On the minds of boards...

EisnerAmper's survey among 250 board members found reputational risk at the top of board concerns like last year. The survey was conducted in early 2014. What is surprising about the findings is the big jump in cybersecurity/IT risk and the decline in concern over crisis management and disaster recovery. Clearly, the Target data breach was very much on the minds of board members at the start of the year. And for good reason--Target even lost their CEO over the breach. In addition, the focus on hacking and Edward Snowden's disclosures of top secret information from NSA had to be of great concern about the damage to reputation from IT failures. Interestingly, board members may be worried about cyber-risk but the American public does not see these cyber-attacks as particularly threatening dangers and are actually fairly complacent about them says a report mentioned in the WSJ today from the commission members who worked on the 2001 terrorist attacks. 

CEO succession planning seems to be a middling concern to reputation-mindful companies according to board members. Apparently, nearly one out of every two board members surveyed think they have a heir in waiting. However, the other one out of two realize that they might not have the right candidate or one that is groomed and seasoned enough for the top job. As we have seen with Target, a CEO-elect was not in place. My bet is that they are looking for a wholesale change and the opportunity is right now to change the culture and get Target back on top. It can happen to the best of companies.

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. 

Sticking up for brands and reputation

An interesting thought for this hot summer day while supposedly chillin' on vacation. I was reading through some of Andrew Hill's articles in the Financial Times and landed on this one because of its close association with reputation. After reviewing a recent brand ranking that came out, Hill says that he expects more ups and downs in brand ratings in the near future compared to the recent past where companies were mostly concerned about survival as the global recession hurt nearly everyone. When it comes to reputation, I have to chime in and say that the entire past decade has been one big volatility cycle, starting with Enron, WorldCom, Arthur Andersen, and it only got worse. Sector by sector fell down and have been killing themselves to climb out of a monstrous hole of distrust and uncertainty. It's been a bloodbath.

Hill makes a good point when he reminds us that in the future "companies will place greater emphasis on how to make customers – and non-customers – trust their overall brand and speak up for it, to mitigate the risk of infidelity." This is where social media comes in and all the new intermediaries that customers are channeling with recommendations on Amazon, Yelp, Google, Twitter, Pinterest and so forth. These are perhaps the newest of new stakeholders, almost like a Seventh Estate.

And let's not bypass employees which Hill did not mention. Customers are indeed important to brands but employees are a whole other segment that can speak up and stick up for brands. They can help inoculate a brand or reputation and they are supremely trusted. Don't forget to read our survey on employee activists which lays out this whole new activist segment that can be mobilized on corporate reputations' behalf.  

I agree with Andrew Hill that brand (or in my case, reputation) is a discipline that will never again "be a low-priority 'afterthought' for their bosses." Our work is cut out for us because as I see it, the volatility ain't nothing yet. There's a firestorm ahead.

Reputation at the speed of light

Nick Carr's article in The New York Times did a number on me. He wrote about how information overload and social media frenzy makes us unable to concentrate, remember, focus and understand. I thought it was only me who was having trouble reading to the end of an article and remembering what I had just read because I'm multi-tasking and multi-thinking like crazy. Carr says he has the same malady as me. He cites a study conducted by the Victoria University of Wellington in New Zealand where these symptoms appear to be common. The researchers, Val Hooper and Channa Herath, conclude: "The findings indicated that there were definite differences between people’s online and offline reading behaviours. In general, online reading has had a negative impact on people’s cognition. Concentration, comprehension, absorption and recall rates were all much lower while reading online than offline." The authors were so intrigued by Carr's article in 2008, "Is Google Making Us Stupid?," that they did some exploratory work. For a while there, I thought I was just growing stupider. But apparently Nick Carr and others have the same case of Internet brain-eating virus that I have. 

A quick synopsis of the research: People reading offline usually read from beginning to end while those reading online tend to skim, skip words, cross-reference, jump around to different links, read in chunks, speed-read, and multi-task. As for offline reading, people read every word, read more slowly, annotate as they go along, and generally retain more of what they read. Online reading is more often happening for work and gathering information while offline reading is more for pleasure at the end of the day or early morning.

Why did this article hit me so hard? This made me think about the extreme difficulties facing many of the companies we work with who are trying to build reputation or protect reputation or repair reputation when their customers and prospects are only one inch deep on their web site. They may be on the company home page or reading an article about best smartphones while simultaneously checking the news, answering email, sending a text, or downloading a document. If you have only 60 seconds at the most to say who you are, what you stand for and why your product is the best or you are a great place to work, how do you do that in skim-able fashion? We are entering an era of reputation at the speed of light. What types of cues, symbols and signs can a company provide that leaves a memorable thumbprint? Are long-form treatises just too much? Maybe Vine and Instagram have it right? Short and sweet but disposable? Or should we be resorting to six-word-stories or hiaku? The findings tell us that not much is going to be remembered if it is absorbed online so the challenge of this new Internet era is getting through to people in a memorable, emotional, story-telling way that sticks. 

