Holiday reputation of retailers needs protecting

Some new research just came out from Toluna Research for web.com about consumer perceptions of big and small retailers this holiday season. Because of the recent spate of big retailer security breaches, consumers are expressing great concern. 

  • 69% are concerned about security when shopping online this season
  • 25% are likely to change their online shopping behavior
  • twice as many consumers (27% vs. 12%, respectively) are concerned about online security at large retailers than small retailers

The big box retailers' reputations will clearly feel the heat this season if consumers are concerned about their security privacy. To keep their reputations intact, they will need to reassure consumers that their credit history and information is iron-clad. Communications will be key to getting shoppers back into the stores and online with confidence. Information about what they are doing to protect consumers, such as special chips in their cards, and beefed up security technology can help. Additionally, communicating from the CEO on down about consumer concerns and acknowledgement that they are aware of a confidence gap in shopping would be beneficial. Having the senior executive team visibly active during the holiday season at the stores or online using social media might send the right message that they are on alert. Perhaps having senior executives shop in the stores for their holiday gifts and video-ing the transactions could help send a "trust" message. Training all employees about how to answer shoppers' questions about cyber breaches is important. In addition, employees need to know that they should not give out their passwords under any circumstances and the same with vendors since this is such a high security risk and easy way to get into retailer systems. One of the things I learned when working on our Employees Rising study was that one of the reasons that companies train their employees in the use of social media is to educate them about not giving out passwords because it only enables cyber thiefs to do ill.

Reputation is everyone's job during the holiday season and making that loud and clear this year will help. Let's wish for a non-cyber-hacking holiday in 2014.

Corporate America, Some Improvement

The Harris Poll on reputation this year found some good news about reputation so it is always worth sharing. There has been a steady improvement in perceptions of Corporate America. Not enough to break out the bubbly but a marked increase among those who think it is excellent or very good. Among those who believe Corporate America rates on the high end of the scale, we only saw 5% saying so in 2009 at the start of the recession. Now we are at 12% which shows there is a bit of an upswing. And among those who say it is very poor or just plain terrible, those numbers are declining somewhat too. All in all, some positive news for those who defend corporate reputations. Although still a work in progress, banking, insurance and financial services industries show positive gains and now consumers see these industries as part of the solution to our economic woes.

Only 31% say that they learn about company information from social media tools and when they do, only 17% trust this information more than other sources. Friends and family continues to be the ultimate source. 

Most fascinating, a large 6 in 10 say they research companies before doing business with them and nearly half decide not to do business with a company because of what they may have learned about how the company behaves. And if they find out that a company is not to be trusted, one third proactively influences their friends and family to stay away. 





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.

 

 

 

 

 

 

Reputation Drivers in Pharma

The pharma industry is always interesting when it comes to understanding how reputations are built. It is an industry that has certainly had its ups and downs and an easy target to blame for this and that. A global survey that was recently completed among 800 patient groups in 43 countries provides interesting insights into how the industry is perceived. The survey is funded by PatientView and looks at the individual reputations of 33 companies and the industry as a whole.

Overall, the reputation for multinational pharma companies places 7th among healthcare industries examined, lower than biotech companies, generic drug manufacturers, non-for-profit health insurers, the private healthcare sector, medical-device companies, and retail pharmacists. Somewhat more than one-third -- 35% -- of patient group respondents give the industry an excellent or good rating on its reputation which fares at parity with results from 2012 although decidedly lower than positive reputation ratings seen in 2011 (41%). Work is still needed.

The report indicates that there are five key drivers of reputation in the multinational pharma industry. They are (and I quote):

  1. A good portfolio of products that brings hope to people suffering from the medical conditions familiar to the patient group.
  2. Media coverage about the company (allied to comments received on the ‘grapevine’ from peer patient groups about the behavior of a company).
  3. A sense among the patient group that a company is truly putting patients at the heart of its business approach. The company needs to demonstrate this fact, not simply articulate a desire to be patient-centric.
  4. A perception among the patient group of a year-on-year positive change in the company’s investment stance across the patient arena—whether it is support for specific patient organisations, for big campaigns, or for patient-centered research.
  5. A feeling among the patient group that a company’s relationship with it (and with peer patient groups) can be relied upon to be long, rather than short-term.

