Posts Tagged ‘CEO reputation’
I think bad news comes in threes. Thinking about President Obama and the recent bad news he has received regarding the terrorist attack in Benghazi, the IRS targeting of conservative groups and the secretly snatched AP reporters’ phone records, it has to be true. It is the culmination and convergence of these three reputation hits that changed the political balance in favor of the Republicans and Tea Party members for a change. Not a full tilt but enough to rain on the President’s parade.
When I talk to company leaders about what drives a reputation into the ground, I often use the baseball metaphor that all it takes is three strikes and you are out. The first mistake happens to just about everyone these days. The second reputation hit is basically unforgivable but no one wants to put you out of business. The third hit takes you down because it is clear that leadership was absent and judgement was non-existent or negligent (even worse). When I think of the perfect example of the Three Strike Reputation Rule, I think of BP. First, they were tied to 15 deaths when the Texas Refinery blew up in 2005 in the US. Second, an oil leak in Alaska from their pipeline in Prudhoe Bay captured negative attention. But third, and for the final straw, the horrific Gulf of Mexico oil spill that ultimately drove their reputation into the ground, along with their CEO’s Tony Hayward. After the third strike, it’s time to call it quits.
Yet, from what I’ve been reading, President Obama’s approval ratings have barely budged from their high marks. Perhaps we will see the proof in the pudding at the next election cycle. Hard to tell. And BP, after much soul searching, is coming back again with new leadership, better values and a new heartbeat. The rest is yet to come.
As you already know, I am keenly interested in how CEOs manage their tenures. In my book on CEO reputation, I referred to the various stages of a CEO’s tenure as the seasons of a CEO. When I wrote it several years ago, it started with the Countdown period (pre-announcement), the first 100 days, the first year, the middle years and ends with the last 100 hours and legacy-setting. Since then, I have continued to follow CEOs closely but have been particularly fascinated by how CEOs can use social platforms to build their companies’ reputations and to some extent, their own. That is what I explained in this new article on CEOs getting social in their early tenure. (See also Weber Shandwick’s Socializing Your CEO II)
Surprising to me, despite billions of people communicating and socializing online, little has changed in experts’ advice to CEOs or other executives on how to navigate their early tenure by taking advantage of social tools. In three separate research investigations on how CEOs spend their time by Harvard Business School, the European University Institute and the London School of Economics, and Fondazione Rodolfo Debenedetti, the words “social” or “digital” did not appear once in the nearly 30,000 words written. Management consultants’ white papers on CEO transitions reveal little attention to how to effectively use social platforms. I have about 15 articles with smart advice on CEO successions and transitions that I send to new CEOs and not one mentions using social media. Further still, an online search of the most relevant 30 hits for “how CEOs should use social media in their first 100 days” does not retrieve a concise blueprint whatsoever. Instead, the mentions consist of lists of Twittering CEOs, reasons why CEOs don’t use social media, events and primers for getting into the social game, articles written by CEOs of digital agencies, and do’s and don’ts for CEOs who use social media.
Social media should be incorporated into new CEOs’ early playbooks. Whether CEOs are communicating, engaging in two-way conversation or simply listening in, social media platforms should be gradually adopted. As technology increasingly permeates all aspects of business and society, CEOs cannot afford to be out of touch with their cultures, how their products or services are being received and what their competitors are up to. Moreover, as the next generation of technology-literate CEOs start taking office as 77 million baby boomers leave the stage, being socially-literate will become the norm, not the exception.
For these reasons and because all these management consultants seemed to be overlooking social media as a leadership tool in their early CEO days, I wrote this article titled Get Social: A Mandate for New CEOs. It just appeared this week on MIT Sloan Management Review’s nicely redesigned Social Business site. Please take a look if you are a new CEO and getting the social bug! Or if you are advising CEOs to jump on the social bandwagon even a little. I firmly and proudly believe that this might be the first (or among the very first) articles on how and why CEOs should be social citizens at the start of their tenures and not wait til their seasons come to an end. There are some great examples from CEOs and presidents of companies such as Aetna, Etsy, GM, MassMutual, Best Buy and BAE.
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.
Another reason for why CEOs matter. Today’s story in the WSJ focused on how investors are increasingly demanding CEO face time in order to get greater insights into the company’s strategy and future and determine whether it is worth their investment to take a stake. One of the CEOs complained said that meeting with investors and analysts is taking up too much time. This should not come as such a surprise. The job of CEOs today is not to only run the business but be that communicator-in-chief with its portfolio of stakeholders which I grant is expanding by the year. The article seems to point out that these meetings are getting more granular than the larger-sized ones of years past and taking up more and more time. One CEO says he meets groups of 50 investors in batches, one after another, or in private 30 minute sessions.
The article provides a few interesting stats on the pressure on CEOs to make time for investors…
- C-suite executives in North America attended 70% of private investor meetings over the past 12 months, up from 64% one year earlier.
