Reputation Management as Change Management

You may remember my post "Reputation is Built on Behavior" in which I argued that communications has very little to do with reputation, but the way an organization behaves does.

I just read an article on the MIT Sloan Management Review website in which Michael S. Hopkins interviews Marvin Odum, president of Shell Oil Co. The interview is to me very exciting, because it appears to be an excellent explanation of how an organization needs to manage itself to manage relationships with stakeholders (and I would say its reputation).

Among his points:

• The technical side of a proposal is only "half of the equation. The other half is about communities and stakeholders."
• He calls this a shift from organizations saying "Trust me. I'm going to do it the right way" to stakeholders demanding "'Show me and involve me. Make me part of this. I’m going to be part of these decisions going forward.'”
• He further notes that this "... changes everything. It changes the way we think as a company. It raises our performance. And it changes the timeline of these projects."
• Not anticipating "nontechnical" risks and opportunities adds time and, consequently, money to projects. Thus, anticipating them is good for the bottom line.

He goes on to say:

"If we can get our people thinking sufficiently from that point of view, not just working with stakeholders and listening to what they say but actually anticipating their needs, anticipating these 'nontechnical' risks and opportunities — and if we can get more people skilled in that way — then the more successful we’ll be, the shorter these project timelines will be, the more trust in Shell there will be."

Mr. Odum is talking about changing how people in the organization think about issues and how to manage them. This is change management. One of the concerns I shared about British Petroleum (BP) in the wake of the Gulf disaster (in the blog I mentioned above) was that aside from hand wringing and replacing the CEO, there were no signs that BP was doing anything to change a culture that has led to an absolutely dismal environmental record.

Mr. Odum also believes this approach leads to better performance:

"As you get better companywide at exploring, understanding and addressing those nontechnical risks, it drives innovation. Because mitigating those risks often drives you right back into the technology loop — back into asking how can you solve novel problems in novel ways, and how can you do it at affordable costs?"

Another point in the article I find to be genuinely thrilling, is Mr. Odum says Shell does scenario planning:

"We’ll look a half a century into the future, and we ask ourselves, 'Where is the world going to go?' We’re not looking to define a definitive answer; we’re looking to define the spread of options that the world has, that governments have, how priorities will change and how things will be implemented. And then we’re looking to understand how we would perform in each of those possible worlds. Then we bring it all the way back to today to see now what we need to do to drive toward being successful in that spread of potential outcomes."

That's what I call a solid approach to environmental management and a firm foundation for reputation management.

And getting more directly at the role communications plays in reputation management, Mr. Odum says:

"... the first thing that comes to my mind in that respect is the word “transparency.” The only way to approach the situation that we’re in is for a company like Shell to be a complete open book in terms of what we do, how we do it. And we have to be able to stand up to the criticism as well as reap the benefits that we get from being that transparent."

One key role communications can play in all of this is monitoring issues and anticipating the nontechnical risks and opportunities Mr. Odum cites by having a thorough understanding of stakeholder wants, needs and expectations.

While I've drawn some fairly long quotes from the article, there is in it much more of great value. I highly recommend you read it. That address again is: http://tinyurl.com/4lskbyn.

Links to CEO Survey and Interview on Irrational Behavior

My friend and colleague Liz Guthridge saw a couple of media pieces I thought you might find interesting:

• One is a survey of CEOs by IBM and talks about how CEOs are dealing with change and complexity.
• The other is an interview conducted by McKinsey with behavioral economist Dan Arieley, who cites examples of irrationality in the workplace and what leaders should do about this

Reputation Is Built on Behavior

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

COMMUNICATIONS

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.

THE REAL BASIS FOR REPUTATION

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'S "TRUST BANK"

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.

THE BP CASE

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.

MANAGEMENT->POLICIES->CULTURE->BEHAVIOR

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.

REBUILDING REPUTATION

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.