Trust in a company and its intentions over the long-term to do right by patients seem to be at the bottom of what drives a positive reputation in the pharma industry. That makes perfect sense. I was surprised, however, to see media coverage as prominent as it was. Years ago, pharma companies did not want to voice all the good things they were doing because it was believed to be implicitly understood. Today with all the access to news and information and the ability to connect with other patients in a matter of seconds, it is clear that pharma companies have to own their own conversations and make sure that misinformation is not being spread virally. This again makes the case for social media which reaches the media and which is used by journalists to confirm or deny what is being chatted about. Tangentially, we surveyed corporate communications heads in pharma companies around the globe about their use of social media and surprisingly learned that the reluctance on their part to proactively use social media to communicate has less to do with regulations but with internal silos and lack of what we called social confidence. Getting one's story out in all its positives and negatives is how reputations are being shaped today.

 

 

 

 

 

Technorati take a reputation detour

I've always said that every industry gets its turn at reputation downfalls. Every industry has to be prepared for clearing its name when crisis strikes. We've seen that in the oil industry, financial services industry, auto industry, pharma industry and so on. The one industry that seems to always fare well in the best industry rankings is technology. However, according to an article in The Economist on what to expect in 2014, we should be getting ready to witness a tech-lashing. The reputation of the Silicon Valley elite are soon meet their due if the tech-party extravaganzas and limosine crowd continue full throttle as they are. As Adrian Wooldridge of The Economist says, "Geeks have turned out to be some of the most ruthless capitalists around....The lords of cyberspace have done everything possible to reduce their earthly costs. They employ remarkably few people: with a market cap of $290 billion Google is about six times bigger than GM but employs only around a fifth as many workers. At the same time the tech tycoons have displayed a banker-like enthusiasm for hoovering up public subsidies and then avoiding taxes. The American government laid the foundations of the tech revolution by investing heavily in the creation of everything from the internet to digital personal assistants. But tech giants have structured their businesses so that they give as little back as possible." These are not kind remarks about an industry that has been revered for so long. Wooldridge might be onto to something as more information seeps into the public's consciousness and the inequality divide starts to gain notice. One example cited by Wooldridge was a recent party where a 600lb tiger posed for revilers in a cage and a monkey was made available for Instagram pictures.  [Where was PETA?] Another article on Gawker headlined this supposed joke: "If you ask people in Silicon Valley about the dismal job market, they'll laugh and say, 'What's 'job market'?' A new mobile social networking app?" And if you are still not convinced that something is underfoot, The New York Times ran an article this week about how all the Silicon Valley million-billionnaires are changing the tenor of neighborhoods in San Francisco, buying up all the real estate and generally crowding out the long-timers. One person is quoted as saying she is surprised by how coldblooded these technorati are. Not a pretty portrait.]

All of this criticism is tied up with ill feelings about technology companies having handed over data to the NSA whereupon Edward Snowden exposed this wrongdoing to the world. These serial reputation-damaging incidents are beginning to chip away at the technology elite's image-making and positivity they've done in making our lives more productive and interconnected.

2014 might just be the year when the technology sector loses its luster and customers and the general public begin to wonder what social good they are doing with all their riches and IPO shares. A reputation risk for the technology sector for sure.

The Reputation Stumble Rate Recedes Slightly

4 TWeber Shandwick’s annual calculation of reputation loss – the “stumble rate” – finds that a few more of the world’s largest companies retained their esteemed status as their industries’ #1 most admired company during 2012. 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 2012 and 2013, 46% of the world’s largest companies experienced a stumble, slightly down from last year’s 49%. These companies did not have too great a stumble, however. On average, they dropped two places, falling from number one to number three in their respective industries. However, for those companies that did fall from their perches, the loss is agonizing. Boards of directors and CEOs will want to understand why their reputations eroded and why their competitors leaped upwards. Explanations will be in order.

Of course, the bright side of the coin is the non-stumble rate of 54%. This means that more than half 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?

