Reputation Gurus

Corporate social responsibility (CSR) — the idea that a company needs to act ethically and responsibly and give back to the communities in which it operates – has been around for decades.

However, I’ve always been suspicious of companies that seem to embark upon CSR for PR reasons.  I know that sounds odd coming from a PR practitioner, but doing it specifically to get kudos from others seems a bit off to me — it lacks authenticity.

That’s why I’m so intrigued by the newest trend in CSR — whereby companies are engaging in responsible practices that also make their business stronger, more profitable, provide a better product, etc.  Some may say that this trend isn’t new at all — think Ben & Jerry’s or 7th Generation.  But, those are examples of companies who were enlightened from the beginning — companies that built responsibility into their business model and built it from the ground up.

The new trend:  Some companies that did not start out with responsibility in mind have evolved to begin incorporating it into their business models.  GE is leading the way in turning a profit on its environmental initiatives.  Likewise, Nike (a client of GCI’s) is making athletic equipment that’s stronger/higher performance and sustainable.  AIG is looking at microinsurance in emerging markets, picking up on the successful work that Nobel Peace Prize winner Muhammad Yunus has pioneered.

These are the companies on the cutting edge of CSR today — and others should follow suit.

Today’s FT has an interesting article featuring a survey conducted by accounting firm Grant Thornton that found that British businesses are not prepared for a PR crisis.  While most British businesses are well prepared to deal with operational threats, they are not prepared from a communications standpoint. 

In the day and age where a PR crisis can hobble a company (Northern Rock and Mattel being the most recent in the news), this seems incredible.  Corporate communications heads need to get themselves prepared quickly (GCI will gladly help!), or suffer the consequences down the line.

A study by GfK NOP research recently found that consumers in five of the world’s leading economies (including, of course, the US and the UK) believe that business ethics have worsened in the past five years.

The problem is that, as our society evolves, ethics and people’s expectations for how a company should behave have evolved as well.  What’s perfectly acceptable today may not be acceptable in a year — or even next month.

So what’s a company to do?  How will company directors know if business practices today will hurt their company tomorrow? 

This is where the right approach to influencer relationship building is critical.  Many companies today have concerted efforts to build relationships with influencers, but few focus on NGOs that could be considered critic groups, and even fewer are using their efforts to listen and learn about changing expectations — before they are changed.  Understanding the changing landscape is critically imporant to building, managing and protecting a company’s corporate reputation, and meeting the evolving expectations of its customer base.

Clients frequently ask us about corporate giving, and what the guideline is for how much a company should put towards its CSR intitiatives.  The general rule of thumb is about 1% of profits — at least in the US.

However, it’s interesting to note that some governments either currently mandate or are trying to mandate how much a company should give, as well as where they spend their money.  In the UK, the foreign secretary recently tried to launch a drive to ensure that British business is “socially responsible” in its international dealings, noting that the way British business behaves impacts the reputation of the entire nation.  I also learned last week that the small country of Slovakia mandates that Slovakian businesses donate 2% of their profits to a Slovakian charity.

I’m not sure if this is a trend, but global businesses should sit up and take notice.  I’m sure that there are no American businesses that would want a government mandate on CSR, nor would most companies. 

The trend of activist shareholders trying to force change in an organization has gained significant momentum.  It’s not new … Calpers (the activist Califorian pension fund organization) blazed this trail decades ago, but others are getting more aggressive and they’re out to win.  HSBC is the latest target (to improve corporate governance and evolve their strategy to focus on emerging markets), but companies like Home Depot have been targeted by activist shareholders like PETA (in which case, there’s an NGO buying stock so that they can make change), and other examples are becoming more frequent.

I am not an IR expert, so I’ll leave the IR commentary to others.  However, it’s clear that activist shareholders can clearly have an impact on a company’s corporate reputation, and that’s, of course, where my interest kicks in.  Just the mere thought that an activist shareholder is demanding change makes it to the front of the FT — including a story today (in HSBC’s case) that outlines all of the shareholder concerns. 

Part of me wonders what it would be like to become an activist shareholder — to be someone who can go in and rattle enough chains to make a company completely change the way it operates … if they’re successful.  A smart corporate reputation manager, though, would know what those changes should be before an activist gets wind of what might need to be changed … and a smart CEO and executive board would make those changes proactively.

This is where listening closely to a wide range of influencers comes in.  The ability to predict what might need to be changed — to understand the changing expectations of a variety of stakeholders – is key to being nimble enough to make changes before an activist shareholder group targets you.  Some may say that this is the job of the IR people, but it’s not.  It’s the job of the lead person in charge of the company’s reputation.

I have often thought that Google would have a brilliant side business helping companies make their intranets more searchable.  They could help organize all of the miscellaneous stuff that ends up on a company intranet, making it a much more useful tool for employees, and even directly deliver Internet content to the Intranet site.

The same could be said for MySpace.  I’ve seen a number of company Intranets, and some take a stab at trying to help employees get to “know” each other online, but think about how powerful it would be if each company had it’s own MySpace on their Intranet.   Colleagues could get to know each other better (helping with cross-department or cross-office collaboration), managers would have a better understanding of the small communities that are so helpful (and could be potentially harmful) in a company, and companies could even hold online brainstorms and idea sharing this way.

