Tuesday, February 28, 2006

America's Reputation


There is an interesting poll among Economist.com readers in its special edition on what to expect in 2006. One of the findings is that 53% believe that America's reputation abroad will deteriorate this year. This is a sizeable change from October 2004 (pre-presidential election) when this question was asked and the figure stood at 44%. Clearly, America's brand health is on the decline.

Although I do not like to compare apples to oranges, I cannot avoid mentioning that President Bush's recent reputation ratings are equally low (around 33%). The link between President Bush's and America's reputation is not accidental. Just as CEO and company reputation is inextricably linked, the same goes for our president and America Inc.

I wonder how low these rankings will go over the next two years. I also wonder how these figures compare to other leaders and country reputations. Perhaps another new research idea.

Saturday, February 25, 2006

Making Sense of the Most Admired


For people who know me, I spend alot of time making sense of the Fortune Most Admired Companies survey which debuts every February. This year's list is out and on its way to subscribers' homes shortly.

After a brief departure when Fortune featured Most Admired Company brands on the cover instead of CEOs, we are back to the CEO standing in as the company. GE's Jeff Immelt graces the cover in the new issue (March 6, 2006). I am actually fine with their choice because afterall "quality of management" is consistently the prime driver of most admired reputations in nearly all the industries that Fortune surveys (actually the Hay Group does the survey work). And as Fortune notes, GE is America's Most Admired for the sixth time in the past decade. No small feat.

Interestingly, Fortune is only displaying the top five or six companies per industry grouping in the issue. The remaining companies in each industry are listed only on the web site and dubbed "contenders." Contenders is a better term than "least admired."I assume that Fortune was getting tired of companies ranking eight or nine and issuing press releases calling themselves "most admired" when they really are not by Fortune's definition. At least this way the top most admired companies are truly the 2006 most admired "class." Makes sense to me.

Although many of the most admired in the top 20 list are consumer-oriented (GE, FedEx, Southwest, P&G and Starbucks), it would be interesting to just look at which b-to-b companies would make it to the top 20 most admired. I am going to check that out since b-to-b companies could use the attention and distinction.

I will continue to write about some random thoughts about the most admired as I dig in deeper.

Wednesday, February 22, 2006

No Smoking Gun


"There was no smoking gun, but there were innumerable brush fires," said well-known Harvard professor Howard Gardner about today's resignation of Dr. Summers and reported in The New York Times.

Gardner's statement is similar to a quote I often use about ripples turning into tidal waves that ultimately tarnish company and CEO reputations. The quote comes from former Morgan Stanley CEO Phil Purcell who said upon his resignation: "It was many, many little waves. It wasn't one storm."

Another good one was spoken by a German shareholder about quality problems at Mercedes and reported in the March 4, 2005 Financial Times: “You don’t break a car company over night. You really need to fall asleep at the wheel.”

Organizational or leadership failure is hard to ignore. The controversies surrounding Dr. Summers were easy to see -- leadership miscommunication, faculty departures, decline in fund-raising and diminishing benefit of the doubt. For Summers, there were too many brush fires to keep putting out. He ran out of time and water.

Monday, February 20, 2006

What is On Your CEO's Book Spine?


A favorite question to ask CEOs or just about anyone in business goes like this.

Former IBM CEO Lou Gerstner's book is titled Who Says Elephants Can't Dance? If you had to pick a title for your book [or chapter], what would it be? This question gets CEOs to think about what they really have to say that is worth 250+ pages of someone's time and which ultimately goes down as their enduring legacy. Not an easy question to answer in five or six words (the maximum book spine length).

While reading about GE's Jeff Immelt last week, I found an article where he answered the question without even being asked. He was speaking before an audience at M.I.T. when he said: "If I were to give you a chapter of my business book, it would be called, 'Two Million Dollars From Greatness.' I can't tell you how many GE leaders give me the excuse that 'I could fund new innovations, but I can't afford it. I can't fit it into my budget.'" Immelt explains that these are the same leaders that have billion-dollar budgets. He must get this response often if he could fill an entire chapter on how two million dollars is not reason enough to excuse a shortage of breakthrough products and ideas.

Good question to ask your chief executive next time you bump into him/her in the elevator -- what will be on your book spine?

Bad Headlines Do Not Impact CEO Pay, Then What?


David Larcker, Professor of Accounting at Stanford Graduate School of Business, joined with two other professors from The Wharton School to assess whether negative media coverage on CEO compensation resulted in reduced executive pay. Seems to me that the answer had to be a resounding "yes." I would never want to be embarrassed like that before the people I work with every day. Every time I pick up Sunday's New York Times Business section to find Gretchen Morgenson skewering another company for exorbitant CEO pay, I imagine some red-faced CEO skulking into work the next day.

