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’ve always said that every industry gets its turn at reputation downfalls. Every industry has to be prepared for clearing its name when crisis strikes. We’ve seen that in the oil industry, financial services industry, auto industry, pharma industry and so on. The one industry that seems to always fare well in the best industry rankings is technology. However, according to an article in The Economist on what to expect in 2014, we should be getting ready to witness a tech-lashing. The reputation of the Silicon Valley elite are soon meet their due if the tech-party extravaganzas and limosine crowd continue full throttle as they are. As Adrian Wooldridge of The Economist says, “Geeks have turned out to be some of the most ruthless capitalists around….The lords of cyberspace have done everything possible to reduce their earthly costs. They employ remarkably few people: with a market cap of $290 billion Google is about six times bigger than GM but employs only around a fifth as many workers. At the same time the tech tycoons have displayed a banker-like enthusiasm for hoovering up public subsidies and then avoiding taxes. The American government laid the foundations of the tech revolution by investing heavily in the creation of everything from the internet to digital personal assistants. But tech giants have structured their businesses so that they give as little back as possible.” These are not kind remarks about an industry that has been revered for so long.
Wooldridge might be onto to something as more information seeps into the public’s consciousness and the inequality divide starts to gain notice. One example cited by Wooldridge was a recent party where a 600lb tiger posed for revilers in a cage and a monkey was made available for Instagram pictures. [Where was PETA?] Another article on Gawker headlined this supposed joke: “If you ask people in Silicon Valley about the dismal job market, they’ll laugh and say, ‘What’s ‘job market’?’ A new mobile social networking app?” And if you are still not convinced that something is underfoot, The New York Times ran an article this week about how all the Silicon Valley million-billionnaires are changing the tenor of neighborhoods in San Francisco, buying up all the real estate and generally crowding out the long-timers. One person is quoted as saying she is surprised by how coldblooded these technorati are. Not a pretty portrait.]
All of this criticism is tied up with ill feelings about technology companies having handed over data to the NSA whereupon Edward Snowden exposed this wrongdoing to the world. These serial reputation-damaging incidents are beginning to chip away at the technology elite’s image-making and positivity they’ve done in making our lives more productive and interconnected.
2014 might just be the year when the technology sector loses its luster and customers and the general public begin to wonder what social good they are doing with all their riches and IPO shares. A reputation risk for the technology sector for sure.
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.
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.
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.
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.
Had a terrific visit to Weber Shandwick Toronto this week. My colleagues hosted a breakfast to discuss the new rules of engagement for employee engagement and reputation and I shared the platform with my colleague Kate. We met some terrific clients and had some very good questions afterwards, always a plus. Reputation and employee engagement are very much intertwined which made the two angles so easily compatible. We also met with some clients and had meaningful discussions about leadership, character and reputation. Afterwards I headed up to Muskoka for a conference among hydro distributors to talk about safeguarding reputation. Terrific conference put on by The MEARIE Group and to prepare, I learned alot about the challenges facing electricity distributors in Ontario. Of course, it was hard not to mention how Mayor Rob Ford of Toronto was negatively impacting the city’s reputation. On the day of the conference, the Mayor of Montreal resigned after being arrested.
At the breakfast meeting, I learned something that I aim to keep for posterity. Most probably, I will add it to our compendium on how to recover from a crisis. We have a master deck on how companies recover and build even better reputations and for me, it’s my team’s Bible. We catalogue all the recovery strategies we can because it always comes in helpful for the next client. But sometimes people have a way of saying something that just lights up your brain waves because it is so insightful and speaks so directly to a company’s character. This Canadian company had a crisis some years ago and one year later to the day, they ran full page ads reminding people of what happened and what they had done since the fateful event. The head of comms said to us while we were chatting at the breakfast that they ran the ad because…” ”We will be the first to remember, not the first to forget.” The company wholeheartedly owned the crisis and was not going to forget. Sage advice.
