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!

Reputation is all about having advocates to support you in time of crisis. An article in today’s Wall Street Journal on Lehman Brothers CFO, Erin Callan, supports this side benefit of building relationships before you need them. “To squash fears that Lehman could face the same kind of liquidity squeeze as Bear (now being acquired by J.P. Morgan Chase & Co.), Ms. Callan has had hundreds of face-to-face meetings and phone calls with investors and trading partners. She aggressively roots out rumors, even while pushing her bosses to disclose more financial information.” Sounds to me like she is out winning the vote every day.

The risk is often worth the reward.

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.

Have been saving this quote for my blog. Remember Jean-Marie Messier of Vivendi Universal fame. He lost his CEO-ship when the company found itself $35 billion in debt in 2002. He is now the head of an acquisitions advisory in New York, Messier Partners. The former CEO has had a comeback and once again we see that people can restore their reputations, including damaged CEOs. Messier is quoted in Time (3.24.08) as saying:

“The U.S. is the country of the second chance–where there isn’t so much jealousy, and if you’ve had problems that you try to rebound from, everyone will applaud and will try to help.”

Interestingly, despite all the negative press and approval ratings chatter about French President Nicolas Sarkozy’s reputation, Messier is quoted as saying that Sarkozy is the one politico who still met with him after his ouster. I thought that this type of behavior speaks to a good character trait in the Sarkozy profiling.

In my new book, I mention the importance of “rewinding.” This is one of the four stages of reputation recovery that I describe as a means to restore reputation for the long-term. It basically means looking backwards at what went wrong (and right) to prevent wrongdoing from ever happening again. It sounds so basic but I am always surprised at how many companies and leaders do not look back at the root cause of their undoing as they try to repair their reputations.

Today I was reading The Economist  an article on Internet communities (3/22/08) when I came across a quote from Winston Churchill that resonated with my thinking on restoring reputation: “The farther back you can look, the farther forward you are likely to see.” A good example was also cited. Philp Rosedale, the founder of Second Life (the virtual community), is said to review old media coverage of AOL’s life history to make sure that Second Life does not make the same mistakes as AOL in not adapting to the web’s open standards.

This got me to thinking about my friend, social psychologist and reputation expert, Joy Sever. She started a business (Tell Me O Muse) a few years ago on the timeless wisdom of Homer’s Odyssey, the ultimate literary story.  There is so much to be learned from the past as she has shown me. Listed below are 18 themes that Joy has culled from her tireless reading of that ancient journey back home.

The 18 Themes of Timeless Wisdom

1~Think carefully about what you’re pursuing … and how you’re pursuing it.
2~There is a right and a wrong time for modesty, but never a good
time for hubris. 3~Fear less. 4~Leaders need strategies. 5~Stay awake or
you may pay dearly. 6~ Use power to empower. 7~ Honor the guest-host relationship. 8~ Do not be fooled by disguises, beggars can be heroes.
9~Treat all people with dignity 10~ Accept the guidance of wise women and
the advice of wise men. 11~Honor solemn oaths. 12~Realize the potential
for enemies to become friends. 13~Maintain your vision, even in the face of temptation and despair. 14~When between a rock and a hard place,
select the path that minimizes loss. 15~When in doubt, test
before acting. 16~Take personal responsibility for your actions. 17~You’re
not home, until you’re home. 18~There comes a time when the
fighting must stop.

Unfortunately we are witnessing too many crises and fallen reputations today. Weber Shandwick’s stumble rate of most admired companies only continues to climb. Business schools need to include courses on the most colossal business mistakes of the past decade and on lessons from the classics (contact Joy!) to make sure that our next generation of business leaders realize the power of the past.

It seems that the world has gone list crazy. Everywhere I turn I see 10 best ways to do this or that. I thought I would take my list for safeguarding and recovering reputation and add it to the listmania. When I searched google for “top 10″ I found 499,000,000 mentions. Just that number alone seems to be deliberately set. Perhaps I should come up with 99 tips on protecting reputation. I don’t think I have 99 tips but I bet if I got started, I could get close. But for now, here is a list of 19 tips….hope this satisfies the world’s ranking urge (and mine).

