reputation

I spoke on a panel one week ago organized by the Association of Corporate Counsel (ACC) in Connecticut. The topic was “Can They Really Say That About Me?” I was joined by terrific panelists….John Hines of Clark Hill (Online Reputation: Legal Perspective), Polly Wood of Reputation.com (Protecting Your Online Reputation), Dr. Pamela Newman of Aon‘s Newman Team (Insuring Reputation) and Stephen Schultze of the Princeton Center for Information Technology Policy (Policy Perspective on Reputation).  We all had a terrific time learning from one another since we all approached reputation from different angles. I approached reputation from a company point of view, John from a legal point of view, Polly from an individual point of view, Pamela from an insurance perspective and Stephen from a policy angle. John Hines organized the event and we are hoping to take the show on the road to Chicago.

Stephen brought up a question that has been lingering in my mind since the session ended. He asked whether society was perpetuating a “reputation gap.” He posed the idea that there is a divide between those that can police their reputation and those that cannot. It costs money, time, resources and know-how to protect your reputation, build positive mentions to push down the negative, open new domains and populate social media to create good first impressions. The “have nots” do not have the same access to information and Internet savvy to protect their reputations, balance the positive with the negative or hire an online reputation management specialist to help better situate their reputations. Just yesterday I wrote on this blog that nearly $1.6 billion was spent in 2012 managing reputations online. With figures like this, Stephen Schultze has to be right asking whether there is a reputation gap. The answer is clearly “yes.”  Perhaps some of these online reputation management companies should provide services pro bono for some of the unfortunate who are maligned online and do not know where to turn to for support.

As for me being in the reputation business myself, I do make it my business to help people whose reputations have been tarnished by explaining what they can do and where they might seek help. So I hope that I am doing my bit to narrow the reputation gap.

A quick note for a Saturday. In this article, I read that small and medium sized business spent nearly $1.6 billion in 2012 managing their reputations online. This figure is expected to reach more than $2.9 billion in 2017. I imagine that if you added in large sized businesses, you’d be closer to $4 billion. (Just estimating) in 2012. This confirms that there is an entirely robust online reputation management industry that has just gotten started.  And the reasons behind this new cottage industry are strong when you take into consideration that nearly 94% of people do not move beyond the first page of Google or Bing to get what they were looking for. Last I had heard, the number was closer to 89% but it certainly is creeping up. I bet it hits 100% in no time.

More tomorrow!

Today I am speaking at an event with the Association of Corporate Counsel on reputation. The title is Can They Really Say That About Me? As I was preparing I looked at how much the term “reputation” had grown in the past 5 and 10 years. Listen to these numbers. Wow. In the past five years, the increase in use of the term “reputation” on Google rose 3,647%. Looking over a 10 year span, the increase was 13,056%. Incredible.

Just thought I’d share as the morning begins.

Last week I came across something that stopped me in my tracks. Actually I was going nowhere because I was on the subway but it struck me (and I shuddered) that I had a moment of insight into a news story that had tremendous implications for companies and their abilities to create lasting reputations. The Pulitzers were announced last week and The New York Times won four. What was so startling to me was that two of the highly prestigious and acclaimed Pulitizers (50%) were for indepth, investigative reporting on the overseas behavior of two different companies. One was a series of reports on alleged corruption at one company and another Pulitzer was won on the costs of human capital in a company’s manufacturing products abroad.

Here is why this is so important — leading companies, the best we have to offer, must safeguard their reputations at all times and not let up for one minute because the spotlight on them is only growing brighter. And just because business operates differently in other cultures or regions, if the behavior does not align with the company’s values or is morally correct, it’s reputation-damaging and wrong no matter where on earth it happens. Earning the right to operate is given to companies through governments or regulators but the license to operate is still very much dependent on the perceptions of communities and consuming public around them and online. How a company behaves matters today and consumers buy based on how companies treat their employees, vendors, customers, communities and others everywhere. Our recent research on the company behind the brand shows that in spades.

These Pulitizers are an early warning sign to companies to carefully consider their behavior on all counts if they want their reputations to be shatterless.

Lately I have been wondering if reputation is going the way of sustainability. Years ago, sustainability and corporate social responsibility was on everyone’s agendas in corporate American and around the world. It was hard to distinguish what was the difference between corporate social responsibility, corporate responsibility, community development, philantrophy, charitable giving,  sustainability and all the other terms that were increasingly undefined, bundled together and fuzzy around the edges. Today, nearly all companies have CSR reports and it is expected of leading companies. CEOs too agree that CSR is critical to their business. A recent Accenture/UN Global Compact study found that 93% of global CEOs believe that sustainability issues will be critical to the future success of their business and 72% cite “brand, trust and reputation” as one of the top three factors driving them to take action on sustainability issues. Revenue growth and cost reduction are second at 44%. Everywhere you turn, sustainability is on the agenda. All in all, that’s a good thing. However, I still think that the terms have been interchangeable and are used indiscriminately except by those really in the know.

