Most Admired

Many clients ask what is the potential impact of a crisis. How long will it last? When will the scrutiny die down? How does it compare to other scandals or crises? How much will it impact my reputation? When should we start the recovery process? The New York Times’ insanely smart Nate Silver who writes the FiveThirtyEight blog had an interesting post yesterday on which political scandal — the IRS targeting of conservative groups or the Benghazi attack in Libya — would be longer-lasting and possibly impact the next election cycle. Silver chooses the former (the IRS scandal) and explains so in his article. More importantly for my interests and for those that follow me was Silver’s five questions that he developed on whether a scandal “has legs.”  He credits Bill James’ Keltner list for the initial questions. To determine whether reputational injury will be enduring, these questions are a good place for companies, leaders and others to start:

1. Can the potential scandal be described with one sentence, but not easily refuted with one sentence? Using the 140 character Twitter test is one good way to see if the scandal has legs. Can you say it in 140 characters. Or try it with as few as 16 words which if you recall is all it took to sink former President Bush in 2003 when he said in his State of the Union Address, “The British Government has learned that Saddam Hussein recently sought significant quantitites of uranium from Africa.” Silver’s argument that if it cannot be easily refuted in a similarly short string of words, you have a problem on your hands. I might add that it could be even less than one sentence…it could be a video or photo today.

2. Does the scandal cut against a core element of the candidate’s brand?  The word candidate could be substituted for company or CEO. In this case, a company that proclaims transparency but is caught doing damage to the environment behind the scenes or engaging in financial manipulation is going to lose its credibility 1-2-3. Think about Enron and their much heralded reputation for innovation at the time. It turns out that their innovativeness was in their financial shenanigans, not in reinventing business processes that led to success. Even though Enron was long recognized by Fortune as one of the most admired and innovative companies in the world, the scandal essentially decimated that impression. In fact, it took its leaders from pinstripes to prison strips.

3. Does the scandal reinforce a core negative perception about the candidate? Or company/CEO in this case. As Silver says, “A scandal can be equally dangerous if, rather than undermining a candidate’s strengths, it reminds voters of what they like least about him.”  I think that Congressman Anthony Weiner’s late night racy Twitter sexting reminded people of his unlikeability and brashness. Perceptions that confirm what you already thought of a person or company are hard to shake loose. Another example would be BP’s then CEO, Tony Haywood, who at the time said that he wanted his life back while oil was spilling into the Gulf of Mexico. Unfortunately, the general perception was that BP did not care about the damage being done to the environment by the oil spill and the CEO’s statement only reinforced that negative reputation.

4. Can the scandal be employed readily by the opposition without their looking hypocritical, risking retribution or giving life to a damaging counter-claim? Most competitors in business do not take advantage when their peers are knocked down by scanal. Companies today easily recognize that a scandal for one company affects all and impacts the entire industry. The question for company reputation is “Can this scandal spread to peers and further damage the industry sector that might already be struggling?” Not a perfect example I fear but an example that comes to mind might be the quality issues that emerged years ago in China when lead paint was supposedly found in children’s toys. That perception continues to linger for products manufactured out of China today. I was recently in a children’s store when a customer asked the cashier where a T-shirt was made because she only bought children’s clothing made in the USA.

5. Is the potential scandal occurring amid an otherwise slow news cyle? This is a good question to ask when a potential reputation disaster emerges. There are countless examples of company reputation debacles that get drowned out by other news that draw the media’s attention. I always think about how some recalls get scant coverage when bigger business stories are erupting. Or how some stories are not uncovered until the cycle is very slow and investigative reporting resumes.  Silver mentions how the crude measure of a Google search shows that today, American’s appetite for political news stories is at an eight year low. So President Obama and the Democrats might just avert the sting from the IRS scandal because it’s not the tantalizing subject for readers as it might have been eight or nine months ago. Perhaps when the Dow is reaching 15,000, some stories just fade away.