Astonishingly, Larcker found that negative press attention about CEO salary had little or no effect on how much chief executives get paid. The authors examined 15,000 press articles on CEO compensation between 1994 to 2002 and found little change in how much companies paid their chieftains despite harsh criticism from journalists. Larcker found that negative press pay outings serves two different needs, unrelated to lowering CEO compensation. First, people want to be entertained and journalists are doing a good job making us laugh with those headlines on $6,000 shower curtains and free seats to Red Sox games. Second, Larcker and fellow researchers think that negative media coverage on executive compensation actually makes us look more closely at the board and wonder how well they are handling their fiduciary responsibility to shareholders. I guess that the attention on CEO pay fades in comparison to the pressure that gets placed on the board's behavior for awarding that much money to one person in the first place.

I know David from Wharton and am glad he is pursuing the media and CEO angle. More and better information on the intersection between corporate behavior and the media is a bonus and I look forward to further insights from the team. Although this is just a working paper, Larcker states "For example, we are also analyzing interviews and other communication in an effort to detect lying by corporate officers. Such research promises to provide new insights in predicting accounting restatements, fraud and stock price performance."

Are CEO lie detectors next?

Friday, February 17, 2006

Reputation That Never Dies

Recently we asked how long it takes for people to forget a corporate crisis. For a long time, it seemed that this was a reasonable question. Clients in turmoil often ask us how long it takes before a crisis fades in people’s minds and no longer makes headlines. [I bet VP Dick Cheney was asking himself this very same question this week.] The results are not too favorable.

When global business influentials were asked about the shelf life of a crisis, they reported that it takes about two years before it loses saliency. I think now that they are wrong. Call me dense but I recently realized that crises, scandals and wrongdoing never make it to the reputation graveyard. With the Internet, a crisis now lives on forever. Martha Stewart has been out of prison for several months but the Inclone stock debacle always comes up highly “relevant” when her name is typed into google or yahoo. [Dick Cheney's reputation will always include some reference to his shooting error.]

Reputational brevity is a thing of the past.

Monday, February 13, 2006

CEO PR Men

In a new survey among nearly 4,300 global business executives and recently released in the McKinsey Quarterly, only eight percent believe that large companies champion social or environmental causes out of "genuine concern." Fairly skeptical bunch. Equally disturbing was the finding that almost nine out of ten global executives agree that large companies are motivated by public relations or profitabilty. This is not a pretty picture.

One thing I have noticed over the past several years is how CEOs will qualify their thought leadership platforms by saying "this is not about public relations." Lord John Browne of BP says this a lot in his speeches. Mind you, he is one of the best pr people in the world. BP's "beyond petroleum" campaign has been a brilliant public relations effort to inform people about global warming, alternative fuels and social responsibility.

Citigroup's CEO Chuck Prince's seven second bow heard around the world is another display of whip-smart public relations. Prince wisely acknowledged the role that Citigroup played in Japanese trading scandals and publicly apologized for his company's behavior. His actions (which I applaud) highlighted his values in practice and his commonsense gesture saying he knew how to share the pain.

Public relations is about relating to your various publics. Since when was communicating with your portfolio of publics a bad thing.

Sunday, February 12, 2006

Do Not Lose the Plot

When I run out of new things to write about, I go to my quotes for inspiration. Lord John Browne of BP was interviewed on CNN and I found this quote (14 June 2004, cnn.com):

“My biggest mistake was to worry about things in too much detail and losing the picture once in a while. I always say to myself that the most important thing is never to lose the plot. No quarter passes with perfection. No year passes with perfection. The real question is: Are you sticking to the plot.”

Good advice to everyone in business today -- keep your eye on the plot.

Saturday, February 11, 2006

How to Differentiate Your Company


Someone provided a quote from Bill Gates in Fast Company's blog about how to distinguish a company: "The most meaningful way to differentiate your company from your competition, the best way to put distance between yourself and the crowd, is to do an outstanding job with information. How you gather, manage, and use information will determine whether you win or lose." Apparently the quote came from a recently released book from Fast Company titled The Rules of Business: 55 Essential Ideas to Help Smart People (and Organizations) Perform At Their Best.

As someone who deals with information alot, I totally agree with Microsoft's chairman. Information is the most valuable currency that an individual, company, CEO or other stakeholder can have. Without knowledge of trends, business shifts, global patterns, industry competition, reputational threats, external stakeholder perceptions, employee concerns (need I go on), companies will slowly die. Siloed management with no peripheral vision leads to organizational failure.

