An Article in the UK Telegraph caught my attention this morning.
In an article Barclays libor scandal:lock them up Jeremy Warner writes “
Virtually all financial scandals follow the same pattern. First there is the initial exposure of wrong doing, then comes the mitigating claim that it was common practice and everyone was up to it, and finally it emerges that the regulators knew all along but failed to act.
This is a flowchart, but what this article clearly shows is that there is a problem with mind-sets in the Banking world.
Corporate culture i.e the way we intuitively do things is regarded as one of the 3 main culprits in Reputation Risk. By now, it should be obvious that there is a mind-set of greed and taking chances in the Banking world.
It is also well known that Reputation Risk is created by regulatory failures. Hence the importance of Compliance Officers in the New World.
However, what the Competition Commission in South Africa has revealed is that often it is the prevailing level of thinking that causes problems and issues. AND, some of that thinking occurs intuitively. With other words, it has been ingrained in some.
Immediately what comes up in my head is the Cycle of Learning. Moving from Unconscious incompetence right through to Unconscious Competence. Except that Unconscious Competence is the most dangerous stage of learning.
Overcoming this will take a lot of unlearning.
It should also be rather obvious that some serious work needs to be done in the Financial sector by OD (Organisation Development/Organizational Behavior ) experts to create unlearning.
Jeremy Warner ends of the article with a statement – “If this were a pharmaceutical company, it would by now have been stripped of its licenses, closed down and its officials had up for endangering the public”
I fully concur. Years ago someone joked and said: “ Bankers are manicured pawnbrokers”.
Well, it is time that we are no longer pawns. As consumers we have choice. BUT, what happens if an industry can no longer be trusted.
This is the danger that regulators are underestimating.
The World’s Most Admired Company survey by Fortune magazine – see 2011 study results at http://money.cnn.com/magazines/fortune/most-admired/ have been one of the ground breaking annual studies to have been conducted in the field of Reputation and have added much to our understanding of what makes companies great.
But what about those companies that did their utmost to destroy their carefully crafted reputations during the past year (and years). Many companies, institutions and individuals have made this list in the past twelve months.
Perhaps we should start a World’s Most Unadmired Company List. Without being specific, there have been many examples. Many websites and other bloggers have asked their audiences for their thoughts on the matter. Take a look at the examples cited in articles such as:
The Holmes Report – The Top 10 Crises of 2011 – http://www.holmesreport.com/featurestories-info/11377/The-Top-10-Crises-Of-2011.aspx
Australia’s 2011 List – http://prdisasters.com/?p=944
These examples show that no organisation is immune against potential crises and incidents that can destroy their good names. The question that should be arising in your mind is:”What is the potential for my organisation to find its way on to this list?”
- 95% (a lot) of major companies have suffered at least one reputational crisis in the past 20 years
- Major companies suffer a “significant” reversal of fortune every seven years
- One out of two (50%) of these reputational failures were tied to having the wrong business strategy or model; 15% from lawsuits; 10% from merger and acquisition issues. Interestingly, the CEO of Willis Global Solutions Consulting Group said that none of the crises were related to natural disasters until 2011. That is hard to believe since there have been plenty of natural catastrophes over the past 20 years that should have impacted companies such as floods, hurricanes, droughts, food shortages, cyclones, earthquakes, SARS, etc.
Also wanted to mention a recent analysis that came from the 2012 Harris Interactive Reputation Quotient (RQ) and was reported in PRWeek. Harris Interactive reported that advertising has less of an impact on company reputation than social media or new stories.
Research continues to show that word of mouth from news stories with negative information about companies drives perceptions more than we realize.
Weber Shandwick reported in their Company Behind the Brand: In Reputation We Trust that consumers are talking about more about company wrong doing than right doing and advertising may not be as able as it used to be in rehabilitating brand reputations.
The key word now is stakeholders. So many companies have customer service or shareholder programs in place, ignoring their other stakeholders. What are the perceptions of suppliers, the government and the media with regards to your company?
Let me leave you with a question: Who in your organisation has assumed a holistic (systemic) view of managing stakeholder reputation?
If there is no one, your organisation is in danger of making the unadmired company list. If you want to find out more about how you can safeguard your company’s reputation or if you want me to address your management team on this issue, e-mail me.
When I facilitate my reputation management training, I always relate that building the reputation of an organisation is like layers of an onion.
The more layers of protection there is, the less chance of damage in a crisis. On the other hand it is also vital to look for potential vulnerabilities and concerns that can penetrate these layers.
These are the questions that I give out to participants with the following instructions – Here is a list of the questions that we need to answer/investigate in order to manage Reputation adequately in in an organisation. Let this partial list govern your thinking during this workshop and when we prioritise a list of action items to manage.
