safeguarding reputation

In a piece I wrote for The HuffingtonPost for 2012, I forecasted that reputation blackmail would show its hand this year. Lo and behold, a front page article in yesterday’s paper headlined “Hackers-For-Hire Are Easy to Find.”  The article had to do with two feuding brothers from Kuwaiti who were suing one another over business they held. One of the billionaire brothers found someone to hack into his brother’s account and post online all his brother’s personal emails including finances, legal affairs, pharmacy bills and everything else that you can imagine gets sent and received from one’s personal account. The cost: $400. Hackers to hire are that cheap and apparently easy to find. One of the reasons there has not been much on this topic where reputations can be easily lost is that people do not want to report this type of reputation blackmail and generate even more attention.

In this instance, the one brother hired Invisible Hacking Group located in China and here is how it works:

“It requested the target person’s email address, the names of friends or colleagues, and examples of topics that interest them. The hackers would then send an email to the target that sounded as if it came from an acquaintance, but which actually installed malicious software on the target’s computer. The software would let the hackers capture the target’s email password.”

You get the picture.

Reputation blackmail presents a very scary scenario. Not only is privacy damaged but reputations which take a long time to rebuild get decimated.  Reputation protection can only go so far. Risk management and reputation warfare gets more complicated by the day.

I have thought about the company behind the brand for at least a decade (maybe more?). Years ago, I was involved in a pilot test where we placed corporate and product ads for several companies from different sectors in a business publication to try to determine the right balance of corporate to product messages to generate awareness and interest to buy. Should a company run one corporate advertisement and 1, 2, 3, 6, or 10 product ads to gain notice? Should they alternate the order — three product ads, one corporate ad, three product ads in that order? Do they even need corporate ads? Over how many months would it take to generate the most interest for the company and the products being sold? This was in the days when companies were wondering if they should communicate what they stood for, who they were and if it really mattered. Obviously pre-Internet days. It was a huge research undertaking that involved printing presses and hand-inserted advertisements. I learned alot about rubber glue and washing sticky hands. But my interest in the company behind the brand has always remained with me and kept me wondering how important it was to consumers (and executives). Do they really care? Does anyone notice the face of a company and its character, its values, its narrative? What do people do if they don’t like the parent company but still want the product? 

Luckily, we now have research on how important the corporate brand or parent company really is and why it matters to consumers and executives alike. We released the research today, The Company Behind the Brand: In Reputation We Trust, conducted with KRC Research. Some of the key findings are:

• 70 percent avoid buying a product if they don’t like the company behind the product (consumers)
• 67 percent are increasingly checking product labels to see what company is behind the product (consumers)
• 61 percent get annoyed when they can’t tell what company is behind a product (consumers)
• 56 percent do research to learn about the companies that make what they buy (consumers)
• 56 percent hesitate to buy products if they can’t tell who makes them (consumers)
• Executives estimate that, on average, 60 percent of their firms’ market value is attributable to its reputation. 
• 86 percent of executives report that their companies increased their efforts to build reputation over the past few years

More to come. And it’s been a busy day getting the research out so will return shortly.

It has been an unusually warm couple of months here in New York. I can’t    help but think that global warming is staring me right in the face.  I often think of myself as a bear that hibernates when cold weather arrives. I often joke with my neighbors that they won’t see me until spring because I’ll be going into my bear cave for my “winter sleep” when the first chill arrives.  So the past couple of months have been an anomaly as I have wandered out doors more often than usual on the weekends. Of course I have to go to work and do the ordinary errands that surround my life but given the choice, I stay inside. Maybe that is why I like to write about reputation because it gives me an excuse to sit in my little office cave that is closed off to the world.

All of this got me to thinking about how climate change gets communicated today when there is criticism about  the science after controversies arose from the release of stolen emails from the Climatic Research Unit (CRU) at the University of East Anglia. This happened a year or two ago.  Undoubtedly this is the perfect case study for how an industry (climate change scientists) suffered reputational damage and now has to recover and restore reputational equity. Climate change skeptics were fairly adept at effectively persuading many in the general public to doubt the scientific validity of global warming.

I was glad to see an article in the New Scientist (sorry, you need a subscription) by Robert Ward (policy and communications director at the Grantham Research Institute on Climate Change and the Environment at London School of Economics) on how some of the reputation recovery methods that I recommend in my book might be applied to regain confidence and trust in climate science.  He sees the situation right, “Even if the claims of misconduct and incompetence are eventually proven to be largely untrue, or confined to a few bad apples, mud sticks.”  This is a truism — no matter how much science you have on your side, it is sometimes never enough when it comes to public opinion.  Sometimes the facts just don’t matter as much as they should in a perfect world.

