Partnering on reputation

I am still technically on vacation but catching up on a few things so I can face Monday. You know how that is. Now back to reputation.

A payoff of a good reputation that gets little attention is how good reputation attracts better business partners. When you think about all those mergers and acquisitions that steam up the marketplace, people forget to mention that likes attract (good reputation + good reputation = consolidation). A recent survey from Fortune Knowledge Group and Gyro:, an ad agency, found that 70% of business executives cite reputation as the most influential factor in choosing business partnerships. I liked how Business Insider spoke about a good reputation as a "validation stamp" that makes buyers feel more comfortable about coming together. Everyone uses those validation stamps today whether it is to help in purchasing products or finding a great new place to work. There is an entirely new industry built on validation stamps when you think about Yelp, TripAdvisor, Better Business Bureau and Amazon. 

When talking about choosing a business partner with a good reputation, senior executives who were surveyed say they focus on companies that have strong cultures (52%), respect for employees by management (50%), employee pride in the company's reputation (41%),  and management credibility among employees (39%).  Again and again, we see that the intangibles are becoming as important as the tangibles. In fact, the research found that senior executives are finding it hard to just depend on the tangibles today. About two-thirds (65%) of executives agree that an increasingly complex business environment has made it more difficult to base decisions on purely “functional” factors (for example, cost, quality, or efficiency). Instead, they are taking deeper looks at culture, reputation and values. Interesting to me that these latter three factors are fast-becoming the distinguishing competitive advantage that companies are seeking to meet their reputation-building and success goals. The world is changing before our eyes.

Last year, I recall looking at a few companies in an industry to compare and contrast how they communicated about themselves on their web sites. I remember how one company distinguished itself by having a tab devoted to its partners. The company told you all the universities they collaborate with, non-profits, NGOs, scientific councils, associations, etc.  It's a smart idea for adding even greater credibility to those validation stamps we all look for today when making a business decision. 

Empathetic CEO Reputation Rising

I did not expect to hear that Angela Ahrendts, former CEO of Burberry and soon to be retail chief at Apple, talk in an interview how when she started at Burberry, she focused on empathy and trust as the keys to building Burberry's culture. In the interview, Ahrendts says about those days, "It's compassion. It's humility. It's saying thank you. It is always putting yourself in the other person's position. I know it might sound weird, but empathy is one of the greatest creators of energy. It's counterintuitive, because it's selfless." Her father instilled the notion of humility in her when he asked her as a little girl, "When you look at a photo, do you see yourself last?" I wonder how many people actually see themselves last but she seems to be one of those people.

At Burberry, Ahrendts communicated often. She regularly emailed to employees and visited offices and stores around the globe. I liked her idea of a weekly video update to employees. Sounds like an inclusive leader. She will be one of the few female leaders at Apple so will be one to watch. 

Empathy. Humility. Compassion. Generosity. All these terms are increasingly showing up in features on CEOs. Is something up? Is climate change impacting CEO brains? Something is taking root and I will be tracking it. However, curious if anyone of this "soft" talk is coming out of this week's World Economic Forum. Hmmmm. 

LatAm Reputation Buildling

I have been traveling in Brazil and Peru for business to talk about reputation. It was a terrific visit because I confirmed once again that reputation is on the agendas of most companies wherever they may be. One of the challenges I heard several times on my visit was how non-U.S. companies do not have to deal with government relations as much as LatAm companies do. This challenge to reputation-building came up as well in several media interviews I did prior to my trip. Each time it came up, I had to chuckle. The truth is that government involvement and regulations in US markets also feel very real and intrusive. I always talk about how government used to be an “invisible hand” but today plays a decidedly “visible hand” in business affairs. For many companies, it is literally like a new line of business. In fact, I have been asked several times nowadays how government affairs departments are being restructured to more effectively manage upcoming policy and government regulations. I was in Sao Paulo and Rio de Janeiro for two seminars on reputation management. In our research on corporate reputation, 91% of executives in Brazil told us that they were increasing their efforts at reputation building. Much of the discussions in the Q&A period in addition to government intervention centered around culture, B2B reputation-building and dealing with social media threats. In one market, we also discussed social CEOs, a favorite new topic of mine. Apparently there are fewer socialized CEOs in LatAm than in the U.S. due to security issues I was told. I found that illuminating.

