Executive Times
Volume 1, Issue 7 October, 1999
Tending to corporate reputation

Every executive contributes to the positive and negative reputations of his or her company through every action taken and each comment made. Personal and corporate reputations are developed slowly, reinforced through consistency, and can be shattered by single events. The care and attention to reputation is a key component to executive success. Some executives are better or luckier than others in getting this right.

What. s your RQ?

The Wall Street Journal reported on September 23 the results of public-opinion research on corporate image. The Reputation Quotient (RQ) is derived from rating twenty attributes in six categories:

  1. Emotional appeal: how much a company is liked, admired and respected
  2. Social responsibility: perceptions of the company as a good citizen
  3. Products and services: perceptions of quality, innovation, value and reliability
  4. Workplace environment: perception of how well the company is managed, how it is to work there, and the quality of employees
  5. Vision and leadership: how much the company demonstrates a clear vision and strong leadership
  6. Financial performance: perceptions of its profitability, prospects and risk

We were not surprised to read that Johnson & Johnson enjoys the best corporate reputation and the highest RQ. The May issue of Executive Times called attention to the Johnson & Johnson credo and how that influences the activities throughout the enterprise. CEO Ralph Larsen commented in The Wall Street Journal, "Johnson & Johnson is a trustmark, not a trademark. Your reputation can be destroyed in an instant; if employees do anything to violate the consumer trust, they probably will not survive here." We found it interesting to note that no financial services companies made the top 30 list. Companies with the worst reputations reported in this survey included Philip Morris, Exxon and Kmart.

As an executive, how much do you value the reputation of your company, and what have you done lately to protect that reputation? When was the last time you led a conversation with others in your company about reputation? What are the consequences to individuals in your company who may harm the company's reputation?

Calling the Maytag repairman

Maytag Corporation
CEO Lloyd Ward will never forget the thrills and agonies of his first few weeks on the job. Promoted from COO to CEO in August, Ward was the subject of a flattering Business Week cover story on August 9. As the second black executive to head a major U.S. Corporation, the story of his road to success included how he overcame prejudice and other obstacles to achieve success. He may have been embarrassed when Black Enterprise quoted Dr. David Thomas of Harvard, "What is significant about Lloyd Ward. s appointment is that he was brought in as a successor to the CEO in a way that heretofore was available only to white Americans and Europeans& It represents a new possibility and is a watershed moment in the history of African Americans in corporate America." On September 8, JP Morgan announced that Ward was elected a director of that company.

A week later, stock in Maytag plunged dramatically (around 40%) on higher-than-usual trading volume. Word from Maytag for two days was that they were comfortable with the First Call earnings consensus for the third quarter, and on the third day, the company announced that earnings would be weaker. That announcement, as Ward said to investors on September 15, was "surprising many of you and undermining our credibility."

Investors, of course, hate surprises, and analysts hate to be led astray, or to be wrong in their earnings estimates. Ward's decisive actions and candid comments to investors went a long way in restoring confidence in Maytag. Ward explained the reasons for the company's actions, especially the nature and timing of their communication with investors concerning the earnings shortfall. He said, "Every action we take is grounded in trust and integrity. I have lived my life that way and I know Maytag. s reputation is firmly anchored in those values. So comments I hear about the lack of integrity or trust, about being mislead or that somehow the truth was not uppermost in the actions of last week, well that is of paramount concern to me."

He went on to describe the actions he. s taken to deliver shareholder value. We think that Ward will prove to be a great CEO for Maytag, and this early trial by fire will galvanize him and other Maytag executives to produce ongoing outstanding results. Time will tell.

What surprises are you prepared to face? What's of "paramount concern" to you? What events and activities have formed your personal reputation? How do you draw on those during moments of trial? What events have been pivotal in forming your company's reputation? How can you reinforce the positive events and tackle the negative?

Flushing away the past

The history of the Kohler Company includes two memorable labor strikes. The first began in 1934 and when police shot into a crowd of strikers, two employees were killed and over forty others were wounded. That strike continued until 1941. Another strike holds the record for longevity, having started in 1954 and not ending until 1962. We read in the Chicago Tribune on September 23 that following a routine, random compliance review of federal contractors, Kohler agreed to pay selected women almost $900,000 in back pay as a result of Kohler policy concerning minimum height making them ineligible for certain jobs. The Labor Department made clear that there were no employee complaints involved, and Kohler stated that the policy was created to ensure that employees could handle heavy lifting and other physical labor. It turns out that statistically more women than men are less than five feet four inches tall, so there was wage disparity by gender. Rather than fight the issue, Kohler chose to correct the wage disparity.