Perhaps Google and MySpace already do this for employee communications departments, but I suspect that they don’t … it’s a shame because both tools could be extremely powerful for motivating and understanding employees — especially those who grew up on such search engines and social sites.

I read an article today about John Clare, DSGI’s departing CEO, who said something that really struck me.  When the reporter asked him if he had any failures, he said, “I haven’t made any mistakes.  You recognize mistakes quickly and you get out of them quickly and then they’re not mistakes then they are just learning experiences.”

After I chuckled (out loud, which is a no-no on a proper English train platform), I thought, “Hmmm … He’s got a good PR person behind him, but he also has a head for smart reputation management.”

Actually, I know he has a good PR person working with him, because it’s my friend and former client Kai Boschmann, who leads all of DSGI’s corporate communications.  But Mr. Clare clearly has a good sense of how to use mistakes as a way to make the business better — and as a way to talk about failures without saying that he (or the company) failed.

There’s a lesson here.  Everyone makes mistakes, but it ’s the smart executives and companies that learn from them quickly and move on.  The trick, of course, is recognizing when that mistake is made — and looking past the situation to learn from the error.  And, it’s the even smarter executive who can talk about those learning experiences to the media and other influencers without sounding defensive.  Every spokesperson can take a page out of Mr. Clare’s handbook.

As the global director of GCI’s Corporate Practice, I have the fortune of working with corporate reputation expert all over the world, and there are many best practices to share. 

For example, something that is coming out of the Nordic region is the concept of employer branding — an area that will, I’m sure, catch on soon in both the UK and the US, in addition to other countries.  It’s based on the very true reality that the ability to attract and retain the best and brightest has become a challenge for employee communications experts, who find themselves working with HR people struggling with the same challenge. 

This is where the concept of “employer branding” comes in, a communications discipline that changes how the company communicates to current and prospective employees.  With Gen Y comes the fastest growing pool of talent, and they expect to be communicated to in a different way – including a heavy emphasis on online networking.  At the same time, there are plenty of Boomers and Gen Xers out there who want to be recruited in a different way. 

The “employer branding” concept examines the types of employees that companies want to attract and retain, and then markets the company to those groups in the way they want to be courted, through a mix of external and internal communications tools.  It’s an interesting approach that we’re excited to bring to other parts of the world.

So much has been written both in MSM and in the blogosphere about the Mattel toy recall that it’s almost not worth commenting on it in this blog.  As far as we can tell, nearly every reputation/crisis management expert out there has applauded Mattel for how they’ve handled the crisis to date, and they really do seem to be doing everything right from a communications view.  Some experts have commented (for example, in today’s Boston Herald) that this could be the worst thing to happen to a toy company, and they’re probably right.

The Mattel situation comes on the heels of concern over many things either made or sourced in China — toys and food being the most obvious examples.  Clearly, China has a far bigger reputation problem than Mattel or any individual manufacturer who sources product from China.

So, here are a few predictions.

First, we believe that Mattel will weather this storm beautifully.  The company has made much-loved toys for generations and they have a multitude of consumers who believe in Mattel, and will continue to buy their toys.  Most people will have forgotten about all this by the time the Christmas buying season is here, particularly if Mattel can continue to anticipate the news cycle and respond to it in a smart way (they need to watch the blogosphere, which is one area where they may be falling down).

Second, there will be more recalls and crises coming from products sourced in China.  This seems to be a tidal wave of negative findings regarding Chinese-made products, which puts the country and its businesses in an interesting position leading into the Olympics. 

Finally, if China can’t fix its own problems — and fast — businesses in the US and elsewhere are going to have to re-think how they source their products.  No company can afford to remain ignorant of how their products are made in China any longer.  If Chinese businesses can’t guarantee safety, then their business partners in other parts of the world will need to find alternative partners to get the products made — it’s as simple as that.

Where will they find new partners?  Could be another region of the world, or maybe in their home country.  Will this increase manufacturing costs?  No doubt, and chances are that it will then increase consumer costs.  Will consumers pay more for a toy today than what they paid yesterday?  If the toy is of value, yes.

This is an interesting house of cards to watch, and an interesting time for China, particularly with the Beijing Olympics just one year away.

There have been a number of major articles about the Canadian-based company Mega Blocks, and the company’s crisis with its Magnetix toy (which, under full disclosure, is a favorite toy of both my children — it’s a great toy that inspires creativity). 

It seems that Mega Blocks has become the most recent poster child for what a company can do wrong and, ultimately, right in the fact of a crisis, and those of us who help companies deal with product recalls/safety issues on a regular basis are familiar with those lessons. 

One interesting part of this situation is that Mega Blocks — which is now doing anything it can to protect the consumer and restore the reputation of this much loved toy — has taken one step further than other consumer product companies.  The company, of course, recalled the toy to make it more safe for children, but it now has an employee who focuses on online sales websites like eBay to purchase old product from people — on the CEO’s own personal credit card.

This is impressive, and certainly another indication of how the eBays of the world continue to change the way companies do business.  It’s a smart lesson to keep in mind for the future if your client or company is facing a similar crisis.