Results, Vision and Values: How CEOs Build Corporate Reputation

Heather Ferguson. Director, Development and Alumni Relations, Faculty of Nursing, University of Toronto and Director, The Empire Club of Canada; Sarah Gauntlett, Grade 12 Student, North Toronto Collegiate Institute; Grant Kerr, St. Paul's United Church, Brampton; Linda Smith, Executive Vice-President, Regional Director, Fleishman-Hillard Canada; Andy MacGillivray, President and CEO, Gay Lea Foods; Ida Teoli, Senior Vice-President, National Markets, Bell Canada; Geoffrey Berg, British Consul General, Toronto and British Consulate General, Toronto; Diana Conconi, Senior Vice-President and Partner, Fleishman-Hillard and Director, The Empire Club of Canada; Mark Lievonen, President, Aventis Pasteur; Gregory W. Gee, President and CEO, Tarion Warranty Corporation; Betsey Solberg, Regional President and Senior Partner, Kansas City, Fleishman-Hillard; and Tom Enright, President and CEO, Canada Newswire.

Introduction by John Koopman

In "Richard 11" Shakespeare wrote:

The purest treasure mortal times afford is spotless reputation: that away,

men are but guilded loam or painted clay.

When Shakespeare wrote "Richard II," today's regulatory and disclosure protections did not exist. In such an era, without prospectuses, annual information statements or even brands, a good reputation was not only of immense value, it was imperative to vendors of every type.

In the free-wheeling clays at the turn of the 20th century, J.P. Morgan marshalled his immense power on Wall Street as much because of his reputation for fulfilling his promises as the strength of his balance sheet. Caveat emptor was the prescription that protected the masses.

Over the past century our governments have offered and the Canadian public has eagerly embraced a myriad of regulatory protections, mandatory disclosure and implied certifications of integrity, in place of the old system of public reputation. Presumably the public is now better protected, but the unintended consequence of the last century's regulatory explosion was the diminished market value of reputation, which was so critical in the entire pre-regulatory age.

However, events at Enron and WorldCom, among others, show that laws and regulations cannot and will never wholly eliminate the less savory side of human behaviour. We are beginning to understand what Shakespeare always understood: that, although a market economy cannot function without some formal rules such as tort and contract law, rules cannot and will never substitute for character.

If any good has come of these scandals it is the re-emergence of the value and importance placed on reputation and trust and a re-inoculation of consumers and citizens with the very healthy caveat-emptor vaccine.

Our guest today is going to speak to us on corporate reputation, and how to understand it, measure it, and manage it. Mr. Graham is well placed to discuss this topic, because both he and the firm he built have outstanding reputations.

On March 25, 1974, Fleishman-Hillard, a public relations firm with a single office in St. Louis Missouri, had just appointed our guest Mr. John Graham as its president. Thirty years later Fleishman-Hillard under Mr. Graham's leadership has developed into one of the world's leading public-relations firms with 83 offices around the globe and more than 2,000 professionals.

In a world where job-hopping is common Mr. Graham has spent 38 years with Fleishman-Hillard. In a world where there are too many self-centred egos, if you review press clippings and articles you will never find Mr. Graham talking about himself; he unfailingly speaks of his staff, his clients and his industry.

Ladies and gentlemen, please join me in welcoming the Chairman and CEO of Fleishman-Hillard, Mr. John Graham, to the podium of the Empire Club of Canada.

John Graham

Thank you. It is always a pleasure to visit Canada and especially Toronto, one of the world's truly great cities.

I sincerely appreciate this opportunity to speak before the Empire Club once again and I thank you for inviting me to spend this time with you.

From my perspective, the timing could not be better for a very basic reason. I spend a lot of time in Southern Texas where the temperature hit 100 degrees Fahrenheit on the first of June and it has barely let up since. So, for a number of reasons, I am very happy to be in Toronto today.

This is a great time to talk with business leaders like yourselves about the value and importance of reputation because it seems that so many companies and so many executives are determined to damage their own.

Every day it seems newspapers bring us another story of a company in crisis that impacts its reputation. And so, every day brings us another reminder of how important a good reputation can be. And how quickly it can be ruined.

I would like to share with you a few of the reputation lessons I have learned over the past 30 years in working with some of North America's largest companies. I want to point out that these are lessons that apply to any company or any organization regardless of size.

And I also would like to spend a few minutes talking about how the chief executive officer is really the chief reputation officer of any well-run company.

Let's begin with the basics. Let's assume for a minute cameras from "60 Minutes" are not camped on your doorstep or investigative reporters from the Globe and Mail are not calling for your comment on sensitive company issues.

