Posts Tagged ‘CEO Capital’
Imagine my surprise when I saw this infographic from CEO.com titled “The CEO’s Guide to Reputation Management.” I also saw it on another site with the daunting title, “The Staggering Significance of CEO Reputation.” Here is why I was taken aback. Several of the facts in the infographic come from my research over the years. The first, that the CEO’s reputation contributes to nearly half of a company reputation comes from our study this year although they could be referring to my work from years ago at another agency. The results were similar showing the steady importance of CEOs on reputation. Kindly they cite us in the next chart about customers caring about CEO reputation. However, the study in the chart about investors comes from a study I spearheaded many years ago so I do not think it is a fair comparison putting them side to side. But perhaps I am reading the chart too literally. And the five pointers at the bottom about polishing a CEO’s reputation comes from my book written in 2003, CEO Capital. Although I still agree that these factors are important in building a good name for CEOs, I do not like the word “polish” or ”image.” Image implies something fleeting and temporary. CEO reputation management is built on a serious exploration of what drives CEO perceptions that benefit a company’s reputation. I address this issue in my book because people used to confuse reputation management with “image” management. Today especially, online critics can detect within nano-seconds if CEOs are being in-authentic within second and are all too happy to tell you so. I just think it is the wrong choice of words for 2012/2013. Either way, thanks to CEO.com for featuring our research at Weber Shandwick and my prior work at Burson-Marsteller.
I was pleased to be alerted to a copy of Reputation Review 2012 by Rory Knight, chairman of Oxford Metrica. Years ago I used some of their research in my book on CEOs and particularly on how CEOs can build their reputation or kill it when crisis strikes. Knight just completed his annual reputation review for AON, the global risk management, insurance and reinsurance company, and as I expected, the report has insightful and timely information for those seeking to better understand the impact of crisis on a company and its bottom line.
Knight reviews the top crises of 2011 such as TEPCO, Dexia, Olympus, Research in Motion, Sony, UBS and News Corp, among others. His company looks at the recovery of shareholder value following crisis. Among 10 crisis-ridden companies in 2011, only News Corp found itself in positive terrain afterwards. In fact, what they found was that 7 of the top 10 lost more than one third of their value. Two companies lost nearly 90% of their value. These companies clearly had to put big restoration processes in place afterwards and I would suspect paid good dollars to firms to restore their good names and overlooked other everyday business to move forward. Oxford Metrica says: “Managing the restoration and rebuilding of reputation equity is an essential part of the value recovery process following a crisis. Reputation equity is a significant source of value for many companies and a coherent reputation strategy can be the difference between recovery and failure.”
The big takeaway from the report, or at least what seems to resonant with me, is that there is an “80% chance of a company losing at least 20% of its value (over and above the market) in any single month, in a given five-year period.” Those odds are not good and as Knight says, screams for having a careful and well thought out reputation strategy in place before a minor event turns into a raging crisis and monopolizes headlines, offline and online. A solid reputation strategy will also help guide the reputation recovery process which is often too hurried. This is the kind of advice that I write about in my book on reputation recovery and underscores having a strategy so you do not find yourself in this situation in the first place. Additionally, Weber Shandwick’s stumble rate of 43% for the world’s most admired companies tracks with Knight’s high rate of expectant reputational downfalls. It is not good at either rate.
The report outlines a process for managing a company’s reputational equity. They are 1) Measure your reputation through benchmarking and vis a vis your peers; 2) Identify the drivers of your company’s reputation in order to allocate resources properly; 3) Prepare a strategy for recovering your company’s reputation; and 4) monitor your reputational equity often and respond accordingly when risk emerges.
The report analyzes the reputational losses of Olympus and Research in Motion after their reputation-damaging events. It is worth reviewing. It also takes a look at the financial results from TEPCO after the tsunami hit Japan. Apparently, 90% of TEPCO’s value was lost, over $US37 billion. Oxford Metrica estimates that events associated with mass fatalities have double the impact on shareholder value than do reputation crises in general. I believe they are right. BP’s Gulf of Mexico tragedy which involved over two dozen deaths wiped off substantial shareholder value off their books.
