Reputation lessons from space

For those of you interested in crisis, this article on the tragic Challenger and Columbia space shuttles is a reminder of how things can easily go wrong. Even for the best and most revered of organizations. NASA’s reputation never truly recovered from these failures.  We have come to learn, even from pre-Internet days, that the tiniest link or problem can cause the greatest of catastrophes. The article cited the theory of  “normalization of deviance “ from Diane Vaughan, a sociologist, who was on the commission investigating the 2003 Columbia disaster. When I was writing my book on reputation recovery, I read many of her articles about the 1986 Challenger disaster and how some risks became accepted as part of how business gets done. People just get used to or should I say immune to risk-taking.  Vaughan uses the example from the Challenger where the O rings’ erosion had been known on earlier launches of spacecraft and simply became routine, hence the normalization of deviance. As Vaughan says, “They applied all the usual rules in a situation where the usual rules didn’t apply.”

The challenge for companies is figuring out how to not become immune to the everyday risks that go with doing certain jobs such as in manufacturing, food and beverages, pharmaceuticals, automotive, mining, oil, just about everything if you start listing them out like I am doing. This brought to mind what it must be like working on oil rigs and how the risks to safety are there each and every day. How the most minor short cut turn on a dime to be the final blow. How do companies train their employees to not take minor glitches for granted – lives and reputations could be at stake if they ever so slightly deviate.  Another question to ask is how do companies make sure that they listen hard to grumblings from employees? Maybe there is a kernel of truth to be had. Perhaps companies need a Bad News Officer who is Mr or Ms Gloom and Doom. That person could be responsible for bringing all the bad news that no one wants to hear or tell and put it on display for leaders to cope with. The hard truth might be tough to hear but the least expensive way to run a company, maybe even save lives.

 

Getting to Likeable

I wanted to mention this terrific conference I went to last week. It was hosted by PRWeek and featured a stimulating array of speakers. Suzie Welch, author and journalist, spoke about how hard it is for companies to get themselves into the "conversation." She was thinking back to her days as editor of  Harvard Business Review and the many times CCOs would call with what they thought was an explosive idea:  “If you're coming in, trying to be a thought or idea leader, and you don't have the results to back it up, you're just beating against the wind. And it backfires later, because when you actually have something to talk about, you already have the stink on you from having tried to sell yourself too soon.” PRWeek has more on her talk. She mentioned that timing matters, having something uniquely new (Amazon's drone shipments), knowing how to exit the conversation if in crisis, authenticity and "likeability."  Suzie was incredibly likeable herself and appeared very approachable and "real." Seems odd that she is so accomplished but goes by what I presume is her grade-school name, Suzie.  When it comes to thought leadership, she also reminded the crowd of mostly senior pr professionals how critical it was to have the courage to tell your CEO when their breakthrough idea might just not be ready for prime time. After all, as Suzie said, there are very few new ideas in the business today. I think we'd all agree. Of course, she brought up the topic of CEO celebrity. She was right in saying that no CEO starts out saying they want to be a CEO celebrity. It just happens because everyone wants to know about them. Richard Branson was mentioned as a good example of an individual who became a celeb CEO in service of his brand, Virgin.

Dan Roth, executive editor of LinkedIn, gave some fascinating examples on how CEOs were posting on LinkedIn's influential Influencer Program  and how they eventually find their authentic, human voice after some false starts. He used Prime Minister David Cameron as an example of a leader who over time went from third person to first person in his posts. Roth also mentioned how some CEOs were big on asking for feedback when they submitted their posts. His comment reminded me of a CEO who continually asks anyone within earshot how his company was doing in the marketplace.  What was the word on the street? It was a terrific signal that he was interested in hearing as much as talking. Roth ended his talk with some fine advice about the Influencer program -- CEOs should realize that they "are not creating content, they are creating conversation."  We all sometimes focus too much on content and getting our corporate message across and not enough on establishing arelationship or demonstrating how human we might actually be.

Although everyone uses the word "authentic" today, I have to make a case for "likeability," to use Suzie Welch's word. For most companies and leaders, working on likeability would go a long way in making their companies great places to work. It's a good word for reputation-building.

Reputation Resilience

flying-away-umbrella

Reputation resilience is a topic I often think about because it should be on all leaders' minds. How can I build the most resilient culture so that we can withstand a crisis that risks our hard fought for reputation? A new report from Schillings in the U.K. examined UK FTSE 350 and leading private companies about reputation risk and resilience. Respondents were Communications, Legal and Risk executives. Here are some of the findings:

  • All executives surveyed are spending more time on reputation risk management than they did two years ago -- 80% say more time (among risk managers), 68% (among communications heads), and 53% (among legal executives). No one said less time.
  • Only 17% say that there is formal reporting to the board of directors on reputation risk. Clearly, not good enough.
  • The top five threats to their company's reputation are (in rank order): business underperformance, information risk, operational risk, health and safety incidents, and employee behavior. Social media comes in at 6th place.
  • When asked what was the biggest obstacle to making reputation risk management top of mind at the company they work for, 37% of respondents said "CEO/Board removed from reputation risk: lack of focus without a crisis and too much reporting." That is unfortunate.  Companies should not need a real crisis to get them to pay attention to risk management.
  • Fortunately, communciations and legal executives are onto it. They know that their jobs require them to take charge of their company's reputation and any associated risks. A full 72% of communications executives said they feel directly responsible and 63% of legal executives are responsible for their company's reputation.
  • How resilient are companies to facing challenges to their reputation? There is a surprising (to me) fair amount of confidence. 55% are "confident enough," 29% are "very or extremely confident" and 16% are "not at all confident or unsure." Although this bodes well for many companies, I would be wary -- essentially 84% of top executives are confident.  If you ask me, they are not worrying enough about all the possibilities that could befall their reputations. Risks to reputation seem to be coming from all directions today and being over-confident is the wrong stance.

