Posts Tagged ‘industry reputation’

Weber Shandwick’s annual calculation of reputation loss – the “stumble rate” – finds that a few more of the world’s largest companies retained their esteemed status as their industries’ #1 most admired company during 2012. This is good news.

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 2012 and 2013, 46% of the world’s largest companies experienced a stumble, slightly down from last year’s 49%. These companies did not have too great a stumble, however. On average, they dropped two places, falling from number one to number three in their respective industries. However, for those companies that did fall from their perches, the loss is agonizing. Boards of directors and CEOs will want to understand why their reputations eroded and why their competitors leaped upwards. Explanations will be in order.

Of course, the bright side of the coin is the non-stumble rate of 54%. This means that more than half of the industries in the Most Admired survey boast companies with durable reputations.

In addition to calculating the stumble rate, we also dig through the data, including the nine drivers of reputation, to glean some interesting insights about stumblers and non-stumblers. A stumbler is an industry whose top company last year is no longer the top company this year. What is interesting this year?

• 22 industries (out of nearly 60, give or take depending on the year) have never had a stumbler since we started monitoring the stumble rate in 2010. The most admired companies in these industries have been stalwarts of reputation: Automotive Retailing; Building Materials-Glass; Computer Peripherals; Consumer Food Products; Electric & Gas Utilities; Electronics; Entertainment; Household & Personal Products; Information Technology Services; Property & Casualty Insurance; Internet Services & Retailing; Metal Products; Mining, Crude Oil Production; Oil & Gas Equipment Services; Pipelines; Newspapers & Magazines Publishing; Railroads; Semiconductors; Apparel Retailers; Diversified Retailers; Food & Grocery Wholesalers; Office Equipment & Electronics Wholesalers.
• 13 industries have stumbled at least three times since 2010. The most volatile, with four stumblers each, are: Airlines, Energy and Life & Health Insurance. Those with three stumblers are: Computer Software; Consumer Credit Card & Services; Financial Data Services; Food & Drug Stores; Medical Equipment; Motor Vehicle Parts; Petroleum Refining; Telecom; Tobacco; Health Care Wholesalers.
• No one particular driver of reputation took a big hit or could be said to be the culprit for reputation erosion. The worst average declines among drivers across all stumblers were experienced only by two drivers – management quality and long-term investment. All other drivers declined by just one ranking position, on average. Perhaps some stabilization on what positively and negatively affects reputation is taking hold.
• However, four stumblers lost rank on all nine drivers. The hardest hit was the Airlines industry. The company that stumbled took the greatest blow on its quality of management driver (dropping 6 ranking spots). Ouch. Other hard-hit drivers for this company were innovation, social responsibility, long-term investment, product/service quality and global competitiveness (a loss of 5 positions on each of these qualities). The company that supplanted this stumbler improved on all of its nine drivers in impressive fashion, rising at least two rankings positions on each driver and four spots on two drivers (financial soundness and global competitiveness). This does not mean that this new “king of Airlines reputation” will necessary remain so…this particular company was also tops two years ago and, as discussed earlier, Airlines is among the three most volatile industries.
• From zero to hero in 12 months. One stumbler lost its enviable top position to a company that is a newcomer to the World’s Most Admired evaluation. This goes to show that even the most reputable companies need to be on guard from all angles – not just their traditional competitors.

Am trying to keep my eyes open. I arrived in Tokyo late last night or should I say early this morning and hoping to adjust before I hit the road visiting our offices, talking to media, presenting research on social CEOs and meeting clients. I thought it would be a good idea to look at The New York Times and understand a headline I saw about “fire ice” in Japan. Why that would necessarily keep me awake, I can’t explain. Perhaps I thought it would distract me from wanting to sleep.

