Excerpt 1 — Why I Wrote This Book

Excerpt 2 — The Battered Corporate Reputation

Everything in reputation management is very simple, but nothing in reputation management is very easy.

For over two decades, I have been a “reputation” watchdog, seeking out the most subtle references to corporate reputation in magazines, newspapers, journals, online media, and books. I have also been a keen and vigilant observer. Now, after so many years, my hard-copy manila folders are bursting with clipped articles and my ever-expanding computerized corporatereputation.doc file threatens to engulf my hard drive’s very last gigabyte.

Years ago, when I first began my inventory of articles, speeches, newspaper headlines, and books, my manila folders were few in number and tagged with labels limited in breadth — “Corporate Advertising,” “Tylenol Crisis,” “Brand Coca-Cola,” “Most Admired Merck,” “Power Brands,” and “Companies to Watch.” Although at this time a few corporate crises had begun to raise eyebrows, interest in such incidents was for the most part confined to narrowly defined audiences who read the business sections of national newspapers and business magazines. Crises that today directly impact a company’s reputation and fortunes rarely made it into the public consciousness.

As the millennium approached, however, interest in reputation mushroomed and my folders, both hard copy and digital, multiplied exponentially. My new folders now had upbeat titles such as “Digital Companies,” “Built-to-Last Companies,” “Wall Street Darlings,” “Euro-Companies,” “Fast Companies,” “IPO Companies,” and “Best Companies to Work For.” I now even had folders labeled “New CEOs,” “Under 25 CEOs,” “CEO Challenges,” “CEO Stats,” and “CEO Brands.” In the midst of my quest to always keep my folder-naming up-to-date, I had a sudden epiphany. I realized that my mushrooming filing responsibilities directly reflected the new importance being given to corporate reputation by the wider business and non-business communities.

The briefest of inquiries soon confirmed my file-inspired hunch. From the beginning of the 1990s, major U.S. media’s usage of the term reputation had tripled. In 1996, New York University Professor Charles Fombrun authored his seminal work, Reputation: Realizing Value from the Corporate Image. Interest in Fortune’s Most Admired Companies and Best Places to Work survey rankings also grew red hot. Confirming that a broad market existed for the study of corporate reputation, Fortune began selling these rankings to more and more companies seeking to build better reputations.

Based on all this accumulated data and critical focus on reputation, I have made an important discovery — the “science” of reputation management has entered a new era. What had begun as a barely noticeable ripple in the sea of business has grown into a rising tidal wave that now sweeps across businesses in every region on earth. Reputation management is now accepted as a distinct body of knowledge, and the study of protecting and recovering reputation is drawing universal interest, not only among business audiences, but also the general public.

Surely, part of the reason for this radical shift in reputation’s appeal was the rise of fashionable dot-com companies in the late 1990s. Led by baby-faced entrepreneurs who built company reputations overnight with too-often empty promises rather than sustainable bottom-lines, business suddenly became highly entertaining and great cocktail party conversation. With a bull market and 401(k)s to invest, the public and investors paid rapt attention to the latest corporate maneuvers, and company success and failure. They also began to take a genuine interest in specific companies and industries, watching their every move, often for both financial and personal reasons. It was the soap opera As the World Turns and the television program The Millionaire all rolled into one. However, more was yet to come, which would raise the level of interest in business reputation from a spectacle to something more serious and useful.

As the twenty-first century took root, the study of reputation became far more rigorous, suggesting for the first time that building corporate reputation was becoming something more than a passing trend. Business professionals began viewing reputation management as a learned skill with characteristics that could be isolated and studied as a body of knowledge, much like other business practices and operations. To complete the cycle, however, the upside of reputation management, as represented by the rise of the dot-coms, was soon to be tempered by the downside of reputation failure. It became startlingly clear that knowing how to build a reputation was not enough. Knowing how to protect and salvage a lost reputation was also critical.

The defining moment came in 2002, a year of multiple corporate scandals including the infamous Enron debacle and the mass demise of Internet start-ups. So overwhelming were these tumultuous, reputation-shattering events that I was driven to adopt an entirely new file-labeling nomenclature: “Dot Bombs,” “Pre-Enron,” “Post-Enron,” “Anti-CEOs,” “CEO Turnover,” “Boomerang CEOs,” “NGOs,” “Web Activists,” “Corporate Apologies,” “Crisis Management,” “Reputation Risk,” “Board Reputation,” “Government Intervention,” “SarBox,” “Shareholder Activists,” and “Reputation Failure.” During this post-dot-com and post-Enron period, the ruins of once-heralded industry leaders, corporate failures, and lost investments defaced a formerly pristine business landscape. Suddenly all corporations and CEOs were vulnerable. Corporate propriety became a matter of overriding concern. Corporate and societal interest in reputation management became intense.