Leaders need to be informed. They must be information-addicts in order to understand how their decisions fit within the context of business and society.

I recall a story I heard GE's Jeff Immelt tell. He said that while he travels, he always reads articles, magazines, newspapers and trade publications ranging from the typical- to atypical- CEO reading matter. He rips out pages and sends them to different individuals at GE. Immelt said that he wants to keep people on their toes and to realize that their CEO is gathering information all the time to compete more effectively. Employees always gasp when they get these torn pages and live in fear that there is some piece of information that is mission-critical to their futures.[Reminds me of some research we did with Fortune several years ago among global CEOs. We found that 73% of CEOs say they often rip a page out of a newspaper or magazine for future reference or to pass on to someone else.] A common CEO tactic.

Information and knowing what to do with it makes all the difference in the world.

Wednesday, February 08, 2006

Non-Profit Leadership & Reputation

Non-profit reputation is on my mind right now since I have to speak to several non-profits next week about building reputation. I started reading Jim Collins' Monograph Good to Great and the Social Sectors: Why Business Thinking Is Not the Answer to find some answers. Collins essentially says that the primary path to greatness in the social sector is NOT to become “more like a business.” After talking to people and trying to understand how non-profits operate when their outputs are not economically-oriented, he comes to the conclusion that the social sector needs to shift from being an economic engine to a resource and mission engine. As he says, "The critical question is not 'How much money do we make?' but 'How can we develop a sustainable resource engine to deliver superior performance relative to our mission?'" [I am not doing justice to the monograph so please get a copy.]

Collins' monograph is required reading for anyone who loved Good to Great and is interested in how organizations can be run without the hierarchy that supports and surrounds CEOs. Collins highlights how public companies keep everyone in place with concentrated executive power -- unlike the social sector where executive power is diffuse. He tells a wonderful example on page 10 that sums up the differences and made me think of Harvard's President Larry Summers newest no-confidence motion reported in today's Wall Street Journal. A corporate CEO went to work as an academic dean but eventually quit ("one of the most draining experiences in my life"). Collins says that another university officer he spoke to nailed the reason why the CEO-dean departed. Referring to tenured faculties, the officer said: "A thousand points of no."

In corporate America, we often have too many points of "yes" but the above example summarizes how hard executive decision-making is when you leave America Inc.

Monday, February 06, 2006

A Living Annual Report


I know I am getting carried away with my idea of turning an annual report into a blog to be written by employees (see my entry for February 1st, Out of the Mouth of CEOs). But now I have a name for it -- The Living Annual Report.

Here's a new twist. During a conversation I had this afternoon with a gentleman who heads sustainability for a foreign bank, we got to talking about turning sustainability reports into blogs that are always "open." Imagine a sustainability report that is a blog where community residents, employees, NGOs, corporate citizens of the world, receivers of a company's largesse, laborers, academics, students, alumni, social investors, etc. could comment and respond on the company's record. Both an exciting and frightening idea.

Reputation would be utterly transparent. Had to share it now that I found a name.

Sunday, February 05, 2006

Fortune 500 Blogging


In the executive summary from Richard Edelman's session on building trust in public and private institutions, a mention is made that there are only 20 blogs in the Fortune 500. In a wiki mentioned on Debbie Weil's CEO blogging site, a reference to a business blog wiki reports that there are 22 Fortune 500 blogs today. Close enough. Still very small. Here is the list:

Amazon.com Inc., Amazon Web Services Blog
Avaya Inc., 2006 FIFA World Cup Blog
Cisco Systems, Inc. Cisco High Tech Policy Blog
Cox Communications, Digital Straight Talk
Dell, Inc Linux Engineering
Electronic Data Systems, EDS' Next Big Thing Blog
Ford Motor Company, 2005 Mustang Blog
General Motors Corporation, FastLane Blog
Hewlett-Packard Company, HP Blogs
Honeywell International, HoneywellnbspBlogs
Intel Corporation, Intel Geek Blogger
International Business Machines, Guide to IBM Blogs
Microsoft Corporation, MSDN's Microsoft Blogs
Motorola Inc, Motoblog: 4 bloggers & a phone
Oracle Corporation, OraBlogs
Sprint, Things That Make You Go Wireless
Sun Microsystems, Inc Jonathan Schwartz
Texas Instruments, Video 360 Blog
Time Warner Inc, Jason Calacanis' Blog
The Boeing Company, Randy's Journal
Viacom International Inc, Real World/Road Rules Blog
Xerox Corporation, Palo Alto Research Center

Many of these big company blogs are in the technology field (Microsoft, Oracle, Sun Microsystems, Dell, HP) although some are considered non-tech such as Boeing, Ford, GM and Time Warner. Other non-Fortune 500 companies with blogs include Stonyfield Farms, Yahoo! and Google.