1. Don’t leave your reputation up to the roll of the dice
2. CEOs must be the first line of defense
3. Communicate in heavy doses
4.  Pay attention to your employees’ vital signs
5. Think of stakeholders as your electorate
6. Remember no reputation is bulletproof
7. Multiply all the bad news you hear by 10
8. Don’t forget that we all live in glass houses – there are no secrets
9. Inoculate your reputation – build a reservoir of goodwill before you need it
10.  Shift focus from what has happened to what should happen next
11. Don’t underestimate your competitors or critics
12. Recovery is continuous with no short cuts or days off – stay the course
13. Don’t let the Internet’s allure blind you
14. Each crisis has its own rhythm
15. Don’t believe your own propaganda
16. Use the “R” word (recovery) judiciously
17. Second chances are rarely a matter of luck – don’t waste them
18. Spin gold from clay – turn crisis into opportunity
19.  Restoring reputation is an epic voyage

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.

Seems like everyone knows that Starbucks shut its U.S. stores last night for several hours to retrain employees/barristers. Even my college-aged son e-mailed me to make sure I knew. The news traveled far and wide. One of the reasons I have been following the Starbucks Saga is that it’s a casebook study of reputation recovery and redemption. The CEO and founder returns as savior and instills a sense of urgency with a shot of humility. In my new book on reputation recovery, CEO Schultz is a text book case for following one of my recommended steps (Step #4) — Resetting the Company Clock. As I write in chapter four,

Instilling a sense of urgency often requires getting the senior team to focus more on what has to happen next and less on what went wrong in the first place. Internal politics and finger pointing distracts leadership from attending to those critical moments when moving toward recovery is essential. Wallowing in regret and recriminations is simply not helpful and keeps the company from moving forward. Even if the company is not frozen in time by recent calamities, business as usual is unacceptable. The pace of getting things done has to be accelerated. A good solution is shock therapy in the form of an overwhelmingly heavy dose of undeniable reality. One CEO, for example, summoned his senior team and displayed charts of its rapidly falling market share. To stun the team further into accepting the facts, he showed slides of competitors with quotes mocking the company. The shock value alone accelerated the team’s drive to rescue the company from their downward spiral.

By shutting down the stores and getting employees to focus on what the chain’s core competency used to be and now needs to be going forward, the CEO has essentially built a burning platform — acknowledge the flames of doom or else we all die. Return Starbucks back to what it once was or else lose out to complacency and sameness. Indeed, all the publicity surrounding the store closings for Expresso Excellence training dramatically underscores that Schultz means business. As someone said in my local Park Slope blog wrote, let’s see how the coffee tastes this morning on Seventh Avenue. To test Starbucks’ sincerity, I went to the Starbucks’ web site to see how they were communicating –if at all – their return to their roots and rebuilding trust. Right there on the home page are links to Schultz’s transformation agenda. Nos. 7 and 8 are clearly posted and I found these words in Communications #8 about last night’s training.

Tomorrow evening, we will come together in an unprecedented event in our company’s storied history.  We will close all of our U.S. company-operated stores to teach, educate and share our love of coffee, and the art of espresso.  And in doing so, we will begin to elevate the Starbucks Experience for our customers.  We are passionate about our coffee. And we will revisit our standards of quality that are the foundation for the trust that our customers have in our coffee and in all of us.But, as I think about it, there is another perhaps equally important reason why we have scheduled this training.  It’s to celebrate who we are. We are Starbucks.  We should be incredibly proud of what we have built. We are the worldwide leader of specialty coffee.  And, believe me when I tell you, we are just getting started.  We will overcome the difficult and humbling challenges we face, and will be stronger for it.  You have my word on that.

Schultz follows my book’s third step to reputation repair and protecting its brand for the long-term — Communicate Tirelessly. I will be watching and ordering a latte today.

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.

The Wall Street Journal had a clever article this week about how companies are increasingly using navigational terms to explain the challenges they are facing in this uncertain economy. Company spokespeople are fast using terms such as headwinds, tacking, winds of change, tailwinds, rough seas and ill winds. I have been guilty of using these types of terms too.  In my reputation work, I prefer medical terms to describe reputation events. Here are a few I like to use. 

• Surgery is just one step on the road to recovery (Got this from the Economist)
• The company is out of the operating room—though not in the clear.
• The long-term prognosis remains uncertain.
• The company looks healthier.
• More surgery may be inevitable
• Must get the company off the ventilator and breathing back on its own.
• The company is out of intensive care.
• The company’s arteries are clogged.

However, my favorite health-related description which I use in my book is as follows:  

• The book is not merely about the initial emergency response.  Corporate Reputation: 12 Steps  to Safeguarding and Recovering Reputation is not just about what happens in the emergency room but more about what happens to the patient after the trauma has been diagnosed, life-saving intervention has been made, vital signs have stabilized, and the patient is out of immediate danger.  It is also about post-operative care and the long rehabilitation before a patient can cautiously begin life anew.