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.

Crisis Lessons to Chew On

Lessons on dealing with a crisis are always helpful, especially when your company's reputation is in jeopardy. I found this list particularly worthwhile because it was written by Sallie Krawcheck, one of the most senior women on Wall Street. I heard her speak at a Forbes conference years ago and really enjoyed her tales of juggling work, family and husband. She was very down-to-earth, approachable and humble. She recently wrote on her LinkedIn page about the lessons she learned from leading through various crises and as she says, watching others make career-ending mistakes handling crises. Here is a brief synopsis of what she advises: 1. Be heroically available. I wholeheartedly agree with her that there are times when executives wish they could just close the door and wait until a crisis fades. We all also know that this strategy does not work and rarely happens. She mentions a colleague who hosted a call for Financial Advisors when investments had gone south and how he said he'd stay on the call until every last question was answered which lasted late into the evening.

2. Allow people to ask real questions, even if you don't want to hear them. We have all been in meetings when no one wants to ask the hard question and most people just throw softballs. Leaders have to create an environment where the hard questions can be asked and there are no repercussions. Sometimes I advise a leader to ask the question himself, provide the answer and get on with it. Once the question is asked, others might have the courage to speak.

3. Frequency matters more than perfection. Krawcheck mentions how her management team had a call at the start and end of every day when the economy was tanking a few years ago. She says that some of the calls were not all that good and packed with answers but at least everyone knew they would be getting an update on a regular basis.

4. On your message: Repeat it, repeat it, repeat it. And do in different media. That is dear to my heart because those of us in public relations understand that to reach people who need certain information, you have to reach them where they are. And they are often not where you think they are. Some people read company emails, some ignore them. And as Krawcheck says, some people are readers and some are listeners. Some are in facilities where there is no easy access to electronic information. Make it easy to find out what needs to be known.

5. Bring in people who know more than you do or provide a different perspective. I found this one unusual since so many companies keep all their information and goings-on close to the vest. And rarely do they want to admit that they might not know something. She mentions how during the recent downturn, her company brought in some experts to bring a new voice into the conversation even if they were saying the same thing she was saying. This is good counsel.

6. Let them see you sweat, but don't let them see you tremble. Another piece of good advice and a good way to end this post. It is okay to work super hard and show that you are not home for dinner with the family night after night when crisis is on your doorstep but make sure that your team does not see you scared. Being confident "goes a long way." Yes indeed.

The High Cost of Reputation Loss

I was pleased to be alerted to a copy of Reputation Review 2012 by Rory Knight, chairman of Oxford Metrica. Years ago I used some of their research in my book on CEOs and particularly on how CEOs can build their reputation or kill it when crisis strikes.  Knight just completed his annual reputation review for AON, the global risk management, insurance and reinsurance company, and as I expected, the report has insightful and timely information for those seeking to better understand the impact of crisis on a company and its bottom line.

 

Knight reviews the top crises of 2011 such as TEPCO, Dexia, Olympus, Research in Motion, Sony, UBS and News Corp, among others.  His company looks at the recovery of shareholder value following crisis. Among 10 crisis-ridden companies in 2011, only News Corp found itself in positive terrain afterwards. In fact, what they found was that 7 of the top 10 lost more than one third of their value. Two companies lost nearly 90% of their value. These companies clearly had to put big restoration processes in place afterwards and I would suspect paid good dollars to firms to restore their good names and overlooked other everyday business to move forward.  Oxford Metrica says: “Managing the restoration and rebuilding of reputation equity is an essential part of the value recovery process following a crisis. Reputation equity is a significant source of value for many companies and a coherent reputation strategy can be the difference between recovery and failure.”

 

The big takeaway from the report, or at least what seems to resonant with me, is that there is an “80% chance of a company losing at least 20% of its value (over and above the market) in any single month, in a given five-year period.” Those odds are not good and as Knight says, screams for having a careful and well thought out reputation strategy in place before a minor event turns into a raging crisis and monopolizes headlines, offline and online.  A solid reputation strategy will also help guide the reputation recovery process which is often too hurried.  This is the kind of advice that I write about in my book on reputation recovery and underscores having a strategy so you do not find yourself in this situation in the first place. Additionally, Weber Shandwick’s stumble rate of 43% for the world’s most admired companies tracks with Knight’s high rate of expectant reputational downfalls. It is not good at either rate.

