case study reputations of companies in the us answer key

Case Study Chapter 1: Reputations of Companies in the United States...

Case Study Chapter 1: Reputations of Companies in the United States

Elementary Statistics

Data in this case has been provided from Elementary Statistics: Picturing the World, 8 th edition. 

The Harris Poll conducts surveys to gather data about the opinions of people in the United States regarding health, politics, the economy, and sports.  It oversees an annual survey to measure the reputations of the most visible companies in the United States as seen by U.S. adults. The survey respondents rate companies according to categories of trust, vision, growth, products and services, culture, ethics, and citizenship.  The results are used to determine the reputation of the companies.  The respondents are randomly selected from the people who have agreed to take part in the Harris Poll, and they complete an online survey.  In the 2020 survey, a sample of 34,026 U.S. adults was used.  The U.S. adult population was 257,900,000 people.  The results for ten companies are shown in the table below:

Answer the following questions in complete sentences pertaining to the information above.  Completed case studies should be submitted through the case study 1 assignment link where you originally accessed it.  They must be submitted as a DOC, PDF, or JPG document. 

You should also be using the additional case study overview link provided to you in Plato.  This further explains each question on the case.

1.  Identify the population and sample sizes (this includes the amount in each along with the unit label on the values) and represent them in a Venn diagram.  (6 points)

b. Does the size of this percentage from part a seem representative of the entire population?  Explain.          (2 points)

3.  Based on the information given in the paragraph at the beginning of the case, what type of sampling technique (random, simple random, stratified, cluster, systematic, or convenience) is used by the Harris Poll in order to obtain the sample size of 34,026 adults?  Explain your reasoning.  (Hint: Don't assume a particular sampling technique if you don't have enough of information to classify it as such.)  (6 points)

4.  What type of data collection (observational study, simulation, survey, or experiment) is used by the Harris Poll?  Explain your answer.  (6 points)

For questions 5-8, identify and explain which level of measurement each column on the table is. As a reminder, each column from the table can only be one type of level of measurement. For each question, you should be explaining your answer by using the definition for the type of level of measurement.  (8 points each)

• Which two columns in the table contain data at the nominal level?
• Which column in the table contains data at the ordinal level?
• Which column in the table contains data at the interval level?
• Which column in the table contains data at the ratio level?

9.  Sometimes, inferences can be made about the data if there are patterns seen in the data. Based on the table given in this case:

a.  Can an inference be made about the rank of a company in regard to the year the company was formed?  Explain. (3 points)

b.  Can an inference be made about the rank of a company based on the number of employees it has?  Explain. (3 points)

Answer & Explanation

Approach to solving the question:

Detailed explanation:

• The left circle represents the U.S. adult population (257,900,000).
• The right circle represents the sample used in the 2020 survey (34,026).
• The overlap between the two circles represents the U.S. adults who are part of the sample (34,026).

Key references:

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16.4 Managerial Communication and Corporate Reputation

• Describe how corporate reputations are defined by how an organization communicates to its stakeholders.

Management communication is a central discipline in the study of communication and corporate reputation. An understanding of language and its inherent powers, combined with the skill to speak, write, listen, and form interpersonal relationships, will determine whether companies succeed or fail and whether they are rewarded or penalized for their reputations.

At the midpoint of the twentieth century, Peter Drucker wrote, “Managers have to learn to know language, to understand what words are and what they mean. Perhaps most important, they have to acquire respect for language as [our] most precious gift and heritage. The manager must understand the meaning of the old definition of rhetoric as ‘the art which draws men’s hearts to the love of true knowledge.’” 14

Later, Eccles and Nohria reframed Drucker’s view to offer a perspective of management that few others have seen: “To see management in its proper light, managers need first to take language seriously.” 15 In particular, they argue, a coherent view of management must focus on three issues: the use of rhetoric to achieve a manager’s goals, the shaping of a managerial identity, and taking action to achieve the goals of the organizations that employ us. Above all, they say, “the essence of what management is all about [is] the effective use of language to get things done.” 16 One of the things managers get done is the creation, management, and monitoring of corporate reputation.

The job of becoming a competent, effective manager thus becomes one of understanding language and action. It also involves finding ways to shape how others see and think of you in your role as a manager. Many noted researchers have examined the important relationship between communication and action within large and complex organizations and conclude that the two are inseparable. Without the right words, used in the right way, it is unlikely that the right reputations develop. “Words do matter,” write Eccles and Nohria. “They matter very much. Without words we have no way of expressing strategic concepts, structural forms, or designs for performance measurement systems.” Language, they conclude, “is too important to managers to be taken for granted or, even worse, abused.” 17

So, if language is a manager’s key to corporate reputation management, the next question is obvious: How good are managers at using language? Managers’ ability to act—to hire a talented workforce, to change an organization’s reputation, to launch a new product line—depends entirely on how effectively they use management communication, both as a speaker and as a listener. Managers’ effectiveness as a speaker and writer will determine how well they are able to manage the firm’s reputation. And their effectiveness as listeners will determine how well they understand and respond to others and can change the organization in response to their feedback.

We will now examine the role management communication plays in corporate reputation formation, management, and change and the position occupied by rhetoric in the life of business organizations. Though, this chapter will focus on the skills, abilities, and competencies for using language, attempting to influence others, and responding to the requirements of peers, superiors, stakeholders, and the organization in which managers and employees work.

Management communication is about the movement of information and the skills that facilitate it—speaking, writing, listening, and processes of critical thinking. It’s also about understanding who your organization is (identity), who others think your organization is (reputation), and the contributions individuals can make to the success of their business considering their organization’s existing reputation. It is also about confidence—the knowledge that one can speak and write well, listen with great skill as others speak, and both seek out and provide the feedback essential to creating, managing, or changing their organization’s reputation.

At the heart of this chapter, though, is the notion that communication, in many ways, is the work of managers. We will now examine the roles of writing and speaking in the role of management, as well as other specific applications and challenges managers face as they play their role in the creation, maintenance, and change of corporate reputation.

Concept Check

• How are corporate reputations affected by the communication of managers and public statements?
• Why is corporate reputation important?

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• Authors: David S. Bright, Anastasia H. Cortes
• Publisher/website: OpenStax
• Book title: Principles of Management
• Publication date: Mar 20, 2019
• Location: Houston, Texas
• Book URL: https://openstax.org/books/principles-management/pages/1-introduction
• Section URL: https://openstax.org/books/principles-management/pages/16-4-managerial-communication-and-corporate-reputation

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IoT: A Fog Cloud Computing Model

Mirror syndrome, openmind books, scientific anniversaries, this is how global warming affects the transmission of diseases, featured author, latest book, stakeholder management and reputation.

The purpose of this paper is to connect two fairly recent concepts in management theory and practice: stakeholder management and reputation. What are the effects of good stakeholder management on the reputation of a business, and does a company’s reputation affect its ability to engage with its key stakeholders? The paper begins with a brief history of the concepts of stakeholder management and reputation. In section three the main interpretations of stakeholder management and its connection to reputation are distinguished. It is then suggested that a new narrative about business is badly needed, in light of the changes that have taken place in the last generation of business models. Section four suggests that momentum is building for a fourth interpretation that offers a more useful idea for businesses in the 21st century. This fourth interpretation is built on the relatively recent idea of “value-creation stakeholder management” and focuses on seeing reputation as an integral part of any viable business model. The final section five outlines some challenges for business executives and researchers.

