A Reputation Recovery

The title of the article says it all, "Sailing through a scandal." Rupert Murdoch and his empire have turned the corner on reputation recovery. As you recall, News Corp was engulfed in scandal over the phone-hacking of a murdered schoolgirl's voicemails. According to The Economist where I found this fascinating article, the Murdoch family has recouped more than double their wealth since the controversy. And Murdoch's sons who are running the now split businesses of entertainment and newspaper publishing are doing just fine. 

What hit home was the article's truthful statement that "a loss can turn into an unexpected win." That is so true in reputation recovery. I've researched and studied the reputation recovery phenomenon for a long time now and if there is one clear thread, it is that crisis morphs into opportunity. There is nothing like a scandal or reputation disaster to make a company even better than it once was. Better leaders are put in place, tough decisions are made, humility returns to the C-suite, and less risky business behavior takes hold. No one wants any further embarrassment to harm the reputational equity of the firm.

The articles says, "The Murdochs’ happy ending is a reminder of how forgiving the corporate world can be if bosses at the centre of a crisis act swiftly and adopt shareholder-friendly policies." True. How a company responds to crisis is the ultimate test and like they say, first impressions matter. But as the article also points out, if Rupert had been a hired hand at an ordinary company, he would have been shown the door.

The Economist ends the article by saying, "Being enriched by scandal may occasionally happen once, but rarely twice." As it happens, that is not entirely true. Many companies stumble after a major crisis because of all the distractions that ensue. It is even more likely, not less likely, that a company will re-dent their reputation after a major crisis. Additionally, media scrutiny is more intense afterwards and journalists and pundits will pounce on any missteps. Granted, the stumble may not be as devastating as the first one but doubt gets raised and before you blink, there are no more do-overs.

How Leadership Shapes Crisis

Andrew Hill of the Financial Times recently wrote about managing crises and how all the planning required today cannot suffice when a situation is beyond catastrophic. He uses lessons learned from a second site in Japan that was equally overcome by the earthquake and subsequent tsunami that hit the island in March 2011 as the Fukushima nuclear reactors. Hill says, "managing in a crisis is not just about planning."

He cites an article in Harvard Business Review about how a sister plant of Fukushima Daiichi dealt with similar events to their nuclear reactors after the disastrous tsunami reached them. At this second plant, three of the four reactors lacked the power to run the necessary cooling systems after the waves knocked them out. Nothing prepared the site superintendent and his team for what was happening. As events spun out of control, the site superintendent took to the whiteboard and wrote down what the team knew and didn't know. He turned incidents into data by writing on a whiteboard the frequency and magnitude of the aftershocks in the hope that it would show that they were decreasing. He soon saw that this was not the case. But by using the whiteboard, the superintendent and his team collectively were able to make sense of the senseless and the unknowable. The superintendent also forced himself not to supply answers or try to reduce uncertainty for his team by pretending he had a plan when everyone was shaken to the core wondering if their family members were alive or if they'd make it out alive altogether. The use of the whiteboard fascinated me because it became a mechanism to control the chaos. It became a personal self-organizing system to ward off crippling ambiguity and a way to replace uncertainty with facts, even if they were not what he wanted them to be. Because the team faced the threat of a radioactive breach if they could not rig up a cooling system in time, his whiteboard writings of events and numbers exposed patterns to the madness and most probably, helped the team feel that they were making sense out of fear.  At one point, the superintendent returned to his whiteboard and "ordered a subordinate to write up the overall picture of the plant and an outline of the recovery strategy. He was determined to share information with his workers as it became available, slowly replacing uncertainty with meaning."

The article is a good reminder that crisis response is shaped by leaders in unimaginable ways. Reputations are built on the large and small ways we respond.

Crisis tips when reputation is on fire

Two perennial crisis-related questions look like they have some answers. How long does it take for a reputation to recover and when in crisis, should companies lay low or communicate aggressively and engage like mad?  

