A recent trust survey confirmed that management has lost public respect. It's not just individual businesses in the firing line, but business itself. MT brought together Most Admired leaders and other practitioners to debate the issue of how to hang onto your good name...
MATTHEW GWYTHER - Where better to start on a discussion of reputation than with Shakespeare? Iago may be a thoroughly disreputable character, but he has some sound words (Othello, III.3) on the value of character:
Good name in man and woman, dear my lord,
Is the immediate jewel of their souls:
Who steals my purse steals trash; 'tis something, nothing;
'Twas mine, 'tis his, and has been slave to thousands;
But he that filches from me my good name
Robs me of that which not enriches him
And makes me poor indeed.
The concept of reputation or honour was around for thousands of years before Fred Goodwin. But nowadays it has moved from the individual to the corporate realm, to the point where it is one of the most important things that faces business organisations.
We're interested in corporate reputation today - not only of individual businesses but of business generally and how this may have been affected by the downturn. Certainly, inasmuch as it is aligned to the subject of trust in business, it has taken a battering - as a recent Edelman Barometer of Trust survey confirmed.
Paul, I want to start with you, because Diageo won 2008's overall MT Most Admired award. Your peers admired your organisation more than any other. What does it mean to you operating, as you do, in a controversial area with talk about minimum prices for alcohol?
PAUL WALSH - If you are the leader of a com-pany, what reputation means to you as an individual should be what it means for the company and vice versa. The first thing I would say is that a great reputation does not make for a great business, but a bad reputation can prevent you from becoming a great business.
Secondly, I do read a lot about 'reputation management' and that always makes me wince. That sounds to me a little bit like propaganda: how do we go out there and 'manage' this?
I would come back to basics. We are a commercial enterprise. Our job is to maximise the future cashflows in a sustainable manner, because the longer you can stretch those cashflows out, the more valuable the company is. You constantly have to look at sustainability.
Any successful company has to start with its customers, because without these people we are nothing. Consumers around the world are placing more emphasis on the reputation of the supplier, of the brand, than they have ever done. My 27-year-old son pays more attention to these issues than I did at his age. It just did not hit my radar screen with the same intensity. I think, therefore, that reputation will influence purchasing decisions.
We operate in what is certainly a regulated business and quite a controversial business. The first epiphany in the company was when we had to say: 'We have to accept that our product in the hands of certain people does cause problems for them, for society, for their family and friends and you cannot hide away from that fact; so now, what are we going to do about it?' That has proven to be quite uplifting. Employees have moved behind it and a lot of our communication, particularly around consumers, is linked to responsible consumption.
The sceptics would always challenge me and say: 'Come on, Paul, you are not really about reducing consumption, are you?' Well, yes, I am, if it means that we can go on unbridled and unfettered in our ability to market our product and in a way whereby the broader society, first, does not see it as something that causes harm and, second, does see the brands as being a champion of responsible consumption.
DAVE LEWIS - If you come to the heart of a brand, it offers a promise that it needs to deliver. That might be functional, it might be emotional. If it's a good brand, it probably has both. In terms of creating, building and sustaining brands, it's all about investing in and understanding and delivering against the expectations that you create. Unilever brands that don't do that are destined to become weak over time. Whether it is an individual brand or a corporate brand, for me it comes down to trust: do I understand you, do I deliver against your expectations in a meaningful way, is that a brand that I aspire to be part of and relate to?
As far as the broader Edelman Barometer of Trust is concerned, the interesting thing was that while 44% of people will still trust what business has to say - which is quite high - 56% would not. I think the issue for the CEOs around this table is that CEOs were only trusted by 18% of people, which puts us slightly below politicians and estate agents.
JEREMY DARROCH - One of the interesting things in our sector, if you look at media and technology and what we have seen over the last 10 to 20 years, is that there has been an explosion of choice. But people are more and more careful about the companies that they do business with. It also seems to me that reputation has to sit very much on the values that you espouse. That is absolutely true at the top of the organisation but it is also true throughout it.
Values are what they are. They are not rules. They are not there to be negotiated. They simply exist. They are the value set that you seek to have in your business and they are what people will test you against. Day to day, do your actions live up to the values that you hold most dear?