Ward is right that hope is not a solution to rebuilding reputation. Many CEOs used to think they could outlast controversy but in fact learn the hard way that it only extends the problem.  ”Communicating tirelessly” — one of my recommendations — is the right path forward.  ”No comment” does not work as it used to. Whether it is finding neutral partners or independent coalitions to bring additional voices into the discussion or actually training climate scientists to transparently talk about and defend the science — its certainties and uncertainties, communications will do more good than harm in this digital world.

An interesting analysis of temperature records appeared in an article in The Economist  which speaks to the importance of bringing in a third, fourth or fifth party opinion to validate scientific findings.  I read it on a plane to Europe in November but kept it because it made commonsense as an approach to understanding the climate change debate — is it getting warmer or not?  Let me just add here that the topic of global warming is a lot more complicated than I will ever understand — gaps in readings, different criteria, different types of thermometers, urban settings where temperatures might be recorder higher, etc.  But interestingly, the Berkeley Earth Surface Temperature project stepped into the argument on climate change 18 months ago to test existing analyses. And they did so with the addition of skeptical scientists and funders as well as Nobel prize winners. As it is often said, let’s open the kimono and thus they did. And they found that the existing temperature records that the earth was warming was not far off the mark from what had been previously reported.  A peer review is underway and I look forward to learning more about that when it is released.  Next up, however, for climate scientists and institutions affiliated with climate change,would be communicating openly and collectively (and maybe relentlessly) to explain how the newest findings answer questions, raise new ones and guide us as to what we need to be doing Now not Later.

Took me a few days but finally found a chance to read a fascinating review in the Financial Times of the impact of the insider trading scandal at management consultant McKinsey & Company and its impact on their reputation. Andrew Hill did a fine job providing a historical review of McKinsey’s ups and downs over the many years of its storied existence and finding former partners and employees to offer their perspectives. As you already know from the trial of Raj Rajaratnam of Galleon Group, the hedge fund CEO is accused of insider trading using tips from former McKinsey partners’ Anil Kumar and Rajat Gupta, global managing partner who left after several terms in 2003.  What intrigued me of course was how McKinsey was recovering from this reputation catastrophe and how it fit with the best practices in my book on reputation recovery. This is not just a bruise but a serious injury to McKinsey’s reputation. Here is what they did so far:

• Communicated regularly with employees and former employees
• Initiated an independent inquiry with the help of a law firm
• Improved processes over protecting confidential client information
• Reviewed its ethics policies and standards
• Redefined what constitutes ”material non-public informtion”
• Built a formal “stop-list” of client stocks that no McKinsey person can trade (not just those assigned to the account)
• Added new training procedures
• Strengthened governance

True to its highly analytical way of attacking corporate challenges (they work for 90 of the top 100 companies in the world, among others), they looked back at how they handled prior problems. Coincidentally, the article points out that they had been putting together a comprehensive internal history of the firm which luckily offered them insights on how they have historically dealt with challenges to their reputation and livelihood. The latter best practice is one I highly recommend to others. In my book, I talk about the importance of the Rewind period where companies study their mistakes to from the past to create a better future. Lord John Browne of BP did so after the refinery fire in Texas City and asked the question of how they did not see the pattern of errors that turned deadly sooner. Looking in the rearview mirror may take time that leaders do not think they have but critical warning signs are often present. Retromining is a critical piece of recovering reputation. As the new McKinsey global managing director, Dominic Barton, also did, he studied other thriving cultures that failed. As Barton said in the article, he had been “thinking what happened with the suppression of the Jesuits in the 1700s. This may seem strange, but [it was] an organisation that was thriving and doing well and all of a sudden was severely challenged.”

Globalization. Everything is different and everything is the same.

In an interview with the Dean of Harvard Business School, Nitrin Nohria noted: “When I came to Harvard Business School in the 1980s, the vast majority of people were interested in studying America, because this is where they hoped to have job opportunities. As late as 1988, when I joined, less than 5% of our case [studies] were outside of the United States. Last year more than a third of our cases were global.” Similarly, Fortune‘s Most Admired Companies survey used to be broken into the America’s Most Admired and World’s Most Admired lists as if they were two different beasts. Fortune now combines them into one big list of the World’s Most Admired and rightfully so. As we are seeing with the ups and downs of the stock market, we are all interconnected. The reputation of UBS or Sony or Procter & Gamble matters the world over.

Global everything is on my mind because I am off to Asia to give a speech on reputation and how to build it, safeguard it and defend it. I’ve been catching up on how reputation plays out in Asia Pacific so that I can be a bit more relevant to my audience. As I am preparing, an article I found struck me as a good example of how things are the same and yet different.