In a new book I just heard about, The Nature Of The Future: Dispatches From
The Socialstructed World by Marina Gorbis, she argues that in the future we may start to see Reputation Statement Accounts just like we get from the bank. But these monthly statements will not inform you of your monetary transactions, but will tell you “how much you’ve earned by contributing to sites such as Wikipedia or Flickr, how many points you’ve earned by providing rankings or ratings on various community sites, or how much social currency you’ve spent by
asking someone for advice.” We already have these kinds of ratings through Kred and Klout although somewhat different.

Her book also refers to the Whuffie Bank which is a nonprofit built on a new reputation currency that can be redeemed for real and virtual products and services. “The Whuffie Bank issues whuffies based on a reputation algorithm that blends information from different social networks and provides an accurate reflection of people’s web reputations. And as the Internet and social networks become a large part of people’s lives, your web influence will become an increasingly accurate reflection of you.” That sure is the truth looking us in the eye.

I am afraid to say that everyone is a reputation expert today. Reputation means so many things that it is getting harder and harder to pin down. And I hope it does not become the new sustainability which has meaning depending on who you are talking to.

On to the future.

I know I should get out of the house (the sun is shining) but I was so excited to read in the Wall Street Journal about a reputation committee being formed at Goldman Sachs. The lead director James Schiro is heading this effort as the lead director on the board and is apparenlty VERY focused on reputation, according to his first letter to shareholders. Reason I am excited? Because I am a chief reputation strategist, I am always looking for trends and firmly believe that reputation committees are going to being popping up in more Fortune 500 companies than in years past. For a speech I gave before women-directors-to-be a few weeks ago, I mentioned two companies who had reputation committees but that was all I could easily find in a quick search. Board attention to reputation is long overdue. Reputation is a form of wealth, a type of equity that you get to dip into when your company is in trouble or facing issues. You need a good stockpile to weather the everyday assaults most companies are facing day in and day out.  It is heartening to see reputation recognized for the worth it is. Here are a few quotes I pulled from the WSJ article that give me hope.

“He [Schiro] said the board clarified the duties of its governance committee to manage Goldman’s relationships with the outside, guard its reputation and review philanthropic and educational initiatives.”

“We continue to be very focused on the reputation of the firm,” Mr. Schiro said in his letter. A “public responsibilities” subcommittee of the board’s governance committee was formed to focus on reputation, chaired by William George, he said.”

Weber Shandwick’s annual calculation of reputation loss – the “stumble rate” – finds that a few more of the world’s largest companies retained their esteemed status as their industries’ #1 most admired company during 2012. This is good news.

Each year Weber Shandwick measures the rate at which companies lose their #1 most admired position in their respective industries on the Fortune World’s Most Admired Companies survey. We call this the stumble rate. Between 2012 and 2013, 46% of the world’s largest companies experienced a stumble, slightly down from last year’s 49%. These companies did not have too great a stumble, however. On average, they dropped two places, falling from number one to number three in their respective industries. However, for those companies that did fall from their perches, the loss is agonizing. Boards of directors and CEOs will want to understand why their reputations eroded and why their competitors leaped upwards. Explanations will be in order.

Of course, the bright side of the coin is the non-stumble rate of 54%. This means that more than half of the industries in the Most Admired survey boast companies with durable reputations.

In addition to calculating the stumble rate, we also dig through the data, including the nine drivers of reputation, to glean some interesting insights about stumblers and non-stumblers. A stumbler is an industry whose top company last year is no longer the top company this year. What is interesting this year?

