The Institute for Crisis Management  (ICM) comes out every year with its list of crises. I always find it interesting to see how the year adds up. As our research shows, reputations tumble primarily because of executive and managerial misconduct. In 2007, ICM found that over half (52%) of major crises were caused by management. Employees accounted for 29% of crises in 2007 and outside forces contributed to the remaining 19%. ICM has been monitoring crisis types for many years going back to 1990. This year it found that three crisis types had risen – recalls, workplace violence and class action lawsuits. Undoubtedly, the horrific shootings at Virginia Tech accounted for the peak in workplace violence and the many toy, pet food and other product recalls contributed to the big 44% increase from the year earlier. The most crisis prone industries in 2007 were:

1. Software Makers
2. Pharmaceutical companies
3. Petroleum Reining
4. Natural Gas Companies
5. Security Brokers/Dealers
6. Banking
7. Telecommunications
8. Automotive Manufacturing
9. Airlines
10. Computer Manufacturers

Another fact caught my eye because it is one of the main tenants of my work on reputation protection and recovery. ICM found that over the past 10 years, most crises were caused by smoldering issues vs. sudden events (65% vs. 35%, respectively). I could not agree more. You can always point to a red flag way before a crisis erupts into public view. Then it’s time to hold up the white flag!

In May I am speaking about reputation at a conference hosted by ID Analytics.  I am looking forward to it because the more I learn about identity theft and loss, the more I see the enormous threat to personal and corporate reputation. Two things this week crossed my desk (or should I say desktop) that highlighted the strong correlation between identity theft and risk to reputation:

• A new product is being rolled out by insurance broker Lockton and Lloyd – Data Breach Reputation Guard. “When a data breach is followed by adverse media attention, the Data Breach Reputation Guard element of the policy will reimburse a business for reputational harm.”
• The second identity loss-related piece of information was something I read on Marketing Pilgrim noting a CNet article on new research among information security professionals. The survey by Frost & Sullivan (I could not find on their web site, so sorry) found that a whopping three-quarters of IT security execs report that avoiding reputation damage to their organization is a top priority.

Our research at Weber Shandwick found that security breaches were among the top five reasons why companies lose reputation today. The number of stolen identities is only increasing.  The connection between identity theft and reputation could not be more apparent. Am glad to know that my comments will resonate with those in the audience. Certainly fits the times.

 This is not at all profound but it seems to me that the group losing out during the Democratic presidential nominee process is not Obama or Hillary or even Bush. In my view, the media is the organization that is suffering the most damage. Over the past several years, several studies have indicated that there is waning trust in the fifth estate. After several scandals and declining revenues, the media is front and center again during this electoral process and getting poor reviews.  Some critics are claiming that the media is too easy on Obama (possibly not the case lately). Other critics are blaming the televised debate in Philadelphia between the two democratic candidates on the questions asked by ABC News’ Charlie Gibson and George Stephanopoulos. The endless nighttime chatter about the candidates’ war of words continues to hash the same information over and over and are engaged in a he-said, she-said stream of consciousness.

We have many more months ahead as the election race heats up and it might be the right time for the media to consider how it can reclaim its status at the top of the most admired professions. 

Loved the headline in this week’s Financial Times. I was flying back from Madrid on Wednesday, April 16th, and as I pulled my FT out of my bag, I saw the premier headline:

“UBS FACES THREE-YEAR FIGHT FOR REPUTATION”

UBS’ new chairman Peter Kurer is quoted as saying:

“We shouldn’t fool ourselves. We can’t pretend  that there has been no reputational damage. Experience says it goes away after two or three years.”

I wish Mr. Kurer had called me. I could have told him that research found that it takes approximately 3.5 years to recover a damaged reputation. So he was close. Perhaps I should send him my book.

Please excuse my tardiness in writing of late. I was traveling in Europe to our offices, visiting clients and talking about reputation recovery. My laptop’s wireless broke and I was unable to post to my blog. Now that I am back in the U.S., I asked myself what fascinated me the most about my visit. Without a doubt, I have to say that I was shocked that the first question I was usually asked was about Eliot Spitzer. Prior to my visit, I had seriously prepared myself to talk about European corporate scandals such as SocGen, Deutsche Post and Northern Rock. Imagine my surprise when the first question was often about the governor of New York. I did not expect Spitzer’s reputation and moral downfall to reach so far so quickly. But then again, who is surprised by anything these days? Since my new book is about reputation recovery and redemption, I guess it should not have been such a surprise. (I was also asked why wives in the U.S. stand by their disgraced husbands. I was not sure why this is so.)