Under those circumstances when you are not facing an immediate crisis you might be tempted to think that you don't have to worry about your reputation. You might even think you don't have a reputation to worry about.

But in my opinion, you would be wrong especially if you do business in the public eye. Nearly every company doing business today has a reputation and even if your company is travelling totally below the radar screen with no discernable reputation you still could at some point have a reputational problem.

A company's reputation can be difficult to quantify, influenced by factors out of your direct control and, therefore, difficult to manage. But you definitely know a good reputation or a bad one when you see it. And you know the companies that do a good job of making their reputation a top priority.

Shaping and continually working to maintain a reputation is more important today than it has ever been because the opportunities to affect your company's reputation have never been greater.

Those of us who have been in the communications business for some time fondly remember the days of the news cycle a decade ago. If you had an article in the morning newspaper that impacted your reputation, you had a lot of time to work on the strategy and a response.

The news cycle, over the years, has been compressed to the point that it no longer exists thanks to round-the-clock news programs and, of course, the rise of the Internet (which incidentally was the topic of my talk here in 1995).

Today, if you are lucky, you might have an hour or two to respond to a crisis. If you don't handle it quickly and right the first time it could be a disaster. Your story could instantly be on the wires and on Web sites in front of billions of eyes. With the click of a few keystrokes millions of opinions about your company will be formed.

Mark Twain once said that a lie can get half-way around the world while truth is still putting on its shoes. And keep in mind this was back when the telegraph was the hot technology.

In today's world, truth is at an even greater disadvantage. Rumours that affect your business can be started at breakfast and sweep around the globe before lunch. During times of crisis, my counsel to clients is always based on two fundamentals--do the right thing and do it quickly.

That is one of the reasons having no discernable reputation means you are at a major disadvantage if faced with a crisis. A good reputation is your last or sometimes your only and maybe your best defence during a crisis.

Of course, the backdrop to this is the distressing volume of corporate scandals and executive misdeeds that have occurred over the last several years. It has certainly captured the attention of the public, the media, and the regulatory officials.

But this should also be tempered by the fact, as all of us know, that the vast majority of companies today do business the right way. As all those bad headlines were being made, there were thousands of companies operating effectively, with good leaders focused on their employees, on serving their customers and their shareholders.

And in so doing, those companies are building on the three pillars of corporate reputation, which I would like to touch on briefly.

The first pillar of a sound corporate reputation is results. Your company or organization must say what it intends to do and then it must deliver.

This means different things to different audiences, of course, but I think Mark Twain summed it up best when he said, "Always do right. This will gratify some people and astonish the rest."

But what is right? The financial community has expectations of performance that probably differ from the expectations of your customers. Results from an employee's perspective are different from the results policymakers might expect. But they are all interwoven and, therefore, interconnected. A company cannot fail in one audience category without affecting its overall reputation. And just as importantly, you cannot pin all your hopes for a strong reputation on strong financial results.

I have known a number of CEOs who privately believed that if their company produced the financial or operational results investors demand they have won the reputation war. That may have been true years ago but not today. Not when nearly one billion people can log onto your digital storefront. Not when the regulators or investigative reporters are playing catch up to missed scandals and working overtime to find new ones.

Vision is the second pillar of good corporate reputation. Vision is the hallmark of any good leader. People--your customers, investors, employees, and others--are always drawn to leaders with a vision.

This is especially true as we emerge from a period of global economic slowdown. Successful corporate reputations must include the concept of a leadership vision--a clear articulation of what the company will become in the future, and what the company will mean to investors, customers, employees and society. That kind of vision fell out of favour with the collapse of the technology bubble because the notion of vision was abused by some people who never understood that a credible long-term goal had to be supported every day by the communication of tangible progress.

The third pillar of a good corporate reputation is corporate values and the culture it takes to sustain them. I cannot over-emphasize how important a strong, healthy corporate culture is in building a reputation.

Culture is a critical driver of reputation, because it guides the actions and attitudes of everyone in an organization. The culture of a company affects every relationship with employees, customers, regulators and policymakers, suppliers, investors, the local community--every individual that the organization touches.

Culture is a particular interest of mine, because the firm I have had the privilege of leading for 30 years has a very strong and distinct culture, which has been, I believe, the key to our success.

Several years ago, before the major global economic downturn really took hold, I spoke at the Conference Board in New York, and made the point that one of the reasons corporate culture is so important is because it sustains you when times are tough. I said it was easy to talk about your company's great culture when times are going well. It is easy to find money to spend on employee programs or events. But what happens when the good times slow down? Budgets devoted to supporting corporate culture many times are the first to feel the pinch when belts are tightened.