Where I wholeheartedly agree with Knight is when he talks in the report about the impact of senior management on crisis and the need for that management to lead with transparency and openness.
“For mass fatality events particularly, the sensitivity and compassion with which the Chief Executive responds to victims’ families, and the logistical care and efficiency with which response teams carry out their work, become paramount. Irrespective of the cause of a mass fatality event, a sensitive managerial response is critical to the maintenance and creation of shareholder value.” One of the takeaways from the report is that winners and losers, reputationally, can be determined by how the CEO responds to the crisis.
The report contains an article by Spencer Livermore, Director of Strategy, at Blue Rubicon, a reputation consultancy. He quotes a stat that is dear to my heart, “Oxford Metrica’s analysis shows that companies which open up more following a crisis and tell a richer, deeper story are valued more highly, increasing share price by 10 per cent on average over a year.” He calls it the communications dividend which comes from investing in communications. Years ago I wrote an article for Ernst & Young’s Center for Business Innovation called Communications Capital and the idea was similar – the right communications can increase market value and strengthen reputation. As Livermore says, “We can make communications worth hundreds of millions more simply by making them better understood.” Having the right compelling narrative built on a well thought out reputation strategy is worth its weight in gold today.
Terrific and thoughtful article in Forbes contributed by Giovanni Rodriguez who is the CEO and co-founder of SocialxDesign, a strategy consulting firm. He wrote the article with John Hagel (Deloite Consulting LLP) and Suketu Gandhi (Deloitte LLP). It is about the role of the CEO in a post-digital world. There have been several articles of late about the value of CEOs. I think this question is being raised increasingly often as crises and scandals are bringing our economies to our knees and CEOs are being caught unaware and mystified. Additionally, as the authors point out, CEOs are losing out to the appeal of the leaderless organization such as the Tea Party, Arab Spring and Occupy Movement. People are increasingly asking who needs CEOs when large groups are able to mobilize and effect change without anyone really in charge?
How did this happen in the first place? CEOs used to be the kings of commerce, the chieftains of business. Their reputations were guaranteed. Apparently no longer. The authors explain that CEOs have lost their midas touch because the world they now govern has grown exponentially complex, unrelenting in its pressure, and values short-termism over everything else. They also postulate that leaders can no longer predict when the next Black Swan of unpredictability will rise up and bite them. If they can’t predict the future, what good are they? In reality, who has the time to see beyond the horizon when all that matters is the next quarterly earnings call.
Their solution is of merit. They suggest that we rethink the bully pulpit and recognize that “the CEO as the great communicator – or at least one of the great communicators — is in great demand. What can leaders do to help make sense of their environments? They can harness the power of narrative.” This sure sounded familiar to me in that when I wrote CEO Capital several years ago, I wrote about CEOs as narrators and sense-makers. I wrote, “By motivating employees and instilling the company with a common purpose, the CEO further encourages a sense of community in the pursuit of worthwhile goals.” So I agree wholeheartedly that words, engagement and making sense of it all matter. CEOs can point us in the right direction and give employees a reason for doing. As the authors also say, “Armed with the right narrative, we can safely distinguish between meaningless surface events and what’s really important.” And in this post-digital world, the CEO narrative helps provide stability where instability seems to flourish. Compelling narratives can “motivate people to do awesome things.” They can “set big things in motion” and as the authors say, be “movement makers.”
Definitely an article worth reading and contemplating when someone tells you that CEOs don’t matter.
Yesterday I was asked to talk about what I do at Weber Shandwick to our Crisis and Issues group in New York. It was an end of the week get together to take the edge off of all the long hours. I talked about reputational issues and answered several questions. It was a nice opportunity for me to reflect too.
I was asked where all the celebrity CEOs had gone which made me recall my first book on CEO reputation. The book was released at the height of the dot com boom when 22 year old CEOs were the norm and celebrity CEOs were plentiful. In my book, I tried to make the point that it was not CEO celebrity that mattered but CEO credibility. As I was answering this question, I realized that I hit on some of the right notes as to why CEO celebrity was not the same today but missed a few. In fact, I mentioned that being CEO today was not an easy job whatsoever. CEOs are much more embattled. Here are some of the reasons I talked about yesterday but others as well taken from an Economist article I was saving to post about.