Each year Fortune publishes the 100 Best Companies to Work For in the U.S. While the bulk of the company evaluation rests on a comprehensive employee survey, Fortune publishes a wealth of employer statistics about benefits, diversity and jobs. Weber Shandwick has been cataloguing this data since 2006, enabling us to look at how each factor is changing over time and how reputations can be shaped by being a best company to work for.

Most Best Company statistics for jobs, diversity and benefits were unchanged between 2012 and 2013. However, this leveling off could be taken as a sign of good news. 2010 and 2011 were mediocre years for jobs and the improvement in job and diversity statistics in 2012 suggested that the market was starting to strengthen and reputations are stabilitzing. Similar numbers in 2013 may signify that improvement is still underway.

Below are insights into these jobs, diversity and benefits trends:

Jobs: The Best Companies reported virtually the same job statistics in 2012 and 2013, including median job growth (6%) and median voluntary turnover (7%). In fact, with the exception of 2010 and 2011 which were poor years for jobs statistics, median job growth has maintained a steady rate since 2006, only fluctuating between 5% and 7%. Perhaps this job growth range is a Best Company standard.

Improvement in negative growth may be a sign of recovering job market. After hitting a low last year (11%), the number of companies experiencing negative job growth remained steady in 2013 (12%). This is a drastic improvement from 2011 when 45% of Best Companies reported negative job growth.

The rate of Americans quitting is on the rise, suggesting that people across the country are becoming more confident in leaving their jobs to find work elsewhere. Best Companies, however, maintained the same voluntary turnover rate between 2012 and 2013 (8%). The difference between these two trends may reflect the impact that a good reputation can have on retaining a company’s workforce.

Diversity: Diversity initiatives at Best Companies have also remained mostly unchanged. The average percentage of women and minorities working at Best Companies has been consistent since 2008. But with women already comprising, on average, nearly half the Best Companies’ workforces, it is very possible that we will see this trend continue into the coming years. 2013 was another solid year for gay-friendly policies and benefits. Nearly all Best Companies this year have gay-friendly policies (99%) and the number of those offering gay-friendly benefits has hit a record-high (93%).

Benefits: The most noticeable change in employee benefits offered by Best Companies since last year is the decrease in number of companies extending compressed workweeks (down from 80% in 2012 to 73% in 2013). Also taking a small hit is on-site childcare, which fell below 30% for the first time since 2008. The Fortune evaluation, however, does not look at companies that offer flexible workweeks, which could be taking the place of these two benefits. Best Companies could be giving employees the opportunity to better balance their work lives outside of a formal perk. We may be starting to see this trend happening at companies not on the best-of list too. For example, while Yahoo CEO Marissa Mayer was recently in the media spotlight for banning working from home, it is possible that Yahoo employees have other options for work flexibility aside from telecommuting. The benefit with the greatest improvement is on-site gym, which hit a high this year (73%). All other perks remained largely unchanged from 2012.

I have been quoting Geoff Colvin from Fortune for years. He has a great way of saying what is important in reputations. Today, the Most Admired Companies survey is out and I quote him:

“So a critical question for business leaders now is how to manage in that environment — specifically, what must be managed for change, and what must be managed for continuity, if we’re to be admired in 30 years? The answer seems clear. Products, services, and strategies must be managed for change, faster all the time. Their life expectancies are shrinking. Brand and culture must be managed for continuity. Look at the three old-timers on today’s list…They possess arguably the strongest brands on earth, and all have titanium-strength cultures.”

He is so right….strong brands and culture and of course, leadership (goes without saying) make for the best reputations.

I love this list!

I was taking a look at the new Harris Poll RQ study that was released this week. Reputations of U.S. companies are always important to review in order to see how companies or sectors are improving while others are declining. The survey has some reptuational nuggets worth sharing here.

