I was wondering the other day whether CEOs and boards were paying too much attention to what was measurable and not enough to what mattered. As companies increasingly focused on complex financial instruments and sub-prime fast money, leaders seemed to have lost sight of what mattered. If boards spent more of their time asking questions such as how the company’s values were being followed each day and whether customers were satisfied enough, perhaps we would not be in the economic mess we are in now. Imagine how businesses might run if the bottom line was core values and net promoter scores (would you recommend this company to someone else). At least corporate responsibility is now part of the triple bottom line (economic, social and environmental).

As I was thinking about this blog post, I came across an interview by Maria Bartiromo who has a BusinessWeek column. She interviewed former Time Warner CEO Jerry Levin. Bartiromo was asking Levin about lessons learned since being the maestro behind the failed Time Warner-AOL merger. Levin says:

“First of all, I think I realize now that there was a rather parochial zone of interest where all of my relationships—maybe even my relationship with myself plus or minus—were based on Time Warner’s destiny. If something didn’t touch on any of the businesses of Time Warner, then I didn’t have any interest. The other thing is: There wasn’t a sufficient understanding that it’s O.K. to be open and vulnerable, to ask for help. To state it in different terms, it’s probably helpful to invoke the feminine principle and be compassionate, empathetic, understanding, give respect to everybody, don’t get deluded by the natural hierarchy. And don’t get too self-satisfied that you have all the answers.

I believe the importance of the capitalist system, the way it’s been structured. But there is such a focus on delivering those returns almost without any understanding that there are deeper issues that management is also about—humanism and respect for people in the company; serving the public interest; higher obligations to yourself and to the world. Very few mission statements take that into account.”

Levin helps me make my point. Maybe we need to figure out how to focus on what matters in addition to or (at least equally to) what we measure.

An interesting article appeared in Fortune at the end of May. Patty Sellers interviewed former CEOs of  once-beloved brands’ JetBlue, Starbucks and Motorola on why they lost their jobs and what they would have done differently. All of these men’s reputations were singed by their stumbles but it should be said that they also faced incredibly difficult challenges that persist to this day. JetBlue is dealing with the rising price of oil, Starbucks is closing stores left and right as its performance continues to weaken and Motorola’s cell phone unit is still struggling. Neeleman was JetBlue’s founder whereas in the case of Starbucks, its founder Howard Schultz is back. For whatever their reasons for being dethroned, listening to what they would have done differently to keep their reputations in tact is interesting. Sellers’ title for the article is apt: Lessons of the fall.

David Neeleman (JetBlue) – “I realize it now that I’m a board member, looking at the company through this little hole once a quarter at a four-hour meeting – board members don’t know that much about the company. They really don’t. I would’ve been much more engaged with the board. ..I didn’t have time to update the board on everything. If you don’t, somebody else will. You have to be able to give them an accurate picture of what’s going on, or they develop their own perceptions and start creating their own stories. And then they make their decisions. How do you keep these people up to date and give them the whole picture.”

Ed Zander (Motorola) – “I go back and the big thing was people. I didn’t’ move fast enough on some people.”

Jim Donald (Starbucks) – “My worst decision was not investing earlier in international. The international markets don’t have as quick returns as the U.S. But if I’d known the U.S. economy was going to crash, I would have invested earlier.”

The reasons for their falls are common  – not communicating one’s own narrative enough, making bets on the wrong people and slowly reacting to market warning signs. Reputations rise and fall on the first two over and over again. In all the work I have done over the years on building CEO reputation and managing CEO transitions, consistent communications and picking the right people are almost always at the top. The latter reason for stumbling – predicting market shifts — is often easy to detect but hard to act soon enough. Take a look at the sub prime mortgage failures that have brought down entire sectors and impacted global economies. The signs were there but few responded in time.

Reputation management at the top can be tricky business.

I recently read in Financial Week that only about three percent of S&P 500 companies have stand-along risk committees as part of their boards of directors. Found this particularly interesting considering that risk has become a major issue these days. Of course some of the most well known recent corporate failures had board risk committees such as Bear Stearns and Northern Rock. Therefore, having risk awareness at the tippy top it is not a sure fire solution to avoiding crisis. It does say something, however, about a company’s commitment to reputational issues. All in all, it is a good thing.

