Reputation Gurus

With so many reputational gaffes that occur, it’s nice to see a company taking a pro-active stance to their reputation management – and getting it right! 

Earlier this year, the Grocery Manufacturers Association and the Chocolate Manufacturers Association, together with 10 other trade groups, filed a petition with the FDA that would allow chocolate manufacturers to use cheaper vegetable fat instead of more expensive cocoa butter, yet still call their products “chocolate”. 

Now, I’m no chocolatier, but I am a chocolate eater, and somehow calling something “chocolate” when it really has nothing in it that makes it chocolate seems like … well, it seems like going into a restaurant, ordering crab, and then being told that white fish disguised as crab is just as good. 

So, I was pleasantly surprised when Mars (maker of M&Ms, Snickers, Milky Way and Three Musketeers) “broke the ranks”.  Based on the huge outcry from consumers, Mars has decided that ”
U.S. consumers do not want their chocolate changed”. 

Even if the FDA denies the petition, ensuring that chocolate manufacturers’ products continue to adhere to the “100% cocoa butter” rule, Mars still comes out a winner by staying true to what consumers call chocolate.

On Sunday, October 7, nearly 36,000 people ran the Chicago Marathon, despite record temperatures.  By noon, the race was suspended, one runner was dead, thousands were overheated and tens of thousands were dehydrated because the race ran out of drinking water.  On Monday, runners were waiting for an apology.  They’re still waiting.  Race organizers, apparently concerned about reputations and a backlash that might harm
Chicago’s bid for the 2016 Olympics, broke a basic rule of crisis communications:  They failed to acknowledge a problem.  They blamed hot temperatures everyone had predicted for several days before the race.  And they blamed runners who prepared for months to run the race.   Executives who hide their heads in the sand during crises also bury their companies’ reputations.  Unless they get it right fast, the Chicago Marathon’s executives will learn that lesson painfully.

In yesterday’s blog posting, I pondered a bit why companies with women at the top have delivered better financial results, according to the US organization Catalyst.  I don’t want to turn this blog into a treatise for the feminism movement, but, interestingly, the FT filed a story this morning that posed the same question.

According to the FT, McKinsey presented research yesterday at the Women’s Forum for the Economy & Society in Deauville, France, which finds that there’s a strong link between the number of women at the top and a company’s financial performance, showing that these companies do better in than the average company in their sector in terms of return on equity, operating result and share price growth.  The study took it further by finding that companies around the world where a third or more of the senior team are women score higher on organisational excellence — accountability, innovation and work environment.

The article does ask why this is true, but there are no real conclusions.  For us as reputation managers, I believe that we should be looking at these types of factors and how to play them up with key internal and external stakeholders.

A recent study by Catalyst, a US research organization that promotes women in the workplace, found that large US companies with the greatest retention of women in top management generate a third more returns than companies dominated by men.

The organization doesn’t necessarily point to why this is true … Is it because women bring a unique perspective to the boardroom?  Is it because companies with more women at the top may have more people with diverse backgrounds, thereby attracting different outlooks, experiences, etc. that help a company be more innovative? 

Perhaps shareholders should look at a company’s senior management composition before buying stock.  Perhaps we, as reputation managers, should factor the diversity of senior managers when assessing the company’s corporate reputation.

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.