ANDREW MOSS - I would absolutely agree with Paul that the tone is set at the top of the organisation, but one thing I am always conscious of is that our reputation is shaped on a daily basis by the many thousands of people who are serving our customers in our call centres - who are changing the experience of the way the company is perceived, literally on an hourly basis. That is happening as we sit and speak now. If I look at the customer complaints I receive, sometimes they are about investment performance, but a lot of them are about people being discourteous to them. These very small things have a large impact.
Insurance is a business which is about helping people when things go wrong, when it comes down to it. If you are burgled - as my daughter was two weeks ago - you ring up your insurance company and it comes and fixes the patio door at the back of the house within a few hours. That makes a big difference to your life, because you feel like you can go to bed that night and be safe. People tend to think of insurance as a financial business when in fact it is a very human business.
PAUL WALSH - Reputations are, in reality, shaped by the broad body of employees around the world, and I totally buy that. I also think that 99.99% of people in a company want the company to do the right thing. They want to feel proud when they talk to their friends, their family - whoever - about the company, because it is such a large part of their life. Therefore, I think you are pushing on an open door in that regard.
JEREMY DARROCH - One of the interesting things about that, Paul, is that if you look at the problems that the banks are facing right now, they have been caused by very, very small parts of their organisation relative to their size. Many of the problems that the big integrated banks are facing are not as a consequence of what their retail banks have done operationally; they have emerged from quite small parts of their operations. I think it reminds us all that your reputation can be defined by any corner of the organisation.
DAVID MANN - The banking industry at the moment almost needs to get out of the limelight. It is like the kid in the classroom who has been bad, and the teacher has that kid in constant focus. So every time something slips, a blob of ink comes out of the pen, it is not their fault but - guess what? - it's off to the head teacher. If a brand does something, the focus comes on it so intensely. There are so many different ways in which people get information about companies now. The internet provides a huge amount of information - and a huge amount of disinformation.
That is coupled with the fact that you have a whole generation that puts more stock on those things. People are looking to understand. 'Is this a company I want to be involved in? Do I want to work for it? Do I want to buy from it? Do I want to invest in it? Do I want to support it in any way, shape or form?' People are making positive decisions on what previously would have been low involvement. The average page visit is 50 seconds, so they are cruising around the internet and forming opinions very quickly. Reputations are built on those multiple instant shots, and I think that is one of the things that is challenging everyone at the moment.
MATTHEW GWYTHER - Tim, one often hears it said that reputation is something that can take years to build but can be damaged beyond repair in a very short space of time. Is it true that the public has become more unforgiving than it has ever been?
LORD BELL - Yes. But 'damaged beyond repair' I do not accept. You could not expect me to. I think anything can be repaired. You might have to do amazing surgery to achieve it, but you can do it. I think your reputation should come from you, not from talking to customers. Yes, you have to talk to them and you should learn something about what they think, but they cannot know about what comes next. They cannot know what is inside you. If people think well of you, it is that much easier for you to do the things you want to do. It has nothing to do with being good or being self-righteous or being a nice person. It has a fantastically important bottom-line impact, which is that it means you can make your business more effective.
If you watched the Treasury Select Committee appearances of the bank managers, I would imagine you had your judgment confirmed that they were at the bottom of the league table of anyone you might want to be, to mix with or marry. They all behaved appallingly. None of them thought about what they were projecting to the public and they looked like a bunch of frightened rabbits who have been caught with their hands in somebody's pockets and did not know what to do or how to get out of it.
The row about Fred Goodwin and his pension is tremendously important to all of you, because I promise you that every journalist is pumping through your annual report looking for your bonus and your pensions arrangements. I think all of you should have rung up Fred Goodwin and said: 'For God's sake, do the right thing in the best interests of all us.' We certainly tried; he would not listen. If he had done the right thing, which is to give some of it away to some charitable cause, that would have done a huge service to CEOs - who, as you rightly say, are rather low in rank. You just cannot sit and look at public opinion and say: 'I do not give a damn about you.'