Another piece of information that caught my attention recently was something from Barbara Reynolds of the U.S. CDC (Center for Disease Control). She was quoted as saying that a whopping 90 percent of a crisis response is communications. There is a lot of truth in that. The irony of her statement according to Robert Alvey, a Hurricane Katrina crisis communicator who wrote the article, is that “businesses and agencies allocate on average one percent of their overall budget to crisis and risk communication. If they do have a plan and exercise it, only nine percent of that drill tests communications.” Again, a frightening truth. In this age of “gotcha” media, more resources and crisis simulations are imperative. Sometimes I wonder what companies are thinking.

I was interviewed this week by Leo Hickman of The Guardian about a crisis at Primark, the successful fashion retailer in the UK. The BBC  Panorama show exposed child labor issues in Primark’s production among three suppliers in southern India. The CEO of the parent company, ABF, George Weston responded quickly and forcefully. I went to the Primark web site and liked what I saw. Their actions and statements are quite visible on the web site and there is no attempt to push the crisis deep into the web site. They mentioned how they had dealt with a different supplier in the past who had committed wrongdoing, reported their investigation into these suppliers over the past 18 months and their apparent deceit, and reinforced their ethical standards and code of conduct. Primark provides a good Q&A as well as videos on how their clothes are made and an interview with a key director who is visibly outraged at the suppliers for harming their reputation and misleading them.

As I was quoted in the Guardian article, this is a “smudge” on their reputation but their quick and forthcoming response helped keep their reputation capital steady. However, they are now in the spotlight and cannot afford any other ethical questions to be raised

I continue to clip articles to comment on and share on this blog. Many times I find these articles while sitting on an airplane and rummaging through the papers I habitually pick up at newsstands. Because I am usually less distracted while sitting on a plane, I seem to enjoy them more. The rush of getting through the paper or the Internet news during the weeks I am in town require as much attention but my mind gets interrupted easily by all the visual stimuli, immediate work demands and inability to concentrate beyond 15 minutes.

Stefan Stern writes for the Business Life of the Financial Times. I met him while visiting London several months ago on the rainiest day I ever remember. It was monsoon-like weather in London. However we had a great conversation about my work on reputation-building and reputation recovery, my book and I had the chance to tell him how much I enjoyed his columns. I cut out (or should I say teared apart) one column from June 10 about change management.  Stern described two change management programs which interested me greatly because of my own recent experiences. One was with high speed passenger train Eurostar and the second with Heathrow’s newest terminal – T5.

My Eurostar experience was spectacular. The rain from Geneva (I think) to London arrived on time and the service was impeccable. The arrival hall was historically noble and beautiful in an “everyone is important and going somewhere important” way. Stern said that when Eurostar moved from Waterloo Station to St. Pancras, 97 percent of the trains were on time on day one. Eurostar had moved everything overnight before that momentous opening.  How is it possible that Eurostar performed so well compared to the disastrous opening of Heathrow’s Terminal 5 in March.

Both organizations prepared. Stern wrote that Eurostar ran an 18 month change program and parent company BA ran a three year program (Fit for 5) to prepare for the massive changes at their respective sites. As you know, Heathrow’s T5 opening was chaotic with misplaced baggage, damaged conveyor belts and frozen screens.  [Traveling through Heathrow always requires lots of patience and luck which I did not have on my last stopover in London. I missed my flight to New York by one minute due to a delayed inbound flight and I could not get anyone to call ahead although I tried.]

To manage the change program at Eurostar, Stern says that the organization’s leaders brought in psychologists to help with the emotional as well as physical relocation. They anticipated the problems and considered their employees’ concerns. As for BA, apparently baggage handlers tried to forewarn their leaders that there were problems but they were ignored. One problem Stern mentioned was that the lockers were not large enough to hold all their clothes and other personal belongings. Also parking spaces were too far from the terminal.  All of this added up to BIG trouble and – calamity! T5’s grand entry was delayed several months. If only management had listened, Heathrow’s and BA’s reputations would not have suffered the damage they did. Same goes for BA’s CEO Willie Walsh who had to apologize profusely and lost credibility.

