Thursday, September 30, 2010

Reputation Is Built on Behavior

We've seen a number of reputation crises in the past few years.


Much of the discussion around these crises in the communications community focuses on how well the organization communicated in response to the crisis. Were they forthright and forthcoming. Did they get the best information they had to the media quickly?

Sometimes, we see discussions of whether PR had a "seat at the table." Was the senior communications executive involved in the initial decisions that led to the crisis? Did he or she see the potential for damage to the organization's reputation and counsel against certain actions to help preserve the reputation. How did management respond?

This is all well and good. It's the kind of thing communications people think about and discuss. It's what we think we do. But communication is really only the very tip of the reputation iceberg.


Reputation is based far more on actions -- the way an organization behaves. In this area, PR matters if it has a seat at the table, insight into the expectations stakeholders have for the organization's behavior and the ability to influence others around the table.

However, there are occasionally cases in which organizations simply behave badly. There frequently are potentially ameliorating circumstances for bad behavior. Did the whole organization behave badly, or just one or two individuals? Was this behavior condoned by management? Was the behavior intentional or a mistake? If the bad behavior was an aberration, then good behavior and communications probably can right the organization's reputation in time.

I believe that most organizations are run by honest people who want to treat their stakeholders and the community in which they operate fairly. I would put almost every CEO I've worked with in this category.

What troubles me are the organizations like Enron, that apparently are genuinely corrupt at the top and intentionally try to game the system. Or those in which corporate greed is really that, and outweighs sensible precautions to protect the community that gives it license to operate and the environment in which that community lives.


Al Golin coined the phrase "Trust Bank" years ago when trying to explain the following concept to McDonald's. The idea is that if you build trust by making deposits in the "Trust Bank" (doing good) your stakeholders will let you make withdrawals in times of need, that is, they will give you the benefit of a doubt when things go against you.

I think Toyota has benefited from a "Trust Bank" effect. It has seen a rough patch or two lately, but through the years it has acted like a responsible corporate citizen, produced high-quality cars and built a loyal customer base.


BP, on the other hand, seems to have dug itself into a hole. According to a well referenced and corroborated entry in Wikipedia:

  • In September 1999, one of BP’s US subsidiaries, BP Exploration Alaska (BPXA), agreed to resolve charges related to the illegal dumping of hazardous wastes on the Alaska North Slope, for $22 million.
  • In August 2006, BP shut down oil operations in Prudhoe Bay, Alaska, due to corrosion in pipelines leading up to the Alaska Pipeline. .... BP had spilled over one million litres of oil in Alaska's North Slope.
  • On 16 October 2007 Alaska Department of Environmental Conservation officials reported a toxic spill of methanol (methyl alcohol) at the Prudhoe Bay oil field managed by BP PLC. Nearly 2,000 gallons of mostly methanol, mixed with some crude oil and water, spilled onto a frozen tundra pond as well as a gravel pad from a pipeline.
  • Two weeks prior to the Deepwater Horizon explosion BP admitted that malfunctioning equipment lead to the release of over 530,000 lbs of chemicals into the air of Texas City and surrounding areas from April 6 to May 16 [2010]. The leak included 17,000 pounds of benzene (a known carcinogen), 37,000 pounds of nitrogen oxides (which contribute to respiratory problems), and 186,000 pounds of carbon monoxide.

These citations relate to BPs environmental record before the Deepwater Horizon explosion, and we all know about that disaster. The Wikipedia article also includes references to numerous safety, political and price manipulation offenses by BP.


According to an article in The Seattle Times, Rep. Joe Barton, R-Texas, told BP executives in a September, 2006, hearing: "BP's policies are as rusty as its pipelines. I'm even more concerned about BP's corporate culture of seeming indifference to safety and environmental issues."

I believe Representative Barton's concern is well founded. A consistent history, such as BPs, suggests a consistent culture from which that history has sprung.


BP has a new CEO, who seems to be making changes. But will he be able to change a culture that has led to the consistent problems we've seen?

Despite BP's green advertising and green investments, I think we all would agree it does not have a green reputation today. Moreover, because it has communicated that it is green, while demonstrating that it is not, it has not presented itself as authentic; it says one thing and does another. This is not the way to build trust.

I would argue BP's reputation is a shambles not because of poor communication but because of poor behavior.

And no matter how good BP's PR team is, it cannot repair this reputation on the outside. This reputation must be repaired from within.


Rob Berick said...

Great post. I think the same can be said from a corporate governance standpoint - policies are one thing, practices are quite another (and the activist investor is keenly aware how to exploit even the smallest of discrepancies between the two). I wish I felt more confident that communications folks would step forward and help manage this component of enterprise risk management. I'd welcome any thoughts you may have on what's holding them back from doing so?

Forrest W. Anderson said...
This comment has been removed by the author.
Forrest W. Anderson said...

Rob, thanks for your comment. I couldn't agree more.

You, apparently, are in investor relations, which is one of the few PR disciplines in which its practitioners do tend to understand how businesses operate; IR targets investment analysts, who intimately understand business.

For PR practitioners to step forward and help "manage this component of enterprise risk management," they would need to be trusted advisors of senior management. In my mind, they have virtually no likelihood of being trusted advisors if they do not understand business and work to harness communications to help achieve business goals.

The PR people I have known who have been trusted advisors to senior management, for example Al Golin, Harold Burson and Peter Chadlington (founder of Shandwick) have not only understood business but have created thriving businesses as well.

IR is actually in a particularly strong position to take this role, because IR sees the impact poor reputation can have on share value. Moreover, if IR doesn't have the ear of the CEO, it hopefully has the ear of the CFO, who does. Perhaps this is a big opportunity for IR.