Posts Tagged ‘Fortune’

I mentioned this new survey on reputation from McKinsey on my blog a few weeks back but what I did not mention was how perplexed I was by the artwork they chose in the report. This is not to knock the great work they do but to raise the question about why they would not question artwork of men saluting each other when it comes to a serious business topic. I know that they regularly use this artist and look in their reports but I flipped through the pages to see if there was a mirror image with a woman or two in it. There was none. And I realize that this harkens back to an earlier style when men ruled the business suite. I understand the style because I saw plenty of it while at Fortune and still love the look. Yet, all in all, I was surprised that they chose this image when we have a paucity of female CEOs and women at the top.  Women are getting ahead but glacially so. And in defense of women, women are already adding value to the reputations of some of our largest, most prestigious corporations.

It is not every day that I read an article several times over and then take notes. That is what I did after reading Graeme Trayner’s paper presented at the Annual Market Research Society Conference, March 2012. Its title is “Emblems and Shortcuts: Rethinking Corporate Reputation Research.” Graeme is a partner at Brunswick in opinion research and a fellow reputation-follower.  I first heard his name when I found a wonderful research article about the concept of the “permanent campaign.”

I basically agree with his thinking on the state of reputation research – where it has been and where it needs to go.  His overarching point of view is that current reputation research might be too mechanistic, rational and simplistic for how people shape perceptions about companies today.  Yes, the current framework most commonly used is powerful because it easily reduces the many drivers of reputation to six or seven key dimensions such as financial performance, quality of products, leadership, etc. Despite its simplicity, that is the beauty of it.  I think he is referring to some of the publically available frameworks from Harris Interactive, Reputation Institute and possibly Fortune’s Most Admired. I see his point that these methods make an enormous assumption that people are rational actors and make decisions about what companies to buy from based on these preordained reputation drivers. And, these frameworks do not take into account reality, that is, different stakeholders see companies differently (financial analysts do not view company reputations the same way as consumers or the media do).  He posits that this way of thinking dilutes what is really happening today.  On the other hand, I should add that the beauty of these frameworks are that they are mostly publically available and can serve as valuable guideposts to how companies are viewed.  They serve a great benefit to companies looking to track broad perceptions over time, those without big budgets and those CEOs who do not take reputation as seriously as they should.  These frameworks have their deficits and I do believe that most company leaders recognize that when taking advantage of them. The solution is to use them as snapshots but to really gauge reputation, a company needs to customize their own research.

Graeme calls for a newer approach that takes neuroscience and behavioral economics into consideration. Essentially he calls for greater attention to how mental shortcuts, symbols and what the crowd is thinking to help us make choices about companies. He calls for a fresh approach that takes into account “a series of interconnected associations and frames, rather than a static set of reputation drivers.”  The world of perception is indeed one big network of images and loose connections, particularly when we are bombarded with so much information today.  

There are many things he writes about that are important to think about when it comes to reputation (which is why I took notes to keep for myself). A few stood out when it comes to identifying the cues and symbols that help shape reputation perceptions.

·         The idea that people use fast or slow thinking (he cites Kahneman, 2011) when it comes to forming opinions. Slow thinking is “deliberative and logical,” whereas fast thinking is what we do most of the time and involves embedding impressions and intuitions about companies and things in our minds.  When I think about how impressions get shaped about companies and leaders for most people whose livelihood is not reputation, it often feels like “hearsay” or “half-truths” certainly do the trick. For example, JPMorganChase was a reputation champion until we heard about the $2 billion trading loss on May 10^th. On May 9^th, they were a leader and one day later, a laggard. For most people, they just heard something fleeting on the news and it became a permanent stain on their reputation. Who has the time to drill down into the facts?

·         He also cites the idea posited by Robert Heath (2011) on low involvement processing. In essence, people are forming images without conscious awareness – “people are still taking in images, associations and messages from advertising, even if they are not fully engaged.”  We can’t take it all in but we are taking it in at a low level.  And these perceptions stick as well. I may never buy a Boeing aircraft but I form impressions through bits and pieces of scrap information.

·         The part that I also like thinking about is the concept he cites about “social copying.” With the pervasiveness of the Internet today, people have access to what everyone else is thinking. That online reinforcement that everyone likes blue M&Ms further deepens one’s thinking about whether a company is a good one or not so good one. “Understanding the social ‘stickiness’ of aspects of a reputation is crucial to identifying how to evolve corporate profiles.”  For this reason, in my view, online reputation management is so critical to managing reputation today.