Another interesting aspect of this newly issued report is that Schillings is a law firm. They have rebranded themselves to be all about managing reputation risk. Their tag line is "Law at the speed of reputation." Serious business. What would compell a law firm to switch to focusing on reputation? Here is what they say about their transformation: "To continue to lead at a time of such extensive change, we’ve fundamentally changed our own offering. By combining our unrivalled expertise in reputation law with new risk consulting and IT security expertise, we have been able to create an integrated offer that continues to safeguard the successful businesses and individuals we represent whilst living up to the promise that underpinned our business from day one." It would be hard to name many law firms that have done the same. Reputation is changing the face of organizations all across the globe and some firms see the opportunity ahead. Maybe Schillings sees the risks down the road for them as a law firm and are taking their risk by the horns. Interesting approach.

Risky business for CEOs

Risk-Management  

A new McKinsey survey among board members reports that members acknowledge knowing little about risk. Nearly three in ten (29%) say their boards have limited or no understanding of the risks their companies face. Even more compelling, members say their boards spend just 12% of their time on risk management, an even smaller share of time than two years ago. Not sure about you, but I'd say that the business environment has become more complex and risky, not less complex and risk-free.

This is not good news for executive teams. When it comes to risk management, reputation is high on the list of vulnerabilities that can damage a company's good name. This has me thinking that if board members are not focusing enough on risk, executive teams are going to be held even more responsible for any misdoings and misdeeds. They had better been attuned to crises and risks that are lurking around the corner. CEOs and their direct reports should make reputational issues an A-1 priority on their management agendas.

I received an email about two weeks ago asking if I had information on whose most to blame when crisis strikes. Years ago, I asked that question of executives and if I recall right, CEOs received most of the blame, regardless of whether they knew about the problem or not. The McKinsey research is hinting at the same blame chain. The CEO takes all the credit when things go right and all the blame when things go wrong. The board is looking in all the wrong places. CEOs, beware.

The Three Strike Reputation Rule

threestrikes_1I think bad news comes in threes. Thinking about President Obama and the recent bad news he has received regarding the terrorist attack in Benghazi, the IRS targeting of conservative groups and the secretly snatched AP reporters' phone records, it has to be true. It is the culmination and convergence of these three reputation hits that changed the political balance in favor of the Republicans and Tea Party members for a change. Not a full tilt but enough to rain on the President's parade. When I talk to company leaders about what drives a reputation into the ground, I often use the baseball metaphor that all it takes is three strikes and you are out. The first mistake happens to just about everyone these days. The second reputation hit is basically unforgivable but no one wants to put you out of business. The third hit takes you down because it is clear that leadership was absent and judgement was non-existent or negligent (even worse). When I think of the perfect example of the Three Strike Reputation Rule, I think of BP. First, they were tied to 15 deaths when the Texas Refinery blew up in 2005 in the US. Second, an oil leak in Alaska from their pipeline in Prudhoe Bay captured negative attention. But third, and for the final straw, the horrific Gulf of Mexico oil spill that ultimately drove their reputation into the ground, along with their CEO's Tony Hayward. After the third strike, it's time to call it quits.

Yet, from what I've been reading, President Obama's approval ratings have barely budged from their high marks. Perhaps we will see the proof in the pudding at the next election cycle. Hard to tell. And BP, after much soul searching, is coming back again with new leadership, better values and a new heartbeat. The rest is yet to come.

5 Questions to Measure a Scandal's Impact

imagesCA7A4Z0IMany 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.

 

 

Rolling Reputations

imagesCADV729OI could tell that it must have been the one year anniversary of the Costa Concordia because I started hearing about the shipliner crash in the past few days.  Reputations keep rolling along throughout the year but especially hit home one year later. Whereas they might be fleeting memories at first, they all come together on the year one anniversary to make us take notice. Today I started hearing more about the memorial service for survivors and families of those who lost their 32 dear ones in Giglio, Italy and it started to stick more than two days ago. There were 846,000 mentions on Google when I searched for Costa Concordia anniversary today. For reputation, one year anniversaries are part of the reputation process.  It is almost like it fits into the five stages of grief. The one year anniversay is a day of reflection and return to the reputation demise that caused the loss in the first place. All the pictures of the cruise ship on its side off the shores of the little Tuscan city are back in view. Debates over raising the ship and removing it are back in the news. Anniversaries are important because they remind us that reputations should not restored overnight. The bigger the loss (especially when lives are lost),  the longer reputation takes to repair. That should be law.

I especially remember the Costa Concordia because we were launching our survey on how corporate and brand reputations have become nearly indivisible. The parent company of the cruise liner pushed media requests over to the Costa Concordia CEO -- the brand leader -- in an effort to disentangle the corporate reputation from the brand reputation. Due to the ease of information flow and the Internet's reach, much of the media coverage mentioned the parent company in the coverage which only proved that corporate and brand reputations have definitely converged. Because the entire incident happened just as we launched the survey, it is forever lodged in my mind.

Talking about reputation, tomorrow's Oprah Winfrey interview with cyclist Lance Armstrong will be another one for the record books.  I am not sure how Lance's confession that he used drugs to help him win the Tour de France several times will go over. My sense is that an apology might not curb his rapid reputation decline and Lance's reputation might not just keep rolling along but might face a hard stop for awhile. No telling where it will be, however, in three or four years.  I will be interested to tune in and watch.

Recovering Reputation One Cup at a Time

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.