Stakeholder management and reputation: a brief history

The idea of “stakeholders” first appeared in the work of the Stanford Research Institute (SRI) in the 1960s as they began to try to systematically give executives a way of understanding the changes in the business environment. ‘Stakeholders’ were defined by SRI as “those groups without whose support the organization would cease to exist. 1 ” In the ensuing 20 years, a number of researchers began to experiment with the idea as they began to develop more robust views of strategic planning, and later “strategic management.” A group of researchers centered at the Wharton School in the late 1970s and early 1980s developed a more action-oriented view of “stakeholders” and called it “stakeholder management.” This group defined “stakeholders” as “any group or individual who can affect or be affected by the achievement of an organization’s objectives.” These researchers believed that in a fast- changing business environment, executives had to pay much more attention to external forces and pressures, and that strategic action required a more sophisticated version of dealing with customers, suppliers, employees, financiers, communities, society, interest groups, media, and the like. Freeman (1984) was an advocate of this view of stakeholder management.

The central principles or elements of the argument were as follows: 2

• “No matter what you stand for, no matter what your ultimate purpose is, you must take into account the effects of your actions on others, as well as their potential effects on you.” This principle is one of simple “common sense” that needed to be applied systematically in the business context.
• “You have to understand stakeholder behaviors, values, and backgrounds/contexts including the societal context.” Once again this is a principle of extraordinary simplicity. You don’t have to agree with stakeholders or their behavior, but good management does require understanding it.
• “To be successful over time it will be better to have a clear answer to the question of what do we stand for.” Freeman (1984) suggested that this question of purpose be called “enterprise strategy,” however it was not widely agreed upon, since the entire business world became enamored of the idea that the purpose of a business was to maximize profits.
• “Stakeholder relationships work at three levels of analysis: the Rational or “organization as a whole;” the Process, or standard operating procedures; and the Transactional, or day-to-day bargaining.” Much literature in strategy has been based on what historians would call a “kings and battles” approach. It is IBM vs. NEC or Google vs. Microsoft. In reality, it is sometimes more useful to think about processes and transactions.
• “Companies need to use the stakeholder idea to think through new structures, processes, and business functions.” Stakeholder relationships become the “unit of analysis” in organizational design.
• “Stakeholder interests need to be balanced over time.” While the metaphor of “balance” can give the idea of making trade-offs among groups, its original connotation was one of harmony. This was not well understood in the stakeholder literature until Freeman, Harrison and Wicks (2007).

There are a number of implications of this argument. If it is correct, then the idea of “corporate social responsibility” is probably superfluous. Since stakeholders are defined widely and their concerns are integrated into the business processes, there is simply no need for a separate CSR approach. Social-Issues Management or “issue” is simply the wrong unit of analysis. Groups and individuals behave, not issues. Issues emerge through the behavior and interactions of stakeholders, therefore “stakeholders” is a more fundamental and useful unit of analysis. Finally, the major implication of this argument, which cannot be overemphasized today given the development of stakeholder theory, is that “stakeholders are about the business, and the business is about the stakeholders.”

Stakeholders is defined as any group or individual who can affect or be affected by the achievement of an organization’s objectives

At some level business executives have always been concerned about their reputation. The simple truth is that if a buyer does not believe that what a seller is offering is genuine, there is no deal. And, likewise, if a seller does not believe that a buyer actually is going to pay or trade, then there is no deal. If a buyer or seller gets the reputation of always giving less than agreed to, it becomes difficult to close transactions. And, this has been a fact since the emergence of the first markets. Concern with reputation is as old as business itself. Trading in traditional villages depended on reputation where sanctions could be applied, since everyone knew everyone else (McMillan 2002). As trade flourished between villages, and between cities, sanctions were harder to apply, as some traders could take the money and run. However, they could never return to trade again. To sustain value-creation over time, a good reputation is necessary for any business, and for any businessperson.

The rise of corporate philanthropy in the early days of the Industrial Revolution can be partially explained by the fact that the early industrialists were at least concerned with their personal reputations.

Andrew Carnegie (1889) suggested that business people should hold excess profits in trust for society. He said,

This, then, is held to be the duty of the man of Wealth: First, to set an example of modest, unostentatious living, shunning display or extravagance; to provide moderately for the legitimate wants of those dependent upon him; and after doing so to consider all surplus revenues which come to him simply as trust funds, which he is called upon to administer, and strictly bound as a matter of duty to administer in the manner which, in his judgment, is best calculated to produce the most beneficial result for the community—the man of wealth thus becoming the sole agent and trustee for his poorer brethren, bringing to their service his superior wisdom, experience, and ability to administer—doing for them better than they would or could do for themselves.

This view of corporate philanthropy has been carried forward to the modern day, with Bill Gates seeking to give away a great deal of his fortune to help those less fortunate. The Bill and Melinda Gates Foundation has enlisted a number of billionaires in the world at large to support their principles. Their guiding principle #14 is connected to Carnegie’s earlier articulation of what has come to be known as philanthrocapitalism. The foundation says, 3

Meeting our mission—to increase opportunity and equity for those most in need—requires great stewardship of the money we have available.

While corporate philanthropy continues to be important, it was not enough to build a company’s reputation through philanthropy. Often philanthropy happened after a company was already subject to criticism for its actions. In the early part of the 20th Century we see the emergence of public relations as a discipline to begin to manage the reputation of a business as it grew and developed. In the United States Edward Bernays and Ivy Lee are often seen as the founders of public relations. Perhaps one of the most famous internal public-relations executives was Arthur Page of the Bell Telephone Company who is recognized as the first person to hold a high executive office as a public relations executive. Page’s principles for public relations are inscribed in the Arthur Page Society today, a society for senior PR executives: 4

• Tell the truth.
• Prove it with action.
• Listen to the customer.
• Manage for tomorrow.
• Conduct public relations as if the whole company depends on it.
• Realize that a company’s true character is expressed by its people.
• Remain calm, patient and good humored.

In more modern times, the idea of reputation has become more generalized, and it has come to mean the perceptions that key stakeholders have of the actions of a particular business. Many scholars argue that reputation is a key resource of a firm, that it helps attract investors, customers and employees, and can create competitive advantage (Fombrun and Van Riel 2004). Since reputation is seen as a “soft” concept, there is much concern with showing that paying attention to reputation “pays off.” There are numerous studies that suggest that having a good reputation ultimately returns profits to shareholders, making what has come to be called “the business case” for reputation management. Making the business case for reputation management points out the underlying flaws in the model of “business,” which the evolution of stakeholder theory has begun to correct.

The evolution of stakeholder management and reputation

Since the early days when the stakeholder idea was used as an organizing principle in strategic planning, stakeholder management, or as it is commonly known, “stakeholder theory,” has developed along a number of dimensions: as a strategic tool; as a corporate communications idea; and as a way of thinking about corporate social responsibility. All three have evolved separate academic and practitioner literatures.

The use of the stakeholder idea in strategic management has continued to evolve. While Freeman (1984) and others suggested a path for strategic management as a field to take if it was to be stakeholder oriented, in fact the field adopted a view of strategy that has come to be known as “the resource-based view” and it is only recently that these two views have been reconciled (Sachs and Ruhli 2011). However, many companies actually adopted some version of the stakeholder idea in their strategic planning and strategic-management processes.