- CEO tenure is shorter than it used to be (on average 6.6 years, according to Booz’s research). They usually come into office with great fanfare. They get approximately two years of grace when they start out (more like 18 months), 2 years to provide evidence that their strategy is working and two years to get pushed out. After six years like this, it’s best to be a CEO nobody.
- CEOs don’t have all the power anymore. Most CEOs now have separate chairmans that are looking over their shoulders and asking a lot of questions. Booz found that in 2002 48% of incoming CEOs were also chairmen. In 2009, that number dropped to 12%. Hard to be a celebrity when there is power sharing going on.
- CEO compensation is always a headline and increasingly links the CEO title to perceptions of greed. CEO compensation is actually declining.
- Shareholders and stakeholders are not sitting idle. They are much more aggressive. Some hedge funds are actively browbeating CEO and corporate decisions and in executives’ faces. The ridicule can get strenuous.
- Boards are more active too. They don’t want their reputations shamed either by poor CEO decisions or poor behavior. And according to Korn Ferry, new board members are more likely to be deep in international experience and have worked abroad. They are not necessarily golfing buddies like board members of yore. Angry birds maybe, but not necessarily tee time!
With all these barriers in place to curb the power of CEOs, celebrity CEOs can hardly flourish. Instead, we are looking at a new world of convening CEOs who communicate internally to employees, communicate online or through video to netizens, travel to speak to customers and influencers at forums they convene themselves (IBM‘s Smarter Planet method), partner with third parties and government to problem solve on today’s economic woes and so forth.
The holidays are over and work is back on my mind full-time. Actually it felt great getting back into the rhythm of work. Thankfully I work at a wonderfully-led, collaborative company. I do not take it for granted, believe me.
By the way, before I get going with this post, I should mention that I have an article on Huffington Post titled “Do Companies Care about Ordinary People?” You are welcome to read it.
Over the holiday, I saved some articles that are worth sharing as this new decade begins and 2010 is in its infancy. The first one in my pile is from the Economist. With all the doom and gloom about business greed and corporate no-no’s in the past decade, The Economist identifies several arguments in the defense of business’s reputation. Resetting the reputation of business seems to be an apt activity to start off this new year. For sure, business could use some reputation-building to replace the reputation-bashing we’ve all been witness too. Here are two to mull over:
1. Business “is a remarkable exercise in co-operation.” Businesses manage to get thousands, hundreds and tens of people working together to produce ideas and solutions to problems. The fact that people collaborate for the common good is pretty remarkable when you think of it. I work with my colleagues around the world all the time and some of us have never met. But we all come together to build the Weber Shandwick brand and help clients.
2. Business is “an exercise in creativity.” When business people put their heads together to solve a problem, we can invent the most amazing things such as “devices that can provide insulin to diabetics without painful injections” and One Laptop Per Child.
I might add one more.
3. Business is “an exercise in sense-making.” When I close my book ,CEO Capital, I have a plea for CEOs to infuse companies with meaning. I said and I repeat here, “…it remains a basic human need to be part of something larger than oneself. This essential yearning has not disappeared despite networked computers and the triumph of the Internet.” I urged CEOs to motivate employees and instill companies with a common purpose in the pursuit of worthwhile goals. As Max DePree, legendary leader of Herman Miller wrote, “Leaders owe a covenant to the corporation or institution, which is after all, a group of people. Leaders owe the organization a new reference point for what caring, purposeful, committed people can be in the institutional setting.”
With luck, committed leadership and an improving unemployment rate, business might be able to improve its reputation in 2010 (2011?). I am banking on it.
