Posts Tagged ‘GE’

A few things from my week worth sharing. Some more important than others but certainly worth my musing about when it comes to reputational issues.

RED CURLY HAIR. I have been fascinated by the new movie Brave and what I have read about how they fashioned the red curly hair of the first female leading protagonist for Pixar named Merida. “Merida’s explosion of fiery ringlets started as a series of springs on a computer. The Pixar team created many kinds of springs, including short, long, fat, thin, stretched, compressed, bouncy and stiff. In order to give Merida’s hair volume, the springs were entered on the computer screen in layers. The layers varied the length, size and flexibility of each curl. We used 1,500 hand-placed, sculpted individual curls. There is this weird paradox where a ‘spring’ of hair needs to remain stiff in order to hold its curl, but it also has to remain soft in its movement.” Since I have red curly hair that does moves this way, I found it fascinating how challenging they found it to do when I see it live every day. It is a miracle of physics and hair-raising proportions (Merida has more than 1500 individually sculpted, curly red strands that generate about 111700 total hairs!) And also, I have a niece named Merida. My sister visited Mexico many years ago and decided that she loved the name. Apparently the Pixar people had the same experience because I read that it is a name found in both Spain and Mexico’s Yucatan peninsula. Merida will be the new Ariel. Red curly hair is going to break through and have a reputation of its own.

COMMUNICATING ETHICS. I attended a conference this week on best practices in ethics communications. The conference was sponsored by Ethisphere and others. Several companies presented how they have built a culture of integrity and ethical conduct and communicated it successfully. What was most telling was how much work and persistence went into building ethics-minded cultures. Presentations came from AFLAC, GE, AECOM, Realogy, Fluor and a few others. Every company had the usual communications vehicles to show such as posters, contests, wallet fold outs, web sites, internal awards, Q&As, banners, videos, newsletters, logos, screensavers, full weeks dedicated to compliance, and so forth but you could tell that ethics was baked deep within each company and there was zero tolerance for misbehavior or wrong-doing.  Moreover, these companies were willing to tackle the hard questions that get raised when ethics is discussed and confronted. Once a company goes down this road, there is no looking back.  Interestingly, AECOM spoke about a global advisory board which included business and political leaders that they posed questions to and asked for feedback. They found it useful when confronting the challenges of different cultures around the world.  Another great example of a truly imprinted ethics program came from the Panama Canal Authority.  Their program was stellar. GE representatives also spoke about their in-depth initiative which they refer to as The Spirit (Ethics) & The Letter (Compliance) and the importance of tone at the top. Amen.  For all the best practices presented, the CEOs were directly involved and critical to success, particularly because budgets have to be set aside for these kinds of initiatives. GE also spoke about the “need to get caught doing some good things,” having the courage to follow through and recognizing that there are no half measures. Fluor’s efforts were compellingly presented because they are a “quiet” company that made a big public commitment when they helped found the Partnership Against Corruption Initiative (PACI) in 2004 at the World Economic Forum.

STORYTELLING. Just to close the week, I was reading an article in The Economist on my way home last night about how Japanese companies could do a better job of storytelling and marketing their companies. It talked about the cultural bias where making things is considered more virtuous than selling them. It closed with an interesting quote that sums it all up. “In Japan, people say: the nail that sticks up gets hammered down—an engineer’s view. In the West: the squeaky wheel gets oiled—a salesman’s mantra. In a crowded global marketplace, even the best-engineered wheels need to squeak.” Food for thought.

The New York Times Sunday Business Section interviewed Cisco’s CEO John Chambers today. Chambers mentioned smart advice he got from former GE CEO Jack Welch on what makes a great company was genuinely true. When Chambers was facing a major business impediment, Welch told the networking CEO that the makings of a great company are “taking major setbacks and overcoming those.”  Chambers thought he had already hit several roadblocks but Welch said that what he meant was not just an obstacle but a “near-death experience.”  This is why leaders often say that the wasting a crisis is tragic. I have my fingers crossed that the near-death experiences we’ve seen over the past 18 months are just a sign of better things to come. As I always say, reputation can’t be left up to the roll of the dice. They need to be managed and often come from ashes.