As in the emergence of the reputation concept there was much concern over making “the business case” for stakeholder management. In an early study Preston and Sapienza (1990) connected data about reputation from the Fortune index to financial performance. The reputation index was identified with “good stakeholder management” and then correlated with financial returns. They found positive support looking at ten-year composite returns. Other studies have suggested a variety of nuances here. 5

While Freeman’s (1984) view of stakeholder management held that it was most useful as a strategic tool, much of the academic world, as well as the world of managerial practice, adopted it as a more fine-grained view of corporate communications. Fombrun (1996) suggests several multi- stakeholder models that have been developed around corporate communications and public relations. Welch and Jackson (2007) outline a stakeholder approach to internal communications within a business. And, a number of public relations textbooks began to organize around the stakeholder idea as well as the idea that public relations was better understood as “how to engage stakeholders.”

There are numerous studies that suggest that having a good reputation ultimately returns profits to shareholders, making what has come to be called “the business case” for reputation management

Another development was the emergence of the stakeholder idea as a key force in understanding corporate social responsibility (CSR). As the movement to demand more responsibility of companies gathered steam, more scholars began to see stakeholder management as central in the development of CSR. Wood’s (1991) important article set the tone for CSR scholars to take stakeholder management seriously as more integrative of how to deal with the external environment in a responsible way. Ironically, Freeman (1984) suggests that if stakeholder management is seen as an integrative business model, then CSR may well be a superfluous idea. Similarly one of the main arguments for reputation management linked the idea to CSR. If a company is seen as responsible, then it gains more trust from its stakeholders, and ultimately improves its business.

As these two ideas developed in an intertwined way, it is easy to see how they are connected in terms of the evolution of the fields of strategic management, corporate communications, and CSR. A more recent development in stakeholder theory, however, points out shortcomings in this earlier work, and the need to develop a new theory about business.

Value-creation stakeholder management

The recent global financial crisis has called much of our common wisdom into question. Perhaps the biggest challenge is to our very idea of how to think about business. The dominant story about capitalism has been for some time that business is primarily about making money. The participants in business are seen as self-interested and extremely opportunistic. The only legitimate purpose of a business, in this view is to maximize profits for shareholders. This traditional view sharply distinguishes between “business” on the one hand, and “ethics” on the other—so much so that the phrase “business ethics” often elicits a laugh or a comment of “that’s an oxymoron.”

Freeman (1994) and Harris and Freeman (2008) have suggested that an appeal to such a “separation fallacy” is fraught with difficulty. As we have seen in the development of both stakeholder theory and the idea of reputation, if the “business case” is separated from the ethical nature of what a company is doing, we will need concepts like “corporate philanthropy” or “corporate social responsibility” to make amends for any damage done by the business. Such a separation assumes that we can clearly divide the consequences of a business into two disjunctive sets: the economic consequences, and the social (or ethical) consequences. However, simple examples point out the folly of such a logical division. If a company hires an employee, clearly there are economic consequences, but just as clearly there are social consequences. Similarly, selling products and services have clear economic consequences, and even clearer social consequences. Trying to “prove” that doing good things socially or ethically can lead to good economic consequences is thus a fool’s errand. It is impossible to divide up consequences into “economic” and “social.” It is far better to adopt “stakeholder” as a unit of analysis, and to admit that stakeholder relationships are complex. All include economic, political, social, ethical, and other factors. Manage the stakeholder relationships and the “business case” takes care of itself.

Of course, one response is to ask what could “the business case” be other than how a company creates value for its key stakeholders, and it is here that stakeholder theory suggests we begin. What has come to be called “Value-Creation Stakeholder Management” (VCSM) is based on a number of principles that taken together begin the construction of a new narrative about business.

The first principle is that businesses are successful (or fail) because they create (or destroy) value for at least customers, suppliers, employees, communities and financiers (shareholders, etc.). And, this has always been the case (Freeman, 2011). One of the major features of most thinking about business, among academics, is that they assume that “markets” are the dominant business metaphor. Complex economic models are developed to explain the behavior of self-interested firms in highly competitive situations. And, while “markets” are one metaphor to use in understanding how real businesses work, they aren’t the only one. Companies create real value for customers and other stakeholders. Assuming that the only value created is economic value for shareholders is simply no longer useful. Even avowed financial markets experts such as Henry Kravis, co-founder of Kohlberg, Kravis Roberts and Co. (KKR) the buyout experts said recently (Primack 2008):

You have to focus on all the stakeholders. It’s a new thing for us and something we’re really hammering. Long-term value is only achieved if growth benefits all stakeholders in a company, from owners to employees, communities and even governments. We are also conscious we are fiduciaries to millions of hard-working men and women and university endowments … Trust must be earned over the long haul and maintained constantly. We have not always adequately explained what we do to the man on the street. Even some of our investors, although happy with the returns we deliver, don’t fully understand what we do and why they should invest with us .

The second principle is that most human beings are fairly complex creatures. While it should not be necessary to state this principle so explicitly, in fact the assumption of “rational self-interest” has a real grip on the hearts and minds of business people and business thinkers. Of course, human beings are self-interested, but they also care for others, as every parent knows. Most of the time we are motivated by a mixture of self-interest and interest in others. This second principle suggests that ethics and responsibility are always a part of what we need to think about in business. Focusing solely on narrow ideas of self-interest can detract from our very humanity.

The third principle of VCSM says that customers, suppliers, employees, communities, and financiers have a joint stake in the business. Their interests go roughly in the same direction. Much of the early strategic research and CSR research in stakeholder theory has spent time trying to elucidate how trade-offs among stakeholders are to be made. VCSM suggests that the key to understanding a business is figuring out how to create value for all key stakeholders simultaneously. How does a new product or service, which creates value for customers, also create value for communities, suppliers, employees and financiers? Of course in the real world trade-offs sometimes have to be made, but VCSM suggests that the next question after a trade-off is how to improve the trade-off for all sides. Great companies keep stakeholder interests in harmony over time.

If one stakeholder is constantly denied a part of the value-creation process, then either that stakeholder leaves the business to find another, or uses the political process to appropriate value. Neither outcome is good for business. As former CEO of Medtronic, Bill George (2003, 104) put it quite eloquently,

Serving all your stakeholders is the best way to produce long- term results and create a growing, prosperous company … Let me be very clear about this: there is no conflict between serving all your stakeholders and providing excellent returns for shareholders. In the long term it is impossible to have one without the other. However, serving all these stakeholder groups requires discipline, vision, and committed leadership .

If a company is seen as responsible, then it gains more trust from its stakeholders, and ultimately improves its business.

The fourth principle is that businesses are sustainable over time if they have a purpose. This purpose must appeal to customers, suppliers, employees, communities, and financiers. Usually, maximizing profits is more usefully thought of as an outcome, rather than a purpose. In a similar manner, humans need red blood cells to live, but the purpose of life is not to make red blood cells. Of course VCSM does not deny that profits are important, but they are a result. As Jack Welch, former CEO of General Electric (GE) told the Financial Times (Guerrera 2009):

On the face of it, shareholder value is the dumbest idea in the world … Shareholder value is a result, not a strategy … Your main constituencies are your employees, your customers and your products.”