I can hardly keep up with all the reputation-related info that crosses my mind these days. Of course, I think everything is related to reputation in one way or another so it is hard to imagine a day without reputation overload. And now it is Saturday afternoon and I should be outside but I wanted to get some thoughts out on my blog. So here are just a few random thoughts and reputation revelations that happened this week:
1. I did a brief introduction to a panel this week for CECP (formerly known as the Committee Encouraging Corporate Philanthropy). It was their 2013 CECP Summit: Ahead Together and they launched a new branding and strategic engagement model. We discussed these changes with Margaret Coady, Executive Director and Daryl Brewster, their new CEO. Like all of us, they are changing with the times as “engagement” becomes critically important to the sustainability of an organization. In addition, emerging trends in Corporate Philantrophy were presented and everyone was excited to hear if giving had changed over the past year. What interested me was learning that giving has actually increased since the economic downturn. Median total giving spiked in 2012 to $35.30 million, approaching pre-recession levels. I was also particularly interested in their finding that companies have re-prioritized certain program areas and education has become the most popular program area. The reason given is that educational giving is tied to creating a solid pipeline for employment. This can only be a good thing.
2. It was good to also have a conversation with Doug Conant, former CEO of Campbell Soup and now founder and CEO of Conant Leadership. We met about 10 years ago when we talked about CEO reputation and I recalled how intensely interested and up-t0-date he was onall things leadership. A true student of leadership. It was nice to see him since I still have the handwritten personal thank you note he wrote me after that meeting. Very memorable.
3. strategy + business had an article this week on Captains in Disruption.This off shoot article is related to their wonderful annual CEO transition survey they do every year. I will be reading that next. This year they took on the topic of whether CEOs are prepared for crises and truly disruptive events. I liked this statement from Clayton Christensen of Harvard who was explaining why top executives do not have access they need to make predictions about the future and where they will be courting disaster. He said, ““Data is heavy. It wants to go down, not up, in an organization. Information about problems thus sinks to the bottom, out of the eyesight and earshot of the senior managers.” So true. Problems when they reach top management are whispers although they begin as shouts at the bottom. Here is Booz & Co.’s advice in the article on planning for disruption:
1. The CEO is the single most critical player in crafting and carrying out a response.
2. It is critical to begin breaking down human inertia.
3. CEOs must make cogent decisions about the team of top executives.
4. It is important to choose a small team of top decision makers to lead the response.
Enjoy the day.
I think bad news comes in threes. Thinking about President Obama and the recent bad news he has received regarding the terrorist attack in Benghazi, the IRS targeting of conservative groups and the secretly snatched AP reporters’ phone records, it has to be true. It is the culmination and convergence of these three reputation hits that changed the political balance in favor of the Republicans and Tea Party members for a change. Not a full tilt but enough to rain on the President’s parade.
When I talk to company leaders about what drives a reputation into the ground, I often use the baseball metaphor that all it takes is three strikes and you are out. The first mistake happens to just about everyone these days. The second reputation hit is basically unforgivable but no one wants to put you out of business. The third hit takes you down because it is clear that leadership was absent and judgement was non-existent or negligent (even worse). When I think of the perfect example of the Three Strike Reputation Rule, I think of BP. First, they were tied to 15 deaths when the Texas Refinery blew up in 2005 in the US. Second, an oil leak in Alaska from their pipeline in Prudhoe Bay captured negative attention. But third, and for the final straw, the horrific Gulf of Mexico oil spill that ultimately drove their reputation into the ground, along with their CEO’s Tony Hayward. After the third strike, it’s time to call it quits.
Yet, from what I’ve been reading, President Obama’s approval ratings have barely budged from their high marks. Perhaps we will see the proof in the pudding at the next election cycle. Hard to tell. And BP, after much soul searching, is coming back again with new leadership, better values and a new heartbeat. The rest is yet to come.