- What kind of company do we want to be? What are our defining traits?
- How distinctive is our Reputation from the rest of the Industry’s reputation?
- How accurate and consistent are the images that we project to our different stakeholders?
- How can we strengthen our relationships with these various stakeholders?
- Evaluate the way your organisation currently manage Reputation Risk. Is it still appropriate?
- What are the issues and problems at Business Unit level that can impact reputation?
- How do our internal features correspond to current perceptions of our Company by the different stakeholders?
- What policies, systems, procedures, rules, regulations, actions and behaviour are not consistent with the organisation’s desired reputation?
What are the issues/Problems affecting each Reputational Driver?
I had a radio interview last night with John Fraser of Classic FM Business. Take a listen and let me know how you thought it went.
As a keen observer of reputational issues around the Globe, it has always intrigued me that once a reputation risk incident has happened, that the organisation’s culture are often found to be the main cause and culprit.
At NASA (Challenger & Columbia space shuttle disasters) and Andersen (Enron), and even now BP (Complacency), corporate culture was implicated. This means that as Reputation Managers we will need to take a careful look at our culture and its potential danger to our reputation.
This lends itself to the question: “What is Corporate Culture and how can we positively influence it as part of our reputation management initiatives?”
Another question to ask is, is there a relationship between organizational culture, performance and reputation?
The definition offered by most is that "Culture is the way we do things around here." But the other day, I heard this. Culture is how we intuitively do things around here.
In other words its the way things get done without really thinking about how we’re going to do it. And therein lies the reputational risk danger. Like Dr. Roger von Oech wrote in his book – a Whack on the side of the Head. “Where all men think alike, no one thinks”.
Culture is essentially the core beliefs, traditions, customs, and established patterns of behavior held and practiced by members of an organization.
If this is true can culture be pinned to a table and dissected? Can it be reduced to bullet points on a flipchart?
It’s not necessarily the same as the values and mission the company puts in the front of their annual report, or the behaviours and processes outlined in their policy manual, although it can be.
What Corporate Culture is however; is the everyday actions, statements, and presumptions of the people who work there. The unwritten rules. The things that are taken as a given. The way we intuitively do things around here.
If you ask an employee why they do *this* instead of *that* and they respond "We’ve always done it that way" that process has become cultural. If it’s merely understood that you can call your boss by their first name, but you address everyone else of your bosses rank or higher by their last name, it’s culture.
If employees understand that they can question anything that doesn’t seem "right" this can be assumed to be engrained in their culture. If it’s understood that you never question anything, that’s culture too.
Edgar Schein, the OD expert (among others) points out that culture exists in layers.
It is often compared to an iceberg. The level that is visible above the surface is the level of behavior. This is the easiest layer to observe and change but it is affected by invisible layers underneath.
The first invisible layer of culture below the surface, according to Schein, is the layer of values:what we care about and what we think is important. You can’t observe values directly the same way you observe behavior but you can certainly infer what they are from the way people act.
The deepest layer of culture – and the hardest one to observe, measure, or change – is the layer of fundamental beliefs.
The three layers interact, of course.
Let me give an oversimplified example. Suppose we have a fundamental belief that employees are basically lazy and that left to their own devices, they’ll just goof off. We’d probably place high values on control systems that allow managers to closely scrutinize employee performance and make sure that employees aren’t getting away with anything. Our behavior would reflect these values. If you asked us about it, we’d tell you that our control systems are just the way our company does business. We might not even be able to articulate the underlying belief about employee laziness that leads to this behavior. While it might not be hard to get us to change some aspects of our control systems, it might be very challenging to get us to change our fundamental beliefs about human nature. (Theory X & Y)
Organizational cultures tend to be self-reinforcing and self-perpetuating. People who share our beliefs will be attracted to our organization; people who believe otherwise will tend to go elsewhere.
Here is an example of how culture can be formed and create reputational risk.
1. Behaviours that produce positive outcomes (not necessarily positive for the organization, but positive for the person) are repeated. Others see the positive outcome and emulate the behavior and get similar results. A belief springs up that this is an accepted way to behave, and it becomes engrained as cultural. This is what we do, even if the written rules say don’t do that.
A practical example is the attitude of self-enrichment by executives in accepting outrageous pay schemes without due concern over the messages they portray. Workers then start to enrich themselves through shoplifting and other wasteful techniques.
2. Behaviours that produce negative outcomes (again, not necessarily negative for the organization, but negative for the person) are avoided. Others see the negative outcome and avoid the behavior. A belief springs up that this is a risky way to behave, and it becomes engrained as cultural. We just don’t do that, even if we are told it’s the right thing to do.