Answer to #1: In research by CoreBrand and Brunswick, it took four years for 16 crisis-stricken Fortune 500 companies to restore their reputations. CoreBrand has an extensive database that has been in existence for 24 years and looks at over 1,000 companies across 54 industries. The four year mark matches with executives' perceptions of recovery time in research we have done at Weber Shandwick. Interestingly, their research added two additional dimensions:

  • It took nearly two years to rebuild perceptions of investment potential ( :( says the stock market)
  • Average time to return to pre-crisis brand equity was somewhat over one year ( :( says CMOs)

Answer to #2: Super fascinating to me. When they looked at the 16 companies, 7 began engaging and communicating with stakeholders soon after the crisis erupted. Yet, the other 9 kept a low profile and stayed out of the news, presumably to deprive "the crisis of additional oxygen" until it subsided. So what does the research reveal about the best route to recovery? Not what you may have guessed off the bat. Here's what they learned. "The low flyer (quiet pattern) companies actually suffered slightly fewer hits to their favorability and overall reputation. And perceptions of management took only half the hit that they took among the engaged ones (classic pattern). At first blush – and ethical considerations aside – it appears that flying low is a stronger strategy. But, there’s a catch. The low flyers appear to suffer a longer downturn in their brand equity. The brand strength of those hunkering down, as measured by CoreBrand, took longer to bounce back. Whereas the engaged group actually began to repair their brand after one year, the disengaged group were still stuck in negative territory with losses in brand equity as a percentage of market cap. The “fly low” strategy has other potential drawbacks. There are greater threats of government intervention as stakeholders demand more accountability, and there are the quiet and negative impacts of corporate silence on internal morale. Even in the age of transparency, disengagement may be a valid short-term survival strategy, but it appears to pose greater challenges to the health of the brand. Silence is not always golden."

These are invaluable lessons to be learned on how to communicate after a crisis. The natural instinct is to hope it blows over, to engage as little as possible and to go radio silent. But these findings show that over the long-term, heightened communications is the best way to go. Perhaps the fact that the news is so transient today and a crisis lingers for only so long before it is displaced by someone else's crisis, the best approach is to go on the record as having spoken up, defended your side of the story and shown that you can be trusted to do the right thing. People will remember that you were not silent and could be counted on when it matters. 

Should be mandatory

When it comes to crises and recovery, I am always all ears. Having written a book on how companies recover and restore their reputations, I am always looking at new advice on spreading lessons learned post-crisis. I just read an interesting way that BP has taken their lessons for others to learn from. CEO Bob Dudley said that they give presentations around the world to policy makers, government officials, industry experts and academics on what they learned from the Gulf of Mexico oil spill. As I think of this, this activity should be mandatory when crises occur that are catastrophic like this one was where lives were lost, business closed and economies threatened. The lessons learned should not just be kept internal but externalized so others can learn and refine their own crisis standards and protocols. BP is doing the right thing. Wish I could get a copy. Wish I could have added into my book. 

When qualitative reputation is just as good

There is an intriguing blog post on the HBR Blog Network titled "Don't Trust Your Company's Reputation to the Quants." Considering all the hoopla around Big Data, I was immediately curious about how they would frame an argument about also relying on non-quantitative data when the world seems so enamored of stats and scores. Of course, companies are right to care about making their numbers and the bottom line but there is another side to the story when it comes to reputation risk. "Reputation will always be too impressionistic, and too long-term in its impact, to be left to your Quants. Indeed, if you do leave it to the Quants, it will most likely be neglected, along with other risks that involve intangibles." Quants can often neglect the commonsense solution that protects reputation or overlook how the public might react to and protest a company action. Qualitative insights and experience often adds a dimension to corporate behavior that is not only sufficient but imperative to safeguard reputation. Their advice is for boards and senior executives to listen to the Qualts as much as the Quants. Qualts are defined as those in the organization who "have internalized the values and larger purpose of the organization, and grasp how powerful these are in maintaining healthy connections between the company, its customers, employees, and other stakeholders." This reminds me of an article I just read by BP's CEO Bob Dudley on the BP oil spill in the Gulf of Mexico. Quantitatively, you could say they should have negotiated settlements through the courts but instead they waived the $75 million statutory liability cap and agreed publicly to pay all legitimate claims. They listened to their qualitative side by not delaying acceptance of responsibility and creating long delays before people affected by the disaster received payment. The qualitative side of their character and their focus on reputation came before strenuously litigating from the start of the crisis.

