Sunday, May 23, 2010

C.B. Bhattacharya Defines Good vs. Bad Corporate Social Responsibility

C.B. Bhattacharya is the foremost scholar in corporate social responsibility (CSR). He defines CSR is "a commitment by a company to maximize society or environmental well-being through business practices, policies and resources".

In other words, CSR is related as much to how one operates the company as it is to the programs one chooses to invest in.

C.B. notes that there is a process that consumers or stakeholders use in judging CSR. It involves three criteria:
1. Understanding: Many companies invest in CSR but do not do enough to make people aware of what they are doing.
2. Usefulness: The CSR program must be seen by stakeholders as being of benefit to them. Companies spend a lot of time talking about the money they spend in CSR. Stakeholders care about the usefulness, not the amount.
3. Unity: the CSR program must be integrated with the strategy of the company.

C.B. has said that philanthropy is not CSR and I completely agree with him. Philanthropy is giving away money or in-kind services to something of importance to society without regard for the value it creates for the company. CSR, on the other hand is not only related to doing good, but also to doing well. It should build the company's value as it builds value for others. It is symbiotic.

When companies contemplate CSR, they must make it part of their overall brand or reputation strategy. It is part of it, not an add-on program. If companies can relate the program to the needs and interests of the stakeholder the program is intended to serve, it will have a greater chance of success. Consider, for example, the great success of the J&J "Campaign for America's Nursing Future", and investment of J&J resources to build the image and attract people to the nursing profession--one of the key customer groups of J&J. The company did well by doing good. On the other hand, consider many of the pharmaceutical companies that report spending $25M on CSR, yet cannot build their reputations because the programs are often not related to the overall strategy of the company, they are not of importance to stakeholders, and few people know about the particular programs. The amount spent might as well be written off as philanthropy--all well and good, but do not expect anything in return.

Friday, May 21, 2010

A Proposal to Change Corporate Social Responsibility to Corporate Engagement

The entire aspect of corporate social responsibility (CSR) has always troubled me. I believe firmly that companies should do good as well as doing well. However, CSR has always been treated as a tactic rather than as part of the overall strategy of the firm. As such, it is more akin to philanthropy rather than a program that is part of the overall brand or reputation management of the company.

With the advent of social media, stakeholder engagement is becoming more prevalent. Stakeholders are gaining more and more knowledge which used to be contained only at the center of the corporation. This is changing the way we talk with, market to and interact with our employees, customers and others.

I think it is time that we change the name of CSR to Corporate Engagement or Stakeholder Engagement. This is not just a name change, but a reflection of what I would hope would be a different mindset. CSR is still about a company doing something to someone else--a community. Engagement is much more active. To engage, we must listen, respect and have a dialog with others. Engagement is a change of mindset and a better reflection, I believe, of where we should be with stakeholders.

I know that some companies think that they are making progress by calling CSR Corporate Citizenship. I still do not like that term. Citizenship is a term that is designed to make a company feel good. Citizens vote. They do not need to be involved in politics. Similarly, corporate citizenship is no more involving than CSR. Engagement, on the other hand suggests that the CEO and others must think about the outside and bring it in. They must be involved. They need to work with others, not do things to or for others.

Tuesday, May 18, 2010

Apple is the New Reputation Leader in Fortune Study

Apple is the new #1 in the Fortune Magazine study of "Most Admired Companies". It seems that Apple continues to delight us and operate above the line of expectations associated with most other electronics companies.

Consider that Apple has so much reservoir of reputation capital that it created lines waiting for the chance to plunk down US$500 to buy the new I-Pod, something few people really understood. In other words, lines were waiting for the chance to pay to see what this new product was. At the same time, no one bothered to pay far less to try out the much touted (by Palm; not by many others) Palm Pre.

Reputations are built by what others say, not what the company says. We are very immune to all the hype companies can generate. It's when other like us get excited that we get excited.

Apple has been so successful that it has managed to commoditize the entire PC industry. It is no longer Apple against HP or Lenovo or Dell. It is now Apple vs. PC. The others seem to lack differentiation. So much so that Apple is able to be priced at twice that of a PC.

Apple will likely disappoint us at some time, but as we have seen with other companies that have excessive amounts of reputation capital stored (J&J and Toyota come to mind), the damage from a mistake will not be as dire as it would be if the company were less admired.

Reputation capital matters. It can carry a company a long way. The I-Pod might not be Apple's finest hour, but go tell that to the consumer of electronics. They still see Apple as king.

Monday, May 17, 2010

Manage Expectations to Manage Reputation

My colleagues at Drexel, Dan Korschun and Trina Larsent Andras, and I are discovering that expectations are where reputations are built, maintained or destroyed. Stakeholders have expectations of both companies and industries that are shaped by their own experiences or by the experiences of others. We used to believe that expectations were related to brands and experience was related to reputation. However, social media has changed that. We are getting more and more of our perspective of companies and brands through social media (more than 85% according to a Razorfish study). "People like us" are our primary influencers. Their views not only shape expectations but can influence whether or not we allow ourselves to actually experience the company or brand directly.