This year, 16% of the U.S. public said that the reputation of corporate America was improving, an increase of 7% over one year earlier. That is positive news despite the fact that 49% of consumers say it is declining. That is not a surprise because trust in business has reached its lowest depths over the past few years of economic decline. But it is a good sign that reputations are making somewhat of a comeback.

But what really has left me thinking twice is not the finding that Amazon.com is the most highly reputable company in America this year, a notch above Apple. What has me in a state of awesome disbelief is that Amazon earned nearly 100% positive ratings on all measures related to Trust and that among Americans who have discussed Amazon with their family and friends, nearly 100% of these conversations were positive about the online retailer. I have rarely, if ever, seen a company ever get that close to 100%. I’ve been conducting research for a long long time and this is an amazing feat. 100% satisfaction! A rarity.

The Harris Poll also found that more than 60% of consumers say that they now “proactively try to learn more about how a company conducts itself”  before they consider buying that company’s products and services. Again, the world of reputation is seriously changing when people care this much about a company’s treatment of employees, customers and communities. Values are increasingly playing a greater role in reputational perceptions and this market force is only going to continue. Mark my words.

We just issued our study on Socializing Your CEO II. It is a sequel to the audit we did in 2010 on how CEOs were using social media. It was one of the earliest explorations of social CEOs and we found that two-thirds of the largest revenue producing company CEOs were bascially UNsocial. Two years is a long time in Internet time so we were curious how  these chieftains were faring in the social dimension now.

We learned that CEOs are more social — hurrah! Good news. In 2012, 66% of CEOs of the world’s top 50 companies engaged online compared to 36% in 2010.  There was heightened visibility on corporate websites and usage of video such as corporate YouTube channels. Where they failed to show a surge like we saw in other social activities was in their usage of social media platforms such as Twitter, Facebook, Google+, Pinterest and LinkedIn.  In fact, in 2010, 16% of CEOs of the largest companies in the world used social media compared to 2012 where the incidence was 18%.  Interestingly to me, the current usage of social media platforms at 18% is similar to what the IBM CEO survey found in 2012 (16% of CEOs participate in social media). However, when IBM asked CEOs whether they’d be using social media three to five years from now, a whopping 57% said yes. They may be over exuberant here but let’s just say that they are acknowledging its importance and their commitment to get the hang of it.

What do I think about all our results? I think that CEOs are still dipping their toes in the social media waters but for the most part, I’d have to say they are decidedly taking their jobs as social storytellers to heart, whether on their About Us/home pages, in video, and to some extent on social media. They are covering all their bases, trying out different channels to find out what suits them and reaching out to stakeholders in the many places they may be — be it prospective talent visiting their career pages, investors checking out their credibility quotient on YouTube or customers visiting their Facebook pages. Of all the social media we examined, the greatest increase over the past two years was for CEOs on Facebook. Usage of Twitter declined which is curious. Perhaps Twitter appears to pose more risk than most. Mind you, these are the largest companies in the world in mammouth sectors – oil, automotive, telecom, financial — and not the usual Internet technology companies that feed off of social media. Also, those of us in the U.S. do not quite realize that CEOs in other regions consider being on a home page to be a big giant social step and in some regions, there are security issues about plastering your information or picture widely. I should add that U.S. CEOs are more social on social networks than their peers in Europe, Asia and Latin America — 26% vs. 18%, respectively.

I thought, however, that I would use this post to talk about social CEOs and reputation since that is what my blog is about. I will return to our Social CEO study often so keep a watch. Not only will I continue to observe social CEOs because I am interested in reputation but because I firmly believe that being social will be a prime driver of reputation in years to come.

Here goes. We learned in our audit that CEOs of the world’s most reputable companies consistently demonstrate greater online engagement than peers at less reputable companies. 81% of CEOs from Most Admired companies (using the Fortune World’s Most Admired study) engage through company websites or in social media, compared to 50% of those from less reputable or “contender” companies worldwide.

