Posts Tagged ‘reputation recovery’
There are many ways to rebuild reputation but one way that companies might consider when recovering from a crisis is developing a Compliments page where employees and non-employees can anonymously thank those front line or other employees for doing their jobs well and conscientiously. I spoke to a company a short while ago as they were dealing with a reputation crisis and suggested that they start a Compliments page where community members could thank those front line people they encounter frequently for doing a honest day’s work. It could help. Of course, the site would attract uncivil types but there must be a way to delete them if they stray too far from the site’s purpose and goals.
Some universities have being doing this for a while. It started at Queen’s University in Ontario because the founders wanted to find a way to counteract bullying. University of Pennsylvania has a Compliments Facebook page as does Penn State. On the U of P site, people thank others for returning their lost wallet, for the sense of accomplishment they feel after doing nonprofit work, to a capella group for their beautiful sound and send support to a fellow classmate struggling with pain. The U of P Compliments page has the goal of “learning to do good and spread good.” Penn State’s site says that it is a social project to spread happiness.
Compliments pages are a wonderful idea considering that incivility that can sometimes surround and engulf us. In Weber Shandwick’s Civility in America 2013 study, we found that 70 percent of Americans believe incivility has reached crisis proportions. With Americans encountering incivility more than twice a day on average (2.4 times per day), and 43 percent expecting to experience incivility in the next 24 hours, dealing with incivility has become a way of life for many. Maybe it is time to turn this tide of negativity.
Compliment sites can be contagious and make people feel good despite their company’s blemished reputation. It could give an employee that extra boost they need to be productive and positive when they find everything uncertain. Hearing a compliment might keep an employee loyal to his or her company and make them feel they are doing their part in getting their company’s reputation back on its feet. Companies might consider trying this and seeing what happens. Reputations get repaired in the oddest ways.
It has been a crazy few weeks — traveling to Berlin, San Francisco and Istanbul. But I am back in the USA. So here are a few observations about things I’ve read and learned that I wanted to share:
1. Deloitte Touche Tohmatsu just issued a new report on reputation risk. Reputation risk was the top strategic risk among 300 global C-suite executives surveyed. The survey found 40% of respondents listed reputation as their top risk concern today, with their business model second at 32% and economic trends/competition third at 27%. In 2010, reputation risk was at 26% so we can see that it has moved to the very top of the C-suite agenda. Henry Ristuccia, global leader of governance, risk and compliance at Deloitte had this to say (love this quote): “Reputation risk is going to always be the meta of all risks…how you manage the underlying factors that could affect the organization’s reputation or brand…how resilient are the people, the culture?” The meta of all risks!
2. In Istanbul, I spoke about Reputation Warfare, the theme of my Harvard Business Review article. The occasion was the 2nd International Reputation Management Conference at Kadir Has University. It was very impressive because there are not many reputation management conferences in this world (Reputation Institute holds one annually) and here I was in Istanbul. Very forward-looking of the university. The summer protests in Turkey at Gezi Park was an interesting backdrop to my discussion on using social media as an opportunity to defend one’s reputation in addition to the risk. Additionally, there was discussion about how the protests had affected the reputation of the country. Tourism took a hit in July but from the looks of it, it was pretty healthy this week. I am going to keep a watch out for how Turkey repairs its reputation and what types of reputation recovery strategies are employed. All very interesting and doable. I also experienced some of the Turkish hospitality that they are so well-known for.
3. Just this past week, I read two articles on how Goldman Sachs and JPMorgan are repairing their reputations. All in one week. Clearly this is a topic that has grown exponentially and particularly in the financial sector. The Economist article on Goldman Sachs was fascinating because it described the scenario setting that is being used to train vice presidents to better understand their responsibilities to the firm when faced with ambiguous and complex challenges to doing business today. The case study is preceded by a film that is described this way: “…an emotive documentary on the history of Goldman Sachs, filled with interviews of luminaries and former executives, each hammering home the virtues that supposedly make the firm distinctive—teamwork, personal accountability and the legendary exhortation by Gus Levy, a former leader of the firm, to be ‘long-term greedy’, by which he meant it should forgo short-term profits if they came at the expense of client relationships.” I mentioned in a previous post how Goldman Sachs is super-engaging in training which included their CEO from the start. In addition, incentives have been revampedd and tied more to collaboration and teamwork. The WSJ article on JPMorgan’s CEO Jamie Dimon focuses on how he is converying “business as usual” as he faces an imminent federal lawsuit, another revealing reputation recovery strategy. He has been touring midsize cities such as Cleveland, Oklahoma City and St. Louis meeting with local businesses and community leaders that are supported by JPMorgan’s philantrophy. According to the article, Dimon’s message are fine-tuned, upbeat and focused on the customer.