Maybe it took me a long time but the word “reset” has become awfully popular. I first noticed when it was used by GE’s Jeff Immelt in his Letter to Shareholders about the effects of the economy and how GE needed to reset itself in response to the global economy. I found it an effective word because it brought to mind a reset button. 

IMMELT: “I believe we are going through more than a cycle. The global economy, and capitalism, will be “reset” in several important ways. The interaction between government and business will change forever. In a reset economy, the government will be a regulator; and also an industry policy champion, a financier, and a key partner […] I think this environment presents an opportunity of a lifetime. We get a chance to reset the core of GE and focus on what we do best.”

Then I noticed President Obama using “reset” in reference to his visit with Russian President Medvedev. “I think that there has been a time over the last several years where Russian-U.S. relations were not as strong as they should be. What I said coming in is that I wanted to press the reset button on relations between the United States and Russia.”

Since I liked the term, especially for talking about my favorite subject of reputation, I decided to investigate whether it has been around for a long time or was fairly new.  In the chart below, you can see that the word reset has jumped 337% since 2000. As expected, the greatest jump occurred between 2007 and 2008.

Unfortunately I was not the only one to notice this trend. The New York Times Magazine columnist William Safire wrote about this popular new word in April 2009. I found the article online when I was searching to see if others were thinking the same thoughts. Apparently the reset button idea bloomed during the U.S. presidential election when it was used repeatedly by VP hopeful Joe Biden and President-elect Obama to describe their campaign strategy. Even secretary of state Hillary Clinton has taken to using the phrase now.  As Safire writes, Washington Post columnist Anne Applebaum mentioned the growing ubiquity, “Press the reset button. Is there any phrase more enticing in the modern lexicon? We all know what it means: Press the reset button, watch your computer reboot and presto! A nice, clean screen appears, and you start again from scratch.”

I am glad that “reset” is a trend and intend to use it as often as I can for describing reputation-building.  You have to reset your reputation now.  Until you press the reset button, your reputation will be ground zero. Resetting your reputation is the right thing to do. If you don’t like the word reset, you can always substitute reboot.

  Corporate responsibility is an integral component of reputation.  Even more so than ever because it matters to so many stakeholders – employees, customers, government, prospective talent, academics, media, bloggers and NGOs.  I think it might even matter to the financial community although perhaps to a lesser degree.  However, analysts have noticed its importance as we have seen with the proliferation of socially responsible investing funds.

In 2008, Weber Shandwick’s Planet 2050 corporate responsibility and sustainability practice conducted a proprietary analysis that demonstrated the rising prominence of corporate responsibility on leadership agendas. Corporate responsibility mentions in global Fortune 100 annual report CEO Letters to Shareholders increased 18 percent from 2003 to 2007. In 2007, energy efficiency and carbon emissions were the dominant corporate responsibility agenda initiatives addressed in Global 100 CEO Letters to Shareholders. These topics barely figured in CEO annual report Letter mentions in 2003. To a lesser extent, but still noteworthy, leaders in 2007 highlighted their eco-friendly products—such as hybrid cars and healthy food products—in their Letters to Shareholders. Volunteerism, a topic featured in 2003 CEO annual report Letters, appeared less frequently in 2007.

As business leaders seemed to increasingly  commit  to corporate responsibility initiatives prior to the economic meltdown, we thought we’d look into whether such efforts helped soften the financial blow of the stock market collapse in 2008.

Using the 2008 Fortune Most Accountable Companies list as the measure of corporate commitment to social and environmental goals, Weber Shandwick explored the relationship between accountability  and stock price performance within the Fortune Global 100. The Accountability Rating was first developed by AccountAbility and Csrnetwork and designed with Asset4.  Since nearly every company on this list experienced a share price decline during 2008, the analysis focused on the average percentage change of closing prices on December 31, 2007 and December 31, 2008. It was of particular interest that 9 out of the top 10 most accountable companies were European (GE was the only American company).

We found that the top 10 most accountable global companies performed better than the overall global Fortune 500 in terms of share price and profitability.  When compared to the 10 least accountable companies, the most accountable ones performed better. We were a bit surprised by the +1% lift in profitability among the least accountable and discovered that two highly profitable companies – Petronis at #99 and Berkshire Hathaway at #100 – were on the list, therefore driving the 1% increase. Even when we take Berkshire Hathaway out of the group, the difference is not as dramatic as we expected. The nine least accountable companies fell to -3% in terms of profitability. If Petronis and Berkshire Hathaway both come out the eight least accountable companies fall to -16%.

