industry reputation

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.

Prophet, a brand consultancy, released its recent reputation survey today. The survey was conducted among over 5,000 consumers in the U.S. Among the most important drivers of reputation rankings were:

• Is a company whose products and services make a difference in my life
• Is a company that inspires me
• Gives me peace of mind
• Is for people like me

Clearly, the above highlights that consumers are thinking of reputations in terms of emotionally-driven factors and ones that resonate with their personal lives. Not a surprise considering how difficult the past few years have been economically speaking. Companies need to think about communicating less in terms of functional performance and more in terms of what they stand for. We've noticed this shift ourselves and it continues to be more dramatic each year. It falls in line with the findings from BAV (Brand Asset Valuator) that I have mentioned on this blog before where they found that generosity and kindness have risen profoundly in terms of key reputation drivers among consumer populations. The world is going soft! Maybe that is all you can depend on these days. Another finding is that consumers are twice as likely to purchase, pay a premium for and recommend products from companies with the best reputations versus those that are less liked. Reputation pays!  They also report that companies with the best reputations "convert customers from considering a company's products/services 90% of the time." This conversion figure is lower at companies with less than stellar reputations -- 60%. Another result that confirms again that reputation and brand reputation are aligning at a greater speed than ever imagined is mentioned in their report: "Prophet’s reputation study found that reputation and brand have overlapping drivers that make both critical for creating impact throughout the purchase funnel. While a company’s brand often plays a crucial role in making customers aware of a company, and is important for driving long-term loyalty, reputation is critical for ultimately driving consideration and purchase." The survey looked at 150 reputations so take a look. Winners and losers for all.

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.

A Wall Street reputation study among marketing and communications executives at financial services firms was released this week.  When asked to rate themselves, only 34% gave themselves an above average grade while 9% gave themselves a grade of  "perfect."  Wonder who those 9% are? The remainder -- 57% -- gave themselves average or below.  The survey by Makovsky and Company had some intriguing results:

• 53% said that Occupy Wall Street impacted their business
• 71% said that Occupy Wall Street will last beyond the upcoming election
• 38% were surprised by Occupy Wall Street (time to be better prepared)
• 74% believe that increased regulation of the industry will help to improve financial service firms' reputations and rebuild trust with customers
• 81% are worried about negative perceptions that exist about executive compensation
• somewhat more than 40% believe that social media has a positive impact on their company's reputation; over half only perceive a neutral effect (fair enough)

So what's a company in the financial sector to do? According to the findings, executives believe that management leadership, quality products and service, and a focus on reputation management will help restore reputation. The killer finding is that 96% of executives agree that the industry brought the problems on themselves. You don't get too much higher than 96%. That's a outright acknowledgement. Of course, today I saw an article saying that college students are still dying to get into the financial services industry. Many are waiting to hear news of summer internships and they are eager to make their way to the the cavernous alleys of Wall Street. So be it. However, I do think that this is the time for financial services firms to hunker down and repair their reputations for the long-term. I vote "yes."

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.

 

I spent last Saturday afternoon reading the Harvard Business Review issue which has Reinventing America on the cover. The March 2012 issue. It holds alot of information about how to bring back America and make it a desirable location for businesses around the world. It is rich with information and insights. I highly recommend. In one article on what's wrong with politics in the U.S., (definitely read), you start to realize that one big problem facing the reptuation of the USA is our intractable political warfare. It is hurting America's reputation as a place to do business. The point is that there are many advantages to locating business in the U.S. but the political problems are creating barriers to consideration. One suggestion from the article is the following which falls in line with our work on Civility in America. We are hoping to conduct our third wave on Civility in America in May or June so we will be sure to look into the demand for getting civics classes back into the classroom. A call for action. America's reputation has to turn around and Congress is not going to be the stimulus. Business will.

 

Stand up for civics. Business leaders should urge public officials—and the public at large—to restore civics to its rightful place in the classroom. Data show that many schools fail to effectively teach the workings of U.S. democracy or the responsibilities that go with citizenship. Just as America cannot be globally competitive without a well-educated workforce, it cannot retain its economic edge without a well-educated electorate that is ready to meet the relentless challenges of democratic governance.

 

 

 

