Posts Tagged ‘crisis’

What is the cost of reputational harm? The New York Times has a back of the envelope calculation from recent crises making the news. Here is what they say?

“It would be too crude to conclude from this analysis that reputation is worth 11 to 14 percent of market capitalization…” and concludes the following: “What is clear, though, is that reputation has huge value. Companies need to guard theirs vigilantly.”

Somewhere in my many investigations on reputation, I have seen a similar calculation that reputation (not reputational harm) places a 10 to 14% premium on a company’s market value. So the Times might just be right.

[By the way, back from vacation. Back to work.]

Before I forget.  As I travel to Weber Shandwick offices around the network in Europe, some things resound in my head. One constant is that I am always reminded how much I enjoy and respect the people I work with inside our network. As colleagues, they are immensely collegial, collaborative, client-first focused and committed. Reputations are built on these types of factors and it is good to be reminded how deep it goes. But returning to a few other things that caught my eye as I traveled last week and look ahead to this week…..

• My colleagues in Berlin told me that the day before I arrived, there had been a march protesting “work.” I found it fun to think about. Down with work! How would we pay our bills? I meant to follow up with this online but forgot because I had to work.

• In a taxi back to my hotel in Berlin, I saw a restaurant named White Trash Fast Food. Wonder what that was?  I think it is a place for music, food and tattoos.

• In some research our parent company IPG did on New Realities among consumers, one of the findings was that people were not suffering from data overload. In fact, US citizens and our German brethren (in a separate study) by Respondi said that they were energized by being their own researchers and not frustrated, overwhelmed and inundated as people think they are. In fact, people felt smarter and in greater control over their choices than ever before. One of my colleagues in Germany mentioned that there was a big debate in his country about information overload and that the abundance of data was making us dumber not smarter. I think not.

• In Brussels, I learned that the head of NATO is a frequent Twitterer. I also learned that the EU’s broadcast service….EbS…Europe by Satellite, provided such good up-to-date information that journalists were losing their edge in being able to report on EU news. I was told that EBS was so good that it broadcasted negative as well as positive information about itself. What’s a journalist to do?

• One well-known and large Fortune 100 company communications professional told us how the company had established an “amplification” room, not a war room, to deal with two years of criticism in order to get their story properly told.

• Another company at our lunch in Brussels had recently won approval from management to develop a word of mouth program that would allow for the negative with the positive. He talked about how hard he had worked at getting it to happen and how a pilot was about to begin that would telegraph the program in consumer language, not corporate speak. He was reading a book titled The Conversation Manager. One victory at a time.

• Our Milan office organized a superb event with the American Chamber of Commerce, a well-known journalist, one of our Milan office’s leaders and the US Consul General who spoke about the rising “green economy” in the U.S. I was there to talk about The New Normality that I mentioned in my last posting. The US Consul spoke highly of President Obama’s efforts and I have to say it felt so good to hear some pro-Obama talk after weeks of backbiting at home.

• I ran into someone in a large department store off the beaten path in Milan who had been at the event with the American Chamber of Commerce. It was Saturday morning around 11AM. Could the world be smaller? He had just bought sunglasses.

• I made it to Amsterdam despite the volcanic ash debacle. It was a long day.

• The Economist wrote an article where they mentioned “headline risk.” Since I often write about reputation risk, I think this is an increasing factor in reputation recovery….reducing headline mentions. At what point does headline risk start to dissipate? And what has to happen? One course of action is a CEO apology or CEO dismissal. That’s been proven to work but not always the best solution.

More later on the rest of my trip.  Will update you on Amsterdam, Paris, London and Madrid in due time.

I came across an article on the growing importance of PR in time of crisis. It was in the London Evening Standard. No surprise why I read it. The title was “Who does a CEO call first in crisis? PR Men.” It first caught my eye because it has to do with CEOs and the rising importance of PR counsel. The reason I took a second look was the headline about CEOs calling PR Men. Please! There must be some women to call. It is 2010 after all. Let’s move on.

The author describes how CEOs used to call their financial advisor or legal counsel when crisis first struck. Now they call their PR head. Research that we at Weber Shandwick have done with Spencer Stuart over the past two years among global Fortune 500 corporate communications officers (The Rising CCO) found an increase in the importance of crisis experience on the job. Additionally, more CCOs now report to the CEO (58% last year), reflecting the rising importance of that position.

“PR has certainly moved up the food chain in the last five years,” says UK PRWeek’s Danny Rogers.  “Reputation is your biggest asset in the modern world. Media and public scrutiny of corporations, brands and individuals has increased. Your reputation can be destroyed so quickly now because it is so global.”

PR should have a seat at the table in good times and bad times.  How a company or organization communicates its vision and values matters 24/7 in this transparent and see-thru world. Reputations can be toppled overnight and sometimes due to rumor and innuendo. Companies must be vigilant in monitoring and defending their reputations. PR deserves to be valued finally.

Very cool research study I just learned about in a WSJ blog. FIT researchers’ Ronaldo Menezes and Ben Collingsworth tracked emails between employees during Enron’s shakedown. They examined  nearly 517,000 emails sent by 150 senior managers during the last year and a half of Enron. They found that there was a spike in email exchange one month prior to the Fortune 500 company’s collapse. They learned that “the number of  active email ‘cliques’ — defined as a group in which every member has direct email contact with each other — surged to 800 from about 100.” Due to privacy laws, they could not dig deeper but this research demonstrates that companies may have a built-in early warning system that might be worth noting. The research is covered in New Scientist.

Early warning systems are very important to detecting clear and present danger that can impact reputations. It would be interesting to determine whether customer service teams have spikes in their emails before a problem unfolds publicly or whether some other company functions (compliance, safety) are chatting more than usual.

Reputations are so vulnerable today that any chance of capturing a problem is worth investigating and testing further. I imagine that Enron top managers had alot to talk about prior to its demise. As we all know, it is often too late by then.

  Regards from Tokyo. I am speaking  later today at the National Press Center on our research on online reputation management that we conducted in cooperation with the Economist Intelligence Unit. Last night we celebrated the 50^th anniversary of the Weber Shandwick Tokyo  office at the magnificent National Museum of Modern Art.  

Our CEO Harris Diamond noted something in  his congratulations speech about understanding the economic crisis that we are all living through.  I thought it  was worth repeating on my blog. He said:  “We can take some comfort from a Japanese poet’s words of wisdom: ‘Since my house burned down / I now have a better view / of the rising moon.”’” The quote is thoughtful reminder that out of crisis rises opportunity. My fellow colleague Tomo said it was haiku. A good one at that.

[Note: Mizuta Masahide was a samurai in the Zeze domain of Ohmi Province. Masahide initially studied haiku first under Shohaku but later became a disciple of the famous poet Basho. In 1688 Masahide's house was burnt down, prompting him to write his most famous haiku Barn's burnt down... This haiku is said to have been highly praised by Basho.]