He recommends some thoughtful ways to embed this thinking in corporate communications campaigns for the betterment of reputation. These are many of the things that we do every day in this field. We urge companies to find that one important “signature” initiative that we sometimes refer to as thought leadership and make it memorable, distinctive and impactful.  A good example might be IBM’s Smarter Planet. Graeme calls this an “emblematic initiative.” Applying muscle to this initiative is critical. His other suggestion to corporate communicators is to start with an issue that tackles a societal problem. The key is making that known and making sure it aligns with the business. A good example is TOMS shoes, a shoe company that donates a pair to a person in need every time someone buys from them. I can’t tell you how many people have told me that when I was looking for summer soles.

Take a read when you want to slow-think and be deliberative. It feels good.

Woke up to the New York Times and an article on the WalMart shareholders meeting in Benton. I was curious how the meeting was going to go because of the recent alleged scandal involving Mexico bribery corruption. And I was particularly intrigued by the backdrop they used for for the presentations. It was an adaptation of the first 5 &10 cent store of Sam Walton. I have always had a soft spot for WalMart because when I was at Fortune, Sam Walton was revered as a hero of small and big business. And John Huey, the editor at the time, had written a book on Sam Walton that really resonated with me. So I was also abit taken aback when the article mentioned a question asked by an analyst at Raymond James. He asked executives what they though the effect of the Mexican problem would be on the company’s reputation. CEO Mike Duke responded, We will be a better company because of this.”  Because of my long history in the reputation field, I am still surprised when questions about “reputation” get asked as if it was the same as what’s the weather going to be tomorrow? or what did you have for breakfast today? It is such a natural question today of most CEOs and leaders (how’s your reputation? what’s your klout score? whose reputation do you admire the most?). Reputation-asking has become an ordinary, humdrum, conversational, colloquial question. At least there are people around like me who still know that years ago, this would not have been the case. And it was particularly interesting that the analyst was asking it since analysts are usually thought of being the first to ask about a problem’s impact on the bottom line and share price. Not on a company’s reputation. They usually are not defenders of intangibles.  So let’s just say that progress is being made and reputation is now squarely on the business agenda. 

There’s no avoiding the bad odds of maintaining a coveted top shelf reputation spot in one’s industry. Each year Weber Shandwick measures the rate at which companies lose their #1 most admired position in their respective industries on the Fortune World’s Most Admired Companies survey. We call this the “stumble rate.” Between 2011 and 2012, 49% of the world’s largest companies experienced a stumble, up from last year’s 43% but exactly the same as 2010’s rate.  With 1-in-2 companies losing their enviable industry position during the past year, the stumble rate highlights just how difficult a good name is to keep.  Looking at this finding another way, #2’s have good odds of becoming #1’s in their industry. Either way, reputational equilibrium is hard to keep. Companies have to continually manage their reputations and watch out for vulnerabilities. Perhaps companies should apply “stress tests” in the same way they are applied in medicine — determining how the organization’s core equity responds to external stress or crisis in a controlled environment. Very much like scenario planning.

2012 Reputation Stumble Rate from

Fortune‘s Most Admired Companies Survey

The industries that have the same #1 this year as last year are:  Aerospace & Defense, Beverages, Computers, Consumer Food Products, Delivery, Electric & Gas Utilities, Electronics, Entertainment, Food Services, Health Care: Insurance & Managed Care, Health Care: Medical Facilities, Health Care: Pharmacy & Other Services, Home Equipment & Furnishings, Information Technology Services, Insurance – Property & Casualty, Internet Services & Retailing, Mining, Crude Oil Production, Network Communications, Pharmaceuticals, Securities, Semiconductors, Soaps & Cosmetics, Specialty Retailers: Apparel, Specialty Retailers: Diversified, Superregional Banks, Trucking, Transportation & Logistics, Wholesalers: Diversified, and Wholesalers: Office Equipment & Electronics.

Seven industries have had a new number one each year since 2009. The industries with the most churn are Airlines, Energy, Food & Drug Stores, Life & Health Insurance, Motor Vehicle Parts, Telecom and Tobacco. During the past three years, a total of 40 industries have seen at least one stumble, so with nearly 60 industries represented on the ranking each year (it varies year to year), few are immune to reputational stumbling.