Several years back we counted how many Fortune 500 companies had internet addresses since that was fairly new at the time. I recall that Interstate Bakeries (remember Wonder Bread?) did not have a url and how bizarre we found that. Five years from now, I expect we will consider it strange that there are Fortune 500 companies without blogs.

My prediction is that employee blogs will be ubiquitous by 2010 and a welcome one at that. The big conversation will be nearly universal.

Saturday, February 04, 2006

Google's Reputation Fault Line?


In the Financial Times editorial today (4 February 2006), the talk was about Google's recent share price jitters (Google reported that its quarterly revenue last quarter was only 97 percent higher than one year ago!) and its decision to launch a censored Google in China. The editorial page seems to believe that Google's reputational fault line is beginning to fracture. The editors "fault" Google for allowing Chinese politics to impact Google's mission of providing unfiltered access to information and freedom of expression. The FT sees Google's China decision as giving competitors an unwarranted edge and some additional yuan: "Reputation matters when rival search engines are just a click away." They are right about that. For the 100 million Chinese users, they do have choices -- Baidu.com, Yahoo! and Microsoft's MSN. They are,however, less right about Google losing reputational equity. In the long run, Google might be approaching the problem the enduring way -- for the greater good.

The popular search engine follows a basic tenet of building sustainable reputation. They are reaching out to a critical stakeholder group and getting a meaningful dialogue going with Chinese regulators and law-makers. Google is also bringing in others by recommending an industry action coalition to provide guidelines on how to deal with countries like China that restrict information. Unlike some companies and countries, Google is saying it does not have all the answers today. It intends to listen hard versus "my way or the highway."

So what is Google doing in China to sustain its reputation as a transparent and open information provider? First, it is not shutting down the existing uncensored Google that takes forever to access because of its dependence on non-local servers. Second, Google will notify users on its local-server Chinese search engine (google.cn) whenever information is being withheld. Third, Google is staying away from email or blogging services for now in order to prevent future demands from the Chinese government to cough up user identities.

Another argument that carries reputational resonance is that an easily accessible google.cn ultimately provides more information to Chinese users than if Google was locked out of China altogether. As noted prominently on Google's About Us page, "We believe that our continued engagement with China is the best (and perhaps only) way for Google to help bring the tremendous benefits of universal information access to all our users there."

Reputations are built on incremental, consistent steps along the way. Although some see Google's self-censored Chinese offering as inconsistent with its mission and evidence of reputational fallibility, stakeholder engagement is a big small step in the right direction.

Wednesday, February 01, 2006

Out of the Mouths of CEOs


I often review the quotes or smart sayings that come out of the mouth of CEOs. I save them because they can actually be profound in their simplicity.

Jack Welch's Straight From the Gut offers such an example. The former GE CEO posed this simple question to employees: “Is the company you read about in the annual report, the company you work for?” Perhaps all employee satisfaction surveys could ask this question (assuming that employees get a copy or read their annual report online). Or maybe a company will let employees actually write their own annual report just like high school students compose their year books.

My daughter worked one summer at a magazine where they had the readers (teenagers) put together an entire issue. They housed the teens from all across America in New York and paid them for their time. The magazine was awesome, cutting edge and less sanitized than most magazines for that age group. It was a hit.

Maybe the time has come for employees to look more deeply at their annual reports and mandatory "letter to shareholders" from CEOs or chairmen. In fact, why not turn the CEO's shareholder letter into a blog and ask readers, employees, investors, alumni, journalists and others to respond. Now that's a simple idea.

CEO Churn


We released our findings yesterday on how many Fortune 500 CEOs exited their jobs in 2005. CEO Churn is on the increase (into the stratosphere):

1.CEO departures increased 126 percent since 2000 (129 CEO departures in 2005 versus 57 in 2000)
2.CEO departures increased 32 percent year over year (129 CEO departures in 2005 versus 98 in 2004)

One has to wonder why anyone would want the chief executive job in the first place. Boards are less patient and as worried about financial liability as CEOs. There is no room for failure or risk-taking. A top recruiter once said: "We are asking them to pitch no-hitters every day." I have always thought that all those departed CEOs should not take up golf but be more proactive about this sorry situation. An Advisory CEO Corps could be established to mentor CEOs as they begin new jobs or hit particularly rough patches in their tenures. Perhaps the Business Roundtable could provide a rotating selection of seasoned CEOs willing to provide counsel for these pressured captains of industry who do not know where to turn.

Although I would like to be able to say that better leadership training is needed, most CEOs report that nothing prepares you for the job.