Many clients ask what is the potential impact of a crisis. How long will it last? When will the scrutiny die down? How does it compare to other scandals or crises? How much will it impact my reputation? When should we start the recovery process? The New York Times’ insanely smart Nate Silver who writes the FiveThirtyEight blog had an interesting post yesterday on which political scandal — the IRS targeting of conservative groups or the Benghazi attack in Libya — would be longer-lasting and possibly impact the next election cycle. Silver chooses the former (the IRS scandal) and explains so in his article. More importantly for my interests and for those that follow me was Silver’s five questions that he developed on whether a scandal “has legs.” He credits Bill James’ Keltner list for the initial questions. To determine whether reputational injury will be enduring, these questions are a good place for companies, leaders and others to start:
1. Can the potential scandal be described with one sentence, but not easily refuted with one sentence? Using the 140 character Twitter test is one good way to see if the scandal has legs. Can you say it in 140 characters. Or try it with as few as 16 words which if you recall is all it took to sink former President Bush in 2003 when he said in his State of the Union Address, “The British Government has learned that Saddam Hussein recently sought significant quantitites of uranium from Africa.” Silver’s argument that if it cannot be easily refuted in a similarly short string of words, you have a problem on your hands. I might add that it could be even less than one sentence…it could be a video or photo today.
2. Does the scandal cut against a core element of the candidate’s brand? The word candidate could be substituted for company or CEO. In this case, a company that proclaims transparency but is caught doing damage to the environment behind the scenes or engaging in financial manipulation is going to lose its credibility 1-2-3. Think about Enron and their much heralded reputation for innovation at the time. It turns out that their innovativeness was in their financial shenanigans, not in reinventing business processes that led to success. Even though Enron was long recognized by Fortune as one of the most admired and innovative companies in the world, the scandal essentially decimated that impression. In fact, it took its leaders from pinstripes to prison strips.
3. Does the scandal reinforce a core negative perception about the candidate? Or company/CEO in this case. As Silver says, “A scandal can be equally dangerous if, rather than undermining a candidate’s strengths, it reminds voters of what they like least about him.” I think that Congressman Anthony Weiner’s late night racy Twitter sexting reminded people of his unlikeability and brashness. Perceptions that confirm what you already thought of a person or company are hard to shake loose. Another example would be BP’s then CEO, Tony Haywood, who at the time said that he wanted his life back while oil was spilling into the Gulf of Mexico. Unfortunately, the general perception was that BP did not care about the damage being done to the environment by the oil spill and the CEO’s statement only reinforced that negative reputation.
4. Can the scandal be employed readily by the opposition without their looking hypocritical, risking retribution or giving life to a damaging counter-claim? Most competitors in business do not take advantage when their peers are knocked down by scanal. Companies today easily recognize that a scandal for one company affects all and impacts the entire industry. The question for company reputation is “Can this scandal spread to peers and further damage the industry sector that might already be struggling?” Not a perfect example I fear but an example that comes to mind might be the quality issues that emerged years ago in China when lead paint was supposedly found in children’s toys. That perception continues to linger for products manufactured out of China today. I was recently in a children’s store when a customer asked the cashier where a T-shirt was made because she only bought children’s clothing made in the USA.
5. Is the potential scandal occurring amid an otherwise slow news cyle? This is a good question to ask when a potential reputation disaster emerges. There are countless examples of company reputation debacles that get drowned out by other news that draw the media’s attention. I always think about how some recalls get scant coverage when bigger business stories are erupting. Or how some stories are not uncovered until the cycle is very slow and investigative reporting resumes. Silver mentions how the crude measure of a Google search shows that today, American’s appetite for political news stories is at an eight year low. So President Obama and the Democrats might just avert the sting from the IRS scandal because it’s not the tantalizing subject for readers as it might have been eight or nine months ago. Perhaps when the Dow is reaching 15,000, some stories just fade away.
