of the employees and the company. On Friday I acted too quickly and I learned a tremendous lesson and I wanted you to hear that directly from me.
We have tough decisions and work to do on Patch, but we’re doing them thoughtfully and as openly as we can. At AOL, we had strong earnings last week and we’re adding one of the best companies in the world to the team. AOL is in a great position, and we’ll keep moving forward.
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.
A new McKinsey survey among board members reports that members acknowledge knowing little about risk. Nearly three in ten (29%) say their boards have limited or no understanding of the risks their companies face. Even more compelling, members say their boards spend just 12% of their time on risk management, an even smaller share of time than two years ago. Not sure about you, but I’d say that the business environment has become more complex and risky, not less complex and risk-free.
This is not good news for executive teams. When it comes to risk management, reputation is high on the list of vulnerabilities that can damage a company’s good name. This has me thinking that if board members are not focusing enough on risk, executive teams are going to be held even more responsible for any misdoings and misdeeds. They had better been attuned to crises and risks that are lurking around the corner. CEOs and their direct reports should make reputational issues an A-1 priority on their management agendas.
I received an email about two weeks ago asking if I had information on whose most to blame when crisis strikes. Years ago, I asked that question of executives and if I recall right, CEOs received most of the blame, regardless of whether they knew about the problem or not. The McKinsey research is hinting at the same blame chain. The CEO takes all the credit when things go right and all the blame when things go wrong. The board is looking in all the wrong places. CEOs, beware.
Plane rides can be good for reading and that is what I did this week on my way back from Seattle. I have always been fascinated by reputational crises and how leaders manage through them strategically and creatively. In the most Harvard Business Review, I found a wonderfully insightful review of Lessons Learned from the Chilean Mine Rescue. The guidance is invaluable and I highly recommend the article in its entirety. As you may recall along with the other one billion people tuning in, in the summer of 2010, the San Jose copper and gold mine in Chile’s Atacama Desert fell in, thereby trapping 33 miners underground for 69 days .
The three Harvard-affiliated authors traveled to Chile after the miners were rescued and developed two case studies on the mining incident. They identified three key iterative tasks that need to happen in order for leaders to manage the conflicting demands placed upon them when crises arise and chaos reigns. And this was a disaster of extreme proportions. One of the clear lessons learned was that crisis-engaged leaders have to carefully balance between being decisive and directive and on the other hand, giving the crisis team the opportunity to ask questions, disagree, experiment with solutions and be creative. The three tasks, according to authors’ Faaiza Rashid, Amy Edmondson and Herman Leonard, are Envision, Enroll and Engage. Here are brief summaries of each one.
- Envision — Leaders have to be realistic and clear-eyed and yet also provide hope and possibility.
- Enroll — Leaders must enroll experts and highly skilled advisors but set boundaries so they do not lose sight of the end goal. They must remind people of what’s at stake and make sense of it all for the team. Interestingly, the article points out that leaders also have to keep the people who are not helpful or whose expertise is not needed right then and there away from the crisis scene or war room. The crisis team needs to not be distracted from their work.
- Engage — This is the stage where execution is critical and the work has to get done. They have to be disciplined and yet open to innovation at the same time. They have to invite learning while the work comes to its conclusion.
In their concluding paragraph, the authors sum it all up….”Leaders must develop a healthy tolerance for failure and ambiguity….” The ambiguity and balance required of leaders in crisis could not have been more apparent than during this crisis. Everyone’s reputation was on the line as well as the lives of the Los 33.
I found this interesting example of how reputation can be managed simply by building a strong and prideful culture for employees. It is a lesson to us all. The article was written by the editor of American Banker and reveals her interesting perspective:
“In terms of how employee experience influences media coverage, I offer the example of two prominent retail brands that I used to cover for a major metro newspaper. One had a disgruntled employee base that was great for leaks that led to juicy stories. From the other, I never got anything aside from the official company line. Even when the second company hit a rough patch, no one called the local paper to complain. Here, a healthy culture offset the impact of an unhealthy stock price: these employees were rallying around their CEO. They cared about their brand and were motivated to contribute to its revival.”
Employees in the second company rallied behind the company and kept its reputational equity stable. They were not roaming the Internet spreading discontent and doubt and catching the eye of some journalist covering the beat. This is how it should work.