Cybersecurity reputational risk

Just recently heard that our first US homeland security chief Tom Ridge is helping to launch an insurance product that specializes in corporate cyber security policies. In the article, I read that the global economy has lost more than $400 billion annually due to these cyber breaches that seem to be coming at us like a tsunami. Moreover, only one in four companies, if that much, have some form of cyber attack coverage.

I also learned awhile back when we did our Employees Rising survey on how employees were using social media to champion and possibly sabotage their companies, that one of the reasons that companies have chosen to train their work forces about being responsible social citizens was to caution them about how cyber hacking often occurs. And that is from employees themselves who can be unintentionally loose with passwords, clicking on errant links or not understanding well enough the safeguards of protecting confidential documents. Again, another reason for formal social media training at work and recognizing the importance of internal employee communications. 

Cyber breaches are clearly hurting the reputations of companies that find their customer data let loose online from hacking. This has become a major reputational issue and one that companies have to get smart about or they will be joining the ever growing long list of the largest data breaches. Plus the background stories in the media often reveal that companies and their leaders had some forewarning or were lax about privacy controls which only makes matters worse. Need I even add that CEOs have lost their jobs over cyber breaches! This is becoming a reputational issue of epic proportions.

Reading to lead

In a review of the McKinsey article on Management for the Next 50 Years, The Economist Schumpeter column had something particularly smart to say (as always).  Although they concede that machines can do a better job of data analysis and synthesis, they point out that executives can do some things better than machines. First, they can inspire and motivate employees and second, they can create "game-changing" ideas or valuable thought leadership. Then they quote Tom Peters, the author of In Search of Excellence and management guru, on the future of leadership. Peters said that the best future leaders will "spend half their time reading books." Hold that thought. It's a powerful idea. With all the data and information targeting us, no one can remember which way is up. The best way to learn and lead by reading is powerful. Because it is so hard to do and hard to find the time, it will be the answer to truly leading companies in the future. Machines can not do that for us.

Social Blogging for Fortune 500 Companies

There has been a lot lately about social CEOs and I have recently posted about the topic. Last night, I just had a chance to review the annual University of Massachusetts Dartmouth Center for Marketing Research study about how the Fortune 500 is using this not so new but ubiquitous medium and blogging, in particular. As the authors say, and I agree, "studying their adoption and use of social media blogs offers important insights into the future of commerce." The key findings are that Fortune 500 blogs are alive and well and serving as a means to promote thought leadership:

  • In 2014, 31% of the studied companies had corporate blogs, showing a slight decrease of 3% in use of this tool in the past year
  • In the 2011 Fortune 500 study, it called attention to the decline of blogging with only 23% hosting a public-facing corporate blog.  In 2012, there was a sizable increase to 28%. That surge surfaced again in 2013 showing 34% of these corporate behemoths creating and sharing content through blogs
  • The top 200 of the Fortune 500 are out-blogging the bottom 200  
  • These Fortune 500 blogs are for the most part (78%) are interactive, up-to-date, taking comments, offering RSS feeds and subscriptions. 

What is particularly interesting here is that corporate blogging is here to stay and has become a relevant means of content-sharing and thought leadership. It provides a smart delivery vehicle to talk about what a company stands for, what's on the minds of its customers, what its products and services can do and what's new and innovative in the field. And the authors agree that we might view this steadiness of corporate blogging as a signal to the marketplace that the time is ripe for thought leadership and in-depth content instead of short missives and pure promotional content that is less memorable. At Weber Shandwick, we see this in the high demand for Mediaco, a platform that helps companies publish and be their own media companies.

I see a surge in thought leadership being tied to the ongoing effectiveness of corporate blogging where ideas and insights can now be more easily shared with the general populace. And I believe that when companies blog on their websites or elsewhere, it leads to greater control over communications and their reputation. Companies can now join the conversation instead of just reacting to the conversation. Reputations have a better chance of stabilizing themselves when they have a hand in the dialogue. A good thing. 

de Blasio's One Year of Grace Closes In

In New York City, we have a new mayor, Bill de Blasio. He has been interesting to watch, especially as he exited his first 100 days and is moving into the last quarter of his first year. [Also because he is from my Brooklyn neighborhood where is a local figure.]