As a keen observer on how reputations get damaged in a crisis, I am always on the lookout for estimates of that damage.  A recent article provided me with some valuable information on how Chinese companies perform when scandal touches them. Scandal plays out slightly differently in China and on their balance sheets than it does in the US and Europe/EMEA. An academic study examined hundreds of scandals linked to companies traded on the Shanghai and Shenzhen stock exchanges between 1997 and 2005. Revelations of financial fraud and various other similar crimes, such as embezzlement and kickbacks, definitely impacted share price as it does in the US.  The researchers found, however, that to really create a cataclysmic collapse of a company’s stock among Chinese companies, there had to be an additional element. “The study found that companies caught up in mere accounting scandals saw their shares drop by an average of 8.8% over the six months on either side of the incident. In those involving the bribery of government officials or theft of state assets, on the other hand, the stock fell by almost a third.” As they conclude, “In China and other less developed markets….business is done on the basis of political and social relationships, not numbers.”  Companies are all impacted by financial scandal but if you undermine the government in China or any of its officials, expect that your financial damage will be compounded by losing discounted financing, access to trusted suppliers, loss of customers, land acquisitions and other benefits that can come with good government relations. Thus, being on good terms with government is critical to success in China. In many ways, this is also becoming the norm in the US as government plays a more visible hand in business affairs.

Whatever the merits on both sides, I wanted to point out here that what I thought was happening in the reputation warfare field is actually coming to pass.  Increasingly more companies are fighting back when they believe their reputations are at stake. Perhaps companies recognize that public opinion might be on their side as the general public loses trust in institutions. But without a doubt, companies are not necessarily turning the other cheek when they think their reputations have been unfairly damaged. In this blog, I have mentioned the increasing frequency of company documentaries that serve to tell their side of the story. Today’s article about Del Monte’s public spat with food regulators over restrictions on its cantalope imports underscores the trend.  To quote from the article,

“The company, which is one of the country’s largest produce marketers, says the restrictions could damage its reputation, and it has sued the Food and Drug Administration to lift them.”

“But advocates of safe food said that it was extremely rare for a major food company to take such a publicly aggressive stance, and that they suspected Del Monte Fresh Produce was trying to bully regulators into thinking twice before pursuing recalls in the future.”

Expect to see more of this in the future.

  As you know from reading my blog, one of my great interests is online reputation management, particularly in times of crisis. At Weber Shandwick, we have conducted research starting way back on this topic….from Safeguarding Reputation to Risky Business: Reputations Online to Reputation Warfare and more to come. This past week I learned of some new research from Altimeter Group, authored by Jeremiah Owyang. They surveyed 144 social business program managers as well as conducting interviews with 63 corporate practitioners and providers. This included our very own David Krejci in our Digital Communications group about our social media crisis simulator Firebell.  I liked David’s quote (“experience the paralysis”) which is what Firebell does – it gives you the heart attack moment when social media has your company in its sights.  Since digital defense has been an important element of what we do, we were delighted to share information on this resource.  Some of the facts (read the full report here) worth noting are as follows:

• Be prepared. More than three-quarters of  social media crises could have been diminished or averted if companies had invested their resources internally and strategically. Of the advanced companies identified by Altimeter, 13 of the 18 have a clearly defined crisis plan with clear roles, responsibilities and action steps.  But they found that 56% of all companies had no clearly defined plan (that’s when the paralysis sets in).
• Companies need social media policies. These policies guide employees on how to participate in the social universe.  Left unguided, employees are uncertain or oblivious how to participate online and probably do so and go off the guard rails. Reputational risk is heightened, not lessened, when no social media policy is in place. In their survey, 83% of all companies they surveyed had a formal policy in place but among the more advanced ones, all 18 or 100% did. Interestingly, 8% had a policy specifically prohibiting employees from engaging on behalf of their companies. While I have traveled around the world, I have seen this to be true but it does not seem to deter most people and in fact, most definitely increases anonymity online. 
• Ongoing education is critical to managing online crises well. I found this section of the report very helpful because there is so much more that companies can do.  An example was given of a company that has a certification program with over 60 online courses.  Companies could certainly do better at social media training, whether it be brown bag lunches, speaker series, internal newsletters, etc.
• Create a scalable hub and spoke system to lead the social media strategy. The more advanced companies have a center of excellence at the hub with oversight for strategy, governance, training and education, measurement and vendor identification.  The centralized hub works closely with the cross-functional and cross-business unit support teams (the spokes) to support the overarching strategy and common policies. The hub is usually operated through marketing and/or corporate communications. This corporate social media team typically consists of 11 people. 

There is a lot of good common sense and best practice advice in this report. Take a look. We have a lot of work ahead of us to make our companies digitally safe.