• 22 industries (out of nearly 60, give or take depending on the year) have never had a stumbler since we started monitoring the stumble rate in 2010. The most admired companies in these industries have been stalwarts of reputation: Automotive Retailing; Building Materials-Glass; Computer Peripherals; Consumer Food Products; Electric & Gas Utilities; Electronics; Entertainment; Household & Personal Products; Information Technology Services; Property & Casualty Insurance; Internet Services & Retailing; Metal Products; Mining, Crude Oil Production; Oil & Gas Equipment Services; Pipelines; Newspapers & Magazines Publishing; Railroads; Semiconductors; Apparel Retailers; Diversified Retailers; Food & Grocery Wholesalers; Office Equipment & Electronics Wholesalers.
• 13 industries have stumbled at least three times since 2010. The most volatile, with four stumblers each, are: Airlines, Energy and Life & Health Insurance. Those with three stumblers are: Computer Software; Consumer Credit Card & Services; Financial Data Services; Food & Drug Stores; Medical Equipment; Motor Vehicle Parts; Petroleum Refining; Telecom; Tobacco; Health Care Wholesalers.
• No one particular driver of reputation took a big hit or could be said to be the culprit for reputation erosion. The worst average declines among drivers across all stumblers were experienced only by two drivers – management quality and long-term investment. All other drivers declined by just one ranking position, on average. Perhaps some stabilization on what positively and negatively affects reputation is taking hold.
• However, four stumblers lost rank on all nine drivers. The hardest hit was the Airlines industry. The company that stumbled took the greatest blow on its quality of management driver (dropping 6 ranking spots). Ouch. Other hard-hit drivers for this company were innovation, social responsibility, long-term investment, product/service quality and global competitiveness (a loss of 5 positions on each of these qualities). The company that supplanted this stumbler improved on all of its nine drivers in impressive fashion, rising at least two rankings positions on each driver and four spots on two drivers (financial soundness and global competitiveness). This does not mean that this new “king of Airlines reputation” will necessary remain so…this particular company was also tops two years ago and, as discussed earlier, Airlines is among the three most volatile industries.
• From zero to hero in 12 months. One stumbler lost its enviable top position to a company that is a newcomer to the World’s Most Admired evaluation. This goes to show that even the most reputable companies need to be on guard from all angles – not just their traditional competitors.

Am trying to keep my eyes open. I arrived in Tokyo late last night or should I say early this morning and hoping to adjust before I hit the road visiting our offices, talking to media, presenting research on social CEOs and meeting clients. I thought it would be a good idea to look at The New York Times and understand a headline I saw about “fire ice” in Japan. Why that would necessarily keep me awake, I can’t explain. Perhaps I thought it would distract me from wanting to sleep.

But I was glad because I also found an uplifting oped from David Brooks. I was drawn into it because he started out talking about how he goes to conferences hoping they will provide him with fodder for his twice-a-week columns. His conclusion is that these conference conveners are the same ones that make it on the glossy covers of business magazines and other upscale publications. They are flashes in the pan. He then goes on to say that all those quiet, unassuming, downhome executives are the real movers and shakers we should be hoping to learn from. He says the following as way of contrast with the cover boys:

“Meanwhile, the anonymous drudges at American farming corporations are exporting $135 billion worth of products every year and transforming the American Midwest. The unfashionable executive at petrochemical companies have been uprooting plants from places like Chile, relocating them to places like Louisiana, transforming economic prospects in the Southeast. Most important of all, the boring old oil and gas engineers have transformed the global balance of power.”

Brooks pays homage to the “Material Boys” — the people who grow grain, drill for fuel and lay pipeline. He calls them the real winners. This peaked my interest because it was unusual to read such reputational support for the oil and gas industry but here it was. The oil and gas industry is usually a fairly maligned sector but Brooks gives them a thumbs up for providing jobs, keeping emissions down and making us energy independent in a big way. Always good to see a reputation shot in the arm.

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!

Boston Consulting Group issued a new report about debunking the myths of the first 100 days. It is worth reading if you are a new CEO. Several facts are worth sharing here however and I already dropped some into my presentation on steps CEOs should take in their First 100 Days. Since I wrote a book on the various stages of CEO tenure and how CEOs build reputation from day one to the very last hour, I try to update it as often as I can to keep up. CEOs have to keep up too because their first 100 days provides them with less time than ever before to get it right.

In one sidebar, the article describes how the CEO job has changed due to the growing complexity facing the modern day CEO. BSG found that organizational complicatedness (their word) has risen by a factor of 35 compared to 1955 (when the Fortune 500 was first created!). Many of these changes we already feel but BCG attaches facts and figures to these changes which are good to have.

Far more complex world for CEOs

•       Number of performance requirements is 6X more than in 1955. Then, CEOs were measured against 4 to 7 KPIs vs. the typical 25 to 40 KPIs now.

Far more scrutiny for CEOs

•       Many more stakeholders are now watching every step that new CEOs take These include activist shareholders, board members, regulators, lobbyists, online pundits, NGOs, consumers, media.

Far more dispirited workforce

•       New CEOs are starting when falling employee engagement levels have dropped as much as 14%.

•       Among U.S. employees, job satisfaction plummeted about 60% in 1990 to less than 43% in 2010.

I truly believe that the disengagement of the workforce is one of the biggest challenges facing CEOs. And what CEOs do in those first 100 days can make or break their tenure’s success. This is why I believe it is time for new CEOs to get a bit more social, like online!~