The growth in engagement among CEOs at Most Admired companies exceeds the growth in engagement among CEOs at contender firms. While contender company CEOs are more social in 2012 than they were in 2010 (50% vs. 28%, respectively), Most Admired company CEOs essentially doubled their sociability in the past few years. I have no doubt about it. Most Admired company CEOs may more acutely recognize the relationship between social media engagement and positive reputation and the importance of having a dialogue with customers
despite the risks.

A new reputation study by Pam Cohen, a behavioral economist for Dix & Eaton, was recently released. It appears that they are looking at various industries and chose the financial sectoras the first one. For this analysis, she drew on over two dozen data sources, government statistical information and industry rankings and surveys. Of the nine drivers of reputation, the top five that impacted corporate reputation in this industry were shareholder investment (ROI), CSR, transparency, sustainability and image. Cohen remarked: “While it is no surprise that ROI shows up among the top drivers of financial institution reputation, more telling is that corporate social responsibility is the number-two driver, and sustainability number four. This, of course, highlights our culture’s return to grass roots despite – or perhaps because of – the downturn in the economy. Values are viewed as being critical to organizational success and acceptance.” Cohen also mentions her surprise that “image” rose back into the top ranks of reputation drivers, a spot it has not held since a decade ago. To me, image is a peculiar term in many ways. When I first started in the reputation business, people used to respond to my answer about what I did as “oh, you do image or impression management.” That used to make me irritable because reputation is so much deeper than image and they were missing the point obviously. I think of image as fleeting, temporary and shallow whereas reputation mobilizes people to support a good company by investing in them, recommending them, believing in them and listening to them. But for this study, I am confident that image was a catch-all for reputation, trust and admiration, all of which Cohen references. I also found it interesting that “transparency” was third in the list of drivers of reputational impact which speaks to the importance of telling it like it is, not saying “no comment,” and being timely and relevant in company communications. Fascinating to me was that “ethics” or “good ethical conduct” did not appear on the list since ethical behavior has been so important in valuing companies of late. Perhaps ethical behavior falls into some of the other drivers and that information was not mentioned in the release.

The second industry they analyzed is retail. Using somewhat different criteria for reputational impact, Cohen found that the leading ones here were overall satisfaction, quality of goods and services, price/value, trust and problem resolution. They also looked at sustainability efforts, convenience and variety. Cohen used social media in this analysis which makes sense considering that social media can go a long way in resolving issues and refining products. When it comes to retail, the quality of products and services nearly always goes first. Makes sense.

I met Pam Cohen years ago when she was at the Ernst & Young Center for Innovation. Some of the research that I did back then on CEO reputation was fed into her analysis which was featured in Forbes. Glad to see that she is still working the reputation angle because her research is top-notch.

Barron’s World’s Most Respected Companies came out last week.  It is a highly coveted list for companies and must please CEOs and boards.  Barron’s lists are definitely worth following because the ratings are gathered from money managers, not consumers which seem to be the stakeholder of choice these days. Apple was number 1 this year which is not a great surprise.  Interestingly, the writer mentions that the problems Apple has faced with FoxConn appear to only be a distraction for now. As always, the ups and downs of company reputations are revealing, particularly among this money-centric set.  As much as I like the list, I like the write up more because there are usually interesting nuggets of information.  This year, these stood out:

·         Investors gave more thumbs ups to US based multi-nationals.  Barron’s says that this is because of the outperformance of domestic stocks in a year of global tumult and the outperformance of quality mega-cap shares as global growth expectations diminished.  Six of the top 10 are among the 30 members of the DJIA.  This was more pronounced than usual.  Even though the money manager sample is US based, Nestle managed to sneak into the top 10 which says a lot for that company’s prospects.

·         What drives perceptions of the world’s most respected companies among this select set? Strong management and sound business strategy top the list, followed by business ethics, product innovation and then financial performance.  In the past two weeks, it seems that I have had more conversations about Ethics and reputation than I usually do. I have been asked to define business ethics, trust and reputation and how they are interchangeable and need better defining.  And as you see below, ethics ranks #3 among money managers in their respect for companies.