I have a strong affection for my book, CEO Capital: A Guide to Building CEO Reputation and Company Success. It was my first book and in many ways, very painful. I worked most weekends and vacations for two years and lost lots of sleep and cherished time with my family. Writing a book is a very humbling experience (an understatement). However, it is dear to my heart because it was a labor of love. I’ve always been fascinated by leadership and how those in charge “take charge” and build reputations on behalf of many. Yesterday, Paul Holmes wrote in his Holmes Report that CEO Capital was one of the best pr books of the decade. Below is what he wrote. CEO reputation (and my book) is not about CEO celebrity but CEO credibility. That is what I built the book is based on. This honor means a lot to me because I firmly believe that CEOs can make a tremendous difference if they add meaning to people’s lives and create value from the contributions that business can make to the world around us.
By Leslie Gaines-Ross
Leslie Gaines-Ross, now with Weber Shandwick, was B-M’s chief knowledge officer when she wrote CEO Capital: A Guide to Building CEO Reputation and Company Success, which built on the firm’s research and presented a roadmap for CEO’s who understand the increasing importance of both personal and institutional credibility. CEO reputation, Gaines-Ross said, is dependent upon three “C” factors—credibility, code of ethics, and communicating internally—and two “M” factors—attracting and retaining a quality management team and motivating and inspiring employees. The book built a formidable case that particularly in the post-Enron world, CEOs need to invest in their own reputations in order to build those of their organizations, a substantial addition to the literature of the profession, and a manifesto supported by compelling original research and informed by intelligent, sympathetic analysis. It was also a rare book about public relations that preaches not to the choir but to the choirmasters.
I was reminded today of some information I read a few months ago about President Obama. Apparently his correspondence director makes sure that Obama sees 10 letters or emails every day from average Americans. Some of these letters are positive and some negative but they are clear reminders of how Americans are suffering and thriving today. President Obama also reads them aloud at certain meetings when he looks around and notices that people are losing touch with the common man or woman. I am sure they come in handy.
When I wrote my first book on CEO reputation (CEO Capital), I mentioned a CEO who started every weekly management meeting with a tape recording from a call center where people complained about the company’s service. The CEO felt that it was important to remind his team that there was still plenty of room for improvement. The Obama example above is similar to the company CEO one I told.
I think that this act of customer awareness is a practice that could help many CEOs who sometimes forget that the purpose of a business is to create a customer, to quote from the late Peter Drucker.
Both presidential and CEO leadership needs to be reminded who they serve to safely steer their country or company reputations in the right direction, especially in these tough times.
Where do I start? Several people sent me a copy of the recent McKinsey Quarterly article on Rebuilding Corporate Reputations. Its sub-headline read, “A perfect storm has hit the standing of big business. Companies must step up their reputation-management efforts in response.” Sounded like a home-run article to me. It was already in my inbox because I subscribe but I had not had a chance to read it. My heart sank thinking that McKinsey had come up with the perfect strategy for rebuilding reputations and that all my advice and research in this area was for naught. I Twittered the article on my ReputationRx Twitter saying that here’s an article that had to be read. After all it was from McKinsey which I greatly admire and religiously read. Soon enough I began reading the article. I stopped in my tracks. I deleted my Twitter instantly.
There are two major problems with this article.
First, the authors misunderstand the business of public relations. A few select quotes from the article reflect a misunderstanding about the business of public relations when it comes to reputation-building.
“Now more than ever, it will be action—not spin—that builds strong reputations. Organizations need to enhance their listening skills so that they are sufficiently aware of emerging issues; to reinvigorate their understanding of, and relationships with, critical stakeholders; and to go beyond traditional PR by activating a network of supporters who can influence key constituencies.”
“Moreover, traditional PR spin can’t deal with many NGO concerns, which must often be addressed by changing business operations and conducting two-way conversations.”
“Reputations are built on a foundation not only of communications but also of deeds: stakeholders can see through PR that isn’t supported by real and consistent business activity. Consumers, our research indicates, feel that companies rely too much on lobbying and PR unsupported by action.”
Authors’ Sheila Bonini, David Court and Alberto Marchi are under the general impression that PR practitioners actually believe that reputations can be built on words, not deeds or action. This could not be farther from the truth. In addition, the authors imply in several sentences that PR is only about the one-way conversation, not the two-way dialogue. Again, far from the truth. Public relations has always been about the art of conversation with and perceptions of one-to-one or one-to-many stakeholders. The business has always been about developing relationships with many publics, no matter how small, how large or how hard-to-reach.
