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.
When I travel to speak in different countries , I spend a good deal of time investigating the reputation of the country I am traveling to and any recent reputational problems they are experiencing. I always want to know what the biggest business scandal, best example of a reputation recovery and what were the most widely covered social media assaults on a business. I usually get asked to comment on these types of questions one way or another during a media interview or in a Q&A session and I like to be prepared.
On my last trip, I was all prepared to talk about Turkey’s issues with the protests in Gezi Park. But everywhere I turned, I was also asked what I thought about the reputation of the United States in light of the government shutdown? Did I think its reputation was being harmed? I have to say that I was somewhat startled by the question because I am always so focused on the country that I am visiting that I forget that it goes both ways. But this time, I realized without any doubt that the reputation of America was being seriously damaged abroad by the incivility and absurdity of the standoff. It felt awful.
This week, we saw something I have posted about before….how companies are increasingly becoming involved in political issues, sometimes against their own will. And this week we saw first hand another form of Starbucks Diplomacy. The CEO of Starbucks, Howard Schultz, posted a note on his company website deploring the shutdown — “Please join me in pleading for civility and a respectful, honest discourse among politicians to bring a solution to the current stalemate.” And today, another note about Americans coming together for the collective good and signing a petition demanding that Congress put an end to the shutdown. Since I really want to get our reputation back on track, I’m all for this.
Fake commentary. This weekend I received constant fake commentary to my blog — every minute. I deleted over 1000 or more in the end. I just could not believe that anyone cares enough to assault my blog like that but apparently wordpress has been having these robo-attacks which affects its users. Very annoying.
On the subject of fakery and forging online reviews, this morning I read about the proliferation of fake reviews online. It is estimated that by 2014, nearly 10 to 15% of social media reviews will be fake. The problem with this is obvious to all — reputations are won and lost by such phony reviews. How many times have you turned away from a product because a review was scathing or negative? And how often has that bad review made you think less of the company behind the brand or anything else that company sells? This causes reputation doubt.
Some of our research at Weber Shandwick has found that online reviews were becoming nearly as important as professional reviews. For example,by more than a margin, consumers pay attention to consumer reviews over professional reviews for consumer electronics products (77% to 23%). They read 11 online reviews on average before purchasing products. Online reviews surely affect the bottom line. New York’s Attorney General Eric Schneiderman, who is leading a crackdown on companies in the business of creating false online reviews, gives good reasons as to why this is more than an annoyance: ”Harvard Business School found that increasing a restaurant’s review score by one star on Yelp.com could boost business up to 8 percent. Cornell researchers found an extra star on Travelocity or TripAdvisor could translate into an 11 percent increase in a room rate.” So there you go. Fake reviews destroy reputations and profitabilty.
Many of these firms hire people in other countries who get paid $1 up to $10 to write one negative review. Luckily, our attorney general in New York is trying to get rid of them and is giving out large fines to keep them from continuing this bad behavior. Reputations deserve better than this.
The Arthur Page Society just issued a new report on The CEO View: The Impact of Communications on Corporate Character in a 24X7 Digital World. The 20 interviews with global CEOs reveals many insights on the evolving role of the CCO (corporate communications officer) in companies today. What is special about this report is that it provides a view from the very top, from the CEO himself or herself. In a section on what’s expected from CCOs in this brave new always-on world, one of the findings caught my interest because of the reputation angle. They refer to it as ”High-Resolution Measurement.” The report states:
Today, CEOs expect their CCO to deliver an accurate, data driven picture of their company’s reputation at a level of detail that is often very granular. Some CEOs report measuring as many as 30 different brand attributes as experienced by as many as 15 discrete stakeholder groups. While the levelof detail and timeliness demanded by CEOs vary, the new emphasis for 2013 is the demand for hard data.
It sounds to me like CEOs want it all because they now understand that the single employee loner or the most vocal customer detractor or the regulatory body in another country or the evolving patient group launching a new website or the members of a NGO group can easily harm the company’s reputation within seconds and make the damage last days, weeks or months. Instead of just worrying about how reputation is faring among a set portfolio of key stakeholders, CEOs now expect CCOs to be on top of those peripheral stakeholders that can rise up and reap havoc. Hard data has the potential to answer many of these questions. I always say that managing reputation by anecdote does not tell the whole story (or even some of it).
There are many more insights worth discovering in the report. Give it a read to understand how the role of the CCO is changing and how vital that position is to the company, the CEO and to the reputation universe.
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.
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.
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.
In May, the company issued a report titled the “Business Standards Committee Impact Report” which laid out 39 recommendations. The report says it was the most extensive review of the firm’s business standards in its 144 years. The CEO, Lloyd Blankfein, led 23 three-hour sessions in 2011 and 2012 with partners and managing directors on personal accountability and included a case study about communications within the firm and with clients, according to the report. It represented “tens of thousands of hours of discussion, analysis, planning, execution, and, importantly, training and professional development which, alone, totaled approximately 100,000 hours. The BSC held 17 formal committee meetings. The Board Committee overseeing the BSC met 13 times. The BSC Implementation Oversight Group held 11 meetings and made five presentations to the Board of Directors. It also met three times with a separate subcommittee of the Board’s Corporate Governance and Nominating Committee which provided ongoing oversight of the BSC implementation.” They also identified three themes that reached across all the recommendations and one of them was “reputational sensitivity and awareness and its importance in everything we do.”
Because I regularly report on how companies recover from reputaional loss, I thought it was important to readers to hear about how one company was finding its way after its reputation was hurt. This report probably represents a good roadmap for other companies that want to strengthen their business practices and reputation. It is also important to note that the CEO has played a major role in getting the committee’s findings infused into the organization.