When these principles are taken together we have the foundations of a new model of capitalism, or a new narrative about business. VCSM offers a way to solve three of the main challenges to business. First of all we need to understand how value-creation and trade can be sustained over time in a rapidly changing global business environment. VCSM suggests that taking “stakeholders” as the unit of analysis is a good start. Further it suggests that focusing on satisfying multiple stakeholder interests simultaneously creates business models that are closely aligned with stakeholders, and that are sustainable.

Second we need to address the issue of the ethics of capitalism, as it has come under increasing attack due to recent scandals and the global financial crisis. Ethics and responsibility can’t be seen as an “add-on” but they must be intimately connected in the business model. By seeing stakeholders as human beings, who are complex in their own right, we begin the process of putting ethics and responsibility into the very center of our way of thinking about business.

Finally we need to address the issue of what to teach in business schools. The rise of the MBA, world-wide, has resulted in the spreading of a view of business that is centered on economics and finance. While these are important disciplines, they are incomplete. Business is a deeply human activity, requiring insights and theories from all the human sciences, from economics to the creative arts. Seeing capitalism as a cooperative system of value-creation for stakeholders opens many doors to disciplines and key ideas that have stayed on the sidelines for too long.

Where is the idea of reputation in this new stakeholder narrative about business? VCSM suggests that reputation is a function of the underlying business model. Reputation is managed by paying attention to the basics of the underlying model. Companies which adopt a business model of creating value for customers, employees, suppliers, communities, and financiers will see their reputations grow or diminish according to how they engage these stakeholders, and how they create value for them. Of course, executives have to pay attention to perception, increased role of media and social media in the 24/7/365 news cycle, new and powerful technologies, and a growing diverse workforce. Yet the easiest way to be perceived as an X is to be an X. At least authenticity is where executives must start. In VCSM reputation is a function of purpose and identity, of what a business stands for, what its values and principles are, and how it engages others. These questions are at the very center of VCSM. Let’s consider the following examples. 6

For many years company ABC ignored some of the harmful effects of its products. ABC was exceptionally profitable, but as the science surrounding its products progressed, increasing concern was expressed about their use over time. After years of focusing on creating value for shareholders, ABC began to be more stakeholder-focused. Initially, this concern was based on a desire to improve its reputation so that profitable growth would continue. Over time some key executives began to see that such a “strategic view” was not enough, even though there were some indications that the company’s overall reputation was better than that of its competitors. Consequently there was some conflict within the ranks of the company. ABC went so far as to undertake an extensive campaign on corporate social responsibility. However, without reexamining its purpose and values, ABC was unable to create as much value as it could have otherwise done. Critics of the company often refuse to meet with executives. And the company will be vulnerable to breakthroughs in the industry that mitigate the harmful effects of its products. Strategy and CSR simply aren’t enough.

Company DEF also has critics of its products and services. However, DEF has spent a great deal of time engaging with its critics, as well as with its key stakeholders: customers, employees, communities, suppliers and financiers. DEF is very clear about its principles and values, and, it spends a lot of time and effort in stimulating conversation about these ideas throughout the company. DEF often (not always) listens to its critics and makes improvements to its business processes. It also changes its products and services to give its customers better value. DEF clearly sees itself as creating value for its stakeholders. Of course, it is also quite profitable.

Communities want Company XYZ in their area. Not only do the target- market customers love their products and services, but the company is known as a community builder. The CEO sees stakeholder interests as “synergistic” rather than subject to trade-offs. He also sees employees as “team members” who are in it together with management to serve customers, make suppliers (and their communities) better, and create better communities around the world. Of course, XYZ is also profitable.

These companies are rewriting the story of business, and as ABC shows, it is not an easy task, especially to take an established company that has begun to have fundamental questions asked about its business. In the following section some of the challenges of this new VCSM story will be addressed.

Future challenges

There are five main challenges to the further development of VCSM and its related idea of reputation. Each is worthy of multiple research programs, and each should bear fruitful inquiry for years to come. The first challenge is to rethink the question of “what is the total performance of a business?” For too long we have simply assumed that aggregate accounting and finance measures like profit and stock price adequately measure total performance. Accounting systems are conventional and built from the point of view of investors rather than stakeholders. Profits, stock price, free cash flow, and the like are functions of these investor- centric accounting systems. Given our earlier arguments about the impossibility of sorting out economic effects from social effects, progress is not likely to be made by leavening these accounting measures with ideas of “social performance” or even “triple bottom line.” We need new proposals for how to measure all the effects of a business on customers, suppliers, employees and communities, as well as investors and other financiers.

The second challenge is to take seriously the idea that the interests of stakeholders must go in the same direction. Firms exist because stakeholder interests coincide. How can we understand this “intersection of interests”? How can we enhance the integration of stakeholder interests? And, how can we begin to understand how stakeholders reinforce each other’s interests? One of the most important issues is how innovation emerges to meld together a set of interests which might look disparate at first glance. How can Werhane’s (1999) idea of “moral imagination” be used to solve conflicts of interest? What is the role of critics, of purpose, principles and values, as well as stakeholder engagement in the process of value-creation?

The third challenge is how to understand the influence of the growing network of stakeholders who are not customers, employees, suppliers, communities or financiers. In short how do we engage with NGOs, governments, and other third parties who can influence those primary stakeholders? And, how are these groups relevant to the value-creation process? They all surely affect the reputation of a business, but simply trying to ameliorate these effects is not sufficient. Today’s technology is too powerful. VCSM suggests that behind most of these groups is an idea about how to make a business better, even though these ideas may be masked by difficult criticisms. And, it is not possible for a business to respond to all groups. However, there is value to be created by learning how to craft engagements with these groups, and as public trust in business wanes, the trust in for instance, NGOs seems to grow.

Seeing capitalism as a cooperative system of value-creation for stakeholders opens many doors to disciplines and key ideas that have stayed on the sidelines for too long

The fourth challenge is to figure out what we teach in business education. If the main premises of this paper are correct, there is much to be changed. Seeing capitalism as a system of social cooperation, where value is created for stakeholders, is a sea change in the story of business as it is told in business schools. Seeing ethics and responsibility as at least as important as profits will require the wholesale rethinking of the disciplines of business. For instance, in marketing we might begin this process by seeing brands as promises and seeing consumers as human beings with names, faces and children. In finance, we need to return to seeing markets as the socially-embedded phenomena that they have always been. In organization studies we need to banish the idea of “human resources” and “human capital,” and replace these with the simply idea of “human beings.” By focusing on stakeholder relationships, and by using “thick” moral concepts to amplify traditional business ones, we can and must build a better business theory to teach the next generation.

The final challenge, and perhaps the hardest one of all, is to change the narrative about business in society at large. How can we come to see businesses (and expect them) to be fully embedded in a societal context?

There is too much rhetoric about “free markets” and too little rhetoric about value-creation (except for investors and other Wall Street entities). If we continue to divorce Wall Street from Main Street, we can expect a populist revolt that may harm the very idea of capitalism as free people cooperating together to create value for each other. Of course in a free society there is healthy competition as everyone has options. However, the narrow interpretation of the old story of capitalism as only about money, “free markets set outside of a societal context,” greed, and competition, has surely run its course. We need a view of capitalism that recognizes that: 1. purpose and profits go together; 2. reputation is a function of a business model that creates value for stakeholders; 3. human beings are complex and not solely self-interested; 4. cooperative value-creation and healthy competition are two sides of the same coin; and, 5. business is a complex societal institution full of morally complex human beings creating value and trading with each other. There is a great deal of work to be done.