Change management requires strict attention to employees’ comments since they are the ones changing. Reputations need not lose face if someone is listening intently. It is never the big things that do companies in but the small ones such as locker sizes and parking spaces…..AMEN
 

At Weber Shandwick, we first introduced the concept of the “Stumble Rate” in January when my book was released. The stumble rate measures the percent of companies that are in top place on Fortune’s World’s Most Admired Companies list in their industries five years ago vs. their standing today. Any company that was top-ranked five years ago and is no longer is considered a “stumbler.” 

Despite a declining stumble rate in the global market, the Stumble Rate for U.S. Fortune 500 companies has risen in the past year (2007). A year ago, approximately half (52 percent) of companies that were their industries’ most admired lost their crowns and this year nearly three-quarters (72 percent) have been dethroned. That is approximately a 38 percent jump year over year. Three out of four U.S. largest-revenue companies losing their reputation thrones is astonishing. Not surprisingly, the industries whose churn increased are associated with current U.S. economic challenges. Sectors such as building/real estate, energy, and automotive all included companies that newly stumbled this year. No surprises there. I imagine that the stumble rate for next year will be just as dramatic.

When I was in Asia Pacific, someone asked me whether these companies had actually stumbled or another company had lept forward in the reputation race.  A good question. I think that losing reputational equity because an up-and-comer has leap-frogged over you to the number one perch is the same thing as a stumble. Someone (usually those at the top) was not watching well enough.

All in all, Weber Shandwick’s stumble rate is a stark reminder that reputation recovery is as much a part of the reputation continuum as reputation building and reputation sustainability. In fact, it is the hardest part of reputation management equation

Am finally getting back in the swing of things after a productive trip to Asia and a well-needed mini-vacation, as I noted earlier. I regularly save all sorts of articles and items I find in the hope that I will comment on them in my blog. So here’s one that I read about in The Wall Street Journal in the Boss Talk Column (June 5, 2008). The interview with the CEO of Home Depot, Frank Blake, focuses on how he is refurbishing the company since he took over 18 months ago. As you can imagine, the challenge is particularly difficult for Home Depot considering that the housing and mortgage crisis has basically collapsed.

Since I have recently been writing about and studying how companies restore their reputations after crisis strikes (also wrote a book on the topic), I found Blake’s answers to several questions particularly illuminating and spot on. Blake mentioned that he was lunching with Coca-Cola’s CEO who asked him “Where are you in the dark night of change?”  At first, Blake says he was unsure what the CEO meant. It became clear when Isdell drew a timeline of how you navigate through challenges: “…things get tougher rather than better, and so doubts start to grow.” The dark side of change in the recovery process hits all CEOs that are trying to undo reputation damage. There are many stumbles along the way that feel like someone yelled  “lights out.” CEOs might remember that recovery takes several years, not 12 months, and the only way to see the horizon is to make the long journey. Additionally, most CEOs who turn around their company reputations say that it was worth the trip since failure usually equates with opportunity.

Blake also mentioned in the interview that he began a survey asking stores to rate how well company HQ was doing. I thought that was a smart way to get feedback, tough as it might be to face the music. Blake honestly comments on their grade: “…unfortunately our scores are not very good. If a store got the same score, we would consider it underperforming and we would be flipping out.”

The interview provides three important lessons about the recovery process when reputations are in the danger zone. First, plow through the dark days. Second, try the hard things such as asking your employees to rate how you are doing. Three, overdose on rewards and recognition. Regarding the last lesson, Blake asks stores to send him examples of employees doing extraordinary things and he writes personal handwritten notes thanking them for their efforts.

Have not written in a while. Returned from Asia and thenoff to vacation.

Just back from one week off and promise to get down to business shortly. lgr

Now that I am back in the USA, I keep thinking about the recurrent questions I received during my many media interviews and internal staff Q&A while visiting Shanghai and Beijing. I was repeatedly asked my opinion about what I thought of companies and organizations who were not donating the proper amount of money for the Sichuan earthquake victims. Having read everything I could before arriving in China, I did not really come across anything that fully prepared me for the intensity surrounding this topic. Although I had an inkling that this was simmering because a journalist alluded to it before I arrived, I did not appreciate how much attention was being paid by the Chinese people to which companies had given in earthquake assistance. In fact, company individuals were often asked to publicly disclose the amount they had given in relief and they were not sure what the right amount should be. When this topic came up, the story of the CEO of a large real estate company also surfaced. Apparently the CEO was among the first to donate money and discuss his contribution on his blog. However, many people believed that the CEO had erred by not giving enough and stained his reputation. The CEO apologized under public pressure and announced he was contributing more to the natural disaster. It seems that people were aware of a list of the top 20 company donors, multinationals and non-multinationals alike.