It has been an unusually warm couple of months here in New York. I can't    help but think that global warming is staring me right in the face.  I often think of myself as a bear that hibernates when cold weather arrives. I often joke with my neighbors that they won't see me until spring because I'll be going into my bear cave for my "winter sleep" when the first chill arrives.  So the past couple of months have been an anomaly as I have wandered out doors more often than usual on the weekends. Of course I have to go to work and do the ordinary errands that surround my life but given the choice, I stay inside. Maybe that is why I like to write about reputation because it gives me an excuse to sit in my little office cave that is closed off to the world. All of this got me to thinking about how climate change gets communicated today when there is criticism about  the science after controversies arose from the release of stolen emails from the Climatic Research Unit (CRU) at the University of East Anglia. This happened a year or two ago.  Undoubtedly this is the perfect case study for how an industry (climate change scientists) suffered reputational damage and now has to recover and restore reputational equity. Climate change skeptics were fairly adept at effectively persuading many in the general public to doubt the scientific validity of global warming. I was glad to see an article in the New Scientist (sorry, you need a subscription) by Robert Ward (policy and communications director at the Grantham Research Institute on Climate Change and the Environment at London School of Economics) on how some of the reputation recovery methods that I recommend in my book might be applied to regain confidence and trust in climate science.  He sees the situation right, "Even if the claims of misconduct and incompetence are eventually proven to be largely untrue, or confined to a few bad apples, mud sticks."  This is a truism -- no matter how much science you have on your side, it is sometimes never enough when it comes to public opinion.  Sometimes the facts just don't matter as much as they should in a perfect world. Ward is right that hope is not a solution to rebuilding reputation. Many CEOs used to think they could outlast controversy but in fact learn the hard way that it only extends the problem.  "Communicating tirelessly" -- one of my recommendations -- is the right path forward.  "No comment" does not work as it used to. Whether it is finding neutral partners or independent coalitions to bring additional voices into the discussion or actually training climate scientists to transparently talk about and defend the science -- its certainties and uncertainties, communications will do more good than harm in this digital world. An interesting analysis of temperature records appeared in an article in The Economist  which speaks to the importance of bringing in a third, fourth or fifth party opinion to validate scientific findings.  I read it on a plane to Europe in November but kept it because it made commonsense as an approach to understanding the climate change debate -- is it getting warmer or not?  Let me just add here that the topic of global warming is a lot more complicated than I will ever understand -- gaps in readings, different criteria, different types of thermometers, urban settings where temperatures might be recorder higher, etc.  But interestingly, the Berkeley Earth Surface Temperature project stepped into the argument on climate change 18 months ago to test existing analyses. And they did so with the addition of skeptical scientists and funders as well as Nobel prize winners. As it is often said, let's open the kimono and thus they did. And they found that the existing temperature records that the earth was warming was not far off the mark from what had been previously reported.  A peer review is underway and I look forward to learning more about that when it is released.  Next up, however, for climate scientists and institutions affiliated with climate change,would be communicating openly and collectively (and maybe relentlessly) to explain how the newest findings answer questions, raise new ones and guide us as to what we need to be doing Now not Later.

  Because I am off from work for the holiday, I have a little time to catch up on things I meant to read in the months before. I was particularly interested in some research on CEO transitions and its impact on the value of the enterprise conducted by FTI.  A few facts jumped out at me from their study among the financial community. They found that one-third (32%) of investor decisions are impacted by the reputation of the CEO. Moreover, the reputation of the CEO was more important to investors than the reputation of the company's products and services. The research covers the value at risk depending on what type of CEO transition occurred. The greatest risk to the enterprise is when a CEO is forced to resign. Because of my work on CEO tenures and how to build CEO reputation, the findings confirm my own research over the years that CEOs need to show success by that 12 month marker. FIT found that investors give new CEOs about six months to assess the challenges and opportunities facing the company, setting a vision and strategy.  They give new CEOs more leeway to improve market performance and valuation -- about 12 months. After the first year, all engines need to be firing. Another particularly interesting finding was what investors look at in their first 100 days to further establish the CEOs credibility in their eyes....here is what they said was of "significant importance." Despite the ranking for "charisma," it is still interesting that it is still estimated to be of high importance and only 16% said it was of limited importance.  FTI concludes that investors take a multi-dimensional view of new CEOs. They expect to see it all.

During First 100 Days Of A New CEO	“Significant importance”
Grasp of the company’s challenges and opportunities	96%
Knowledge of/experience with industry dynamics	92
Vision	88
Operational focus	88
A strategic plan	88
Leadership style	76
Charisma/personality	54

 FTI Consulting  

Industry reputation is always changing. One of the major shifts in reputation today is the collateral damage that one company can inflict on its entire industry. Wish there was a more positive incline in how consumers see American business and government. Gallup's recent analysis is now out and provides a look into who is up and who is down. It is no surprise that the real estate industry reputation has declined preciptiously from 2001. Even my own industry -- PR -- has witnessed a decline besides the fact that it is doing well.  The computer and Internet industry look like they are surviving the best with positive lifts in reputation among US consumers.   The drop in perception of government, the deepest decline, seems to the theme of the day. To learn more about why that might be...take a look at our research on Civility in America. It says it all. [Have to add that the CEO of Yahoo, Carol Bartz, was fired via a telephone call. How civil is that? Regardless of what was happening at the company, what happened to the pink slip?]

Overall View of Selected Business Sectors (% of U.S. Consumers)
Industry	% Positive	% Neutral	% Negative	Change in Positive Since 2001
Computer	72	16	10	5
Restaurant	61	25	12	-1
Internet	56	26	16	12
Farming & Agriculture	57	22	19	-2
Grocery	52	24	24	-5
Retail	44	33	22	-3
Travel	42	35	21	-8
Accounting	36	42	19	-11
Publishing	38	38	22	-9
Automobile	42	25	32	-3
Telephone	39	30	31	0
Movie	38	23	37	5
Sports	37	25	36	-1
Television & Radio	39	21	40	-3
Electric & Gas utilities	38	20	40	7
Advertising & PR	32	29	37	-6
Pharmaceutical	36	20	43	-3
Airline	29	30	39	-8
Education	35	18	47	-15
Legal	29	24	45	0
Banking	30	21	47	-17
Healthcare	27	18	55	-10
Real estate	23	23	52	-23
Oil & Gas	20	15	64	-4
Federal government	17	20	63	-24
Source: Gallup, August 2011