We also looked at the rankings within each of the nine reputation drivers that survey respondents assess companies on to help understand why companies stumbled. Of the stumblers between 2011 and 2012, we learned that…

• One stumbler experienced a ding to just one of its drivers. Sometimes it just doesn’t take much when you have strong reputational competition.
• Two stumblers lost ranking across all nine drivers.
• The most pervasive loss of reputation was in the areas of Use of Corporate Assets and Social Responsibility. Nineteen stumblers’ rankings went down on these two drivers, followed closely by Management Quality with 18 stumblers losing rank on this driver.
• What may have degraded perceptions of these drivers? A 2011 media analysis of the largest drops suggest that survey takers may have been sensitive to management changes (e.g., one CEO step-down announcement considered by analysts to be too far in advance of his intended departure date and one long-term CEO retiring) and management of assets (e.g., property spin-offs and failed asset funding). As for social responsibility, no stumbler experienced particularly steep drops on this driver so nothing reported in the media popped as a clear reason for the dings. Perhaps CSR activities are once again being more closely scutinized by peer survey takers as CSR becomes expected behavior.
• The driver least damaged was Global Competitiveness with 12 stumblers losing position.

We have been very busy this month. We also released a survey on where the most powerful women in business spoke in 2011. Using the Fortune Most Powerful Women in business list that includes U.S. and non-U.S. professional executives, we audited where they spoke to determine how much they were in demand and what podiums they were invited to.  There were several interesting findings that are worth noting since one way to build professional reputation, get company messages across to important audiences as well as build corporate reputation is to leave those four walls of the C-suite.  In fact, I was speaking to someone at Forbes the other day who confirmed to me that the executive conference business was booming. As it were, women are in great demand.

• These most powerful women spoke at 218 unique events in 2011.
• The leading speaking forums in 2011 for these top women executives included Fortune’s Most Powerful Women Summit, The World Economic Forum/Davos, India-US CEO Forum, Women Corporate Director’s Global Institute, the Paley Center for Media International Council Summit and the APEC Women and the Economy Summit.
• We also provided insights on what types of conference events they spoke at – from industry-specific events (e.g., World Food Prize Conference and FICCI-IBI Conference on Global Banking) and conferences geared toward job function (e.g., Techonomy and ANA Conference), followed by women’s leadership and academic forums.
• Our research also found that the digital category (e.g., Digital Life Design and South by Southwest) is starting to emerge and is crossing women business leaders’ radar screens.

We do this type of analysis every year and sometimes we analyze all CEOs and top level executives –men and women. However, we thought that looking at where executive women spoke was past due. So here we are.

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.

I was quoted by Fortune‘s Geoff Colvin in the August 15th issue. He wrote about the Murdoch scandal and mentioned how “large ideas emerging from this story so far will influence companies of all types for years to come.” One of those large ideas is that we have officially arrived at the pivotal point where reputation has an edge over financial performance. As Geoff says, this is Reputation’s Moment. Companies may not have fully noticed but reputation is indeed “the new currency of corporate success.” Music to my ears.

In the article, Colvin makes a few points that could not be truer. I excerpt some below which includes my take on reputation as the new metric of corporate success.

“Previous major scandals were mostly financial; the numbers were lies. Not this time. The damage so far derives en­tirely from behavior—phone hacking and possible police bribery—that ap­pears to be illegal but has nothing to do with reported financial results. Wheth­er it’s illegal doesn’t matter anyway; it’s slimy, and that’s enough. News Corp. is deeply tarnished, and the financial ef­fects could be significantly bad.

The company has lost about $5 bil­lion of value in the few weeks since the scandal hit. Longer-term effects could be much worse. “The greatest reputa­tional threat to News Corp., aside from criminal prosecution of Murdoch fam­ily members, lies within regulatory and policy circles,” says Rupert Younger, director of the Centre for Corporate Reputation at Oxford University’s Said Business School. News Corp.’s televi­sion businesses—TV networks, TV sta­tions, and satellite broadcasting ser­vices worldwide—are together a major source of profit, and they’re all subject to government regulation. Govern­ment leaders have treated News Corp. gingerly for years, but now “politicians who have been afraid to tackle such an important company are starting to feel that it may be possible to do so,” says Younger. “This could literally destroy News Corp.,” in the sense that the com­pany could be broken up.

Long-term damage to the company’s reputation among customers, employ­ees, communities, and others could also hurt. “In this new reputation economy, people care about whether a company shares the same values as they do,” ob­serves Leslie Gaines-Ross, chief reputa­tion strategist at the Weber Shandwick communications firm. Her reading on the scandal so far: “A clearer demon­stration of the direct relationship be­tween corporate reputation and cor­porate well-being is hard to imagine.”