When I was in Lima this week at an evening reception, I had a discussion with two businessmen who told me how optimistic they were about business growth in Peru. They were noticeably ebullient. Considering their past history, they said they had never seen so many doors opening to them. There seemed to be no ceiling on their optimism about the future. Refreshing.

As always when I travel, I catch up on magazines because I find myself on planes. I caught an article in The Economist that ties into this post’s train of thought. One line particularly stood out…”…place matters more than ever in a globalized world.” The writer was making the point that in a global world where everything has become so homogenized (like “a universal airport lounge”), people crave a sense of place and the more distinctive, the better. While I was in Brazil and Peru, it felt like there was a definite pride in their “place “for being different than the U.S. and other regions and for the boundless opportunities ahead. That could only be a good thing for sparking innovation, building top flight reputations and surprising the global competition.

Timing is Everything in Reputation

Timing is everything when it comes to reputation. There are several articles today about how London's reputation for financial integrity has been damaged by recent events in their banking system. What's more interesting to me besides the three banks whose reputations have been undercut for rigged interest rates and money laundering is the timing of these crises. All three bank debacles occurred within weeks of each other which is a collective reputation-killer for the city of London and the sector. I always say that you can err once, misstep again but the third time and you're out! I think that is a baseball cliche of sorts. But it is true that three is the magic number when it comes to reputation. Companies and leaders fall, often trip a second time as they institute change but on the third try, you definitely lose investor and customer patience.  After a third attempt or three sequential mishaps, your reputation gets a scarlet R. I think that is what is happening to the U.K. banking system. Not that this has not happened to us in the U.S. We have had our fair share of 1-2-3 and 4+ reputational fouls.  In fact, enough for a lifetime. The saving grace for the U.K.'s financial sector is that the Olympics are stealing the show and its summer holiday time. People are also very worried about the economies around the world and leadership changes in the U.S. and China. As they say, timing is everything and the U.K. banks picked a good time to stumble (if they had a choice, very unlikely). There was a line in one article about this reputational meltdown for the City of London which made me read it twice: ..."the U.K. government had launched a public inquiry into banking culture -- even bringing in a bishop to offer a moral perspective."  I am curious what the Bishop shared.

There are plenty of companies with excellent ethical programs and cultures that could serve as best practices for these wronged companies. I'd turn to them too. We've got to get these ethical violations straightened out to restore trust once again in our financial centers. Let's do more than keep our fingers crossed. And let's make sure we listen to the stories from the other side in case we're not hearing the full story. That's been known to happen!

Future-Proof CEOs

Just finished reading the new IBM CEO survey, Leading Through Connections. There is alot of great information about how CEOs see the world, particularly the new workforce. Instead of the usual command and control state of affairs, CEOs now realize that they will be building their company reputations on their employee intelligence networks and shared values. As the report says about CEOs, "they are arming the people who represent their brands to the world."  Without knowing what the values, mission and purpose of an organization is, there is little hope that reputations can be steadied and differentiated in the present sea of information chaos and overload. "For organizations to operate effectively in this environment, employees must internalize and embody the organization's values and mission."  Companies with the best reputations will have employees who help build and safeguard their companies reputation every minute of every day because they understand what the company stands for. They will guard their company reputation as their own because they will implicitly understand the character of the organization. It is now the CEO's job to arm them with the tools to understand how best  to represent their brands no matter where they are or what time zone they are in. Shared beliefs, up and down the ladder, will create winning cultures and winning companies. The survey touched a teeny bit on CEOs and social media. Here is what they said. "Though CEOs frequently mentioned dipping their toes into social media waters, few claim to be personally immersed. This arms-length involvement puts CEOs in a precarious position.They are making critical judgements about a disruptive technology without much firsthand knowledge." A few weeks ago, I had a discussion with a corp communications officer for a major global companywho told me that he knew little about social media and depended totally on a younger guy in his department to handle it. The time is ripe now for CEOs and other company officers to take the leap forward and get to understand social media more deeply. That's where the future is headed and headed at light-speed. In fact, in the survey, the most startling stat for me was how social media was the least utilized customer interaction method today. Yet, CEOs predict that in three to five years, social media will become one of the top two ways to engage customers. They expect a 256% increase in usage! The number one way to engage in the future was face to face and sales interactions, as it is now. But social media is going to ramp up quickly as the best way to engage with customers and CEOs know it. They just have to get their companies in gear for 2015 when social media reaches its full potential. Unfortunately, the study shows that traditional media will lose out (CEOs predict a 61% decrease in three to five years) as social media gains acceptance.