Bibliography

Carnegie, Andrew. 1889. “Wealth.” North American Review 148 (391): 653–665.

Fombrun, Charles J. 2006. Reputation . Cambridge: Harvard Business School Press.

Fombrun, Charles J., and Cees B. M. Van Riel. 2004. Fame and Fortune: How Successful Companies Build Winning Reputations. New York: FT Prentice Hall.

Freeman, R. Edward. 1984. Strategic Management: A Stakeholder Approach . Boston: Pitman Publishing Inc. Reprinted in 2010 by Cambridge University Press.

Freeman, R. Edward. 1994. “The Politics of Stakeholder Theory: Some Future Directions.” Business Ethics Quarterly 4 (4): 409–421.

Freeman, R. Edward. 2011. “Some Thoughts on the Development of Stakeholder Theory.” In Stakeholder Theory: Impact and Prospects , edited by Robert A. Phillips, 212–233. Cheltenham: Edward Elgar.

Freeman, R. Edward, Jeffrey S. Harrison and Andrew C. Wicks. 2007. Managing for Stakeholders . New Haven: Yale University Press.

Freeman, R. Edward, Jeffrey S. Harrison, Andrew C. Wicks, Bidhan L. Parmar and Simone De Colle. 2010. Stakeholder Theory: The State of the Art . Cambridge: Cambridge University Press.

George, Bill. 2003. Authentic Leadership . San Francisco: Jossey-Bass.

Guerrera, Francesco. 2009. “Welch Condemns Share Price Focus.” Financial Times . Accessed August 2011. http://www.ft.com/intl/cms/s/0/294ff1f2-0f27-11de-ba10-0000779fd2ac.html#axzz1WWQxsecY

Harris, Jared, and R. Edward Freeman. 2008. “The Impossibility of the Separation Thesis.” Business Ethics Quarterly 18 (4): 541–548.

McMillan, John. 2002. Reinventing the Bazaar: A Natural History of Markets . New York: W.W. Norton, Inc.

Primack, Dan. 2008. PE Week Wire , October 17.

Preston, L., and H. J. Sapienza. 1990. “Stakeholder Management and Corporate Performance.” Journal of Behavioral Economics 19 (4): 361–375.

Sachs, Sybille, and Edwin Ruhli. 2011. Stakeholders Matter: A New Paradigm for Strategy in Society . Cambridge: Cambridge University Press.

Welch, Mary, and Paul R. Jackson. 2007. “Rethinking Internal Communication: a Stakeholder Approach.” Corporate Communications: An International Journal 12 (2): 177–198.

Werhane, Patricia H. 1999. Moral Imagination and Managerial Decision-Making . New York: Oxford University Press.

Wood, Donna J. 1991. “Corporate Social Performance Revisited.” Academy of Management Review 16 (4): 691–718.

• For a more nuanced history of the idea see Freeman et al. (2010, Chapter 2).
• The following paragraphs draw from Freeman et al. (2010, Chapter 2). We are grateful to Cambridge University Press for permission to recast the ideas here. For the record, I believe that most of these principles are still correct.
• http://www.gatesfoundation.org/about/Pages/guiding-principles.aspx (accessed August
• http://www.awpagesociety.com/site/about/page_principles/.
• For a complete list of these studies see Freeman et al. (2010, Chapter 4).
• The following examples are based on the experience of the author with real companies. The companies have been thoroughly disguised.

Related publications

• Is the Systems Approach Dead?
• Ethics in Organizations (ll): Organizational Change, Improvement and Order
• Threats: How to Successfully Survive Ourselves
• Getting it Right, the Wrong Way: the Gump Trap

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Business Continuity and Crisis Management Consultants

Reputation Management Case Studies: Big Brand Turnarounds

Discover reputation management case studies from leading brands. Learn how they successfully navigated crises to reshape their image!

December 14, 2023 By //  by  Bryan Strawser

Ever wondered why some businesses bounce back from crises stronger than before?

The secret lies in reputation management. In the ever-changing, highly visible business world of today, a company’s repute can be its most valuable possession or its greatest downside.

This piece will dive into real-world examples where big names like Starbucks and Johnson & Johnson faced significant challenges that threatened their standing. Yet, they managed to navigate these rough waters effectively. We’ll explore how Domino’s Pizza transformed negative customer feedback into an opportunity for improvement and rebranding.

Through these case studies, you’ll gain insights into successful strategies for managing your own company’s reputation amidst adversity. Ready to learn more?

The Imperative of Reputation Management

Reputation management has become an indispensable aspect of any successful business. It shapes public perception and fosters customer trust, two elements that directly influence a company’s bottom line. But it doesn’t stop there; reputation management extends beyond simply controlling the narrative.

This practice encompasses all activities aimed at maintaining a positive image in the public eye. Whether it’s promptly addressing negative reviews or effectively managing crises, every action contributes to how your brand is perceived.

A study on corporate reputation management revealed that companies with robust reputation strategies enjoyed better financial performance than those who neglected this area. This shows the compelling correlation between a good name and profitability.

Navigating the Complexities of Reputation Management

Tackling challenges head-on is vital for effective reputation control. Negative publicity can quickly spiral out of control if not addressed appropriately and timely – damaging both sales and consumer confidence in your brand.

To combat these issues, businesses must implement proactive measures to safeguard their reputations before problems arise. They should monitor online chatter about their brands constantly using tools like Google Alerts or social media listening software – ready to respond immediately when necessary.

Beyond damage control, enterprises need strategic plans focused on building strong relationships with customers through consistent high-quality service delivery coupled with transparent communication practices. Research has shown that these are key factors influencing consumers’ perceptions towards organizations hence affecting overall corporate reputations positively.

Unpacking the Reputation Management Challenge

Navigating reputation management can be a treacherous journey for businesses. It’s not just about combating negative reviews, but also handling crises effectively and proactively. Let’s break down some of these challenges.

Dealing with Negative Reviews

No company is immune to negative reviews. But it’s how you handle them that sets your business apart. The key? Address issues promptly, offer solutions, and make sure customers feel heard.

The Crisis Conundrum

A crisis situation can escalate quickly if not managed properly – from product recalls to public scandals – every minute counts in minimizing damage to your brand image. Remember the old saying “A stitch in time saves nine”? That applies here too.

Fostering Trust through Transparency

To manage reputation successfully, transparency should be at its core. Companies need more than ever to communicate openly during tough times or when things go wrong – this fosters trust among consumers and stakeholders alike.

Maintaining Consistency Across Channels

In today’s multi-channel world where opinions are formed within seconds on social media platforms, consistency across all channels is vital for effective reputation management. A unified voice gives credibility and reinforces brand values while preventing any potential miscommunication or confusion amongst audiences.

Case Study 1 – Starbucks Racial Bias Incident

In April of 2018, a racially charged occurrence occurred at a Starbucks in Philadelphia, causing the coffee chain to be thrust into the spotlight across the US. Two African-American men were arrested for allegedly trespassing while waiting for an associate.

This event triggered widespread backlash and calls to boycott Starbucks. The corporation’s standing was in jeopardy as it confronted serious inquiry concerning its approaches and procedures with respect to racial prejudice.