 These two ideas, the one-man prob­lem and corporate reputation, are ob­viously related. At News Corp. they’re two sides of the same coin. Yet Rupert Murdoch never seemed to put them to­gether. Long before this scandal, he said, “Our reputation is more important than the last $100 million.” He was right.

 In this brave new recessionary world, we have evolved into a reputation economy where companies are trading on their reputations like never before. They are trading for better regulatory favor, more loyal customers, higher skilled talent, more positive word-of-mouth and more capital. Reputation has become an account in credit that you can draw down on or add to. In this new reputation economy, people care about how decisions are made and whether companies share the same values as they do. It is not just value, as in dollars earned, but also values, as in standards maintained, that has become a crucial element of corporate success.

   The new CEO at Nalco, Erik Fyrwald has this to say about being an outsider CEO and getting up to speed. I think that all this advice is right on target, especially his statement about thinking you have all the answers at the start and then unlearning those assumptions so you can learn how things really are. Fortune interviewed him about water and carbon but I liked the part about being a new CEO best. Most outsider CEOs come into a job knowing what the board has told them. As we know, the board is usually the last to know (so says Warren Buffett).  In my research, I have heard over and over from CEOs that their perspective 100 days later is usually 360 degrees different from what they thought day one. This probably goes for anyone starting a new job. If you want to build a good internal CEO reputation, try to keep your opinions to yourself for a couple of months until you REALLY know what you are talking about. First impressions are usually just that, first impressions.

You came into Nalco as CEO from the outside. What was at the top of your to-do list?

I spent the first weeks and months listening a lot — to the leadership of Nalco, talking to people across the organization. Traveled a lot. Got out there with customers all over the world trying to understand what we do well, what we didn’t do well, where they saw the opportunities. Spent time with my leadership team, getting their view on what we needed to do and also assessing the leadership and who we really needed, and what other capabilities we needed to bring in.

A lot of people in your position, coming in as CEO, have told me that focusing on the team is critical …

Step one.

… and in many cases focusing on the culture. From the outside you’ll see that it needs to be steered a little bit. Was that the case?

Yeah. The positive is, we had a great culture to build on, a culture of service, customer comes first. But we had not been nearly aggressive enough going after the growth geographies and bringing more of the water system solution to the customer. Talking to the leadership, it was very clear that that was a huge opportunity.

You only get one chance at those first few months. When you look back, what did you learn?

I learned that as you get into the job and start to think you know the answers, don’t get locked in. You haven’t been in the company that long. You think because you’ve been in other places that you can figure it out quickly, start to form a theory of what the right answer is. Keep testing that theory, because it does two things. One, it gets the management team aligned. And two, you can get deeper into the organization, you can get customers connected to it, and then you get a much better answer. So don’t make conclusions too quickly. At first I thought I knew the answers, but then the answers got much better as we dug deeper. That was very important.

  Rankings are moving up in this world. I noticed the statement from Fortune in their recent announcement on the World’s Most Admired that they received their best response rate in history. Hmmmm.  After years of falling response rates, what’s the deal here? And this week my colleage told me that the entries for Ethical Corporation Awards were delayed by a few days because of the outsized volume of entries. Is this a trend? Are these rankings rising in importance because what’s better than having an independent third party saying you are #1? There is definitely a trend here worth watching.

*** IMPORTANT ANNOUNCEMENT: SHORTLIST DELAYED ***

As a result of the sheer volume of entries for the inaugural Ethical Corporation Awards, we have been forced to delay the announcement of our shortlist.

This announcement will instead take place in the afternoon of Monday 8th March.

Fortune‘s World’s Most Admired Companies survey comes out tomorrow if I have my information right. Not soon enough. After a year like we just had, it will be sobering to see how the world’s largest companies have fared. Several months ago I wrote that there would be a new world order in the reputation space and I think it has arrived. A number of the world’s golden children will lose their perch atop the golden pyramid of fame and fortune. I suspect too that overall ratings scores will be deflated year over year.  It is hard to be overly enthusiastic about the showing we have seen this year, especially in the minds of  C-level executives doing the ratings. I also look forward to seeing what they choose for the cover. For many many years, we had CEOs grace the cover of Most Admired because they were once popular and received the kudos for a job well done. No longer. The past several years had products as the feature on the cover. Last year we saw Steve Jobs, CEO of Apple, a CEO in a class of his own. Wonder what we will see this year? The good news is that this year’s reputation kings and queens might serve as ground zero for the next few years to come. My general sense is that we are starting over with a reordering of reputation royalty. I look forward to seeing the changes among the most admired, my favorite yardstick of world business. Always something new to ponder.