  • 22 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; Information Technology Services; Property & Casualty Insurance; Internet Services & Retailing; Metal Products; Mining, Crude Oil Production; Oil & Gas Equipment Services; Pipelines; Newspapers & Magazines Publishing; Railroads; Semiconductors; Apparel Retailers; Diversified Retailers; Food & Grocery Wholesalers; Office Equipment & Electronics Wholesalers.
  • 13 industries have stumbled at least three times since 2010. The most volatile, with four stumblers each, are: Airlines, Energy and Life & Health Insurance. Those with three stumblers are: Computer Software; Consumer Credit Card & Services; Financial Data Services; Food & Drug Stores; Medical Equipment; Motor Vehicle Parts; Petroleum Refining; Telecom; Tobacco; Health Care Wholesalers.
  • No one particular driver of reputation took a big hit or could be said to be the culprit for reputation erosion. The worst average declines among drivers across all stumblers were experienced only by two drivers – management quality and long-term investment. All other drivers declined by just one ranking position, on average. Perhaps some stabilization on what positively and negatively affects reputation is taking hold.
  • However, four stumblers lost rank on all nine drivers. The hardest hit was the Airlines industry. The company that stumbled took the greatest blow on its quality of management driver (dropping 6 ranking spots). Ouch. Other hard-hit drivers for this company were innovation, social responsibility, long-term investment, product/service quality and global competitiveness (a loss of 5 positions on each of these qualities). The company that supplanted this stumbler improved on all of its nine drivers in impressive fashion, rising at least two rankings positions on each driver and four spots on two drivers (financial soundness and global competitiveness). This does not mean that this new “king of Airlines reputation” will necessary remain so…this particular company was also tops two years ago and, as discussed earlier, Airlines is among the three most volatile industries.
  • From zero to hero in 12 months. One stumbler lost its enviable top position to a company that is a newcomer to the World’s Most Admired evaluation. This goes to show that even the most reputable companies need to be on guard from all angles – not just their traditional competitors.

Ode to Oil & Gas

background_oil_and_gasAm trying to keep my eyes open. I arrived in Tokyo late last night or should I say early this morning and hoping to adjust before I hit the road visiting our offices, talking to media, presenting research on social CEOs and meeting clients. I thought it would be a good idea to look at The New York Times and understand a headline I saw about "fire ice" in Japan. Why that would necessarily keep me awake, I can't explain. Perhaps I thought it would distract me from wanting to sleep.

But I was glad because I also found an uplifting oped from David Brooks. I was drawn into it because he started out talking about how he goes to conferences hoping they will provide him with fodder for his twice-a-week columns. His conclusion is that these conference conveners are the same ones that make it on the glossy covers of business magazines and other upscale publications. They are flashes in the pan. He then goes on to say that all those quiet, unassuming, downhome executives are the real movers and shakers we should be hoping to learn from. He says the following as way of contrast with the cover boys:

"Meanwhile, the anonymous drudges at American farming corporations are exporting $135 billion worth of products every year and transforming the American Midwest. The unfashionable executive at petrochemical companies have been uprooting plants from places like Chile, relocating them to places like Louisiana, transforming economic prospects in the Southeast. Most important of all, the boring old oil and gas engineers have transformed the global balance of power."

Brooks pays homage to the “Material Boys” — the people who grow grain, drill for fuel and lay pipeline. He calls them the real winners. This peaked my interest because it was unusual to read such reputational support for the oil and gas industry but here it was. The oil and gas industry is usually a fairly maligned sector but Brooks gives them a thumbs up for providing jobs, keeping emissions down and making us energy independent in a big way. Always good to see a reputation shot in the arm.

Reputation Worries All Around

the-one-percentReputation is often high on agendas these days.  Years ago, it was not usually number one but among the top three to five items that kept boards and CEOs up at night. This week someone sent me an issue of Operational Risk and Regulation and I quickly breezed through the table of contents online when I noticed that they had an article describing a risk survey among operational risk managers. This is not usually the typical stakeholder group I get asked about so I took a look at the various types of risks that were keeping them up at night or at least, stressed out during the day. Reputational damage was at the top of their top 10 list for 2013.  When I turned to the fuller description on reputational damage, the first sentence was quite boldly stated. "A good reputation has never been easier to lose -- though this may not be a problem for much of the financial sector, as it doesn't have one." I understand where the author is going with this statement but the financial sector does have a reputation, just not a particularly good one. A company or sector can have a good or bad reputation and in some cases, somewhere in between. Most every sector, person and organization has a reputation. And just as a company can lose reputation over night or in seconds, so can it begin the process of redeeming itself by beginning the process of being straightforward, transparent and communicative. The financial sector, like many others, has certainly been battered but it does not mean that it is not crawling back and trying to restore its credibility. If anything, the financial crisis of the past few years has taught the financial sector to be more humble and that might just be a good place to start.

 

KEY RISKS FOR OPERATIONAL RISK DEPARTMENTS

IN 2013

 

Reputational damage

83.2%

Failure to enforce internal controls

79.8

IT sabotage/cybercrime/cyberattacks

77.4

Complex fraud and abuse of customer data

73.4

Business continuity

66.0

Sanctions and AML compliance

57.2

Culture, incentives and compensation

46.8

Operational risks associated with emerging market operations

 

42.3

Political intervention

35.0

Epidemic/pandemic disease

16.2

Ordnance Survey, in association with Operational Risk & Regulation