Saturday, May 24, 2008

Can Governance Help Boost Reputation?

Among the things I am most proud of is my co-founding of The Directors College in Canada, a joint program of the DeGroote School of Business at McMaster University and the Conference Board of Canada. This is the only program in the world that rewards successful graduates with a diploma as a certified corporate director. To attain the diploma, students must complete four modules (two-days each) and then take (or write as they refer to it in Canada) a rigorous exam. Not all pass, but hundreds have.

From the more than 10-years I lived in Canada, I was able to see the difference that exists between the U.S. view of governance and that adopted by most of the rest of the world. The U.S. has taken a "rules based" approach, led by the Sarbanes-Oxley legislation that dictates certain accounting standards to build greater transparency for shareholders. The rest of the world has adopted a "principles based" approach, which sets few legislative regulations, but rather provides for guidelines for companies seeking to enhance their governance. Each works well. The U.S. approach works best for those who break the law. There are clear ways to punish those people with fines and jail time. The non-U.S. approach is best for companies that seek to do better than the legal standards.

As an example, many governance experts in both the U.S. and in other countries have encouraged companies to split the role of chairman and CEO. Few U.S. companies have done this; many companies outside of the U.S. have. It is fairly typical in Canada to have a non-executive CEO, and this advances governance because the CEO is regularly reviewed by the board rather than running the board.

The resistance to separate chair and CEO roles is just one examples of how many companies in the U.S. will only adopt governance standards that are within the legal guidelines and will not adopt a more principles-based approach that might raise the bar for themselves and others.

In my teaching in The Directors College, I found directors in Canada much more willing to look at areas like reputation and human resources where they might want to get involved in monitoring and reviewing how management is handling things. We encouraged directors to ask the CEO for regular reviews of the management team, so that board is comfortable that the senior leaders of the company are exhibiting the right leadership ethics and responsibility. I find this a difficult issue to get directors in the U.S. to care about.

I wonder at times if the rules-based approach just keeps companies "on the road", while the principles-based approach "makes them better, performance drivers". A good driver knows the rules of the road, how to stay in his/her lane, the speed limits, etc. In contrast, someone who goes on to be a better driver, knows a bit more, including how to maintain one's car, deal with unexpected occurrences, etc.

Simply meeting Sarbanes-Oxley standards in critical but doesn't make one company better than any other. I think that the goal of companies is to be "disproportionately valued". To get to this goal, companies must do things disproportionately better than their competitors. Going beyond the rules-based governance standards may be one more way for companies to be better than others.

Thursday, May 22, 2008

Create and Foster an Employee Brand for Greater Value

There have been numerous studies that have found that employee and customer satisfaction are linked and that together they drive financial value. However, Professors Mjken Schltz and Mary Jo Hatch found that 90% of the employees they surveyed at various companies did not understand the company's brand and 70% weren't committed to supporting it even if they did understand it.

The findings by Schultz and Hatch are troubling on a number of fronts. First, it suggests that companies are not informing their employees about their desired brand, and second that even if they are telling employees something about their plans, they are not providing employees with the ability to help the company achieve its brand objectives. What a waste!!! With all the lip-service given by organizations to employees being "their most important asset", it is evident that most organizations still think of the employee asset in the same way they think of physical and financial assets--a tangible asset or cost to the company.

Employees are the most important asset a company has because of the intangible asset they represent. Employees who are informed, committed and energized can not only deliver on the brand promise, but they can help transform the customer experience from one that is good to one that is exceptional, thereby making the company "disproportionately valued" by customers.

At a recent talk meeting I attended, Harold Burson, founding chairman of Burson-Marsteller, referenced a conversation he had with a CEO who asked him who his most important stakeholder was. Burson noted that it was the employees, because every day they were the represenative of the company's reputation for those outside the company.

I once had the opportunity to review the brand advertising plans of a major company. I told the head of marketing that I thought that the ads were excellent. They changed my view of the company. I then made a statement and asked a simple question. "These ads make a promise that you are a new company, with a new commitment to serving your customer. Are your employees properly informed and trained to be able to deliver this promise so that the customer experience will be as you claim it will be? The answer is what I had expected. The company had not spent one minute training employees. They had not even informed employees of these new ads and the new brand strategy. I was asked what I suggested should be done. I recommended that the ads be put on the shelf and held until the company was certain that emplooyees both understood the brand, were committed to it, and were able to deliver it consistently.

I know that I repeat myself in many of these blogs, but I find it incredible how many companies do not understand that brand starts with employees. We have to have an employee brand to attract and keep our top talent, but the employee brand also must be connected with the product and service brands of the company to create the corporate brand. It is only when product, service and employee brands are integrated that we can hope to achieve the consistent behaviors to go along with our communications activities. The vast majority of what reputation is built on is the behavior of the company, not its words. When will more companies come to understand this?

Wednesday, May 21, 2008

Can Corporate Brand Management Be the Way to Real Values?

The new document from the Arthur Page Society entitled "The Authentic Enterprise" is a remarkably good piece that is designed to spark a dialogue about the changes going on tha impact corporations and the changing roles and responsibilities of the Chief Communications Officer. A key focus on the document is on values and the role of the CCO in helping to lead the company toward an identification of its core values.

I responded recently to a blog on the Arthur Page Society's website (, in which Roger Bolton, formerly the CCO at Aetna talked about his role as the leader in the definition of the "Aetna Way". I suggested that I believed that companies with solid values were those who respond well in times of crisis versus those who only gave their values lip-service.

It is only in about the last 20 years that companies have given so much concern to crafting "values statements". Such statements were spurred on by consulting firms, but many organizations adopted them mainly as ways to "speak to their values" and gave little real focus to how they might actually "live the values".