- CEOs and finance chiefs spent 14 days and 17 days, respectively, on these meetings.
The article provides many different reasons for why meeting the CEO is important but one that wrapped it all up for me was when a president of Fidelity Investments said that meeting the CEO provided “nuances” about the company that does not come through in an earnings call and helped him “put the entire mosaic together.” I thought that the “mosaic” idea was useful in understanding what role the CEO and his or her reputation does actually play. Although the CEO is just one part of the picture or mosaic in this case, the CEO’s leadership, transparency and credibility helps glue together the partial perceptions of a company we all have and fit them into a pattern that yields a reputation. Getting to meet the CEO and gauge his or her character through the whites of his/her eyes is a critical piece to the puzzle of reputation that adds to a valuation about a firm’s future performance. After all, isn’t that part of the CEO job description today — to balance the external and internal?
I could have told them so. Research (noted by WSJ’s Leslie Kwoh) from Lehigh University found that shareholders do think CEOs matter. They analyzed shareholders’ reactions to the unexpected deaths of chief executives by measuring the stock performance the day after the announcement as well as at other intervals leading up to 30 trading days afterwards. There was a 5.6% swing in share price on the day after the announcement that the CEO unexpectedly died (i.e., heart attack, plane crash). The swing was even more pronounced one month later, at 14.6% on average. Interestingly, this swing has grown considerably since the 1950s, 1960s and 1970s. CEO reputation and the CEO’s impact on the company’s performance MATTERS. Decades ago, people believed that companies ran themselves pretty much. The CEO’s decision-making, strategic direction and ability to motivate employees and outbeat the competition is clearly understood today to have a profound effect on corporate performance and by extension, reputation. Good proof to add to my deck on why CEOs matter. Thanks to Lehigh’s Tim Quigley and researchers!
I have to say that the headline in today’s WSJ re the $2 billion trading loss at JPMorganChase strongly resonated with me. The title is “J.P. Morgan Trades in Its Crown.” In our research on safeguarding reputation, we start out by summing up reputation failures among the world’s most admired this way:
“The last decade has seen many of the world’s most admired companies descend from their once lofty positions. They were in a class by themselves — corporate reputation royalty whose invincibility was universally accepted by business executives around the globe. No one could have predicted that these companies would ever part with their crowns. How the world has changed!”
It looks like we now have another major kingpin to add to our Weber Shandwick “stumble rate” analysis that we calculate every year. You can find more about it in an earlier post. But…between 2011 and 2012, 49% of the world’s largest companies experienced a reputational stumble, up from last year’s 43% but exactly the same as 2010’s rate. There seems to be no more untouchables among the Fortune 500 with this recent news.
I was also intrigued by Jamie Dimon’s remarks about what he could have done differently to have caught this $2 billion blunder earlier. Dimon’s deadpan answer was paying more attention to the “newspapers” among other things. He was referring to earlier reports in the papers about the trading problem. Have to hand it to him for taking the blame and being brutally honest in his response. He’s been true to his reputation on that count.
“In hindsight, the new strategy was flawed, complex, poorly reviewed, poorly executed and poorly monitored. The portfolio has proven to be riskier, more volatile and less effective an economic hedge than we thought.”
Another side note of interest is that this reputation crisis did not start in social media. It has certainly taken off online but as far as we know now, there’s been no social media assault that instigated this crisis. No online cloak and dagger here.
Will be interesting to see how this pans out reputation-wise. Will this tarnish the bank’s reputation for the long-term or just be a stain? No doubt it will be headline news for a while. Dimon is eminently quotable –the WSJ has his most notable quotes already listed. I hate to have to say it but another one hits the dust.
Years ago at my former job, the research we did caught fire due to one simple finding. In fact, I used to think of myself as the 50 percent woman. Our research on CEO reputation revealed that 50 percent of a company’s reputation was attributable to the CEO. For some reason, this one simple factoid traveled around the world like wild fire. People just found it incredibly memorable. Part of the reason that the “50%” was so radioactive was because CEOs had became better known (Jeff Bezos, Steve Jobs, John Chambers, Jack Welch, Bill Gates, Carly Fiorina) and no one had really asked the question. Reputation as a body of knowledge was still nascent (not like it is now) but it was just about to tip. And tip it did.
In our new survey on the corporate brand, we asked the question again. It’s been about 10 years since that earlier study. And despite all the ups and downs in the stock market, CEO compensation issues, scandals, Occupy Wall Street, celebrity CEOs, the Internet, etc etc, the executives in our study reported that 49% of a company’s reputation is due to the CEO’s reputation.
As interesting, when we asked consumers — the general public — 66% say that their perceptions of top leadership also affect their opinions of company reputations a great deal to a moderate degree. Only 7% say that there is no link between the two. So CEO reputations arenot going over their heads whatsoever.