I was eager to read JPMorgan Chase CEO Jamie Dimon’s Letter to Shareholders this year. Considering the London Whale episode of the past year, I thought his Letter would be revealing. He clearly did not skirt the issue. I cut and paste some quotes below which are direct, apologetic and conciliatory. Also, I used the picture from the Letter to Shareholders here because it was surprising in that it almost looked like a man running for office but mostly because it is something that we advise clients which is to make better use of photos of their CEOs and execs with people (preferably employees) and not alone in some corner office isolated and solitary. You can’t know what is going on in your company by spending too much time in the office. It derails CEOs all the time.
What I like was how he presented his lessons learned for his reputation recovery plan. They are bulleted below as follows and include a favorite piece of advice of mine — problems don’t age well:
- Fight Complaceny
- Overcome conflict avoidance
- Risk Management 101: Controls must match risk
- Trust and verify
- Problems don’t age well
- Continue to share what you know when you know it
- Mistakes have consequences
- Never lose sight of the main mission: serving clients
On Responsibility: “I also want our shareholders to know that I take personal responsibility for what happened. I deeply apologize to you, our shareholders, and to others, including our regulators, who were affected by this mistake.”
On Complacency: “Complacency sets in when you start assuming that tomorrow will look more or less like today – and when you stop looking at yourself and your colleagues with a tough, honest, critical eye. Avoiding complacency means inviting others to question your logic and decisions in a disciplined way. Even when – and especially when – things have been going well for a long time, rigorous reviews must always take place.”
On the Aftermath: “There are a few things, however, that occurred this past year that we are not proud of. The “London Whale” episode not only cost us money — it was extremely embarrassing, opened us up to severe criticism, damaged our reputation and resulted in litigation and investigations that are still ongoing.”
On Reputation Committees: “That’s why we have a risk committee framework within the firm with extremely detailed reporting and many other checks and balances (like reputation committees, underwriting committees and others) to make sure we have a disciplined process in place to question our own thinking so we can spot mistakes before they do real damage.”
Reputation mandate. The new CEO of Barclays made it clear to employees at the beginning of the year what it would now take to repair the bank’s reputation and equally clear about what they did not want. The new CEO pointedly said in his memo to 140,000 employees that things were going to be different now and employees should know that…”The rules have changed. You won’t feel comfortable at Barclays and, to be frank, we won’t feel comfortable with you as colleagues.” Anthony Jenkins took over from CEO Robert Diamond who resigned when news broke out about Libor manipulation or rate-rigging.
Jenkins believes that the prior regime put short-term profits ahead of values. Now that he was in charge, people have to commit to their reputation restoration program or hand in their IDs. Their program is called the TRANSFORM program and is based on living their values to restore Barclay’s reputation, not just to restore their bottom line. As part of their rebuild, all employees viewed a film of the bank’s history (“Made by Barclays”). Their new values and purpose, developed by their senior leadership group and Executive Committee along with many others, were also unveiled. Their Purpose is to help people achieve their ambitions “in the right way.” Their five values are Respect, Integrity, Service, Excellence and Stewardship. As this new program rolls out, people will be measured and rewarded according to these values. Sounds good. Ambitious. Doable. Will be watching.
I had heard alittle about some reputation problems (tax avoidance) that Starbucks had encountered in the U.K. over the past couple of months and just read this story about how they are working to counter their dip in reputational equity with a little frothy promotional offering. Now until mid-February, they are discounting coffees on Mondays to earn back customers’ trust and show that they are sorry. I was particularly enamored of this advertising campaign which is fun, clever, positive and should definitely help. It qualifies as a reputation recovery uplift.
I was recently interviewed in the Tennessean about how a hospital in Nashville, Saint Thomas Hospital, was handling the crisis related to the fungal meningitis outbreak. The question posed to me by the reporter was how this public health disaster caused by a New England compounding company would ultimately impact the hospital’s reputation. Like many people, I have been following the crisis but did not know much about how Saint Thomas Hospital specifically was dealing with the contamination and its aftermath. Of the nearly 17, 500 vials, 2,000 were sent to the St. Thomas Outpatient Neurosurgery Center. The Clinic is on the St. Thomas campus but not wholely affiliated with the hospital. Apparently the high number of people coming to the hospital’s emergency room is where the problems with the compounded steriod drug injected into people for back pain first came to light.