The authors have a good close to their post: "But Qualts appreciate more than anyone else how succumbing to immediate financial temptations can mortgage a reputation, creating reputational debt. They maintain and evolve decision-making models that guide those decisions with clear reputational standards that remain inviolate up, down, and across the extended enterprise." This is where understanding what your company stands for, how it behaves and the value of reputation for the long-term comes into play.

No one is arguing that quantitative inspection is not important. It is just that reputation is not black and white but as someone once told me, plaid. It is very complex and the fabric of reputation is made up of many patterns, colors, threads and how well its owner takes care of it. 

Saving your reputation

I am always looking for quotes and just found two today. They appeared in an article in The Guardian about how charities or non-profits can manage crises. Here they are:

"The 17th century bishop Joseph Hall shrewdly noted that 'a reputation once broken may be repaired, but the world will always keep their eyes on where the cracks were.'"

"Brand is a promise to your stakeholders. It embodies what you want them to believe about you. Reputation, on the other hand, belongs to them. In short: brand is how you talk to the world, reputation is how the world hears you."  Vicky Browning, director of CharityComms

The article was based on a panel held in London and the key advice about managing a media crisis for charities who are caught up in the public glare when crisis strikes:

  1. Understand your risks
  2. Respond proportionally to the intensity of the crisis
  3. Be prepared
  4. Know what you can control and what you can't 
  5. Monitor and measure perceptions
  6. Become the expert and authoritative source on the issue 
  7. Respond quickly and with sensitivity (empathy!)
  8. Involve your employees, keep them informed
  9. Invest in reputation before you need it
  10. Stick to your messages

These reputation remedies could apply to any crisis -- be it a for-profit or non-profit. The one that struck me as an interesting nuance which I had not thought about in a while was reacting in proportion to the crisis event. Sometimes just a statement on a website will suffice whereas sometimes the CEO needs to call a press conference and provide regular updates. Knowing when the CEO should visit the site of a crisis and when not to requires good judgement and good counsel from crisis experts. Over-reaction can intensify a problem.

The nature of the response reminds me of an incident that occurred this week. Chairman Rupert Murdoch of 21st Century Fox made an $80 billion takeover bid for Time Warner and Time Warner's CEO Jeffrey Bewkes responded. Instead of a media statement, no comment, CEO email or other response, he chose to produce a three minute video directed at his employees using the medium that the company has excelled in during the past few years -- digital media. The video begins with “Hi everyone. I wanted to speak directly to you about the news you’ve been hearing today about our company.” Short and simple and appropriate to the situation. Here's an example of taking control of what you can when your company is in the public eye. Bewkes got his points across, took little time out of employees and other stakeholders' time and was personal, conversational and direct. In a way, he discounted (dissed?) the takeover bid by appearing on the small screen. Good choice. 


Toronto Musings

201Had a terrific visit to Weber Shandwick Toronto this week. My colleagues hosted a breakfast to discuss the new rules of engagement for employee engagement and reputation and I shared the platform with my colleague Kate. We met some terrific clients and had some very good questions afterwards, always a plus. Reputation and employee engagement are very much intertwined which made the two angles so easily compatible. We also met with some clients and had meaningful discussions about leadership, character and reputation. Afterwards I headed up to Muskoka for a conference among hydro distributors to talk about safeguarding reputation. Terrific conference put on by The MEARIE Group and to prepare, I learned alot about the challenges facing electricity distributors in Ontario. Of course, it was hard not to mention how Mayor Rob Ford of Toronto was negatively impacting the city's reputation. On the day of the conference, the Mayor of Montreal resigned after being arrested. At the breakfast meeting, I learned something that I aim to keep for posterity. Most probably, I will add it to our compendium on how to recover from a crisis. We have a master deck on how companies recover and build even better reputations and for me, it's my team's Bible. We catalogue all the recovery strategies we can because it always comes in helpful for the next client. But sometimes people have a way of saying something that just lights up your brain waves because it is so insightful and speaks so directly to a company's character. This Canadian company had a crisis some years ago and one year later to the day, they ran full page ads reminding people of what happened and what they had done since the fateful event. The head of comms said to us while we were chatting at the breakfast that they ran the ad because..." "We will be the first to remember, not the first to forget." The company wholeheartedly owned the crisis and was not going to forget. Sage advice.