 

The report outlines a process for managing a company’s reputational equity. They are 1) Measure your reputation through benchmarking and vis a vis your peers; 2) Identify the drivers of your company’s reputation in order to allocate resources properly; 3) Prepare a strategy for recovering your company’s reputation; and 4) monitor your reputational equity often and respond accordingly when risk emerges.

The report analyzes the reputational losses of Olympus and Research in Motion after their reputation-damaging events. It is worth reviewing.  It also takes a look at the financial results from TEPCO after the tsunami hit Japan. Apparently, 90% of TEPCO’s value was lost, over $US37 billion.  Oxford Metrica estimates that events associated with mass fatalities have double the impact on shareholder value than do reputation crises in general.  I believe they are right. BP’s Gulf of Mexico tragedy which involved over two dozen deaths wiped off substantial shareholder value off their books.

 

Where I wholeheartedly agree with Knight is when he talks in the report about the impact of senior management on crisis and the need for that management to lead with transparency and openness.

 

“For mass fatality events particularly, the sensitivity and compassion with which the Chief Executive responds to victims’ families, and the logistical care and efficiency with which response teams carry out their work, become paramount. Irrespective of the cause of a mass fatality event, a sensitive managerial response is critical to the maintenance and creation of shareholder value.” One of the takeaways from the report is that winners and losers, reputationally, can be determined by how the CEO responds to the crisis.

 

The report contains an article by Spencer Livermore, Director of Strategy, at Blue Rubicon, a reputation consultancy. He quotes a stat that is dear to my heart, “Oxford Metrica’s analysis shows that companies which open up more following a crisis and tell a richer, deeper story are valued more highly, increasing share price by 10 per cent on average over a year.” He calls it the communications dividend which comes from investing in communications. Years ago I wrote an article for Ernst & Young’s Center for Business Innovation called Communications Capital and the idea was similar – the right communications can increase market value and strengthen reputation.  As Livermore says, “We can make communications worth hundreds of millions more simply by making them better understood.” Having the right compelling narrative built on a well thought out reputation strategy is worth its weight in gold today.

The broad brush of industry reputation

I wanted to return to the subject of CCOs. I just spoke via SKYPE to a group of communications professionals in Nigeria about the importance of CEO communications and corporate reputation. As I was preparing, I started thinking again about how useful the information we at Weber Shandwick gleamed from The Rising CCO IV was. This is the study we do annually with Spencer Stuart. One of the factors I mentioned in my talk this morning was how CCOs have to battle perceptions about the industry they are in along with their own company reputation.  When we asked CCOs worldwide what consumer attitudes were impacting their jobs the most over the past two years, their responses can be seen in the chart below. Industry reputation led the list. I have to admit being somewhat surprised. When we compiled this list for the survey, I was thinking that the economy and privacy had to be the biggest issues of the day when it comes to public opinion. The fact that privacy was so low raises the question about whether social media gets us all hyped up about privacy problems or whether CCOs have their heads in the sand when it comes to this particular issue. Not sure. What I do know is that industry reputation needs managing today and just adds another layer to the complexity of the CCO position.  And perhaps this is also why CCOs said that the top quality for success today is crisis management.  Not only do they have to manage their own company’s reputation and that of their CEO’s but they have to look at everything with an industry lens as well.  A crisis that happens to a competitor impacts everyone in the industry.  Today, reputations are painted with a very broad brush. Just in the past week or so, we have seen how the reputation of the financial sector is back squarely in the spotlight.

Consumer Attitudes That Impacted CCO Job Most In Past Two Years

 

Global CCOs

Toward our industry

51%

Toward the economy and spending

41

Toward product or quality issues

38

Toward the environment

34

Toward big business

33

Toward the government or politics

17

Toward privacy

 7

  Talking about industry reputation, you should take a look at Reputation Institute’s recent global RepTrak results about the ups and downs of industry reputation. Most industries have an average reputation with only three standing out – consumer products, food-manufacturing and beverage.  At the other end, the bottom, we see financial-bank, financial-diversified, chemicals, telecommunications, utilities, and way on the bottom tobacco.  Pharmaceuticals saw a slight increase over 2011.