After the reporter contacted me, I immediately went to Google to learn more about how the hopsital was dealing with the crisis and found this interview with the CEO of St. Thomas Hospital, Dawn Rudolph. I was very impressed with the steps she took to lead the hospital through the crisis and it was apparent to me that she had taken her crisis preparation seriously and had good judgement. It is worth reading how she and her communications department prepared talking points for medical staff, worked with the Centers for Disease Control and Prevention and Tennessee Emergency Management Association, coordinated with the clinic to determine who would do what and let people do their jobs while she fiercely observed what was happening. Some of her actions that are worth noting when you want to recover your reputation post-crisis:
1. Stay out of the way of those who have a job to do such as the clinical care teams
2. Surround yourself with good people
3. Anticipate challenges
4. Make yourself available. Clear your calendar.
5. Plan for the short-term. Ask Rudolph’s question, “What am I missing?” and take answers from everyone.
6. Be prepared for misinformation that circulates in the media or online. (The crisis was incorrectly tied to a viral meningitis scare in the area)
7. Give your team talking points for them to explain what is happening to their families.
8. Watch your team carefully. The psychological effects can be tough to swallow.
9. Pointing fingers and trying to explain who is at fault is not going to be well understood when people’s lives are in danger. (The hospital and clinic are different entities but Rudolph did not spend her time making the distinctions for people who were worried about the health of their family members. Very civil and very impressive.)
The best part of the interview was what she said about what she wishes she had done, “I would have immediately grabbed an administrative person and had them pull a chronological list of what had occurred that day relating to the crisis. We did that in spots, but things evolve fast. I would have said, ‘you’re designated to be the record keeper and check in several times a day with team leads,’ because it was so multidimensional.’”
I was pleased to be alerted to a copy of Reputation Review 2012 by Rory Knight, chairman of Oxford Metrica. Years ago I used some of their research in my book on CEOs and particularly on how CEOs can build their reputation or kill it when crisis strikes. Knight just completed his annual reputation review for AON, the global risk management, insurance and reinsurance company, and as I expected, the report has insightful and timely information for those seeking to better understand the impact of crisis on a company and its bottom line.
Knight reviews the top crises of 2011 such as TEPCO, Dexia, Olympus, Research in Motion, Sony, UBS and News Corp, among others. His company looks at the recovery of shareholder value following crisis. Among 10 crisis-ridden companies in 2011, only News Corp found itself in positive terrain afterwards. In fact, what they found was that 7 of the top 10 lost more than one third of their value. Two companies lost nearly 90% of their value. These companies clearly had to put big restoration processes in place afterwards and I would suspect paid good dollars to firms to restore their good names and overlooked other everyday business to move forward. Oxford Metrica says: “Managing the restoration and rebuilding of reputation equity is an essential part of the value recovery process following a crisis. Reputation equity is a significant source of value for many companies and a coherent reputation strategy can be the difference between recovery and failure.”
The big takeaway from the report, or at least what seems to resonant with me, is that there is an “80% chance of a company losing at least 20% of its value (over and above the market) in any single month, in a given five-year period.” Those odds are not good and as Knight says, screams for having a careful and well thought out reputation strategy in place before a minor event turns into a raging crisis and monopolizes headlines, offline and online. A solid reputation strategy will also help guide the reputation recovery process which is often too hurried. This is the kind of advice that I write about in my book on reputation recovery and underscores having a strategy so you do not find yourself in this situation in the first place. Additionally, Weber Shandwick’s stumble rate of 43% for the world’s most admired companies tracks with Knight’s high rate of expectant reputational downfalls. It is not good at either rate.
The report outlines a process for managing a company’s reputational equity. They are 1) Measure your reputation through benchmarking and vis a vis your peers; 2) Identify the drivers of your company’s reputation in order to allocate resources properly; 3) Prepare a strategy for recovering your company’s reputation; and 4) monitor your reputational equity often and respond accordingly when risk emerges.
