Posts Tagged ‘blog’

  The trading scandal at UBS brings to mind the long journey that companies undertake to recover and restore reputations. UBS is now back at square one as they deal with the recently revealed $2.3 billion rogue trading. This reputation disaster brought me back to the days of the Societe Generale SA rogue-trading incident three years ago. If you recall, Jerome Kerviel managed to lose $7.2 billion on his derivatives scheme. The reputation drag on SocGen’s reputation today and on UBS tomorrow is quite real. The SocGen scandal has not entirely faded in the past three years. In fact, everytime one reads about what happened last week at UBS, the SocGen scandal gets replayed. This is unfortunate for those who go down the path of reputation recovery like SocGen. SocGen’s recovery program was quite extensive when you look at it from a three year vantage point – they dismissed Kerviel’s bosses, demanded that the bank move slower as new security systems were put into place and launched an internal controls program called “Fighting Back.”  In addition, other measures were set forth such as spending on new IT security, starting a newly independent accounting group, beginning a SAFE (Security and Anti-Fraud Expertise) program to oversee financial operations and training 7,800 employees about fraud. Ultimately the CEO and chairman stepped down one year later.  All these remedies for recovering reputation came from an article in yesterday’s WSJ and I was glad to be able to list these steps for other companies contemplating what to do when faced with sky rocket type scandals.

Yesterday morning started off with an email to me from Netflix’s CEO Reed Hastings. I immediately went to the Netflix‘s CEO apology on the blog.   What confused me however was the tone of the video. Although I am a loyal customer and fierce advocate of what Netflix has done for delivering movies to my home, I thought that the video apology was abit too cheery (outdoors in sunny California. albeit a parking lot) and efficient.  Maybe too rehearsed is the right word. I did not get the sense that this was a very repentent CEO who had seen his stock value decline 52% since the change in pricing occurred. But what really threw me was that he did not share the stage alone. In the video, CEO Reed Hastings had the new head of the DVD spinoff, Qwikster, Andy Rendich, joining him.  I always say that CEOs get all the credit when things go right but all the blame when things go wrong. Why did Hastings deflect some of that blame on this poor soul. I cannot remember the last time (if ever) I witnessed a CEO apology tied to the announcement of a new spinoff. I sincerely doubt that was a good launch plan for Qwikster. My sense is that there’s more apologizing to come. This poor guy Andy looked like he too was somehow responsible for the communciations debacle.

Despite these ramblings, the article on the Netflix problem in today’s New York Times made me smile. The authors wrote, “But in the short term, the risk to corporate reputations is palpable.”  It is not often that I even see the words “corporate reputation” in a top tier publication. Usually it is referred to as brand health or brand reputation or positioning.  It is fairly rare to see corporate reputation used as a commonly understood concept.  My two cents is that short term feels like long term these days when you are in the spotlight. As someone said to me, it’s like a nuclear assault whether it is 6 days, 6 weeks or 6 months. Ultimately, Netflix will be forgiven but like the SocGen example above, reputation damage takes its toll and lingers longer than most CEOs care to imagine.

I heard about an interesting blog post the other day. Julia Kirby, an editor at Harvard Business Review, blogged about the Maclaren stroller recall last month. I live in more-fertile-than-thou Park Slope where Maclaren strollers probably have the highest density of any borough. Park Slope is the neighborhood in which Amy Sohn just wrote a best selling book, Prospect Park West, about the lives of chic and cranky mommies, plentiful playgrounds and majestic brownstones. As you may recall, Maclaren announced a recall of every baby stroller made in the US over the past decade. If a baby’s fingers were in the wrong place when the strollers opened, there was risk of damage to the child’s fingers (amputation!). The blog describes what Maclaren was doing about the situation as it became a media frenzy. The best part were people’s responses to Kirby’s question about what would you do if you were the president of Maclaren USA? Definitely worth a read if you want to brush up on crisis response strategies (how to make the hinge repair kits available to owners, working with the CPSC – Consumer to Product Safety Commision’s Office of Compliance, working with retailers, engaging outside investigators, producing a video on how to use the strollers properly and the new hinges, confusion over misinformation, competitive issues, etc.)

What truly fascinated me is that the CEO of Maclaren USA posted on Kirby’s blog in response to the comments made. They were his first substantive remarks. Here is just a piece of his blog response.

“I cannot but benefit from all the contributors for the value they are providing to my perspective as the CEO of Maclaren USA. I note with interest the comments from Ian Mitroff and Robin Cohn. Only if we could get Alan Schoem of the CPSC to participate. There are many comments that will shortly appear on our website and through a blog site that I am setting up for direct communication with any and all consumers therefore I would be sparse with my words here [although the posting promises to be long]. It goes as follows, in short, and I hope people would not take these out of context: 1. The biggest issue we are facing now is that the products are safe ‘in-use’ 2. The issues that revolve around the unfortunate injuries are issues that are industry wide. 3. In unit terms, there are 20 times more strollers sold in the USA than Maclarens each year and they ALL have the same issue. What do you do when you face a situation like this? This is what we are trying to manage. On the other hand, what is the ultimate aim of an industry regulator such as in this industry. I would submit that the aim of such an exercise would be: 1. Provide “corrective action” to ensure safety of consumers 2. To raise awareness in respect of the issue amongst ALL consumers of such products 3. To raise standards in the industry by highlighting weaknesses in regulation or industry practice In my view, none of the above were achieved and this was mainly as a result of an early leak in the agreed joint recall announcement planned for November 10th. This leak was as a result of inadequate procedures to protect the necessary confidentiality of process in order to ensure that the objectives are not compromised. The result of this early leak was panic amongst parent and tens of thousands of calls and website visits to the wrong addresses. All of this with a company team that was preparing for the following day.”

Not only is it amazing that the CEO felt the urgency to post about the stroller problem before his company’s blog was up and running (most CEOs restrain themselves) but he told us about the leak that unraveled their plans. The BIG lesson to be learned here is that companies should plan for leaks because it is nearly inevitable today. In fact, our research among executives on safeguarding reputations online found that confidential leaks are one of the night terrors that keep them awake at night. All communications professionals should build the possibility of a leak into any crisis planning because it happens more than we anticipate. I applaud the CEO for defending the Maclaren reputation and getting some of the facts straight. I wonder if he would have revealed as much as he did on the blog if he had waited. Quite possibly, he received several tips on managing the crisis from the thoughtful commenters and tested out a few messages himself before the company blog appeared. Might have been a very smart strategy. However, it will be interesting to hear more about how the crisis impacted their reputation and subsequent sales.