·         Russian and Chinese companies did not perform well in the rankings. Clearly there is a perception of “untrustworthiness,” says Barron’s.

·         They predict that the global healthcare companies might be due for a reputational upgrade.  Barron’s says that right now all the pharma companies are cast into one big “ugly” bucket of drug-patent expiration, reimbursement head winds and weak development pipelines.  “Funny, it would seem a forward-looking investor could make the case that aging populations in the developed world and growing medical spending among the emerging middle-class could boost these giants’ fortunes in the coming years.”

Every week I think nothing new is happening in the world of reputation. And I am always wrong. There are always CEOs coming and going, companies that get into trouble and lose reputation points and new things to learn. That’s the best part. Here’s a few:

1.     Booz Allen released their fabulous CEO Succession report. I read it every year and welcome the insights. This year they focused on new CEOs, a topic dear to my heart and book. This year they found that 14.2% of CEOs of the world’s 2500 largest public companies changed over. This is a sizeable increase from last year when the turnover rate was 11.6%. This increase makes sense because as boards battled the recession, it was not the opportune time to change chief executive reins. Better to batten down the hatches when times are tough. Strikingly, Bozo found that outsider CEOs are making a comeback. In 2011, 22% of all new CEOs were outsiders compared to 14% in 2007. That’s definitely surprising to me since the trend has been in favor of insiders for a while now. The possibility is that companies need fresh new ideas and outsiders with global experience as they now look to grow. You should check out the report because there always is a lot of fascinating information on the world of CEO transitions. For example, outsider CEOs are more likely to lose their jobs, the number of CEOs being appointed chairman has declined and nearly 90% of new CEOs have not been a CEO before. That last fact is astounding and perhaps why we get asked about our services on CEO First 100 Days as often as we do. In another post, I will provide Booz’s insights on advice on CEO’s first year in office.

2.     Reputation Institute released its worldwide reputation findings on the Most Reputable Companies. Their headline reads, “Reputation Is Impacted More By What You Stand For Than What You Sell.” In their research, they found that “People’s willingness to buy, recommend, work for and invest in a company is driven 60 percent by their perceptions of the company and only 40 percent by their perceptions of their products.” That’s an important finding and mirrors Weber Shandwick’s results on the importance of the company behind the brand. We are on the same wavelength, clearly.  They also found that only 11% of the top 100 companies have better reputations abroad than at home. “It’s because reputation isn’t something that’s easy to export,” says Nicolas Georges Trad, Executive Partner at Reputation Institute. Love that quote.

3.     I also attended Spencer Stuart’s CMO Summit this week on innovation. It was illuminating in how innovation gets baked into companies from the head marketing honcho. Whereas one company CMO panelist was analytical in her approach, another was more artistic and qualitative. Goes to show that culture drives execution. From the panel, I learned about another usage of HIPPO which is always a bonus to me – it is a reference to the Highest Paid Person’s Opinion. Everyone in business knows what that means.

It is not every day that I read an article several times over and then take notes. That is what I did after reading Graeme Trayner’s paper presented at the Annual Market Research Society Conference, March 2012. Its title is “Emblems and Shortcuts: Rethinking Corporate Reputation Research.” Graeme is a partner at Brunswick in opinion research and a fellow reputation-follower.  I first heard his name when I found a wonderful research article about the concept of the “permanent campaign.”