(The IBM study talks about "future-proof" employees. I borrowed it here for my title. I like the phrase! Also really like the infographic. )

Woefully Uninspiring

 Employee communications will undoubtedly be the hot topic of the next few years, especially in the reputation space. As leaders come to terms with the fact that employees can be their best advocates and worst badvocates, internal communications will rise to a new level. That's a good thing because I think leader-to-employee communications is more immature than the art and science of external communications.  With all the technology we have, you'd think that employee communications would be more advanced. But it is not.  Research by Dov Seidman and the Boston Research Group surveyed thousands of employees at all levels. One of the more startling  findings was that 27% of bosses think that employees are inspired by their firm, when in fact only 4% of employees agree.  And 41% of bosses say their firms award people based on values rather than financial performance.  Only 14% of employees agree. Bosses have  much to do to get employees inspired and willing to go the distance to make their firms successful and a place others want to work at. Talent, leadership and culture are drivers of reputation. Time to inspire before it is too late.

Culture Trumps All

One of the advantages of having worked at several companies is that you really get to understand how different cultures can be. In the newest strategy + business study -- The Global Innovation 1000: Why Culture is Key, the researchers make the point that the most important ingredients in building an innovative environment is strategic alignment and a culture that supports innovation. They found after studying the world's biggest spenders on R&D over seven years that "there is no statistically significant relationship between financial performance and innovation spending, in terms of either total R&D dollars or R&D as a percentage of revenues." That's a very revealing statistic. It is natural to assume that high R&D spenders would have the best bottom lines and most success. It just is not true. Now that innovation spending is back on track after a poor economy, the authors conclude the following below. This is such a critical point for those wishing to understand innovation and what really is important in building a reputation for being a best place to work:

"Culture matters, enormously. Studies have shown again and again that there may be no more critical source of business success or failure than a company's culture -- it trumps strategy and leadership. This isn't to say that strategy doesn't matter, but rather that the particular strategy a company employs will succed only if it is supported by the appropriate cultural attributes."

It always gets back to the people and the culture. The research is alot deeper than this but the quote above about culture trumping strategy and leadership just jumped out at me. I'd have to argue that the leadership provides the foundation for a culture that supports innovation and that leadership might matter even more than strategy but culture shapes success, and ultimately reputation.

Self-Inflicted Reputational Disasters

I recently had a discussion with someone about self-inflicted and non-self-inflicted reputational disasters. Most of the reputation crises I have worked on and written about were self-inflicted because the early warning signs were there in the first place and leadership had an opportunity to change course. Unfortunately, the early warning signs were ignored or deemed inconsequential. An article in strategy + business, the Booz & Company journal, discusses the concept of self-inflicted black swans (a surprise occurrence that causes a major impact) and provides excellent food for thought.  Essentially, the author points out that there are ways to detect if the culture is ripe for these kinds of disasters and ways to protect against their occurrence. And it all gets down to the organizational culture or DNA. There are some very good suggestions such as clarifying who is really in charge of identifying risk exposure, aligning incentives so that people are rewarded for anticipating and disclosing risk and third, creating unfiltered pathways so that those at the top hear the "ground truth" and not just what they want to hear. The bonus for me after reading the article was learning about some stats that the authors uncovered. Since I am always looking for good stats to illustrate the downside of reputational disasters, self-inflicted or not, I want to share here:

The unintended consequences associated with a self-inflicted black swan can be devastating. They include negative publicity; huge, sudden costs; lost revenues; lawsuits and criminal judgments; and regulatory penalties. Analysis of the stock prices of companies that suffered such events in 2009 and 2010 in the oil, automobile, aircraft manufacturing, and financial-services industries shows that within two months after a visible self-inflicted crisis, an average of 18 percent of shareholder value was lost, relative to the S&P 500. Moreover, stock price performance continued to diminish over time: On average, shareholder value came down 33 percent within a year.

A loss of shareholder value of 33 percent over a year's time is catastrophic in my book.  It is worth learning how to prevent these unexpected surprises from occurring and figuring out how to turn these black swans into white ones.