Reputation Gurus

The Coca-Cola company announced today that it is creating a culture to more proactively address issues such as sustainability, marketing to children, the company’s role in society, etc.

While we applaud Coca-Cola for becoming more proactive in this area, which is a right step in rebuilding Coke’s corporate reputation, we also wonder about the company’s motivations. Are they doing it because it’s time for the company to wake up and realize that it could be a leading contributor to society in general? Or are they doing it because they are a constant focus of critic groups?

Regardless, it’s a step in the right direction, and we should all watch carefully over the coming years to see whether they’re making true changes in their culture, or if this is just a platitude.

A lot has been written in both MSM and online about Delta Air Lines’ emergence from bankruptcy, and the company has earned a new-found respect from industry insiders for using bankruptcy protection to completely overhaul its operations. I saw one comment about Delta being the “one who did bankruptcy right,” compared to its competitors and others who have sought Chapter 11 protection in the US.

The company has also gotten a lot of kudos for how it treated its employees during the time that it was in Chapter 11, as well as what it has done for employees as it emerged from protection at the end of April. Delta’s CEO Jerry Grinstein made a noble announcement that he would forego any additional compensation or bonus that he earned by navigating the company through this arduous restructuring. Instead, he has asked Delta to give that money to financially strapped employees as well as to a scholarship fund for Delta employees’ children.

As someone who worked with Delta just as they were going into Chapter 11 protection, I know that the company did everything right when it came to employee communications — before, during and now after the bankruptcy. They provided complete transparency with everything that was happening, including when they asked employees for paycuts and furloughs. They had a robust intranet for disseminating information, and they even held regular town-hall meetings to allow employees to vent their frustrations and fears. After they emerged from bankruptcy, the company announced modest raises for everyone — a true sign that they appreciate what their employees did during rougher times.

Delta is on its path to recovery, and hopefully has a loyal employee base to rely upon as it tries to grow internationally — it needs its employees now more than ever. Any company wishing to engender positive employee relations would be smart to talk with Delta’s employee communications team.

The FT ran an interesting short piece this morning (June 19, 2007) about how brands that were once tarnished have been able to turn around their image in consumers’ eyes. It states that Nestle, which was once subject to boycotts for developing world marketing activities, topped some national rankings when a research group asked consumers in five countries to name their most ethical brands.

As someone who grew up in a household that boycotted Nestle, I find this fascinating. In my mind, Nestle will always be linked to poor baby formula … but they’ve been able to resurrect their image by being much more progressive with their marketing practices.

This reinforces my conclusion that most companies’ corporate images can benefit from a progressive stance on an issue important to them — be it the environment, “living wages”, supply chain diversity, etc. The key is to have the first mover advantage — to be the first in their industry to take a leadership position on an issue that’s important to the company, its employees and its consumers/customers.

Old Rule: Corporate reputation is defined by external stakeholders.

New Rule: The most important element of corporate reputation comes from within the company. While it’s important to understand how the company is viewed externally, reputations are built or lost by internal stakeholders. It’s the internal stakeholders who need to live and breathe the company’s values – and to make decisions on a daily basis using those values as the guide. One company I admire in this area is Darden Restaurants, which makes daily decisions based on its core values. Whenever in doubt, Darden uses its values as a filter to help make the right decision for the company.

Monday’s Financial Times reviewed a new book called “Damage Control: Why Everything You Know about Crisis Management is Wrong.” The article says the authors believe companies should “rarely if ever … admit guilt and … meet each accusation with a counterattack.”

I haven’t read the book yet, but the review makes its premise seem so ridiculous that I can barely contain myself. No company should ever roll over on its reputation, but to counterattack blindly is foolish and risky. The article suggests that traditional crisis management makes apologies for the company and ignores the fact that critics don’t care about truth — only winning.

The problem is that it oversimplifies business realities; coverage of the book indicates that:

1. Crisis managers only issue apologies. In fact, crises are most effectively managed by making sure people quickly understand the context of a story. If a company is responsible for wrongdoing, acknowledging that is important.
2. Combative crisis management is needed because today’s anti-business environment only wants to punish executives. In fact, the same market that scrutinizes business activities allows every company to defend itself.
3. Embracing a “political” communications model for crisis management is the right approach. In other words, companies should adopt the cheap, coarse approach to communications that compromises today’s political discourse to defend themselves.

Co-written by a former White House communicator, the book oversimplifies and generalizes. I’m sure the authors have deep experience as crisis counselors. But I strongly suspect they offer more measured counsel to their clients than they do to their readers. At least I hope so — for the sake of those clients.