That is not the case at companies that really value a culture of success. In fact, that is precisely the time when the culture you have built can see you through. A strong culture will help your employees stay focused on doing outstanding work, despite other issues that may be swirling around you.

Results. Vision. Values. In my experience these are the three pillars on which successful corporate reputations are built.

And in my experience, there is only one place to start building it--in the CEO's office.

CEOs today are expected to deliver on many responsibilities--leadership, strategy, performance, shareholder return, customer satisfaction, corporate governance, social responsibility, and more.

How the CEO delivers on these critical areas determines the reputation of the company. And the company's reputation also often influences how it performs in these areas. That is why the responsibility of managing, building and guarding the company's reputation has to be a top priority for any CEO.

It cannot be a part-time job, and it cannot be delegated to the human resources or corporate communications departments. Again, the CEO has to be the chief reputation officer. Results, vision, and values may be the foundation, but a company's reputation ultimately rests at the top of the organizational chart. It always has; it always will.

Smart CEOs set the tone. He or she must become the company's greatest champion for the kind of reputation it wants to achieve. The CEOs and the company's reputation must become synonymous.

The best CEOs understand that there are two distinct aspects of being an effective leader. You need to combine the job of being a CEO with the role of being a CEO.

An illustration of what I mean was driven home very effectively by former prime minister Brian Mulroney at the funeral for Ronald Reagan, which many of you may have seen.

In his eulogy, Mr. Mulroney noted that French President Mitterand once said that Reagan has a sense of the state about him. It sounded more profound in French, but my French would not do it justice. At any rate, Mr. Mulroney said that there is "a vast difference between the job of president and the role of president." Reagan, he said, "embodied that unusual chemistry of history and tradition and achievement and inspirational conduct and national pride."

Achievement and inspiration neatly sum up good leadership for a country or a company.

And once the CEO has committed to the concept, there are a few tangible steps any organization must take to solidly establish a strong reputation.

First, management needs to determine what the reputation goal is and focus the rest of the company toward achieving it. You must define it if you want people to believe it. And if you want people to embrace it, your reputation must be grounded in the truth. That means you need to assess exactly where the company's reputation stands among the audiences it cares about. Through survey research, you can identify exactly how your company is viewed among your important audiences.

From there, you can extract the nuggets of truth and use that knowledge as the foundation for the reputation you want to achieve. In other words, start on ground that your audience accepts, in order to get them to listen and then move to where you want to be.

Having defined the company's reputation, the next step is to ensure that all employees organize around it in order to fulfill it. And like any other corporate asset, reputation can and should be measured. It is tempting to classify reputation management as more art than science but the fact is reputation can be measured and managed.

There is a growing body of literature on this very subject, written by academics, public relations practitioners, and journalists.

Fleishman-Hillard has created a program called Reputation Equity Assessment and Direction, or READ, which we use to help clients measure how well their messages resonate with key stakeholders. It has proven to be a very effective tool for a number of our clients.

At the end of the day, creative, disciplined communications are at the heart of managing a company's reputation. Effective organizations place a premium on ensuring that the company's audiences really understand your results, your vision, and your culture.

And let me add that communication is, of course, a two-way street. You have to listen to those audiences as much as, if not more than, you talk to them.

During my career I have been blessed to have the opportunity to work with some of the great business leaders of our time. You cannot have that kind of proximity without picking up a few things along the way. I have always been grateful for the lessons I have learned from the CEOs that I have worked with.

And since we are talking about lessons learned, I thought I would close today with a story of one newly hired CEO of a large high-tech corporation and the advice he received.

The CEO who was stepping down met with him privately and presented him with three numbered envelopes. "Open these if you run up against a problem you don't think you can solve," he said.

Things went along pretty smoothly, but six months later sales took a downturn and the new CEO was really catching a lot of heat. At his wits' end, he remembered the envelopes. He went to his drawer and took out the first envelope. The message read, "Blame your predecessor."

The new CEO called a press conference and tactfully laid the blame at the feet of the previous CEO. Satisfied with his comments, the press--and Wall Street--responded positively, sales began to pick up and the problem was soon behind him.

About a year later, the company was again experiencing a dip in sales, combined with serious product problems. The CEO quickly opened the second envelope. The message read, "Reorganize." This he did, and the company quickly rebounded.

After several consecutive profitable quarters, the company once again fell on difficult times.

The CEO went to his office, closed the door, and opened the third envelope.

The message said, "Prepare three envelopes..."

Again, many thanks to the Empire Club for inviting me to join you today. I have certainly enjoyed it. Thank you.

The appreciation of the meeting was expressed by Heather Ferguson, Director, Development and Alumni Relations, Faculty of Nursing, University of Toronto and Director, The Empire Club of Canada.