Here is what I think. I do not believe, like most everyone, that Spitzer can ever rebuild his reputation in the political arena. That chapter is now closed. But I do believe that he can repair his reputation in time by dedicating himself to the common good. Years from now, we may actually hear Spitzer say that this colossal public failure (even crime?) gave him an opportunity to do something with his life that he would never have imagined possible or contemplated. Yale’s Jeffrey Sonnenfeld has written extensively about individuals who recover lost reputations over money, sex (less often) and other improprieties. Sonnenfeld’s recent book is called Firing Back: How Great Leaders Rebound from Career Disasters. In his chapter on “Lessons Learned from Legends and Losers” is his advice to “Know Your Own Story” — “…all of this entails knowing, telling and constantly retelling the leader’s story and to have an explanation for the downfall such that it enables faith in the leader’s ability to rebound.” Spitzer now has to find his own narrative to explain how his lost his way, betrayed his family and colleagues, and let New Yorkers down. He then has to find his own personal route to redemption and earn forgiveness.

Reputation forgiveness should not be ruled out.

We all know that there are dog years and human years. Then there are reputation years. An article in PRWeek (UK) has this quote from Dell’s EMEA communications head Kerry Bridge about its reputation emergence from Dell Hell: “We lost sight of the importance of conversations with customers. The ramifications could take us ten years to overcome.” Bridge was referring to Jeff Jarvis’ BuzzMachine Blog criticizing Dell’s customer service that attracted over-the-top media attention. I must applaud Bridge for being realistic about how long it takes to restore reputation. Although our research has shown that it takes about 3.5 years just to get back on your feet, it probably takes a good 7 to 10 years for a company to go from poor to good to great. Reputation years are tiresome because leaders feel every minute of pain and suffering. Ten years probably feels like 20 years when it comes to reputation calendars. However, reputations can be restored. That’s the good news.

Reputation erodes in many ways. One sure-fire way is when employees spill the beans. A working paper from the National Bureau of Economic Research found that employees lead the list of corporate whistleblowers when it comes to fraud.  Companies often wonder how they get themselves into these jams. It is actually pretty simple. Perhaps if they kept the lines of communications wide open or just a little open, employees would not have to resort to tattle-telling. Remember Sharon Watkins and Enron’s Kenneth Lay. If he had only listened and acted sooner.  We continually see reputations dashed as negative things come to light. The worse is when it surfaces little by little.  I wait every day to hear the Societe Generale story continue to unfold. Now we hear that another person may have been involved with rogue trader Jerome Kerviel. This week we heard that there were early warning signals alerting Societe Generale officers about the fuzzy transactions. Employee fraud is usually suspected by other employees but no one says anything out of fear. The article in BusinessWeek (January 28, 2008) where I learned about the corporate whistleblowers reports that 82% of them are ostracized, fired or demoted. Not much incentive for telling the truth.  

Source: National Bureau of Economic Research

My new book is out officially today (as I hinted last night).  It is titled Corporate Reputation: 12 Steps to Safeguarding and Recovering Reputation.

There is more information on a dedicated site — www.corporatereputation12steps.com. It is based on our discovery that the corporate reputation “stumble rate” continues to rise.  Over three-quarters (79 percent) of the world’s number-one most admired companies lost their crowns over the past five years in their respective industries. While reputation loss may now be inevitable, my new book offers a realistic roadmap to reputation recovery that can help any leader stabilize and regenerate a company’s most competitive asset.

It is pretty simple: recent corporate crises have demonstrated that a company’s reputation can be destroyed in seconds. A mishandled response, inappropriate act, product tampering, or poorly timed financial disclosure all have the power to instantly tarnish a respected reputation. As I see it, the well-managed and reputation-conscious company need not stand defenseless when faced with a damaged reputation.

Tomorrow we officially launch my new book on safeguarding and recovering reputation. All the details will be here as well as on our Weber Shandwick’s home page. It’s exciting and I invite you to check it out. Couldn’t be more timely, don’t you think?

We regularly get curious about things that happen in the communications and reputation space. Recently we were wondering if the frequency of “the company declined to comment” in the global media had risen or fallen in light of the intense media scrutiny that accompanies corporate crises and companies’ growing recognition of the need to be transparent.  My hypothesis, which was proven wrong, was that there had been a preciptious decline in “no comment” over the past several years. I based that assumption on the fact that “no comment” is increasingly perceived to be “guilty as read.” Instead no commentitis has risen steadily and although it has seen a few dips, remains standard operating procedure in the business world. Of course, every situation is different but reputations can be chipped over those two simple words.