The Response: Transparency and Training

Understanding the gravity of this situation, Starbucks responded swiftly. CEO Kevin Johnson issued a public apology, expressing deep regret over what transpired and vowing to take steps to ensure such incidents wouldn’t happen again.

To demonstrate their commitment towards resolving these issues, Starbucks announced they would close more than 8,000 stores across the United States for an afternoon in order to conduct racial bias education training. This move affected approximately 175,000 employees—a clear signal that Starbucks took this matter seriously.

A Commitment Towards Long-Term Change

Beyond immediate response measures like employee training sessions or policy changes lies deeper systemic solutions—demonstrating ongoing commitment is key when managing reputational crises effectively. In this case study example with Starbucks’ journey towards addressing bias, we see how organizations can transform negative incidents into opportunities for positive change by committing resources, time, and leadership towards creating a more inclusive culture.

Starbucks’ reputation management strategy following this incident provides important insights for businesses. It shows the significance of timely response, transparent communication, and most importantly—action—that aligns with public expectations and corporate values.

Lessons from Starbucks’ Reputation Management Strategy

In the face of a reputation crisis, Starbucks showcased exemplary management skills. The incident at hand was an allegation of racial bias in 2018. This presented a massive challenge for the company’s image.

The first lesson to glean is the importance of swift and decisive action. Upon learning about this incident, Starbucks did not waste time in addressing it head-on.

Swift Action

This quick response demonstrated accountability and a strong commitment towards resolving issues that threaten their reputation. By acting swiftly, they managed to prevent further damage while also showing that they took such matters seriously.

Transparent Communication

Besides immediate action, another crucial element of Starbucks’ strategy was transparent communication. They openly acknowledged their mistake rather than trying to downplay or ignore it.

This honesty helped restore public trust because customers saw them admitting fault instead of shying away from responsibility – thus creating an environment conducive for rebuilding relationships with its patrons.

Action Plan Implementation

• Closure for Training: As part of their corrective measures, all Starbucks stores were temporarily closed for anti-bias training.
• New Policies: In addition, new policies were implemented aimed at preventing similar incidents in the future.

This multi-pronged approach used by Starbucks provides valuable lessons on how businesses can manage reputational crises effectively.

Case Study 2 – Johnson & Johnson’s Tylenol Crisis

In the realm of crisis management, few examples stand as prominently as Johnson & Johnson’s handling of the 1982 Tylenol crisis. When seven people in Chicago died after ingesting cyanide-laced capsules, it could have spelled disaster for both the product and company.

But instead of retreating into damage control mode, J&J decided to prioritize consumer safety over immediate financial concerns. They swiftly pulled approximately $100 million worth of products off shelves nationwide—a bold move that conveyed their commitment to customer wellbeing above all else.

The Role of Transparency in Reputation Management

J&J did not stop at recalling its products. The company also established a line for concerned consumers and communicated openly about each step they were taking to fix this issue. Their transparency throughout this ordeal helped them regain public trust even amidst such a major health scare.

Proactive Response: A Key Aspect Of Effective Crisis Management

Beyond being open with their customers, J&J took proactive steps towards resolving the situation effectively. This included designing tamper-resistant packaging—a first in pharmaceuticals—and re-launching Tylenol within two months from its withdrawal. Learn more about how J&J handled this incident here.

In retrospect, these actions marked a turning point not only for J&J but also for the industry at large, setting new standards in crisis management and demonstrating how a company’s response can shape its reputation. The Tylenol case is now considered an exemplar of effective reputation management, taught worldwide as a testament to the power of swift action, transparent communication, and prioritizing customer safety.

Insights from Johnson & Johnson’s Crisis Management Approach

The Tylenol crisis is a hallmark in reputation management, and the response by Johnson & Johnson still stands as an exemplar of effective action.

A Proactive Response to Protect Customers

In 1982, seven fatalities occurred following the consumption of Tylenol capsules containing cyanide. Rather than denying responsibility or downplaying the situation, Johnson & Johnson acted swiftly. They made sure to prioritize customer safety over profits and recalled 31 million bottles nationwide—an unprecedented move at that time.

This proactive step was costly but essential. It demonstrated a commitment to their customers’ wellbeing above all else—a critical factor in rebuilding trust following such a devastating event.

Transparent Communication as Key

Besides recalling products off shelves, they launched an aggressive public awareness campaign about the risks associated with consuming their product under these circumstances—once again prioritizing transparency over potential reputational damage. This included clear messaging through media outlets and establishing toll-free hotlines for consumer queries.

Their open communication allowed them to control the narrative surrounding this crisis effectively and provided assurance that every possible measure was being taken for consumers’ protection.

Laying Foundations For Future Trust

Facing one of its most significant challenges head-on led not only to safeguarding its current reputation but also setting up future success for Tylenol brand . Their handling became synonymous with responsible corporate behavior during crises—highlighting how important it is not just what you do when things go wrong but how you respond matters more in terms of long-term reputation management.

Case Study 3 – Domino’s Pizza Turnaround

In the late 2000s, Domino’s Pizza faced a significant reputation crisis. Customer complaints about product quality were rampant, and public perception was negative.

Facing the Music: Addressing Customer Complaints Head-On

Rather than shying away from these criticisms, Domino’s made a bold move. The company openly acknowledged its shortcomings in an ad campaign that surprised many. This demonstrated that they weren’t scared to confess their errors and take steps.

The transparency of this approach resonated with customers. But acknowledging problems isn’t enough; you need to fix them too.

A Recipe for Success: Revamping the Product

Determined to regain customer trust, Domino’s started working on improving their core offering – pizza itself. They reworked recipes based on feedback and introduced new ingredients while enhancing existing ones like cheese and sauce.

This wasn’t just marketing spin either; taste tests confirmed improvement in flavor compared to previous iterations.

Maintaining Momentum: Continuous Improvement

Reviving its image required more than one-off changes though; it needed a continuous improvement strategy as well. Environmental initiatives, pioneering technology , and enhanced customer service played a part.

This comprehensive approach to reputation management demonstrates the importance of listening, responding effectively to feedback, and continuously improving your offerings. Domino’s case study serves as an example for other businesses facing similar challenges.

Key Learnings from Domino’s Pizza’s Reputation Revamp

In 2009, Domino’s Pizza found itself grappling with a reputation crisis. The pizza chain was receiving significant backlash due to the poor quality of its products and service. Rather than ignore these complaints, Domino’s chose to confront them head-on.

The company embarked on an ambitious plan that started by acknowledging their shortcomings in a series of public communications. This included airing commercials where executives read out harsh customer criticisms and admitted that they had failed to meet expectations. It was this honesty and transparency that began paving the way for Domino’s comeback.

Revamping Product Quality

A key element of this strategy involved revamping their core product: the pizza itself. After conducting extensive taste tests and soliciting customer feedback, Domino’s introduced a new recipe which led to more positive reviews.

This shift towards prioritizing customer experience wasn’t just limited to their pizzas though; it extended across all touchpoints including delivery times, mobile app usability, and store cleanliness among others.

Leveraging Technology for Better Customer Experience

To further improve user experience, Domino’s invested heavily in technology. They developed features like real-time tracking for deliveries – providing customers not only with greater convenience but also building trust through transparency about order status.