But I was glad because I also found an uplifting oped from David Brooks. I was drawn into it because he started out talking about how he goes to conferences hoping they will provide him with fodder for his twice-a-week columns. His conclusion is that these conference conveners are the same ones that make it on the glossy covers of business magazines and other upscale publications. They are flashes in the pan. He then goes on to say that all those quiet, unassuming, downhome executives are the real movers and shakers we should be hoping to learn from. He says the following as way of contrast with the cover boys:

“Meanwhile, the anonymous drudges at American farming corporations are exporting $135 billion worth of products every year and transforming the American Midwest. The unfashionable executive at petrochemical companies have been uprooting plants from places like Chile, relocating them to places like Louisiana, transforming economic prospects in the Southeast. Most important of all, the boring old oil and gas engineers have transformed the global balance of power.”

Brooks pays homage to the “Material Boys” — the people who grow grain, drill for fuel and lay pipeline. He calls them the real winners. This peaked my interest because it was unusual to read such reputational support for the oil and gas industry but here it was. The oil and gas industry is usually a fairly maligned sector but Brooks gives them a thumbs up for providing jobs, keeping emissions down and making us energy independent in a big way. Always good to see a reputation shot in the arm.

Reputation is often high on agendas these days.  Years ago, it was not usually number one but among the top three to five items that kept boards and CEOs up at night. This week someone sent me an issue of Operational Risk and Regulation and I quickly breezed through the table of contents online when I noticed that they had an article describing a risk survey among operational risk managers. This is not usually the typical stakeholder group I get asked about so I took a look at the various types of risks that were keeping them up at night or at least, stressed out during the day. Reputational damage was at the top of their top 10 list for 2013.  When I turned to the fuller description on reputational damage, the first sentence was quite boldly stated. “A good reputation has never been easier to lose — though this may not be a problem for much of the financial sector, as it doesn’t have one.” I understand where the author is going with this statement but the financial sector does have a reputation, just not a particularly good one. A company or sector can have a good or bad reputation and in some cases, somewhere in between. Most every sector, person and organization has a reputation. And just as a company can lose reputation over night or in seconds, so can it begin the process of redeeming itself by beginning the process of being straightforward, transparent and communicative. The financial sector, like many others, has certainly been battered but it does not mean that it is not crawling back and trying to restore its credibility. If anything, the financial crisis of the past few years has taught the financial sector to be more humble and that might just be a good place to start.

Ordnance Survey, in association with Operational Risk & Regulation

A new reputation study by Pam Cohen, a behavioral economist for Dix & Eaton, was recently released. It appears that they are looking at various industries and chose the financial sectoras the first one. For this analysis, she drew on over two dozen data sources, government statistical information and industry rankings and surveys. Of the nine drivers of reputation, the top five that impacted corporate reputation in this industry were shareholder investment (ROI), CSR, transparency, sustainability and image. Cohen remarked: “While it is no surprise that ROI shows up among the top drivers of financial institution reputation, more telling is that corporate social responsibility is the number-two driver, and sustainability number four. This, of course, highlights our culture’s return to grass roots despite – or perhaps because of – the downturn in the economy. Values are viewed as being critical to organizational success and acceptance.” Cohen also mentions her surprise that “image” rose back into the top ranks of reputation drivers, a spot it has not held since a decade ago. To me, image is a peculiar term in many ways. When I first started in the reputation business, people used to respond to my answer about what I did as “oh, you do image or impression management.” That used to make me irritable because reputation is so much deeper than image and they were missing the point obviously. I think of image as fleeting, temporary and shallow whereas reputation mobilizes people to support a good company by investing in them, recommending them, believing in them and listening to them. But for this study, I am confident that image was a catch-all for reputation, trust and admiration, all of which Cohen references. I also found it interesting that “transparency” was third in the list of drivers of reputational impact which speaks to the importance of telling it like it is, not saying “no comment,” and being timely and relevant in company communications. Fascinating to me was that “ethics” or “good ethical conduct” did not appear on the list since ethical behavior has been so important in valuing companies of late. Perhaps ethical behavior falls into some of the other drivers and that information was not mentioned in the release.

