Strategy

Leadership: The buck stops here

It takes a strong chief exec to rescue a company’s lost reputation.

Most companies spend years or even decades building solid reputations, but just one breach of the public’s trust can ruin much of that hard work almost overnight. With endless amounts of information at our fingertips, consumers are more knowledgeable, engaged and critical than ever. And that’s making executives miserable. “Companies live in glass houses, and there are no secrets anymore,” says Leslie Gaines-Ross, chief reputation strategist with international communications giant Weber Shandwick.

About two-thirds of all crises are blamed on the CEO, no matter whose fault it actually is, according to research by Gaines-Ross, whose book, Corporate Reputation: 12 Steps to Safeguarding and Recovering Reputation, was released earlier this year. Want a textbook example of crisis management? Look no further than the actions of Michael McCain, president of Maple Leaf Foods (TSX: MFI), which was forced to recall many of its products because of a listeria bacteria contamination in one of its plants. “He couldn’t have done anything better,” says Don Watt, CEO of DW+Partners, a Toronto-based firm that specializes in retail strategy. “He went on television right away, he looked haggard, he’d obviously been up all night with the problem, he bought time, he talked about it openly.”

Watt says Maple Leaf could have fared much worse had everyone put their heads in the sand, but adds that the company was also helped because it had a solid reputation before the scandal.

It’s important companies step up and take the heat, but even the most basic actions can lead to speedy recovery, says Gaines-Ross. For example, open and sincere communication with employees and the public, and having empathy for those affected are actions that can back up the sincerity of an apology. Gaines-Ross outlines a four-stage recovery program that companies should keep in mind when trying to salvage their reputations. The first is minimizing the damage, followed by a “rewind stage,” where the company identifies what went wrong and implements what went right. Next up is rebuilding the company’s reputation in incremental steps before, finally, there is the recovery stage, which is the hardest to sustain for the long term. Executives polled by Burson-Marsteller, a market research firm in New York, believe it takes slightly more than three years to recover from a crisis if the right steps are executed quickly enough.

While CEOs help build company reputation, it’s also up to them to ensure a speedy recovery. “Even though it’s time to be huddling with their team and figuring out a strategy, they need to be seen in the halls talking to employees and the media,” says Gaines-Ross. “They need to be easily accessible.” While Gaines-Ross stresses that CEOs need to be at the forefront of the recovery process, CEOs believe that leadership accessibility deserves a mere ranking of fifth on a list of 10 crisis management strategies, according to Burson-Marsteller.

“It used to be that financial performance was the most critical factor in a company’s reputation. That has really changed,” says Gaines-Ross. “Now, the quality of products and services, leadership credibility, effectiveness in communicating, transparency and openness are rising in importance.” For example, she points out that before 9/11, employee safety issues weren’t even on the radar, and now they are one of the Top 5 factors that trigger reputation loss. (No. 1 is still financial irregularities.) Gaines-Ross says security has also become a major issue. Companies losing personal data and leaving top-secret files on subways can expect no sympathy from the public.

Regardless of how corporations lose their lustre, the hardest but ultimately most effective step for CEOs may just be admitting they’re the ones to blame.