With corporate disasters seemingly everywhere, and with the business community now tainted in the eyes of the general public and generally devoid of credibility, the study of reputation became a legitimate body of knowledge with emerging new disciplines. One of these distinctive disciplines that I termed was “Reputation Recovery” — the study of the ill effects of organizational failure and the steps needed to counter, stabilize, rebuild and safeguard company reputation. Even though company crises have always been with us — the Three Mile Island nuclear reactor incident and the Tylenol poisonings, for example — the sheer number and magnitude of corporate stumbles and falls from grace since 2002 magnified the need for a viable framework for the repair and recovery of damaged company reputations. It was then that a new genre in the reputation field was born.

As whistleblowers, e-mail trails, deliberate leaks, and bloggers emerged, it became apparent that corporate downfalls were neither born overnight nor accidental. A lengthy trail of missed or misinterpreted signals usually preceded a crisis. By isolating and identifying these overlooked warnings, experts believed they could establish ways to diminish, if not prevent, reputation-damaging crises before they occurred, and if they did occur, make sure they were never repeated.

Moreover, while common business wisdom had always assumed that an organization would rebound from an incident within two years due to the inevitable waning of public interest, research now showed that such an assumption was no longer true. In an age of 24/7 media coverage, the Internet and always-on communications, coupled with the public’s growing appetite for sensational news, companies and even entire industries were likely to wear a scarlet letter for many years. Stakeholders now demand far more assurance and evidence before declaring that a company has turned around.

Restoring a tarnished corporate reputation now takes closer to four years, while rebuilding a preeminent reputation takes even longer. Good to Great esteemedauthor Jim Collins states that it takes a company “…on average four years to crystallize a coherent strategic concept and seven years of intense effort below the radar screen before a company would show a significant and sustained leap to great results.” Collins is essentially saying that it takes seven years to go from just good to great. Reputation recovery—going from not good to just fair, much less to great again—is clearly no small feat.

As the number of companies that suffered corporate crises — and started over to restore their once-good names — continued to mount, I began trying to answer several questions:

• How do companies lose reputation?
• What triggers reputation loss?
• Were there distress signals?
• Why are so many companies struggling with tarnished reputations?
• Who is ultimately responsible for losing reputation?
• What does it take to restore a damaged reputation?
• What can a company do to safeguard its reputation from loss?
• Can a company build an enduring and lasting reputation in this day and age?

Mounting questions such as these were the genesis of this book. I became captivated by this emerging dimension of reputation management — reputation recovery and sustainability — and Corporate Reputation: 12 Steps to Safeguarding and Recovering Reputation was born. My interest in the science of recovery is rooted in the belief that everyone deserves the opportunity to redeem themselves and that second-act performances are in many cases far superior to the first.

Once seemingly impregnable, corporate reputations have fallen suddenly and precipitously. The last decade has seen many of the world’s most admired companies descend from their once lofty perches. These companies had been in a class by themselves — corporate reputation royalty whose invincibility was universally accepted by business executives and the media around the globe. No one would have predicted that they would ever part with their crowns. Yet they were dethroned. Consider these extraordinarily facts about several legendary Fortune 500 companies:

• Only three companies from Fortune’s America’s Top 10 Most Admired Companies in 2000 were among the Top 10 Most Admired in 2006.
• Once ranked number 1 in Fortune’s America’s Most Admired Companies survey, technology behemoth IBM fell to rank number 354 in 1993. Ten years later, IBM made it back into the Fortune Top 10 America’s Most Admired All-Star list and now ranks at the top of its industry.
• Sony, a one-time high-flier in the corporate reputation league tables, now ranks sixth in its industry in the Fortune 2006 World’s Most Admired Companies survey. Just three years ago, it ranked second in its industry.

Reputation failure is no longer a threat that looms large for companies only in high-risk industries and activities. It has become an all-too-familiar scenario for all companies in all corners of the world. A Weber Shandwick proprietary analysis revealed that over three-quarters (79 percent) of the world’s number-one most admired companies lost their crowns over the past five years in their respective industries.

Reputation loss is also on the rise. Nearly 9 out of 10 business executives participating in Weber Shandwick’s Safeguarding Reputation™ survey agree that susceptibility to reputation damage is a growing threat. Similarly, a sizeable 84 percent of global senior executives surveyed by the Economist Intelligence Unit reported that reputation risk increased significantly over the past five years. When executives were asked to choose among 13 risk types, reputation risk emerged as the most significant threat to global corporate business. Reputation risk exceeded all others, including regulatory risk, human capital risk, information technology (IT) network risk, and market risk. Reputation risk was considered even more threatening than terrorism, natural hazards, and physical security.