The second industry they analyzed is retail. Using somewhat different criteria for reputational impact, Cohen found that the leading ones here were overall satisfaction, quality of goods and services, price/value, trust and problem resolution. They also looked at sustainability efforts, convenience and variety. Cohen used social media in this analysis which makes sense considering that social media can go a long way in resolving issues and refining products. When it comes to retail, the quality of products and services nearly always goes first. Makes sense.

I met Pam Cohen years ago when she was at the Ernst & Young Center for Innovation. Some of the research that I did back then on CEO reputation was fed into her analysis which was featured in Forbes. Glad to see that she is still working the reputation angle because her research is top-notch.

I wanted to return to the subject of CCOs. I just spoke via SKYPE to a group of communications professionals in Nigeria about the importance of CEO communications and corporate reputation. As I was preparing, I started thinking again about how useful the information we at Weber Shandwick gleamed from The Rising CCO IV was. This is the study we do annually with Spencer Stuart. One of the factors I mentioned in my talk this morning was how CCOs have to battle perceptions about the industry they are in along with their own company reputation.  When we asked CCOs worldwide what consumer attitudes were impacting their jobs the most over the past two years, their responses can be seen in the chart below. Industry reputation led the list. I have to admit being somewhat surprised. When we compiled this list for the survey, I was thinking that the economy and privacy had to be the biggest issues of the day when it comes to public opinion. The fact that privacy was so low raises the question about whether social media gets us all hyped up about privacy problems or whether CCOs have their heads in the sand when it comes to this particular issue. Not sure. What I do know is that industry reputation needs managing today and just adds another layer to the complexity of the CCO position.  And perhaps this is also why CCOs said that the top quality for success today is crisis management.  Not only do they have to manage their own company’s reputation and that of their CEO’s but they have to look at everything with an industry lens as well.  A crisis that happens to a competitor impacts everyone in the industry.  Today, reputations are painted with a very broad brush. Just in the past week or so, we have seen how the reputation of the financial sector is back squarely in the spotlight.

  Talking about industry reputation, you should take a look at Reputation Institute’s recent global RepTrak results about the ups and downs of industry reputation. Most industries have an average reputation with only three standing out – consumer products, food-manufacturing and beverage.  At the other end, the bottom, we see financial-bank, financial-diversified, chemicals, telecommunications, utilities, and way on the bottom tobacco.  Pharmaceuticals saw a slight increase over 2011.

Industry associations have a hard challenge ahead of them.  22 of the 25 industries were average or below. Being average is not good enough either in this catch 22 world.

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.

It has been an unusually warm couple of months here in New York. I can’t    help but think that global warming is staring me right in the face.  I often think of myself as a bear that hibernates when cold weather arrives. I often joke with my neighbors that they won’t see me until spring because I’ll be going into my bear cave for my “winter sleep” when the first chill arrives.  So the past couple of months have been an anomaly as I have wandered out doors more often than usual on the weekends. Of course I have to go to work and do the ordinary errands that surround my life but given the choice, I stay inside. Maybe that is why I like to write about reputation because it gives me an excuse to sit in my little office cave that is closed off to the world.

All of this got me to thinking about how climate change gets communicated today when there is criticism about  the science after controversies arose from the release of stolen emails from the Climatic Research Unit (CRU) at the University of East Anglia. This happened a year or two ago.  Undoubtedly this is the perfect case study for how an industry (climate change scientists) suffered reputational damage and now has to recover and restore reputational equity. Climate change skeptics were fairly adept at effectively persuading many in the general public to doubt the scientific validity of global warming.