The Kano Model is a good way of observing the influence of expectations. According to Kano, there are standards that customers expect to receive in order to be satisfied. These standards are constantly changing. Above the "line of expectation" are those products and services and companies that "delight" us. Those are the ones with outstanding reputations. Those falling below the line of expectations fall short of our expectations, as does their reputation.

The key to reputation management is to manage the line of expectations. We know that some company will attempt to differentiate. When it does, it could delight stakeholders. This will then change the line of expectations and shift the reputation standards for the category.

Consider that at one time a radio in a car was not expected. It was a delight factor. Now, all cars are expected to have radios. Think about the expectations we have for cell phones and other items we buy. Many of the things we expect were unusual and delighters in the past.

Reputation management, then, is similar to marketing and communications strategy and brand management in that it is competitive and category based. For example, Apple continues to operate above the line of expectations--it continues to delight. BP has fallen far short of expectations for envrionmental and safety issues, thereby dragging its reputation down. In doing this, it also likely has changed the slope of the line of expectations for the entire industry down. Some player in the industry has the ability to delight us by exceeding expectations. Hopefully, it will not need to be after another environmental disaster.

Saturday, May 15, 2010

Can BP Find More Ways to Ruin the Reputation of the Entire Oil Industry?

There is enough finger pointing going on following the Gulf Oil disaster to make everyone cringe. President Obama has finally had it; the public has had it. BP, which at first minimized the situation, has been pointing fingers at the company that operated the platform and at Halliburton, a company whose reputation can not possibly get much worse. No one is taking responsibility, likely because the lawyers have told them not to in an attempt to minimize the legal ramifications.

The problem is that BP is not following the standards of "Crisis 101". They continue to make promises they cannot keep, to talk as if this is not one of the greatest environmental disasters the world has seen, and to shirk responsibility. The CEO even said that BP would take responsibility for "all things that are proven to have been caused by BP". In other words, "read the fine print". The platform--someone else's problem; the pipe--someone else's problem. So, what exactly is BP taking responsibility for?

When a company outsources to others, it still owns the responsibility for the end product. It cannot shirk that. It's partners are its responsibility--perhaps not legally, put certainly in the court of public opinion.

BP is damaging not only itself but also the entire oil industry. The industry has been unbelievably silent during this crisis. When they have spoken it is to suggest that drilling still is needed. They have not seemed to take this disaster to heart and to understand the emotions. They are reinforcing the worst perceptions of the industry.

BP once wanted to be a shining star. Its star has not only dimmed but has gone out and perhaps turned the shine out of the entire sector.

Tuesday, May 11, 2010

Johnson and Johnson's McNeil Labs Tarnishes its Reputation

Johnson & Johnson has been my poster-child for a company with a solid reputation. Since 1982 when it managed itself out of the Tylenol crisis by using its Credo as a guide to doing the right thing, J&J has been my top pick for reputation leader. It lived by its values. Until now.

We are now learning that McNeil Labs, a J&J subsidiary based in Ft. Washington, PA, just outside of Philadelphia, has been under investigation for some time by the FDA for safety violations. Following complaints by customers, McNeil withdrew its consumer products. It has been disclosed that Children's Liquid Tylenol was improperly mixed at the manufacturing level and that kids could have receive more Tylenol than is legally and medically indicated.

Why did it take customers to bring McNeil to action? Why did the FDA not take stronger action sooner?

The second question is the interesting one. J&J has built such a deep reservoir of goodwill and trust over the years that almost no one who knew the company believed that it would do knowingly and willingly do anything wrong. The FDA probably thought that it was following a bad lead--J&J could not be knowingly violating safety regulations. But, it seems that they might have been. Even the stock market continued to vote for J&J. Despite the news, its stock increased in value.

The first question is the shocking one. The fact that McNeil did not alert customers, those who according to its Credo are their #1 responsibility, is absolutely shocking. J&J has let everyone down.

I spoke recently with an employee of J&J who expressed shock and disbelief that the company would not live up to the standards that it had always maintained. The calls to J&J are coming in at a rate of 3,000 per hour and the Internet contacts are just as heavy. All employees are being asked to pitch in to help "man" the phones to answer questions.

One can only wonder what has happened to J&J. Has the company joined those who have cut costs so deep that it has now impacted its ability to function at the level it once did? Has the economy made J&J less focused on the values that made it great and distinct from other healthcare companies in the first place?

As a great fan of J&J, I am thoroughly disappointed. I hope we will learn what went wrong and that we also will see the real J&J emerge. I fear, however, that the company that lived by its Credo in 1982 no longer has the same culture.

Thursday, May 6, 2010

Does GM Really Believe that their Main Problem is Marketing?

GM has been the subject of many business school cases focused on their inability to recognize market changes and adapt their company to meet the challenge of both a new consumer and foreign imports. But, it seems that the new CEO, Ed Whitacre thinks the problems can be fixed with a new marketing chief. He removed chief marketing officer Susan Docherty, who had been put in the position only 5-months ago, and hired Joel Ewanick, who lead a very clever marketing campaign for Hyundai.