The analysis shows that even in an unprecedented  year like 2008, the most responsible companies  outperformed their peers. As my fellow colleague and founder of Planet2050 Brendan May said, “It is not surprising that effective and genuine corporate responsibility impacts the bottom line, in good times and bad.” Companies cannot afford to abandon their corporate responsibility efforts although it is understandable if progress slows in this economy.  Companies that abandon corporate responsibility and sustainability efforts are proof positive that it was all for show in the first place.

I have posted about scenario planning before and wrote about it in my last book as well.  Scenario planning is a good way to plot what your leadership might do when their reputation falls off a cliff. I have always been fascinated by the process, especially when it works.  In fact, I have a recent Royal Dutch Shell Scenario Planning book that I bought from Amazon about three years ago. I keep it out on my desk as a reminder of a smart way to plan. It was amazing to me that it sold commercially.
Today’s WSJ had an article on the return of scenario planning. It was very popular after 9-11 when companies felt the urgent need to prepare for such sudden disasters. Apparently it lost some favor as the economy became bullish and everyone lost their senses. A study by Bain & Co. which I have used in presentations showed that  scenario planning had soared from 1999 to 2002 as a risk management tool (up 30%) among senior executives.  Now it is back on the upswing as we face unprecedented economic challenges.

I did not realize that scenario planning first surfaced in the US Military in the 1950s and became popular with companies such as GE and Shell in the 1970s. My mistake for believing that Royal Dutch Shell was the source.

Peter Schwartz, a partner at the Monitor Group and former head of the Global Business Network where I first learned about him, says that scenario planning is a learning tool and for making informed decisions. Not just a tool for the worst case scenario but a process for learning how to make the right and avoid the wrong decisions. The article ends on an upbeat note – that perhaps scenario planning can be used to plot possible responses to a business upturn.

Same could be said about reputation recovery. Time to start. Never too early. Only too late.

“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.

    Recently reread GE Jeff Immelt’s Letter to Shareholders in its 2008 Annual Report.  A few comments.  I like how GE has a picture of its senior team in the introduction.  It is not the first time but it goes a long way in honoring the team.  I always find GE’s CEO Letters revealing.  The general theme is that GE along with the global economy and business in general have to be “reset” for the long-term and perhaps forever.  “The interaction between government and business will change forever.  In a reset economy, the government will be a regulator; and also an industry policy champion, a financier, and a key partner.”  Immelt calls it a reset world. The CEO is resetting the company to focus on three big themes – emerging market growth, clean energy and sustainable healthcare.

One of my favorite parts, of course, came when Immelt discusses GE’s reputation.  Immelt has often mentioned “reputation” in his CEO Shareholder Letters and clearly considers reputation a metric of success.  He said in an earlier CEO Letter (2002): “My own role on the GE Board is clear. I have two functions: lead the company as CEO with integrity, clarity and purpose, as measured by financial performance and reputation.”  This time he said, “Let’s face it: our Company’s reputation was tarnished because we weren’t the ‘safe and reliable’ growth company that is our aspiration. I accept responsibility for this. But, I think this environment presents an opportunity of a lifetime. We get a chance to reset the core of GE and focus on what we do best.”  

When I wrote my book on Reputation Recovery, I had a section on Resetting the Company Clock which came from a statement made by Nissan CEO Carlos Ghosn.  It is the role of the CEO to not only be the company’s reputation guardian but to reset the company clock when crisis strikes, winds shift or people do not recognize the urgency of the day.  The word reset is a good one.

Interestingly, Immelt notes that GE has instituted more scenario planning, presumably to see around corners and a new process to identify what he calls industry “naysayers” who might have something important to tell his unit heads. We call these people “badvocates” but either way, GE intends to listen more carefully than before.

In the last paragraph, Immelt says “GE will be a better company winning through this crisis.” I underlined the word winning.  In recent weeks, I have heard several CEOs use “winning.” Maybe something’s changing.