The Freefalling Reputation Stumble Rate
Weber Shandwick’s annual calculation of reputation loss – the “stumble rate” – finds the lowest rate of loss since we began calculating and tracking this rate back in 2010. During 2015, just about one-quarter of the world’s largest companies lost their esteemed status as the #1 most admired company in their industry. That’s just one in four compared to one in two in 2010. That is more than a trend … that’s a sea change. And good news for those who stay awake worrying about their company’s reputation.
Each year Weber Shandwick measures the rate at which companies lose their lofty perch in their industries on the Fortune World’s Most Admired Companies list. We call this the stumble rate. Between 2015 and 2016, 25% of the world’s largest companies experienced a stumble, down from last year’s 31% and on a steady decline since 2012.
Before jumping into several insights about which industries experienced the greatest upheavals reputation-wise, let’s pause for a moment to ponder what the increasing stabilization of corporate reputation rankings means. Several ideas come to mind. First, boards of directors are doing a better job at picking CEOs to lead companies. Perhaps the trend towards hiring insiders over outsiders is having a lasting effect on companies being well-led and focused on the long-term. Equally true, succession planning seems to be finally taken seriously at the board level. Second, in 2010, companies were still on shaky ground from the Great Recession. It was not a pretty picture, if you recall. Not that everything is perfect today but confidence in a more stable future led by more talented CEOs seems to have taken hold. Third, the reputation recovery process appears to be better understood today and leaders know how to shorten the pain. CEOs are not only seasoned in building stronger reputations but they now more deeply understand the ABCs of recovering and protecting their companies from harm. Since every company witnesses its 15 minutes of fame and 15 minutes of shame these days, CEOs are better able to stop the bleeding, begin restoring reputation and create lasting change. For these reasons, we may be seeing a greater decline and less volatility in reputation loss.
In addition to our annual report on the stumble rate, we also provide some insights into the industries that have or haven’t had a stumble. We dig through the data, including the nine drivers of reputation, to glean some insight into what causes a company’s reputation to stumble. A stumbler is an industry whose top company last year is no longer the top company this year. What’s interesting this year?
- The industry stumbler taking the hardest hit during 2015 was Soaps & Cosmetics. It happens all the time. A #1 company loses its industry crown. For that very reason, reputation damage is considered one of the greatest threats to companies. However, sometimes it is momentary and we see raters maintain their faith based on track record and keep the company amongst the All-Stars.
- Life & Health Insurance is a chronic stumbler, with six stumbles since 2010. Clearly this is an industry in transition. Just this morning I read this article in the WSJ about changes afoot. Other stumble-prone industries, with five stumbles each since 2010, are Energy, Diversified Outsourcing Services and Motor Vehicle Parts.
- Six industries (out of 50+, exact number depends on the year) have never had a stumbler since 2010. The most admired companies in these industries have been stalwarts of reputation: Consumer Food Products; Entertainment; Property & Casualty Insurance; Internet Services & Retailing; Mining, Crude Oil Production; and Semiconductors. That is a pretty impressive track record.
- Specialty Retailers stumbled for the first time. This is the only industry to have had a perennial number one lose its top spot this year.
- Four industries have first-time #1s. Companies in Chemicals; Electronics; Healthcare: Pharmacy and Other Services; and Specialty Retailers are, for the first time, their industry leaders.