How long are the memories about your company? Do events from fifty or more years ago mean anything to your current stakeholders? Are the memories positive or negative? Do these memories impact your approach to decisions today? What guides you?

Out with the Olde

The New York Times reported on September 19 that H&R Block, the largest and most trusted tax preparer, will have its share of challenges in assimilating Olde Financial, which it agreed to acquire for $850 million. Olde is a discount broker that has a history of accusations that it "abused its customers and discriminated against blacks and women." The Olde name is likely to go away quickly, and H&R Block will try to achieve synergy. The market hit the Block share price by about 20% after the announcement. Many skeptics dislike this marriage, especially given past Block blunders around synergy, including Hyatt Legal Services and CompuServe.

What do you do when the market reacts negatively to the plans you envision will produce great success? How convincing are you? When merging two cultures with different reputations, how are you confident that the more positive reputation will survive?

Breaking precedents

Yer out

The union members who followed their leader. s direction lost their jobs and the ones who didn. t are still working. What happens next? Richie Phillips heads the major league baseball umpire. s union as we. re writing this, but we don. t think he. ll remain as leader for long.

Can a leader not have followers? What happens when a leader doesn. t do what the followers feel is in their best interest?

Boggles the mind

The Vanguard Group, like many companies, has a mandatory retirement age for directors. When visionary founder John C. Bogle turned 70 last May, he expressed publicly a desire to remain on the board. When it began to appear that the board would not make an exception in his case, widespread shareowner support for Bogle emerged. Wisely, the board passed a resolution to waive the requirement for Bogle. Gracefully, Bogle decided to step down from the board voluntarily.

What approach do you take to exceptions? Do you wait for reactions to initiate waivers, or do you anticipate impact, and propose exceptions?

Unity of purpose with clear and consistent application

We read in the Financial Times (September 21) that U.N. Secretary General Kofi Annan called to the attention of members of the U.N. general assembly that "there are rights beyond borders." He made it clear that to maintain universal support for action in the face of extreme human suffering, actions must be applied consistently, without regard to region or nation. Actions without Security Council authority, like Kosovo, can set dangerous precedents for future interventions.

What do you do to pull together divergent interests? Are there borders you choose not to cross? What precedents do you set by decisions on where you become involved and where you remain disengaged? Are those the precedents you want to set?

Equitable gets the "AXA"

We remember the first time we noticed the name "Equitable ". It was shining in lights at the top of a building on Michigan Avenue in Chicago, right at the Chicago River's edge. It turns out that the brand name goes back about 140 years, and consumers readily associate the name with an insurance company. That's exactly the problem that will be corrected through a name change to AXA. Eugene Miller, former vice-chair of Chase Manhattan Corporation who joined Equitable as CEO two years ago, wants the company to be recognized as a fully integrated financial planning operation. The name change, backed by what Advertising Age (8/23/99) estimated as a $40 million ad budget, will allow the company to promote AXA Advisors, the new name for its sales force. AXA, by the way, is the name of the global parent company. The Equitable name will still be used on selected insurance products.

Do you have the courage to make a major split from the past to build a different future? When does something like a name become an obstacle to success? Can you afford to build name recognition? Can you afford not to?

Taking the bypass route

Drive by

Ford Motor Company
and Microsoft announced a joint venture in September whereby they will collaborate on building cars to individual customer orders. Some auto dealers are worried that they will be cut out of the transaction.

What is your relationship with intermediaries in your distribution channel? Are there fears that roles will be eliminated? How do you and your business partners manage change?

No visits to the dentist

Merck
decided to sell its new painkiller, Vioxx, to dentists through CollaGenex rather than through Merck. s own giant sales force. CollaGenex markets drugs exclusively to dentists, while Merck doesn't currently call on dentists.

What makes you decide to outsource some part of your business? When do you buy or build expertise, and when do you rent the expertise of others?

Driving away

As it turns out, last year. s announced "merger of equals" between Daimler and Chrysler looks more like an acquisition. President Tom Stallcamp was too outspoken, according to the Detroit News (September 24), and Co-Chairman Juergen Schrempp forced his resignation.

How many divergent views do you need in your company? When does an opinion turn into dissent?

Joining the PACers

Touchdown in Washington. The Indianapolis Colts became the first team in the NFL to form its own political action committee, according to The Washington Post (September 6). Joining thousands of other companies who pay to play in Washington, the Colts will have a few dollars to represent their interests and issues in the nation's capital.

How are your personal and corporate interests represented in Washington? Which special interests are your own? Do you feel that your concerns are being heard?