Bill Nielsen, former head of communications (CCO) at Johnson & Johnson gave a speech last year in which he quoted President Lincoln who said that reputation was like the shadow of a tree. The tree was the reality, the shadow was like reputation. Bill noted that company's need to "fertilize the tree rather than the shadow". Well said, but what does this really mean and how do companies do it?

Rather than spending so much time on the words of value statements, companies should instead focus on what business they're in, what they stand for, vis-a-vis their stakeholders, and how they see their responsibilities to these stakeholders. The famous J&J Credo, a true statement of values, was written when J&J was getting ready to go public. General Johnson wanted investors to know what kind of company they would be investing in. In essence, J&J was putting forth its brand promise and assuring that there were no surprises between the promise and the experience by investors.

This is an important concept for companies to adopt. Rather than trying to mimic the J&J credo, they neek to be true to themselves, i.e., "authentic". The organization needs to define its core values, its attributes, and how it will behave and will not behave, including what businesses it will and will not enter. This is not a job for the writing of values statements, but rather the real job of corporate brand management, a process that focuses on all of these aspects. The new "second wave" of brand management, as Prof. Majken Schultz of Copenhagen Business School calls it, is not narrowly focused as brand management might have been in the past. It is integrated with and is used for the kinds of organizational change management needed to close the gap between organizational intent and behavior that is needed to become authentic with stakeholders.

Monday, May 19, 2008

A Good Corporate Reputation Starts with a Good Corporate Brand

Most communications professionals do not recognize that building a good reputation is directly linked to the relevance their corporate brand has with key stakeholders. Too often, public relations and communications professionals try distance themselves from the term brand, arguing that it is related to marketing and advertising and narrowly focused on products and customers. This is not and should not be the case.

Brand management should be focused on identifying the values and attributes of the organization that resonate with key stakeholders. Reputation management, which communications professionals often refer to as "being known for doing good", suggests correctly that reputation is a derivative of actions by the organization that are relevant with key stakeholders. In other words, reputation is a vote by stakeholders that the brand attributes are important and relevant to the stakeholder.

If reputation management is not linked to brand management, one risks trying to build reputation through corporate responsibility programs, which although important are tactics, not strategies. The only way external communications programs can work is if they are supported by the actions of the company, and that means that the company must have the values, be able to deliver consistently on its desired attributes, and be able to build relationships with its stakeholders.

On the other side of the wrong perceptions of brand and reputation management are those advertising and brand professionals who think that brand is related to logo, design changes or slogans alone. Those are simply symbols that should help illuminate and help build associations for the brand. But, we should always recognize that when we talk about building a brand or changing a brand, we are talking about identifying attributes and linking actions with communications. Both the PR and design perspectives often minimize the importance of linking the concepts of brand and reputation.

Thursday, May 15, 2008

Crisis Management is Not the Only Things We Can Learn from J&J's Handling of the Tylenol Crisis

Johnson & Johnson's handling of the Tylenol incident in 1982 is the stuff of legends. As the reader might recall, a "madman" laced Tylenol capsules with cyanide, killing 7 people in the Chicago area in October of that year. J&J has rightly one high praise for how quickly it acted, pulling all Tylenol from all stores in the U.S. within 4-days. Its handling of the crisis helped the company not only rebuild Tylenol's market share within 6-months when many people thought the product was dead, but it also secured people's trust in J&J as a company.

Clearly, J&J did everything right from a crisis communications perspective. They addressed the problem head-on, they were open and honest with the media and frantic customers, and they cared more about their ongoing relationship with customers than they did about the possibility of law suits and the short-term bottom line.

Juxtapose this against what happened in 2007 when Mattel toys that were made in China were found to have high quantities of lead. Mattel missed filing the required 24-hour report with the Consumer Products Safety Commission (CPSC), suffered a fine of over $1 million from the CPSC, and still took more than 6-weeks after that to file its full report. When Mattel's CEO finally went public, he placed the blame on the Chinese for poor manufacturing quality. He later had to go to China and publicly apologize to Chinese officials for his statements.

People who study crisis communications use J&J as the gold standard and offer up Mattel as another example of a company that missed the boat on properly handling its crisis. I'd like to offer a different take on what should be learned.

J&J acted the way it did because it lived by its Credo, a document that acts as a values and brand statement for the company. The then CEO of J&J, James Burke, met with his top executives twice a day as soon as the crisis hit. He used the Credo to question everyone as to what should be done. The Credo's first paragraph states that the company's first order of business is to maintain the trust of the doctors, nurses, mothers and fathers who use its products. Burke and his team recognized that if they did not live up to the Credo, it was of no value. It was the most severe test of the document and it helped the company do the right thing. It acted like a "constitution", guiding the organization when straight thinking might have been difficult. I can imagine how difficult it was to come to grips with the decision since it meant millions in lost inventory, sales and potentially opening the company to law suits, since the withdraw might be interpreted as an admission of guilt.

Like J&J, Mattel has a values and responsibility statement that is prominently displayed on its website. It speaks to its commitment to making products of the highest quality and safety specifications. However, when tested, Mattel demonstrated that its statement of values were merely words, not true guiding principles for the company to live by. By trying to shift blame to the Chinese, who clearly did make the products unsafely, they failed to recognize that one can outsource manufacturing, but one cannot outsource reputation. Mattel owned those Chinese manufacturing plants in an intangible way, even though they may not have appeared on the balance sheet.

I am coming to believe more and more that companies with good reputations have them because they have a set of underlying values that guide their behavior. These values do not allow them to attempt to spin their way out of problems. They deal with them honestly and openly; they get through them and reinforce the trust that customers placed in them before. In fact, that trust is enhanced because they have proved their trustworthiness with their actions. That's the real message of the Tylenol incident that other companies should really pay attention to.