I basically agree with his thinking on the state of reputation research – where it has been and where it needs to go.  His overarching point of view is that current reputation research might be too mechanistic, rational and simplistic for how people shape perceptions about companies today.  Yes, the current framework most commonly used is powerful because it easily reduces the many drivers of reputation to six or seven key dimensions such as financial performance, quality of products, leadership, etc. Despite its simplicity, that is the beauty of it.  I think he is referring to some of the publically available frameworks from Harris Interactive, Reputation Institute and possibly Fortune’s Most Admired. I see his point that these methods make an enormous assumption that people are rational actors and make decisions about what companies to buy from based on these preordained reputation drivers. And, these frameworks do not take into account reality, that is, different stakeholders see companies differently (financial analysts do not view company reputations the same way as consumers or the media do).  He posits that this way of thinking dilutes what is really happening today.  On the other hand, I should add that the beauty of these frameworks are that they are mostly publically available and can serve as valuable guideposts to how companies are viewed.  They serve a great benefit to companies looking to track broad perceptions over time, those without big budgets and those CEOs who do not take reputation as seriously as they should.  These frameworks have their deficits and I do believe that most company leaders recognize that when taking advantage of them. The solution is to use them as snapshots but to really gauge reputation, a company needs to customize their own research.

Graeme calls for a newer approach that takes neuroscience and behavioral economics into consideration. Essentially he calls for greater attention to how mental shortcuts, symbols and what the crowd is thinking to help us make choices about companies. He calls for a fresh approach that takes into account “a series of interconnected associations and frames, rather than a static set of reputation drivers.”  The world of perception is indeed one big network of images and loose connections, particularly when we are bombarded with so much information today.  

There are many things he writes about that are important to think about when it comes to reputation (which is why I took notes to keep for myself). A few stood out when it comes to identifying the cues and symbols that help shape reputation perceptions.

·         The idea that people use fast or slow thinking (he cites Kahneman, 2011) when it comes to forming opinions. Slow thinking is “deliberative and logical,” whereas fast thinking is what we do most of the time and involves embedding impressions and intuitions about companies and things in our minds.  When I think about how impressions get shaped about companies and leaders for most people whose livelihood is not reputation, it often feels like “hearsay” or “half-truths” certainly do the trick. For example, JPMorganChase was a reputation champion until we heard about the $2 billion trading loss on May 10^th. On May 9^th, they were a leader and one day later, a laggard. For most people, they just heard something fleeting on the news and it became a permanent stain on their reputation. Who has the time to drill down into the facts?

·         He also cites the idea posited by Robert Heath (2011) on low involvement processing. In essence, people are forming images without conscious awareness – “people are still taking in images, associations and messages from advertising, even if they are not fully engaged.”  We can’t take it all in but we are taking it in at a low level.  And these perceptions stick as well. I may never buy a Boeing aircraft but I form impressions through bits and pieces of scrap information.

·         The part that I also like thinking about is the concept he cites about “social copying.” With the pervasiveness of the Internet today, people have access to what everyone else is thinking. That online reinforcement that everyone likes blue M&Ms further deepens one’s thinking about whether a company is a good one or not so good one. “Understanding the social ‘stickiness’ of aspects of a reputation is crucial to identifying how to evolve corporate profiles.”  For this reason, in my view, online reputation management is so critical to managing reputation today.

He recommends some thoughtful ways to embed this thinking in corporate communications campaigns for the betterment of reputation. These are many of the things that we do every day in this field. We urge companies to find that one important “signature” initiative that we sometimes refer to as thought leadership and make it memorable, distinctive and impactful.  A good example might be IBM’s Smarter Planet. Graeme calls this an “emblematic initiative.” Applying muscle to this initiative is critical. His other suggestion to corporate communicators is to start with an issue that tackles a societal problem. The key is making that known and making sure it aligns with the business. A good example is TOMS shoes, a shoe company that donates a pair to a person in need every time someone buys from them. I can’t tell you how many people have told me that when I was looking for summer soles.

Take a read when you want to slow-think and be deliberative. It feels good.

Hard fact of the day: “The percentage of engaged employees in world class organizations is double that of average organizations. In the U.S. alone, Gallup estimates that the cost of disengaged employees in lost productivity is $370 billion per year.” 

To move the reputation needle, engage your employees.

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