Fostering Open Communication Channels

Last but certainly not least, communication played an essential role throughout this process. By keeping lines open via social media channels as well as traditional ones – such as phone calls or emails – they ensured customers felt heard and valued. This ongoing dialogue allowed Domino’s to make sure it was addressing genuine customer concerns.

The Domino’s saga is a reminder of the potency of paying attention to clients and making changes based on their opinions. It demonstrates that even in crisis, businesses can turn things around if they are willing to take bold steps towards change.

Key Takeaway: 

When Domino’s Pizza faced a reputation crisis in 2009, they didn’t turn away. Instead, they admitted their flaws publicly and started an overhaul. By improving product quality based on customer feedback, investing in technology for better user experience, and fostering open communication channels – both traditional and social media – Domino’s successfully turned its brand image around.

Managing your reputation isn’t a walk in the park. It demands swift action, transparent communication, and customer-centric thinking.

From these reputation management case studies, you’ve seen how Starbucks bounced back from a racial bias incident with sincere dialogue and company-wide training.

You learned about Johnson & Johnson’s exemplary handling of the Tylenol crisis by prioritizing customer safety over profits. This set a benchmark for others to follow during crises.

Dominos Pizza took their criticism head-on, revamped its product based on feedback, which led to an impressive turnaround story we can all learn from.

All these big brands show us that effective reputation management is possible when companies are ready to take responsibility and prioritize their customers’ interests above all else.

Want to work with us and learn more about reputation management?

• Our proprietary  Resiliency Diagnosis  process is the perfect way to advance your crisis management, business continuity, and crisis communications program. Our thorough standards-based review culminates in a full report, maturity model scoring, and a clear set of recommendations for improvement.
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• Our  Crisis Communications services  help you rapidly implement and mature your program to ensure your organization is prepared for what lies ahead.
• Our Free  Crisis Communications 101 Introductory Course  can help you understand the basics of crisis communications and reputation management.
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About Bryan Strawser

Bryan Strawser is Founder, Principal, and Chief Executive at Bryghtpath LLC, a strategic advisory firm he founded in 2014. He has more than twenty-five years of experience in the areas of, business continuity, disaster recovery, crisis management, enterprise risk, intelligence, and crisis communications.

At Bryghtpath, Bryan leads a team of experts that offer strategic counsel and support to the world’s leading brands, public sector agencies, and nonprofit organizations to strategically navigate uncertainty and disruption.

Learn more about Bryan at this link .

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Reputation and Its Risks

• Robert G. Eccles,
• Scott C. Newquist,
• Roland Schatz

Identify, quantify, and manage the risks to your company’s reputation long before a problem or crisis strikes.

Reprint: R0702F

Regulators, industry groups, consultants, and individual companies have developed elaborate guidelines over the years for assessing and managing risks in a wide range of areas, from commodity prices to natural disasters. Yet they have all but ignored reputational risk, mostly because they aren’t sure how to define or measure it.

That’s a big problem, say the authors. Because so much market value comes from hard-to-assess intangible assets like brand equity and intellectual capital, organizations are especially vulnerable to anything that damages their reputations. Moreover, companies with strong positive reputations attract better talent and are perceived as providing more value in their products and services, which often allows them to charge a premium. Their customers are more loyal and buy broader ranges of products and services. Since the market believes that such companies will deliver sustained earnings and future growth, they have higher price-earnings multiples and market values and lower costs of capital.

Most companies, however, do an inadequate job of managing their reputations in general and the risks to their reputations in particular. They tend to focus their energies on handling the threats to their reputations that have already surfaced. That is not risk management; it is crisis management—a reactive approach aimed at limiting the damage. The authors provide a framework for actively managing reputational risk. They introduce three factors (the reputation-reality gap, changing beliefs and expectations, and weak internal coordination) that affect the level of such risks and then explore several ways to sufficiently quantify and control those factors. The process outlined in this article will help managers do a better job of assessing existing and potential threats to their companies’ reputations and deciding whether to accept a particular risk or take actions to avoid or mitigate it.

Executives know the importance of their companies’ reputations. Firms with strong positive reputations attract better people. They are perceived as providing more value, which often allows them to charge a premium. Their customers are more loyal and buy broader ranges of products and services. Because the market believes that such companies will deliver sustained earnings and future growth, they have higher price-earnings multiples and market values and lower costs of capital. Moreover, in an economy where 70% to 80% of market value comes from hard-to-assess intangible assets such as brand equity, intellectual capital, and goodwill, organizations are especially vulnerable to anything that damages their reputations.

• Robert G. Eccles is a visiting professor of management practice at Saïd Business School, Oxford University, and the founding chairman of the Sustainability Accounting Standards Board.
• SN Scott C. Newquist ( [email protected] ) are founders and managing directors of Perception Partners, a firm based in West Palm Beach, Florida, that advises companies on corporate governance, corporate reporting, and reputational risk.
• RS Roland Schatz ( [email protected] ) is the founder and CEO of the Media Tenor Institute for Media Analysis, a firm based in Lugano, Switzerland, that helps organizations manage their reputations through strategic media intelligence.

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What Are the Real Lessons of the Wells Fargo Case?

Respondents to this month’s Wells Fargo “case study” identified problem symptoms, diagnosed causes, proposed remedies, and even suggested a title for a follow-on case.

Mitch says that when one company is consistently more successful than others in that industry on a key operating metric, “be skeptical. In this case it was cross-selling retail products.” Outliers in competitive industries raise a red flag, he wrote.

A number of causes for the alleged fraudulent behavior at Wells Fargo were put forth. They included poor leadership, improper incentives, inadequate auditing and poor control, questionable organizational (particularly human resource management) practices, and human behavior traits in general.

As “Former Employee” put it, “much of the language in the Visions and Values about caring for team members and customers is just words and not lived out by management.” Tom has “serious questions regarding the oversight responsibilities within all levels of management, especially the Board of Directors!” Arie Goldshlager labels this “a classic case of Goals Gone Wild , referring to a paper by Harvard Business School colleague Max Bazerman. Goldshlager goes on: “Wells Fargo was asking its sales force to sell 8 products (‘Going for gr-eight’) to customers that needed fewer products.” This was coupled, as Thomas Dean put it, “with high, high pressure on line employees to perform or be fired.”

Hamad Sheikh suggests that the problems might not have occurred if “the Audit team (had been given) sufficient power and resources to do their work.” “Former Employee” maintains that “Wells Fargo has no HR presence at the local level, which means there is no buffer between rogue managers and conscientious employees.” And Peter, citing a Harvard Business Review article by David DeSteno, Who Can You Trust? , reminded us that “90% of people—most of whom identify themselves as morally upstanding—will act dishonestly to benefit themselves if they believe they won’t get caught.”

Possible remedies were suggested by Dino Ferrari (“They should install a balanced scorecard that measures all metrics. Hard and soft.”), Steve Braje (“You’re better off showing the value of increasing customer loyalty and focusing on that.”), and “bean counter” (operate by means of a balanced triangle “with equal sides for the customer, the shareholders, and the employees.”). Bob suggested that leadership might begin by changing the Visions and Values section on the current company web page to read: “We believe in our vision and values more strongly today than we did the first time we put them on paper more than 20 years ago. Major shortcomings in being true to our values have resulted in a decision to assess all board members and the top 200 executives regarding their historical and future ability to effectively perform their jobs while truly acting in accordance with our values. Being true to our vision and values will guide us toward growth and success for decades to come.” He would then benchmark the company against those “which have truly acted in accordance with their vision and values over 10+ years to get ideas for what might work at Wells Fargo.”

