Most Admired

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.

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.

 

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.