  It seems that Checklists are all the rage. Everyone seems to mention the Checklist Manifesto by Atul Gawande which I now have on my vacation reading list.  Along these lines, Michael Useem, Wharton management professor, has written The Leader’s Checklist which is out now. I think I will have to read that too because it is a subject that I follow regularly and I’ve always liked his work.  Useem provides the 15 mission critical principles that help leaders navigate the stormy waters of crisis and personal success. In an interview with Useem, he talks about the need for a checklist to avoid “unforced errors.” I was not sure what that meant so I looked it up and quickly found that “unforced error” is a sports term (which is why I had not heard it).

Forced Error- A forced error is when your opponent hits a really good shot (powerful groundstroke, angled volley, drop shot, lob, etc), that you have to run, stretch, dive or scramble to get. Once you get there you are unable to put it back into the court or you hit the net. Technically, you made a mistake but since the your opponents hit a superior shot, they “forced” that error. Basically, if you hit a shot on the run and it doesn’t go in, it’s a forced error.

Unforced Error- An unforced error is a mistake that you make due to simply hitting the ball incorrectly (shanks, mishits) or using improper positioning, lack of precision or just bad luck (such as hitting the let cord and having it drop back on your side). In other words, if you are playing a neutral rally and your shot goes out of bounds or hits the net, that is an unforced error.

The point is that Useem is telling leaders to keep a checklist so that they don’t make a mistake such as forgetting to remind employees about following ethical guidelines or how to treat a customer everytime they walk into a room.  When it comes to a Reputation Checklist, we actually have one — 99 Tips to Safekeeping Reputation. Although there are 99 of them, they are all worth reading and takes about four minutes. Take a read. I keep mine on my bulletin board behind my desktop at work as a reminder that reputation needs to be managed daily, if not hourly.

I am in a big believer in being prepared for reputational damage or crisis. My book on Corporate Reputation: 12 StepsTo Safeguarding and Recovering Reputation is all about learning from crisis and being ready for the next one.  As Weber Shandwick’s most admired stumble rate declares, every company should plan on some reputational mishap or misstep in the future. Nearly four in 10 companies have lost reputational status in the past year. I just read an article sent to me about the National Preparedness Leadership Initiative at Harvard. The initiative’s goal was to learn lessons from leaders who have faced crisis situations such as terrorist attackes (Israel, Madrid, London), natural disasters (Hurricane Katrina), health scares (pandemics), oil spills (Deepwater Horizon), etc. 

One of the first lessons they uncovered applies to companies and institutions and is:

“…that bad leadership – much like smoking – is a public health risk factor. Whether in the aftermath of a terror attack or a natural disaster, we have seen that when leaders don’t perform well lives are lost and people abandoned.”

And the second lesson is getting everyone on the same page so everyone can work quickly, effectively and efficiently on behalf of a common and shared goal. 

“Working together after a disaster requires forging bonds before a disaster.” 

Third, and a powerful lesson for companies, is to “expect every citizen to participate.”  Leaders have to listen no matter how soft or weak the signals are. And these early warning signs need to get to those who can act and whose job it is to protect reputation. Empowering employees is critical to averting reputational disaster. As the National Preparedness Leadership Initiative found, “citizen bystanders” can make all the difference as we saw with the shoe bomber and underwear bomber airline incidents of the past few years.

“We should regard these heroes as leaders in their own right.”

 No doubt you have heard about icorrect.com – the web site that sets the record straight about rumors and hearsay. The website says that it  is about protecting ” one’s reputation in cyberspace forever.”

ICorrect was started by the founder of Shanghai Tang, the terrifically classy and expensive department store chain. Since I was recently in China, I certainly did not pass up the opportunity to drop into Shanghai Tang and admire all its beautiful apparel and items. It is known as a luxury lifestyle brand.  Sir David, the founder and businessman, began this web site to help people clear up misinformation that lives permanently on the Internet. Several well-known celebrities and luminaries have taken to clearing their records. Anyone can view the corrections although to post costs $1,000 annually. There are posts from Cherie Blair, Sienna Miller and Michael Cain. I do wonder if they are actually took the trouble to post these corrections but it seems to be the case.

 Here is an example — the accusation followed by the correction.

Accusation: Kate Moss to make her acting debut in Shakespeare’s The Tempest

Kate Moss is taking the acting world by storm – making her stage debut in the Tempest. The supermodel, 36, has landed a minor role as a nymph in an upcoming version of Shakespeare’s play. It follows a series of meetings and phone calls with Kevin Spacey who is overseeing the production as part of the Bridge project at London’s Old Vic. Our spy tells us: “Kate has had several acting lessons and is keen to broaden her…….