I was glad to see an article in the New Scientist (sorry, you need a subscription) by Robert Ward (policy and communications director at the Grantham Research Institute on Climate Change and the Environment at London School of Economics) on how some of the reputation recovery methods that I recommend in my book might be applied to regain confidence and trust in climate science.  He sees the situation right, “Even if the claims of misconduct and incompetence are eventually proven to be largely untrue, or confined to a few bad apples, mud sticks.”  This is a truism — no matter how much science you have on your side, it is sometimes never enough when it comes to public opinion.  Sometimes the facts just don’t matter as much as they should in a perfect world.

Ward is right that hope is not a solution to rebuilding reputation. Many CEOs used to think they could outlast controversy but in fact learn the hard way that it only extends the problem.  ”Communicating tirelessly” — one of my recommendations — is the right path forward.  ”No comment” does not work as it used to. Whether it is finding neutral partners or independent coalitions to bring additional voices into the discussion or actually training climate scientists to transparently talk about and defend the science — its certainties and uncertainties, communications will do more good than harm in this digital world.

An interesting analysis of temperature records appeared in an article in The Economist  which speaks to the importance of bringing in a third, fourth or fifth party opinion to validate scientific findings.  I read it on a plane to Europe in November but kept it because it made commonsense as an approach to understanding the climate change debate — is it getting warmer or not?  Let me just add here that the topic of global warming is a lot more complicated than I will ever understand — gaps in readings, different criteria, different types of thermometers, urban settings where temperatures might be recorder higher, etc.  But interestingly, the Berkeley Earth Surface Temperature project stepped into the argument on climate change 18 months ago to test existing analyses. And they did so with the addition of skeptical scientists and funders as well as Nobel prize winners. As it is often said, let’s open the kimono and thus they did. And they found that the existing temperature records that the earth was warming was not far off the mark from what had been previously reported.  A peer review is underway and I look forward to learning more about that when it is released.  Next up, however, for climate scientists and institutions affiliated with climate change,would be communicating openly and collectively (and maybe relentlessly) to explain how the newest findings answer questions, raise new ones and guide us as to what we need to be doing Now not Later.

Industry reputation is always changing. One of the major shifts in reputation today is the collateral damage that one company can inflict on its entire industry. Wish there was a more positive incline in how consumers see American business and government. Gallup’s recent analysis is now out and provides a look into who is up and who is down. It is no surprise that the real estate industry reputation has declined preciptiously from 2001. Even my own industry — PR — has witnessed a decline besides the fact that it is doing well.  The computer and Internet industry look like they are surviving the best with positive lifts in reputation among US consumers.  

The drop in perception of government, the deepest decline, seems to the theme of the day. To learn more about why that might be…take a look at our research on Civility in America. It says it all. [Have to add that the CEO of Yahoo, Carol Bartz, was fired via a telephone call. How civil is that? Regardless of what was happening at the company, what happened to the pink slip?]

I’ve been very busy so have not had a chance to mention two studies related to reputation that are worth reviewing.

The first one is about industry reputation which continues to intrigue me. The Harris Interactive Poll found that the most credible industries among 2,152 adult Americans are supermarkets, hospitals, banks and electric and gas utilities. They have been doing this research since 2003. Not too surprisingly but disturbing nevertheless was that when asked this question about 17 industries, a large 48% said “none of these” industries are trustworthy. This was the highest number of people saying this since 2003.  Overall, no one industry is doing particularly well and this speaks to the overall downturn in perceptions of business over the decade.

The second survey that should be on your radar is research by Nora Ganim Barnes. She has been diligently surveying Fortune 500 companies with regard to their social media usage.  Social reputation is a growing component of reputation which is why I am writing about this. This is the third survey that she has done on this topic at the Center for Marketing Research at the University of Massachusetts Dartmouth. Here are some of her key findings for 2010 (conducted in August/September 2010) which are great to track over time.

1. One quarter (23%) of Fortune 500 companies have a public-facing corporate blog with a recent post over the past 12 months. Two years ago, only 16% had blogs so this is a healthy increase.