The second argument I have with the article’s direction is its premise that there are three new ways to manage reputational threats in uncertain times. They are 1) understanding key stakeholders and what matters to them (e.g., benchmarking competitors, quantitative research); 2) being transparent and action-oriented (e.g., more business activities, less lobbying); and, 3) engaging a wider portfolio of influencers through a variety of means to spread word of mouth (e.g., grassroots, partnerships with NGOs). These are good strategies for advising companies and their leaders about restoring and rebuilding reputation. No doubt about it.
These practices, however, are all commonplace in the public relations domain and have been for many years now. In fact, I would argue that this has always been the business of public relations – understanding a company or organization’s many publics, researching stakeholders on perceptions and concerns, getting the true story out, changing corporate behavior by doing the right thing, and engaging influentials in conversations that lead to deeper understanding. These recommendations are part of the everyday toolbox employed by most PR professionals working now (and for decades). And in fact, PR professionals greatly expanded on these three recommendations years ago, particularly in the general public, corporate responsibility and social media space.
Today’s Financial Times had an article on business’ role in restoring reputation and mentioned the McKinsey article. The author seens to agree with me. Whew. Michael Skapinker wrote “This is all sensible but it strikes me as yesterday’s advice.”
Moving on….I do agree wholeheartedly with McKinsey’s conclusion that CEOs should lead a company’s reputation strategy. I have always said that CEOs are the guardians of company reputation. My first book on CEO reputation, CEO Capital (2003), argued exactly this point, as I am sure many others have too.
After letting off some steam here, it occurred to me that PR firms have clearly not done a good enough job communicating what we do for clients or McKinsey’s authors would have known that their recommendations are core to PR engagements today. When I first joined the PR field from Fortune, I too had a limited understanding of what the industry did. Now that I have been in the field for nearly a decade, I recognize that PR is often misunderstood and we are partly to blame.
In short, it seems that McKinsey has succumbed to the stereotype of PR as an industry of spin doctors and no more. This is not true. And probably has never been true. McKinsey’s recommendations are not new and the best of them have been used by PR for some time now. What is needed is not as McKinsey proclaims, less PR but probably more PR.
“Do CEOs Matter?” asked Harris Collingwood in The Atlantic. The article begins with a discussion about the anticipated return of Steve Jobs to Apple in June and the impact on Apple’s share price during the past year’s ups and downs regarding his health prospects. Steve Job’s mortality raises the timely question about the value of CEOs in today’s world. Do they matter at all? Collingwood refers to several academic studies and concludes that CEOs do not matter as much as we think and can have as large a negative effect on business performance as a positive one.
Since I have spent quite a while in the CEO reputation area and authored a book, CEO Capital, on how CEOs build reputation to achieve business success, I have seen equal proportions of studies that downplay the CEO’s impact on financial performance as those that show a sizeable return on a company’s destiny. As the article rightly points out…not all industries are the same — the CEO effect is marginal in some industries where strong government regulation prevails. Does that say alot for all those TARP-supported companies we are now watching. All in all, I firmly believe that CEOs can play a profound role in a company’s future by making the right decisions that shape its long-term growth. We are certainly seeing our new president shape the reputation and future horizon of America Inc.
The article highlights a quote from GE’s CEO Jeff Immelt and apparently confirmed by his predecessor Jack Welch. Immelt told a gathering sponsored by the Financial Times that in the 1990s, “anyone could have run GE and done well…Not only could anyone have run GE in the 1990s, [a] dog could have run GE. A German shepherd could have run GE.” Somehow I don’t quite think that is the case but they must know. CEOs may have indeed mattered less in the 90s but there is no doubt in my mind that they matter more now as our world has turned more global, more complex, more imitable, and more transparent. We are being short-sighted if we do not think that the right leader can make a difference most of the time. Not everyone is Steve Jobs but I would not want to work in a world led by mediocre business leaders.