Industry associations have a hard challenge ahead of them.  22 of the 25 industries were average or below. Being average is not good enough either in this catch 22 world.

Improving reputation #1 success factor

Every year, we at Weber Shandwick work with executive recruiter Spencer Stuart to survey worldwide CCOs (chief communciations officers) about the challenges and opportunities facing them. The survey is called The Rising CCO.  It is a subject that I have always been very interested in.  My interest does not stem solely from being in the public relations industry but in the complexity of the communications position today. How a company communications in good times and bad speaks volumes about the management, its values and its attention to the public trust. This year, as in other years, we asked about the impact of social media on CCO positions, what senior managment expects from them, how their effectiveness if measured, the number of board meetings they attend, the qualities needed to be successful, crisis management and a host of others. Here's one fact for today that has to do with reputation. I will continue to discuss some others that are reputation-related. We learned from CCOs that improving corporate reputation tops the list of senior management’s expectations for corporate communications this year, as reported by approximately two-thirds of global CCOs (65%).  This focus on reputation was followed by obtaining positive media coverage (60%) and increased support of brand reputation/marketing (56%). This prominence for reputation is not surprising  given  that reputational crisis is practically a fact of life for large companies globally – nearly three-quarters of CCOs (71%) experienced a crisis threatening their reputation in the past two years. I was not surprised either by how important positive media coverage is although I know how difficult that is to secure enough of what will please a CEO. Quantity and quality always matter at the top.

More to come on other interesting feedback from the study.

 

CEO as PR Expert Needed

Job descriptions for leaders today have to begin including public relations expertise. Just looking at this week's headlines convinced me that CEOs have to be PR crisis experts to be qualified for the job. I was thinking about this when I read the oped in The New York Times from an investment bank's employee and hearing the news about the Afghan killings by a U.S. military person. I also just read an indictment by a former Google employee about the oversized focus on advertising since Larry Page took the reins at the search giant.  Whereas we used to enumerate the operational excellence of CEOs-to-be, today we should seriously consider whether they are crisis-seasoned enough. Bank CEOs, presidents and Internet champion CEOs have little time to respond when their organizations or countries are making breaking news. I hold my breath waiting for them to respond. Every word is dissected and critiqued. Not easy. Years ago, I worked on a research project about how pr-savvy board members were. We looked at how many board members  in the Fortune 500 had "any" communications experience. Sad to say, there were few. I used to wonder how these board discussions went when no one in the room knew how to deal with detractors. Now I realize that not only do boards need some practiced PR professionals among their board members but CEOs too need to also be PR- tested. Of course, corporate communications officers are there to work alongside CEOs experiencing a crisis but CEOs themselves need to be good at communicating their positions and steadying the troops (so to speak). Tone is sometimes everything.

Here are remarks from the highest offices of the US government in response to the Afghan rampage. Wonder what you think?

"And obviously what happened this weekend was absolutely tragic and heartbreaking. But when you look at what hundreds of thousands of our military personnel have achieved under enormous strain, you can't help but be proud generally." -- President Obama

"This terrible incident does not change our steadfast dedication to protecting the Afghan people and to doing everything we can to build a strong and stable Afghanistan." -- Secretary of State Hillary Clinton  

"Our thoughts and prayers are with the families and their entire community." -- Deputy American ambassador to Afghanistan, James Cunningham.

 

 

 

 

Managing risk and reputation

Beautiful morning here in New York. I even hear the birds chirping, almost like Spring. However, for me, it is a sit-down day. I am working on an article which I will tell you more about later but I am looking at many hours in front of my laptop as I draft away. I already started my list of what I want to do when it gets done in a few short weeks. When I wrote my books and other articles, I started a similar list that contains all the things I want to do on an ordinary Saturday or Sunday like see a movie, go out for dinner or lazily walk in the park.  Anyhow, back to my blog post. I have my own reputation and risk to manage with this article looming before me. I kept an advertising insert from a few weeks ago because it had a few good stats on reputation. It was on Risk Management, a favorite of mine because reputation often comes up.  It was written by Joe Mullich. I am unable to find the link, apologies. A few interesting facts:

  1. Accenture found that 44 percent of companies do not gauge reputational risk
  2. The Federational of European Risk Management Associations (FERMA) along with the Institute of Risk Management (IRM) found that reputation risk from social media is cited as a "material risk" by nearly 50 percent of European companies, making it one of the greatest threats that companies face.
  3. Corporate responsibility or CSR is having a large impact on consumers' buying habits.
  4. Reputation is seriously affected by missteps. Mullich's section cites a 2010 study of the world's largest 1000 companies and found that 80 percent of those firms have a major "reputational" event every five years that causes them to lose one fifth of their value.

I particularly liked #3 above because we found a similar trend in our recent study on the importance of the corporate brand behind the product brand. And this quote intrigued me...."The higher the cost of the purchase and the more that translates into a long term relationship, the important reputation becomes." I think that is exactly right. When consumers are buying big ticket items or even medium sized ticket ones, the relationship is deeper and the consumer wants to get it right. They want to invest their dollars with a nod to doing right and supporting companies that treat employees right. The big shift however is that consumers feel this way about the company behind the brand for smaller, everyday purchases.

The article also mentions how insurance companies are introducing reputational risk or crisis management insurance policies (something we know about) and interestingly, that there is a new data terminal that incorporates a reputational risk indicator "which allows investors to identify the severity of criticism and negative press coverage directed toward individual companies and market sectors." That's new to me and quite interesting. Perhaps it is one of those predictive systems that advise companies on emerging threats that we have seen as more clients are being proactive vs. reactive.

Digitally Ready?

  As you know from reading my blog, one of my great interests is online reputation management, particularly in times of crisis. At Weber Shandwick, we have conducted research starting way back on this topic….from Safeguarding Reputation to Risky Business: Reputations Online to Reputation Warfare and more to come. This past week I learned of some new research from Altimeter Group, authored by Jeremiah Owyang. They surveyed 144 social business program managers as well as conducting interviews with 63 corporate practitioners and providers. This included our very own David Krejci in our Digital Communications group about our social media crisis simulator Firebell.  I liked David’s quote (“experience the paralysis”) which is what Firebell does – it gives you the heart attack moment when social media has your company in its sights.  Since digital defense has been an important element of what we do, we were delighted to share information on this resource.  Some of the facts (read the full report here) worth noting are as follows:

  • Be prepared. More than three-quarters of  social media crises could have been diminished or averted if companies had invested their resources internally and strategically. Of the advanced companies identified by Altimeter, 13 of the 18 have a clearly defined crisis plan with clear roles, responsibilities and action steps.  But they found that 56% of all companies had no clearly defined plan (that’s when the paralysis sets in).
  • Companies need social media policies. These policies guide employees on how to participate in the social universe.  Left unguided, employees are uncertain or oblivious how to participate online and probably do so and go off the guard rails. Reputational risk is heightened, not lessened, when no social media policy is in place. In their survey, 83% of all companies they surveyed had a formal policy in place but among the more advanced ones, all 18 or 100% did. Interestingly, 8% had a policy specifically prohibiting employees from engaging on behalf of their companies. While I have traveled around the world, I have seen this to be true but it does not seem to deter most people and in fact, most definitely increases anonymity online. 
  • Ongoing education is critical to managing online crises well. I found this section of the report very helpful because there is so much more that companies can do.  An example was given of a company that has a certification program with over 60 online courses.  Companies could certainly do better at social media training, whether it be brown bag lunches, speaker series, internal newsletters, etc.
  • Create a scalable hub and spoke system to lead the social media strategy. The more advanced companies have a center of excellence at the hub with oversight for strategy, governance, training and education, measurement and vendor identification.  The centralized hub works closely with the cross-functional and cross-business unit support teams (the spokes) to support the overarching strategy and common policies. The hub is usually operated through marketing and/or corporate communications. This corporate social media team typically consists of 11 people. 

There is a lot of good common sense and best practice advice in this report. Take a look. We have a lot of work ahead of us to make our companies digitally safe.