Tipping the scales

We read in The New York Times on September 6 that more employers are looking for employees to lose weight as a way to reduce costs. More than half of Americans are now overweight, and 23% are now classified as acutely overweight, which we used to call obese. We were familiar with employers offering wellness programs and fitness centers. Pitney Bowes revised prices in their cafeteria to push healthier food. SmithKline Beacham hired a firm to create programs for 1,600 employees who reported weight problems. What. s next? Cash bonuses for pounds lost?

What boundaries are appropriate between work life and the rest of life? Where should an employer become involved, and where should an employer stay away? Even if as an executive you believe you are taking actions in the best interests of an employee, are you sure you're in the best position to determine the interests of employees?

Legacies

Boardmeister

Robert K. Mueller
wrote the book on corporate governance, in fact, he wrote several of them. Written before the activist approach to corporate governance, Mueller's wisdom provided many directors with a practical approach to carrying out their duties effectively. A chemist at Sinclair Refining Company and executive of Monsanto, Mueller later chaired the Arthur D. Little consulting firm. He died in late August at age 86.

A different economist

Herb Stein
was the rare economist who often said, "I don't know." Smart, witty, and knowledgeable about a lot, he was also quite willing to disclose to others when he didn't know something. He wrote about economics simply and clearly. All his life, he remained open to new ideas. He served on President Nixon's Council of Economic Advisors for six years, and chaired it from 1972-4. You've probably read his clear and witty prose in The Wall Street Journal. Especially in Washington, his pragmatism and openness will be missed. He died in Washington in September at age 83.

Reading

Rewarding

Any executive interested in finding out more about what other companies are doing about reward systems should read Thomas B. Wilson's new book, Rewards That Drive High Performance. This book presents stories about 38 companies, structured around eight areas:

  1. Building an Entrepreneurial Spirit
  2. Creating a Stake in the Enterprise
  3. Keeping a Focus on the Customer
  4. Working as a Team
  5. Supporting a Business Turnaround
  6. Retaining Critical Talent
  7. Reinforcing the Quality Process
  8. Matching Rewards to a Changing Strategy
You can read descriptions about the approach to rewards used by 4-6 companies in each of these areas. These stories may or may not present best practices, but they do provide a description of the reality that many executives face daily. At the end of each case study, we wanted to find out more. We also found that the names created for the reward system programs were generally lame. There's no need to read this book straight through, as we did; focus instead on the areas most similar to what you face today. Wilson ends the book with ten key factors that make reward systems successful. Call or write us if you're curious, or read the book.

Mad Dow disease

We. ve overdosed on James K. Glassman and his Dow 36,000 theory. He and Kevin Hassert have a new book out titled Dow 36,000: The New Strategy for Profiting from the Coming Rise in the Stock Market . They've made the case frequently over the past few years, and despite criticisms of their math errors, the book version is here. Skip it. Read the September Atlantic Monthly for a short version, or visit the Slate archives (at slate.com) for a discussion between Glassman and Economist writer Clive Cook on the same content during 1998. Also skip the other Dow books, including: Dow 100,000; Dow 40,000; When the Dow Breaks; and Beat the Millennium Crash.

Good ol. Strom

For those who may have pigeonholed Strom Thurman, there are new perspectives to discover upon reading Ol' Strom: An Unauthorized Biography of Strom Thurmond by Jack Bass and Marilyn W. Thompson . You'll find out about Strom as South Carolina. s youngest school superintendent and youngest jurist. You. ll see him perform as a liberal governor, and mourn the death of a child. All the familiar parts of his story are there, too. The authors quote Joe Biden's tribute to Strom and the secret to his success: "It lies in his strength of character, his absolute honesty and integrity, his strong sense of fairness, and his commitment to public service."

A toast

A. Manette Ansay's
new novel, Midnight Champagne, tells the story of a wedding through describing the complexities of love with both humor and melancholy. Unlike the poor writing in Bridges of Madison County, Ansay describes loving Midwesterners with skilled craft and grace. Her images are poetic, as in the opening lines:

"Valentine's Day. Mid-afternoon. A crossroads thirty miles north of the Illinois line, each highway straight as a stickpin holding fast for a tidy seam. Who can't describe the American heartland, those glorious patchwork quilts of corn and wheat? But this is deep winter, the sun pale as ice. The fields are the featureless white of amnesia. Fence posts and windbreaks divide them like the clean lines of desire. And right smack in the middle of it all sits the Great Lakes Chapel and Hideaway Lodge, mired in a pool of plowed asphalt."

Consider packing this book for a coast-to-coast flight, or enjoying it as a great weekend or evening break.

1999 Hopkins and Company, LLC

About Hopkins & Company

In addition to publishing Executive Times, Hopkins & Company engages in a variety of other activities focused on helping executives succeed, including:

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