The FT’s top global brands were published today, with Google leading the pack, followed by GE, Microsoft, Coca-Cola and China Mobile. What’s interesting is that Google — which barely existed a decade ago — now enjoys the world’s most prestitious brand title, while China Mobile rounds out the top 5. The rise of the global Chinese company is just beginning, and I predict we’ll see many other Chinese companies in the top 10 in the near future.

Conde Nast’s new business magazine, Portfolio, is hitting the stands. It’s filled with beautiful images and tenderly cultivated prose.
It’s also a primeexample of the “celebritization” of business executives. Business news coverage is increasing, but the focus on “rock star” managers and their companies is skyrocketing. Maybe it results from companies’ increased visibility. Maybe it reflects the fact that we’re investing in mutual funds. Personally, I suspect it proves that journalists believe business stories are more interesting and get better play when they focus on “heroes” and “villains.”

Whatever the motive, companies are under the microscope. Governance advocates scrutinize executive pay. Attorneys general in 50 states recognize the political value of a showcase lawsuit. Business media are less friendly towards business. And the online community realizes how much power it wields — with companies large and small.

Corporate reputations are under greater pressure than ever. And companies that fail to burnish and protect their reputations risk everything. On any given day, we see pharmaceutical, insurance, financial services, communications and other businesses under siege over some perceived misdeed. As fines and settlements grow, so will the attention these investigations get from the public. Investments to protect the corporate reputation will always be far smaller than the costs of dealing with the aftermath — and far more helpful to the company’s health.

Research In Motion broke the cardinal rule of crisis management this week. Rather than explain the problems that led to Tuesday night’s Blackberry blackout, the company has tried to ignore its way out of a problem. I, for one, haven’t received so much as a “Gee, we’re sorry” email from the company.

“Crackberry” doesn’t mean we’re addicted to R.I.M.’s four-inch-square plastic box. We’re addicted to information. Interrupt the flow and we’ll do what any addict does: find another supplier.

Companies that bet on market dominance to get them out of a jam have been on the losing end of customer frustration. R.I.M. should remember the lessons of Sony Playstation, Kryptonite bike locks or Intel. All three brands tried to bull their way through quality, supply or service issues. All three were slow to respond to customer complaints. All three got in trouble. All three long for their previous market share.

Blackberry is no longer the only game in town. Customers nationwide voiced frustration that the company offered no explanations, no assurances and no satisfaction. R.I.M. better realize that its franchise is fleeting … and that customer loyalty is built on good relationships. Until it does, it risks quickly throwing away the bank of good will that its superior products have, till Tuesday, built up.

Change rules. Change really does rule in the world of reputation management, and it liberates us as communications professionals. It allows us to evolve our thinking. No longer are we constrained by the antiquated “it’s always been this way” approach. When I hear that from a client, it’s a sure sign that a rule needs changing. And, by changing it, we’ll work together to build something great.

In the coming weeks and months, we’ll explore a lot of changing rules. Here’s the first.

Old Rule: Corporate brands are less important than consumer brands.

New Rule: Enlightened companies understand that corporate brands are actually more important. Until recently, companies put significant resources into developing their consumer-facing brands, and far fewer in building their corporate brands. But, times are changing. Many companies have realized that the corporate brand is, in many ways, more important than their consumer positioning – and that the consumer brand is a subset of their overall corporate brand. By focusing on bolstering the corporate brand, companies expand their license to operate in the communities they serve and attract better talent.

There is some interesting news this morning that deserves some comment.

First, the Wall Street Journal has a new editor — Marcus Brauchli was named managing editor, as Paul Steiger retires because he’s at the company’s mandatory retirement age. As the FT pointed out, he becomes managing editor at a time of historic transition for newspapers. Brauchli was in charge of the recent redesign of the paper, and so I’m sure he’ll have lots of other ideas of how to transform the industry.

Secondly, Conde Nast is launching a new glossy business magazine today called Portfolio, which is edited by Joanne Lipman. I have not yet seen a copy of this magazine (it may not hit UK newstands any time soon), but it sounds like an interesting read that could be a useful publication for helping to build and/or reinforce a company’s reputation. The news coverage that I’ve seen about the publication likens it to Vanity Fair … It will be interesting to see how this publication takes off.

Lastly, and this is also from the FT this morning, the UK foreign secretary Margaret Beckett launched a drive to ensure that British business focuses on corporate social responsibility, particularly when operating outside of the UK. They are encouraging British business to do this because, if they don’t, the “UK’s national reputation can be seriously damaged.” I’m interested to know what others think about this.

Here’s my take … I believe that all companies should have a strong CSR component, particularly when operating outside of their HQ country, and so I’m surprised that the UK government feels the need to mandate this approach. Perhaps US businesses should take note of this issue, as I’m sure they’d rather develop their own CSR programs without government intervention.