I can’t recall the U.S. media covering who did not give funds during Hurricane Katrina. Instead I tend to recall the companies that did the right thing, not necessarily only financially but in kind provisions and volunteerism. Obviously a very interesting difference between Eastern and Western cultures when it comes to disaster relief and understanding of what corporate responsibility means. This experience made me realize how important it is to see the world through the eyes of different cultures and to recognize the power of civil society upon corporate behavior. The pressure from employees and the community were dramatically driving corporate giving.

I was also asked twice in Beijing what would happen if an earthquake occurred during the Olympics in August. This question reminded me of how I felt after the terrorist attack on in New York on September 11th which I witnessed up close. After 9-11, barely a day went by for nearly two years that I did not think that another attack was imminent in New York. For that very reason, I did not regard the question as strange although now that several years have passed, I do not think about it constantly. In response to that question, I believe that the Chinese government is as prepared as any country and learned a lot over the past six months to effectively handle such a crisis if it should strike. Hopefully the Olympics will be smooth sailing and triumphant for all.

I am visiting our office in Shanghai before heading to Beijing. I was particularly excited to come to Shanghai because my son studied here for six months recently during his semester abroad from college. He has been learning Mandarin since he was about 10 years old and has already spent two summers in Beijing. So I wanted to see Shanghai as he saw the city during his many months here.

 Last night my gracious Weber Shandwick colleagues took me to a restaurant on the Bund that provided a view of the financial center and the old section of the city. The skyline is absolutely extraordinary — gleaming, tall, modern, flashy, whimsical, creative, and bold.  My first reaction was that the financial center looked like Second Life in real life. 

I am learning alot about the reputation of Shanghai and its cosmopolitaness. It is dynamic, energized and rushing to the future.

Just seeing the skyline caught my breathe. Beyond impressive.

Today I will be having lunch with clients, media interviews and even being interviewed on TV about my favorite topic. Reputation is certainly a hot topic here as China deals with the aftermath of the earthquake, the Olympics, globalization and building brand awareness and differentiation for its corporations and its country.

My son has lived in the future and his mom is just learning to understand what he saw.  I have alot of catching up to do.

I have not written recently since I have been traveling throughout Asia Pacific for my book and meeting Weber Shandwick clients. Media interviews are on the agenda as well. One of the side effects of my visit to AP, unexpectedly, is that my own perceptions of Weber Shandwick grows brighter and brighter every day. Although I often feel that I understand the depth and breadth of the firm, I see now that not until you visit the network do you truly understand. As a visitor for just a day or two in each market, I also get to meet my colleagues en masse in internal staff meetings. Without a doubt, my Weber Shandwick colleagues are WOWing me. Everyone is enthusiastic, client-focused, smart and generous of spirit. Little did I realize that as I talk about building corporate reputation at luncheons and events, I myself would personally be so impacted by Weber Shandwick’s reputation and its future. Definitely a big return on reputation for me.

So far, I have visited Sydney, Singapore and Hong Kong. Off to Shanghai and Beijing this week and then back to NYC next weekend.

I was catching up on my reading this morning when I learned about presidential candidate Barack Obama’s newest web site. Talk about taking a lesson from corporate America on handling myths and rumors! My blog has previously referred to Starbucks and Coca-Cola having designated areas on their sites that let them refute rumors. Well, Obama now has one and it is worth visiting.  It is called Fight The Smears. The YouTube generation is sure shaking up the entire presidential election.  Obama’s YouTube Channel has nearly 1,200 videos. More than 50m people have apparently watched Obama’s videos.  The advocates are turning out in numbers for this unusual presidential candidate. We are learning that reputation-building online is infectious.

On another subject, am listening to BBC while posting and heard that more confidential documents were left on the subway by someone. The information reveals data on money laundering, drug trafficking and terrorism. Since this is the second such incident in a week, embarrassment is an understatement. The reason I raise this is that our 2006 research found that “security breaches” and “data losses” are among the top five triggers of reputation loss.  Fairly prescient I might say.