GM has been increasing sales but losing market share and Whitacre seems intend to build share back for the company. A great goal. However, I am not sure that I have found anyone who has backed off of buying a GM car because someone else had a more clever ad campaign. Whitacre, who grew up in the telecom industry, seems to think that people choose cars the way they choose wireless plans. This is a guy who continues to live in Texas and has little or no knowledge or understanding of GM or the car industry. He is impatient. Impatience with a company like GM could be expected, but change at GM is hard--it's a huge "battleship" that has been built and reinforced over generations. Change is difficult.

One of the things we always warn students and clients is to not look at other companies and try to imitate their marketing efforts. Imitation is not a strategy. Differentiation is strategy. Ewanick did wonders with Hyundai, but he had a lot to work with. He will have far less to work with at GM. I don't know Docherty and do not know what she did or did not do to warrant this removal, but can you really expect marketing to help sell a car that few people really believe in?

Marketing and branding can do a lot, but the prerequisite is a good product with a value proposition that resonates with the needs and interests of customers. GM does not measure up on either of these counts. Good luck to the new head of marketing. My advice while working for Whitacre--rent, don't buy.

Tuesday, May 4, 2010

United-Continental:The Merger Might Not Be Great for Travelers, but they Got the Branding Right

The announced merger of Continental and United may or may not be great for travelers. Eliminating an airline will certainly not help to lower fares, but it makes good business sense for both airlines.

What I found interesting was the brand strategy employed and I think they got it right. The new airline will be called United, but the logo will be that of Continental. This is a smart move from a number of perspectives. First, it unites (no pun intended) the two organizations and shows everyone that they are united--take the name from one and the logo from the other. Second, the United name is better from a number of perspectives--it stands for unity, which is what the two airlines were after; it is the better known airlines with the more important hub (Chicago versus Newark), and finally, the logo (the Continental world) demonstrates the global nature of the new airline as well as reminding people that Continental was part of the deal. This is important as well, not only for employees but also for customers since Continental has had a better reputation than United.

It is interesting that the new airline has decided to move to be based in Chicago with the CEO of Continental and the new CEO and the CEO of United moving to Chairman. Again, a compromise that works well for both organizations.

About 60-70% of mergers do not work as intended due to culture conflicts between the parties. I am not sure if this will be the case for the new United. Their new ads suggest that things got better for travelers. That I doubt. However, from a branding perspective, I think they got it right.

Sunday, May 2, 2010

Arizona Hurts Brand USA

The United States had been building its reputation around the world during the past year that we were back to being a world leader and not a country that would go it alone without regard for the views of other countries. After years of thumbing our noses at what other countries wanted or thought, we returned to recognize the interconnectedness of the world and also the fact that countries like China, India and Brazil were becoming major players on the world stage and had to be given respect.

With the election of Barack Obama, much of the world stood in awe of the US again. We were a country that elected a black man as president. A country with a history of slavery and bigotry had elected someone who would not have been allowed to eat at a lunch counter or sit in a movie theater 50 years ago. Even in advanced democracies like the UK or Canada or France or Germany, it is virtually unthinkable that a visible minority would win the popular vote for leader. The US was back to being seen as "the shining city on the hill", as Ronald Reagan used to claim. Even our worst critics had to give the US its due. Perhaps the US was a welcoming, pluralistic society that all could admire.

That all came to a screeching halt with the move by Arizona to pass a draconian immigration law that will certainly lead to racial profiling--it is impossible for it not to lead to that since it was aimed exclusively at one group of immigrants--Mexicans. While the law could eventually be struck down by the courts for being unconstitutional on the grounds that it permits improper search and seizure, it has done its damage already.

The Arizona bill sealed the deal. The rest of the world is now convinced that our bout with sanity was an anomaly. We are once again being seen as a bit of a crazy, gun-wielding group of semi-literates. Everyone knew that parts of the US had this tendency, but we always seemed to rebound with people like Lincoln and Roosevelt and Kennedy and even Reagan to convince the world that we were really pretty decent. While I never liked Reagan's politics, I admired the fact that he sought friends on the other-side of the "aisle" and always liked compromise rather than ideology.

The Arizona vote reinforces the most negative views of the US. It breaks the positive brand image we had been creating and pushes us back to a point where much of the world now looks at us as being less democratic than other countries--we are not the leader; we are a "used to be". Our hatred and fear of outsiders could actually ruin this country. Already, Mayor Bloomberg of NY is warning that our immigration laws are not allowing foreign college grads to remain in the US. In the past, we educated foreigners and they remained to build some of the great companies of the world and to discover new scientific breakthroughs that benefit the US first. Now, we are denying visas to these grads, so they are returning to India and China to create great companies there.

America was always great for what it created, but it was even greater because of its intangibles. That's the way with all great brands; the promise of future performance seems unlimited. We want more of it.

We are now seeing stop signs put in front of large segments of the population. This was our history with blacks, but we had tried to put that behind us. This is not the way the modern US was supposed to develop. We were supposed to be the country that welcomed all those who wanted a better life. This was not and should not be our brand image. But, Arizona--and I'm sure a number of other states to follow--is showing the world that we are just as bad as our worst critics feared. I pray that we can find some good soon to trump the bad.