Higher-Ambition Boards

A client turned me onto the concept of Higher-Ambition leaders and I’ve kept the article close. It outlines what drives great corporate reputations and the kinds of CEOs that lead them. Higher-ambition CEOs are stakeholder-centered and purpose-driven. Their sense of purpose goes hand in hand with their focus on financial performance. They understand the challenges of running a company but also understand the importance of earning trust and commitment from their many stakeholders. The good news is that higher-ambition CEOs outperform their peers in terms of economic, social, organizational and stakeholder returns (including shareholder returns) and they do so for successive generations.  Here is a short description on what they do from the HBR piece where I first read about them:

“They forge a more powerful strategic vision by drawing on an expansive view of their companies’ heritage and cultural, organizational, and social assets.

They build the widespread commitment and capabilities to achieve that vision by developing the organization into a community of shared purpose, marked by high levels of emotional connection, trust, and respect.

They have the strength of character to commit themselves and their organizations to that vision over the long term.”

Little did I know that there was a Center for Higher Ambition Leadership and an annual Summit. And I recently just learned that there is a working paper on Higher-Ambition Boards. The central question the authors –Edward Ludwig, Elise Walton and Michael Beer -- asked was whether higher-ambition companies and CEOs had higher-ambition boards to guide them through their many business decisions and protect the company’s values for generations to come. They studied 14 higher-ambition companies* (see below) and their boards to find out how boards could contribute to the sustainability of purpose-driven companies. The findings are fascinating if you want to learn more about how these boards operate:

·       Only 2 of the 14 companies indicted that the CEO was explicitly measured on nonfinancial metrics. Despite most board’s implicit support for higher-ambition companies, most are not explicit. Here is an example from Herman Miller’s explicit higher-ambition board evaluation of their CEO: “The board doesn’t jut look at money and math as an outcome. The company/CEO scorecard has volunteerism, environmental, inclusiveness, safety—and more. It’s a broader spectrum than the balanced scorecard of most companies.”  CEOs should encourage their boards to be explicit about discussing what it means to be a higher-ambition company and not just accept that it is a given or intuitive in how they govern the company. 

·       Higher-ambition boards have a responsibility of taking an active role in talent management. In the research, they found one company where the individual directors took a more personal role in developing talent for the next generation by sitting down with executives and sharing their personal leadership journeys one-on-one. The directors also helped teach the leadership courses given to top executives and rising stars to demonstrate the importance of their involvement and trust-building.

·       Higher ambition CEOs should engage and bring along their board members to be purpose-driven. They should recruit directors based on their values and commitment and should build in processes to sustain the commitment to higher-ambition practices. One company has each board member evaluate the board as a whole and then individually with non-attribution. Each board member gets their results. If the board chair learns from these evaluations that someone is not performing in a way that helps to drive high-performance, the board Chair steps in and sometimes has to take action.

*Aetna, Becton Dickinson, Con-way Trucking, Cummins Engine, Guardian Insurance, Henry Schein, Herman Miller, Steelcase, NYSE/Euronext, Terex, United Rentals, United Stationers, WESCO, Wyndham Worldwide

Bench Strength Reputation Counts Too

The CEO is not the only leader who influences corporate reputation. In our recent study on the CEO reputation premium, more than four in 10 global executives (44%) believe a company’s reputation is influenced a great deal by senior management other than the CEO.

The importance of the senior management team is even more pronounced in companies with strong reputations. More than half of executives in highly reputable companies (56%) believe a company’s overall reputation is greatly affected by the reputation of the senior management team, compared to only one-third of executives (30%) in companies with weak reputations.

It is important for companies to recognize that while the CEO wields tangible power over reputation, other top executives have considerable influence and can add substantial credibility to the company’s narration. Viewing other executives as a portfolio of storytellers can play a powerful role in the development of a strong company reputation.

You can tell how important that senior team is when you read media coverage about companies where executives are leaving. That is always a sign of trouble brewing. A stable and steady senior management team is critical to helping shape reputation and even the CEO's reputation. A good CEO can attract the best and it can speak volumes. 

All-Hands Meetings for All, All the Time

Interesting thought. I read that all-hands meetings are now expected in technology companies, whether small or large. CEOs are now expected to show up often and show up in person or via skype or video link. And they are expected to answer all sorts of questions ranging from what the corporate strategy is to why the bathrooms are messy or the expresso machine is not working. This kind of "radical openness" is going to fast become the norm, not the exception in corporate America as connectivity narrows the gap between all levels.  A new world is dawning. 

What goes into corporate reputation?

In our new global research on CEO reputation that we just released, we asked several questions on corporate reputation in general.  How could I resist? Interestingly, nearly nine in 10 executives (86%) consider the reputations of their companies to be strong. However, fewer than four in 10 (38%) concede to a very strong reputation — hardly a cause for confidence in the ability to withstand a crisis or major threat. 

Company reputations are shaped by a variety of factors, with quality of products and services identified as the most important factor by 66% of global executives, followed by financial performance (57%). Leadership reputation falls among the top five drivers (49%). This did not surprise me. Quality of products/services has always led the list among both executives and consumers. And financial performance, as they say, is necessary but not sufficient. 

The CEO Reputation Premium: Gaining Advantage in the Engagement Era, Weber Shandwick, 2015.

The CEO Reputation Premium: Gaining Advantage in the Engagement Era, Weber Shandwick, 2015.

Importantly, a company’s industry ranks as the third most important driver of corporate reputation (50%) and is among the top five drivers of reputation for each industry represented in our study. This finding is quite different from earlier studies on reputation where industry classification was less importantThe reputational impact of an industry today ripples beyond a single company. As an example, the BP oil spill impacted the reputation of other oil majors, and sizable triage had to be applied to improving their collective reputation. The same goes for just about every industry today. For executives responsible for managing reputation, the adage about being “tarred with the same brush” rings true.

Particularly noteworthy is the high importance that worldwide executives place on marketing and communications in driving reputation. Perhaps the proliferation of outlets and new ways that reputation can be communicated today is elevating the influence of marketing communications. In today’s digital age, consumers have countless ways of finding out information about a company, and the more effective marketers and communicators provide organizations with better ways to leverage the conversation and be heard.  Additionally, whereas companies can easily imitate their competitors’ products and services overnight, how a company communicates and engages stakeholders can nowadays provide the differentiating and sustainable edge.