2.  When it comes to industries, the industries with the most blogs are computer software, peripherals and office equipment. This includes companies such as HP, Microsoft, Apple. There have been increases in blogs in the specialty retail industry (Best Buy as an example) and telecommunications as well (Verizon, AT&T).

3. About one third (32%) of top 100 ranked Fortune 500 companies had a blog, a slight dip from 38% in 2008. 

4. A whopping 90% of  Fortune 500 blogs take comments, have RSS feeds and take subscriptions. That is good news to see that these blogs are interactive and not one-way.

5.  They looked at corporate Twitter accounts (had to have tweeted in the past 30 days) and 60% had Twitter accounts, a jump up from 35% in 2009. Nine of the top 10 Fortune 500 companies had accounts and consistently posted.  Specialty retail companies were the most likely to have Twitter accounts. Since they are so consumer-facing, makes sense.

6. A fairly large 56% of the Fortune 500 companies are on Facebook. Not bad but not up to the level it should be and will be over time.

Industry reputations are still failing but social media seems to be exploding (Twitter and Facebook) among the top companies in the US.  We are witnessing the Great American Reach Out. Industry reputations could begin the climb upwards if there was greater adoption of interactivity. No doubt industries will take this seriously and jump onboard. CEOs as well will become more socialized in the years ahead.

This week I joined a panel discussion on reputation and trust at American Banker/US Banker’s The 25 Most Powerful Women in Banking national workshop.  The women in attendance were all very senior women with years of experience. I spoke about the changing world of reputation and how complex it had become. No longer are we living in a world where large corporate advertising campaigns suffice for reputation-building. Today, Google is a reputation management system not a search engine, microconstituencies are increasingly influential, the visible arm of government is no longer faint, an activist general public matters, and the media is never turned off. I talked about the radical changes in industry reputation – such as the financial sector – and how little attention is paid today to the tobacco industry compared to a decade ago where they seemed to be the only ones who did not lightly offer their employer’s name when they walked into a room. In fact, there are few industries that have been untouched by issues and stumbles today.  As part of my comments, I mentioned how CEOs and companies are perceived to manage a crisis or catastrophe impacts reputation like never before.

The workshop was terrific. I was very impressed with the senior women in the room, their words of advice and the program itself. Thanks to Barbara Rhem for making the day so meaningful, downright educational and energizing.  I think every woman there would agree. A few things stuck out.

• The regulatory environment has placed much demand on banks and other financial institutions. Many agreed that the demands required an increasing amount of time to the point that it was hard to focus on improving the bottom line.
• There is no more climbing the ladder, it is climbing the lattice. The work place is more of a web than a straight chute to the top.
• Sylvia Hewett, founding president of Center for Work-Life Policy and prolific researcher and who I admire, spoke about new research that she will be publishing soon on how women can succeed. She talked about pitfalls or tripwires that get in women’s way. She talked about women clinging to “performance” while men focus on “relationships.”  And it takes relationships to succeed. Also, women have to do better at figuring out how to use their friendships or professional relationships to get ahead and not think that they are violating their relationships. Additionally, women need to not share their ambivalence as readily as they do.
• True or not, an interesting idea. GE’s CEO was mentioned as asking executives how many loyal lieutenants they have to determine whether they have the support when things get rough or to push initiatives through.
• As sexual politics and innuendos get exposed, it is becoming increasingly difficult for male and female executives to dine together. Had not thought of that. Ugh. Someone mentioned how at one Fortune 500 company, mentoring relationships where men and women are involved now include an executive coach for that very reason.
• The need today to deal with “ambiguity” and “uncertainty” all the time today.  How we have to operate in the “grey zone.” This of course applies to men as well as women.
• The importance of boards in ferreting out risk and how women board members need to speak up and be strong when they things being done wrong.
• Many of the women I sat with or overheard mentioned how they were used to being the only woman in the room in their companies and at meetings.  Remarkable how some things never change.