This article made me think I have some hard thinking to do on shaping reputation in this nano second, evaporable world. After all, who has time to think online or read offline? I think at the core, companies are going to have to focus focus focus on one message that they want the world to know and figure out how to get that embedded into people's consciousness. They are going to have to apply all the energy and muscle they have to make this one message synonymous with them. It reminds me of how well BP was able to hammer home Beyond Petroleum and solar energy. Not the best example I know but one that is emblematic of what I am thinking. IBM's smarter planet is another. What is the one signature idea or product that solves a common problem and says it all. Like a song in your head that repeats and repeats.

I do have to share one line from Carr's article that made me really really laugh today. He said, "Sometimes when people ask what I do for a living, I am tempted to say that I write emails." Ditto.



Brand America...steady but strained

The American Brand is doing okay. Are you surprised? I was and wasn't.  Pew Research just issued new research on perceptions of the international balance of power among over 48,000 people in 44 countries from March 17 to June 5, 2014. The research revealed that America's image is similar to what it was nearly one year ago despite recent image problems from spying on other country leaders, negativity over drones, Middle East flareups and unrest.  65% (median) voice a positive image of the United States. This positive reputation extends to perceptions about America in Africa, Europe, Asia, and Latin America. Only in the Middle East are perceptions far below the global median (30% median). Thirty of the 43 countries surveyed contain majorities that view America positively. 

No surprise here. The biggest declines in perceptions of America surfaced in Russia (51% positive in 2013 to 23% today). With the turbulence in the Ukraine today and the recent downing of MH17, the numbers have probably slid further downward.  Other spots where anti-American sentiment exists are Greece, Pakistan and Argentina. The Middle East is decidedly unfavorable in their perceptions of America, particularly Turkey, Egypt and Jordan. Israel is the only country in that region that has a favorable view of the American brand. Palestine's view of America, although poor, saw a rise in favorability from 16% to 30% (those figures have probably changed too).  Interestingly, younger people between 18 and 29 are far more positive towards the American brand than those 50 years old and higher.

The reputation of President Obama has played into this rise in favorability for America relative to years ago when America was vastly unpopular for the war in Iraq and its foreign policy initiatives, according to the research. With the exception of the Middle East, Obama has a favorable reputation. Half or more of those surveyed in 28 of the 44 countries in the Pew Research sample believe that when it comes to world affairs, he will do the right thing.  See the chart below (sorry for the poor reproduction). This assessment has not changed much from one year ago. However, there are five countries where his standing has dropped significantly -- Brazil, Germany, Argentina, Russia and Japan. Clearly, the tapped telephone conversations of German leadership by the U.S. government significantly hurt Obama's reputation. His image has risen substantially in two nations -- Israel and China.  Overall, is important to note,  that compared to 2009 when Obama took office, his ratings have dropped. The bloom is off the rose although Obama's reputation has remained steady over what I would contend has been a very tough year. 

CEO sucession and assorted reputation things

A few CEO related items that I came across this week. I decided to bunch them altogether in one post ...in the name of efficiency. 

  • I was reading an article from David Larcker and others in the Stanford Closer Look Series. I met David years ago when he was at University of Pennsylvania's Wharton School and he helped me draw a correlation between the rise in CEO reputation and business performance. So I am indebted. He recently wrote Seven Myths of CEO Succession and in his first myth, he writes that most companies know who their next CEO is (WRONG). Well, surprise surprise. In research done by the Corporate Governance Research Initiative at Stanford University Graduate School of Business and which he is a Director, only 54% of companies report grooming a potential successor to the current CEO and 39% say that they have no viable internal candidates to replace the CEO if it should happen that moment.  I was also intrigued by another myth which was that Boards know how to evaluate CEO talent (NOT EXACTLY). In another study conducted in 2013 with The Miles Group and the Rock Center for Corporate Governance, the report found that Boards place considerable emphasis on financial performance (such as accounting, operating and stock price results) when it comes to CEO performance evaluations and not enough on non-financial metrics (such as employee satisfaction, customer service, innovation and talent development). From experience, the latter can make or break a CEO's successful tenure and should not just be considered a nice-to-have.
  • Brandfog came out with a second study on social CEOs. It is among 1,000 employees in the U.S. and U.K. and results in the U.S. are compared to a similar study in 2012. The study found that social media engagements is perceived to make for better CEO leaders -- only 45% of US employees thought this in 2012 whereas in 2013, the figure was considerably higher at 75%. Also, 82% of employees believe that CEO social media engagement helps to communicate company values and shapes a company's reputation. I'd have to agree. In addition to social CEOs being seen as more transparent and trustworthy, it is seen as an effective way to prevent crises and mitigate risk by nearly 80% of those surveyed.
  • Also found this useful article on how to get nonprofit CEOs to be more social. 

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.