KEVIN MONEY - I just wanted to share with the group a piece of research we have done about trust and how you rebuild it once it's broken. When we first started doing the research, we thought the biggest factor would be delivering on commitments - simply being consistent over a period of time. In fact, once trust has been broken, people are looking to be listened to and to be acknowledged, for their concerns to be heard and then for action to be taken. Hence, the notion of reciprocity becomes hugely important in rebuilding trust, and what we often find is that organisations have lost the right to communicate because they have not listened. Right now, the banks are saying: 'We are doing this.' The public is saying: 'We have heard it all before, we do not want to listen, we do not want to listen'. The banks have to demonstrate that they have listened first and then rebuild trust.
SANDRA MACLEOD - I think what we are seeing is a change in expectations, a call for a different kind of leadership. It's about sustainability and it's about things you can trust. Gone are the brash, exciting days and the high-energy days. It's now saying: 'What is still going to be around? What can we rely on?' Therefore, there is almost a cautionary principle coming through, but there is definitely a change in feeling in terms of expectations and what people are looking for.
When we are talking about the financial services industry as a whole, we hear the comment 'back to basics'. I think organisations as a whole need to really think through, very carefully and simply, the very basics about the customers and the employees.
One of the big questions in the current climate is: how are organisations energising employees to go that extra mile? But those very employees are feeling a little battered and bruised. They have lost their friends, they have lost colleagues, more and more is expected of them ... How do organisations encourage that extra dynamic, particularly when the contact with the brand is through your employee? And therefore how do you encourage that best possible contact with the organisation that is the ambassador of your reputation? So I think there are some very big issues out there that are quite fundamental. It is back to basics. It does not sound terribly exciting, but I think they are very important things that are easy to lose sight of as people go through cost-cutting and other approaches right now.
MATTHEW GWYTHER - What about the reputation of business generally? There are some individuals out there who say that the bonus culture was out of control, that reward even for success is wrong. And there are even semi- socialist things being pedalled about the place now. Paul, are you going to be more worried now - when it comes to the talk about your annual package of remuneration - than you were over the previous four or five years?
PAUL WALSH - Not particularly. I think the pendulum will definitely swing, whereby there is more discussion around the fat cat subject, but I think for those companies where performance pay really reflects its performance, you should be fine. We will see an easing of compensation in our company with good reason, because the consumer is not buying, so how can you criticise that? When it comes back, it should move as well, so I am not worried about that. I do think there may be a lot of media piling on in this regard. We will get through that, we always do, but I do think it is a little more extreme here in the UK.
I am not seeing a massive negative pendulum swing against business; against banks maybe, which in many ways we were all brought up to believe were the bastions of society.
JEREMY DARROCH - I think, absolutely, business has been good for society and consumers. If, however, consumers have enough bad news and stop believing, there is a risk that you'll see some sort of deficit of trust - and we all have to be cognisant of that, because, as a result, you do start to get unwanted, excessive intervention, because the natural reaction of governments and regulators is to seek to find places in which they can step in.
LORD BELL - I think business is at risk. What it is at risk from is not who is going to close down businesses, but the regulation, which will become absurd. It is already pretty bad - in your case, for instance, Paul. God knows what you are going to do - and there is an audience out there that is soft, ready to listen to the idea of regulation.
You will be allowed to do posters and newspapers, then they will decide on the pack promotion and slowly they will chop your legs off until you are back down to a lot of white bottles which have the words 'gin' or 'rum' written on them. That is how they do it. That is what they are starting to do to drink; it will be cars next. They are delighted by the disaster in the car industry because it is helping them hugely with their anti-car policy.
Click here for a full transcript of The MT Debate: What Price Reputation?
Andrew Moss, CEO, Aviva
Dave Lewis, chairman, Unilever UK
Paul Walsh, CEO, Diageo
Jeremy Darroch, CEO, BSkyB
Lord Tim Bell, chairman, Chime Communications
Sandra Macleod, group chief executive, Echo Research
Matthew Gwyther, editor, MT
David Mann, lead partner, strategy/products, Accenture
Dr Kevin Money, director, John Madejski Centre for Reputation, Henley Management School