The report analyzes the reputational losses of Olympus and Research in Motion after their reputation-damaging events. It is worth reviewing. It also takes a look at the financial results from TEPCO after the tsunami hit Japan. Apparently, 90% of TEPCO’s value was lost, over $US37 billion. Oxford Metrica estimates that events associated with mass fatalities have double the impact on shareholder value than do reputation crises in general. I believe they are right. BP’s Gulf of Mexico tragedy which involved over two dozen deaths wiped off substantial shareholder value off their books.
Where I wholeheartedly agree with Knight is when he talks in the report about the impact of senior management on crisis and the need for that management to lead with transparency and openness.
“For mass fatality events particularly, the sensitivity and compassion with which the Chief Executive responds to victims’ families, and the logistical care and efficiency with which response teams carry out their work, become paramount. Irrespective of the cause of a mass fatality event, a sensitive managerial response is critical to the maintenance and creation of shareholder value.” One of the takeaways from the report is that winners and losers, reputationally, can be determined by how the CEO responds to the crisis.
The report contains an article by Spencer Livermore, Director of Strategy, at Blue Rubicon, a reputation consultancy. He quotes a stat that is dear to my heart, “Oxford Metrica’s analysis shows that companies which open up more following a crisis and tell a richer, deeper story are valued more highly, increasing share price by 10 per cent on average over a year.” He calls it the communications dividend which comes from investing in communications. Years ago I wrote an article for Ernst & Young’s Center for Business Innovation called Communications Capital and the idea was similar – the right communications can increase market value and strengthen reputation. As Livermore says, “We can make communications worth hundreds of millions more simply by making them better understood.” Having the right compelling narrative built on a well thought out reputation strategy is worth its weight in gold today.
Years ago when I wrote my book on reputation recovery, I told how disgraced Tyco International waited until they had proved themselves before launching a new advertising campaign. I wrote:
“When it was time to formally declare that the recovery process was officially in place, new CEO Breen initiated two noteworthy advertising campaigns. The first introduced Tyco’s brand-new 13-person leadership team that replaced the entire previous executive team. The advertising targeted to Wall Street, legislators, and employees featured the following statement accompanied by individual executive’s signatures: ‘‘We signed on because we believe Tyco has a bright future. We signed below to show you we mean it.’’ The signatures underscored the point that these executives had personally signed up for the mission. The campaign underscored how Tyco’s new leadership team was standing shoulder to shoulder behind Tyco’s improving reputation. The 13-person team portrait also communicated that new leadership was focused on the team, not the individual. According to Jim Harman, Tyco International’s vice president of advertising and branding, ‘‘The message behind this campaign was that Tyco had hired senior managers with the highest level of integrity from diverse manufacturing companies.’’
The advertising served as a reminder to influential stakeholders that Tyco was well on its way to rebuilding the reputation it lost.
AIG has now joined these ranks. If you recall, AIG was the recipient of the largest government bailout during the recent economic crisis and was on the short end of the stick when it came to public outrage. Since the new CEO, Robert Benmosche took over in 2009, AIG rebuilt its business and began paying back its loans to the US government. No one believed they would do it. And yet just yesterday, the government sold off what was left of AIG securities for a surprisingly big profit of nearly $18 billion in profit. Although they launched this new YouTube campaign about their comeback several weeks ago with the tag line, “Thank you, America. We’re proud to be keeping our promise to stand by you,” their timing is right and I dare say they hit the right notes in the campaign.
You’ve heard this statement before. “What you spend years building, someone can destroy overnight.” I have probably written this several times on this blog when talking about crisis and reputation risk and I certainly wrote something very close in my book on reputation recovery. Well today it was cited in an article about GM‘s former CEO Rick Wagoner. The article was about his graduation speech made at Virginia Commonwealth University. A short 12 minute speech about “taking risks and accepting defeat gracefully.” He has been silent for over three years. Talk about grace. But in his closing lines, he made the statement about building and losing reputation which Mother Teresa apparently said (I did not know and am glad to have learned the origin of this statement). And he added his own two cents at the end to this famous piece of advice about reputation. He said “Build anyway.” A good reminder to those who wonder if being CEO is worth it or leading a country, I might add.