A Practical example would be that of speaking up or whistle blowing. The moment people see how a whistleblower is treated, they will be scared. Like the vernacular in South Africa. In Zulu they speak about an impimpi – being a spy. No one wants to be branded in this way, yet from a risk management perspectives we want them to speak up so that we can deal with issues whilst they are still small.
This procession can eventually lead to a culture that is overall positive and nurturing or negative and oppressive, depending on which behaviours prove rewarding and which prove to have unpleasant consequences.
Most cultures fall somewhere in between. One thing I am certain of is that once a culture is established, changing those fundamental core beliefs is probably the most difficult challenge in OD and Reputation Management.
In most reputation risk root cause analyses, I have found that the culture had a lot to do with the fundamental root cause of the risk that emerged.
To prevent unnecessary reputation risk in your own organisation, I would recommend that you work closely with your colleagues in OD/Organisational Behavior to impact the corporate culture in a positive way.
I have just been quoted in an article in Norman Mark’s blog – ‘How Do You Determine Whether the Risk Management Process Is "Effective"?
This was my response: Effective risk management is when each risk event identified is examined through the lens of both the direct loss to the firm and indirect losses that may arise because of damage to the firm’s reputation associated with the event.
My definition has evolved from working with clients where I could see the imbalance the risk management process i.e that too much attention was placed on financial losses.
Those readers who received my Powerlines newsletter Nr. 89 dated Nov 2009 will recall my article ‘One Event, Multiple Stakeholder Impacts’ in which i showed the danger of how one event could have multiple stakeholder impacts.
That is the type of danger that exists when you do not view a risk event and put it through the stakeholder lens.
Once there was a rabbit sitting in a field and sprucing himself up. He polished his nails, cleaned his whiskers and even put on some deodorant. An eagle, flying overhead, asked the rabbit what the occasion was. The rabbit replied that "tonight I have a date with the Lioness. The lion is out of town, and the Lioness has a crush on me".
A few minutes later, the Lion returned, his flight having been cancelled.
"What are you doing, Mr Rabbit", asked the lion as he passed by looking at the spiffy-looking rabbit.
Answered the rabbit, "N-n-nothing sir. I am just sitting here talking nonsense to myself".
That’s exactly what I am doing right now!
Right now, I am wondering if this is just the sign of the times. What do you do when at the last minute many people cancel to attend a Masterclass, that they wanted to attend, but now can’t due to operational requirements.
I guess operational requirements take preference over learning activities. So, what now?
I guess I will just sit here for a while. Little I can do, the matter is out of my hands.
I will have to reschedule with these delegates. Watch http://reputationdefence.invite43.com/ for the new date!
I just read an interesting article in the Business Report which stated that the global financial crisis is largely the result of financial institutions not taking risk management seriously.
The article contained a number of interesting pointers and is based on a KPMG survey on risk management in banks which was released on Monday.
The article states that risk management was just a support function and an interesting finding was that though risk management programmes exist, there were shortcomings in their approach.
This correlates with my experience in teaching understanding about reputation risk. Worldwide reputation risk is seen as the one risk that is the most difficult to define and manage. Therefore it is often left to chance and dealt with post event.
It just goes to show that if there are problems existing with traditional risk programmes, then reputation risk is even less understood and managed.
In my master class workshops I show the audience three ways to define reputation risk. It is only then that the reality dawns on them, how to mitigate it.
(If you are interested in learning more about Reputation Risk, and whether it is a strategic risk on its own or just a consequence of a risk, register for my next Reputation Risk Management Master Class).
I read an interesting article today about how on Monday, 13 people were trapped in one of the courts lifts (elevator) at the Johannesburg High court.
When the group were rescued, three people had passed out – two from the heat and one after suffering an asthma attack. A Few weeks ago the same thing happened at Johannesburg Hospital (now called the Charlotte Maxeke Hospital)
This poses some debatable questions. How can we put our trust in the courts, if we cannot trust the building in which it is housed?
Levels of maintenance creates perceptions, sometimes unwanted.
It also raises questions about risk appetite. The other day I was in a lift in a building,going from the 13th floor to the bottom. On our disembarkment, I asked the CFO about whether the company had a policy stating that key executives should not travel in the same plane or car together.
He stated affirmative, upon which I said: ”But we all got in the same lift together” – there were three of us.
Last year, the Department of Labour conducted spot-checks on lifts in Durban, discovering that in more than 55% of cases, they were not adequately serviced.
Now, some will say, that lift accidents do not happen often…the probability is low. Sure, but the organisation’s reputation is still tarnished.
Customers experiences in a lift creates anticipation for future assocations with the institution. The mere fact that I read about the level of maintenance, says clearly that the reputation of the institution is being affected.
And that, can take longer to repair, than some maintenance schedule.
(For those interested to find out how an elevator works, go to http://science.howstuffworks.com/elevator.htm)