Thus as much as it might be politically incorrect to admit that the reputation of the CEO plays a significant role in how companies are viewed, it does. Of course, product quality matters most but leadership from the top, how they behave and what they communicate is not to be ignored. A large 59% of consumers cite leadership communications as influencing company perceptions. It no longer pays to be silent.
Another exciting day (despite the clouds and threatening rain here in NY). Weber Shandwick’s research was covered in today’s WSJ. B8. In the print edition. Can’t send you a link (although here is one if you can get in) to the online version since you have to subscribe! But you can get all the relevant info here from the press release and the executive summary.
Back at the beginning of the year, we released a terrific study (I really feel an affinity for this one) about the growing indivisibility of reputation and product brand. We had so much great data that we figured we would release at intervals. So here we are with the second installment of the global research, The Company behind the Brand: In Reputation We Trust – CEO Spotlight which explores the importance of executive leadership and communications to helping reverse the tides of waning trust in companies and solidify reputation. Here are some big learnings from the survey with KRC Research among 1,950 consumers and executives in two developed (U.S. and U.K.) and two developing markets (China and Brazil) :
- A full two-thirds (66 percent) of consumers say that their perceptions of CEOs affect their opinions of company reputations. Executives, like consumers, don’t overlook the importance of a leader’s reputation – they attribute nearly one-half (49 percent) of a company’s overall reputation to the CEO’s reputation. Say goodbye to the days when purchases were made solely on product attributes. Today’s consumer is savvy, well-informed and privy to a wide array of purchase options. Decisions are now increasingly based on additional factors (yes siree) such as the company behind the brand, what the company stands for and now….even the standing of its senior leaders.
- Nearly three in 10 consumers (28 percent) report that they regularly or frequently talk about company leaders with others. When consumers are asked what influences their perception of companies, approximately six in 10 (59 percent) say they are influenced by what top leaders communicate. Things have radically changed when you can say that consumers — the public square — are reacting to what leaders say. Corporate leadership communications are important across the globe, but to an even greater extent in emerging markets. Nearly two-thirds of Chinese consumers (64 percent) and nearly three-quarters of Brazilian consumers (72 percent) rely on executive communications when learning more about a company. For those companies growing in emerging markets, this is important.
- Respect for corporate leaders – CEOs and other corporate leaders – has taken an especially large hit in developed markets – 72 percent of U.S. and 71 percent of U.K. consumers have lost respect in the past few years. Not such a surprise to me because the past few years have been hard on everyone. A bit different in developing markets however: Chinese consumers are evenly split on their changing opinions of corporate leadership (35 percent lost respect vs. 38 percent who increased respect). Brazilian consumers are more likely to have increased their respect for top executives than decreased their respect (33 percent vs. 21 percent, respectively).
Here’s the last word that holds a lot of punch in my book….a large 60 percent of a company’s market value is attributed to its reputation. Sixty percent. That’s no small change. Get those execs on the communications trail sooner than later.
Thought I would check out Pinterest and see if anyone was posting on reputation or CEO reputation. Why am I not surprised that the pickings are slim. Pinterest is not exactly the place where people want to pin interesting items and favorite photos or sayings on reputational matters or CEO quotes. But I had to take a look. For “reputation,” there are a bunch of quotes and the same infographic over and over. Seems to be a favorite. It is about how to manage your personal e-reputation and its from a reputation management agency in Geneva. Good for them.
As for CEO reputation, there are two items pinned of photos of people. But mostly a non-pinterest event. Thought I’d see a little more but no.
Infographics seems to be popular on pinterest. They add visual splendor. I have a pinterest account but never started it. I might just do that today. Might be fun. We will see.
Because I am off from work for the holiday, I have a little time to catch up on things I meant to read in the months before. I was particularly interested in some research on CEO transitions and its impact on the value of the enterprise conducted by FTI. A few facts jumped out at me from their study among the financial community. They found that one-third (32%) of investor decisions are impacted by the reputation of the CEO. Moreover, the reputation of the CEO was more important to investors than the reputation of the company’s products and services.
The research covers the value at risk depending on what type of CEO transition occurred. The greatest risk to the enterprise is when a CEO is forced to resign.
Because of my work on CEO tenures and how to build CEO reputation, the findings confirm my own research over the years that CEOs need to show success by that 12 month marker. FIT found that investors give new CEOs about six months to assess the challenges and opportunities facing the company, setting a vision and strategy. They give new CEOs more leeway to improve market performance and valuation — about 12 months. After the first year, all engines need to be firing.
Another particularly interesting finding was what investors look at in their first 100 days to further establish the CEOs credibility in their eyes….here is what they said was of “significant importance.” Despite the ranking for “charisma,” it is still interesting that it is still estimated to be of high importance and only 16% said it was of limited importance. FTI concludes that investors take a multi-dimensional view of new CEOs. They expect to see it all.
|During First 100 Days Of A New CEO||“Significant importance”|
|Grasp of the company’s challenges and opportunities||96%|
|Knowledge of/experience with industry dynamics||92|
|A strategic plan||88|