But this article in The New York Times this week was written almost as a mid year round up and makes it clear that the new mayor is still trying to find his balance. From watching CEOs, the first year is one of reckonings too. De Blasio, like new CEOs, has many more constituencies to worry about now besides rallying the troops to get out the vote.  The complexity of managing all those constituencies can be overwhelming and fraught with fault lines. As the mayor deals with racial tensions, police reform, availability of low income housing and budget constraints, he is disappointing the left who were his stalwart base. The alleged police-related death of Eric Garner on Staten Island does not help and heightens the scrutiny on the mayor's progress so far. The article interested me in particular because Bertha Lewis, former CEO of Acorn, is cited asking friends to give the mayor a full year before "discounting Mr. de Blasio as just another politician." From my work on CEO tenure, people begin to cement their impressions at about nine months. Luckily, mayors and CEOs do get a grace period when they first start but the mayor's next moves are critical to setting his legacy and reputation in stone.


Facing up to reputation imperfections

Ain't it the truth. Mark Borkowski writes on his blog

"We need to get used to the fact that these days there is no fixed mark on reputation.  Along with the Buzzfeed generation comes the hint that the old media traditions fail, with short form memes feeding the wires, and less emphasis on the elongated and researched story.  Brands and individuals must become comfortable with their imperfections and vulnerabilities because we have a crowd and a ‘can know anything’ psyche, where reputations are savaged in an instant and often with no grounding in reality.  The emotion of the crowd gathers momentum and careers along gathering falsehoods before the accused has even woken up to the storm."

It is very hard for companies to accept their imperfections. Transparency is one thing. Hanging out the dirty laundry is another. We are all going to have to develop thick skins and get better bleach. 

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The Reputation Stumble Rate Stumbles

Weber Shandwick’s annual calculation of reputation loss – the “stumble rate” – finds the lowest rate of reputation leadership loss since we began tracking this rate in 2010. During 2013, fewer than four in 10 of the world’s largest companies lost their esteemed status as their industries’ #1 most admired company during 2013. 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 2013 and 2014, 35% of the world’s largest companies experienced a stumble, down from last year’s 46%. For those companies that fell from their perches, there is likely extensive introspection and remedial action plans being discussed as I write this post.

The good news is the non-stumble rate of 65%. This means that about two-thirds of the industries in the Most Admired survey boast companies with durable reputations.

 

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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?

  • 19 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, Property & Casualty Insurance, Internet Services & Retailing, Metal Products, Mining, Crude Oil Production, Oil & Gas Equipment Services, Pipelines, Newspapers & Magazines Publishing, Railroads, Semiconductors, Diversified Retailers, Food & Grocery Wholesalers.
  • Two industries stumbled for the first time during 2013: Information Technology Services  and Office Equipment & Electronics Wholesalers. This must hurt.
  • The Energy industry is a chronic stumbler. No Energy company has been able to hold the #1 spot for consecutive years.  In the course of six years, there have been five different Energy leaders.
  • Five industries have stumbled four times since 2010. The most volatile industries are: Airlines, Life & Health Insurance, Medical Equipment, Motor Vehicle Parts and Health Care Wholesalers.
  • Six industries have a first-ever number one: Diversified Outsourcing Services, Food Production Information Technology Services, Medical Equipment, Mega Banks and Electronics and Office Equipment. Interestingly, the new leader in Medical Equipment is also new to the industry, having ranked #3 last year in Pharmaceuticals. This probably has to do with a change in their business mix.
  • For most of the stumblers, the People Management driver declined. The biggest drops in People Management (one of the nine drivers) were in Mega Banks (-3 ranking positions) and in Soaps and Cosmetics (also -3 spots).  In 2013, the Mega Banks stumbler experienced a crisis-riddled year that pointed to lack of leadership oversight of personnel.
    • The Soaps and Cosmetics stumbler decline might not be reflection of its own management troubles, but rather strides made by the competitors.  In one case, a well-respected CEO came out of retirement to replace his successor on an interim basis. One of his top priorities is to prepare a lineup of executives who will eventually replace him.
    • The other competitor announced – shortly before the Fortune survey was distributed to respondents – it was rolling out a supply chain collaboration platform to make its manufacturing more responsive to shifting customer tastes. This agile manufacturing process is expected to help add 1 billion new customers.