As if that were not enough, he then proposed a question suitable for the next case study: “What would you suggest Elizabeth Duke do when she becomes chairman of Wells Fargo on January 1?”

What do you think?

ORIGINAL COLUMN

Case studies used in business schools portray dilemmas faced by managers. Students diagnose the problem and recommend actions. They are thought to learn at least as much from failure as from success. If that’s the case, there must be an educational treasure trove in the recent experiences at Wells Fargo, regarded as one of the best-managed banks in the world. A case about Wells Fargo might well contain some of the following.

For years, Wells Fargo has prided itself on putting “culture first, size second.” Its culture is built around the idea of One Wells Fargo, “imagining ourselves as the customer.” Its vision includes the mission of helping its customers succeed financially. This vision is supported by values such as “people as a competitive advantage, ethics, and what’s right for customers.” The organization even has gone so far as to define its culture as “understanding our vision and values so well that you instinctively know what you need to do when you come to work each day.” That’s all pretty impressive.

Given this context, it made sense that incentives were put in place several years ago to encourage frontline employees to develop “deeper” relationships—defined by the number of the bank’s services utilized--with existing customers. However, the goals on which the incentives were based were so daunting that they raised the temptation to cheat by establishing fake new accounts and even transferring token amounts of funds between these accounts without customers’ knowledge. When the practice became so prevalent—2.1 million accounts from 2011 to 2015—that it began to generate numerous customer complaints and evidence surfaced regarding systematic cover-up of the practice in the ranks.

Wells Fargo announced in September 2016 that some 5,300 employees were fired. The action was taken by leaders who claimed they were unaware of the practice; nevertheless, the board replaced CEO John Stumpf and clawed back some of his compensation. The monetary and non-monetary costs to the financial institution in penalties, fines, and loss of trust began to mount.

Months before the fraud was disclosed, Tim Sloan, then president and COO (and now CEO), was quoted as saying: “People are our competitive advantage, so we care for our team members and want them to enjoy what they’re doing. Customers tell us they do business with Wells Fargo because our people care about them—that is our Vision.”

But the problems didn’t stop there. In August 2017, the bank found that the fraudulent activity affected 1.4 million more accounts between 2009 and 2016, and perhaps additional accounts before 2009 for which, “it did not have sufficient data,” according to Sloan.

When the bank’s largest shareholder, Warren Buffett, was asked about the matter, he commented in a CNBC interview , “There’s never just one cockroach in the kitchen. Once you put a spotlight and start looking at everything, you’re likely to find something additional.” Other events were proving Buffett to be right.

It was disclosed this past July that an insurance company with which Wells Fargo had a contractual relationship had, over a period of nearly 12 years, been requiring as many as 800,000 of the bank’s auto loan recipients to take out insurance on autos that were already insured. Wells Fargo management claimed that it was unaware of customer complaints collected by the insurance company. Further, when made aware of the problem—including thousands of borrowers who could not make the extra payments and subsequently had their autos repossessed—management made provision to reimburse only those customers taking out auto loans in the last five of the twelve years, according to the Federal Office of the Comptroller of the Currency.

Wells Fargo announced last month that four executives had left in connection with a regulatory investigation into the bank’s foreign-exchange operations. It also announced what was described as “disappointing revenues and higher legal costs,” triggering at least a short decline in its share price.

A complete case study would, of course, contain much more information about the problem and the thinking behind decisions. That more complete case will, I’m sure, be written and studied. But in the meantime, we can at least ask ourselves what we might learn from what we know. Of course there will be the obvious lessons concerning the cost of management greed, dishonesty, and cover-up.

What are the real lessons of the Wells Fargo case? What do you think?

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The Impact of Online Reputation Management

Adam Dorfman

Why Reviews Matter

Consumer Research: 85% of consumers conduct online research before making a purchase and 89% trust online reviews. (Cone Inc.)

Brand Trust: 72% of consumers trust online review as much as word of mouth. (Local Consumer Review Survey)

The Bottom Line: A difference of one “star” in the average rating in a typical online business profile can lead to a 5–9% difference in revenues. (Harvard Business Review)

Reputation’s Two-part Solution

Technology Platform: The Reputation for Enterprise technology platform is a comprehensive solution for monitoring, analyzing, and improving online reviews.

Managed Service: A full-service add-on to the technology platform, leveraging our expertise in online reviews and social media to help our customers request reviews, respond to criticism, and manage their social media presence.

Case Study Overview

Review management vs. control.

A consumer-facing company with locations across the United States contracted Reputation to monitor and improve the online reviews of its stores. We conducted a trial to demonstrate the effectiveness of our Managed Service offerings. The trial contrasted two groups of stores:

• Control Group: Access to our technology platform only.
• Managed Group: Access to the Reputation technology platform, and comprehensive reputation management campaign run by us.

Breakdown: Control vs. Managed

For more information about these results or Reputation for Enterprise, call: 1-800-REPUTATION

Finding #1: Asking for Reviews Significantly Increases Volume of Positive Reviews

Our client is in a seasonal industry, so we contrasted monthly review volumes for Summer 2011 with Summer 2012. Review management significantly increased the number of positive reviews.

Key takeaways

• Average volume for the Control group stayed largely the same between 2011 and 2012 and throughout the trial.
• Average volume for the Managed group was more than 4 times higher during the trial than it was in Summer 2011.
• Average volume for the Managed group was more than 5 times higher than the Control group during the trial.

Positive Reviews Generated, Monthly Average

Finding #2: Asking for Reviews Significantly Reduces the Proportion of Negative Reviews

We also saw that Managed Service reduced the proportion of negative reviews being published. Not only were the Managed stores receiving more positive reviews, they were attracting fewer negative reviews. The Control group saw no change.

• During the trial, the proportion of negative reviews for the Managed group fell by nearly 60%.
• The Control group’s proportion of negative reviews stayed the same.

Proportion of Negative Reviews

“Managed Service leads to 500% more  positive reviews and 60% fewer negative  reviews.”

Finding #3: Customers More Likely to Post a Review When Emails Are Sent Shortly After Sale

At the start of the trial, we sent out review request emails to customers who had made a purchase in the previous 6 weeks. Thereafter, we sent out requests to customers daily, following each sale. We saw a significantly higher response rate when customers were contacted directly after the sale.

• Customers were 9% more likely to open the request email when it was sent shortly after the sale and more than twice as likely to click through to a review site.
• Review management provides the highest return when activities are conducted continuously.

Email Campaign Response

Finding #4: Robust Infrastructure is Key to Success

An audit of the reputation management activities conducted for the client demonstrates the importance of a robust technology and support infrastructure. For 31 locations, we sent out more than 13,000 customized emails over the trial period, generating hundreds of new reviews. We also initiated an automatic alerting system for our engagement team, allowing us to promptly respond to exceptionally positive and negative reviews and maximize customer goodwill for the client.

• Effective reputation management requires both a scalable technology back-end and a coordinated team of trained individuals.
• Detailed data collection and regular audits or reporting can accurately measure the impact of reputation management efforts.

Email Campaign Snapshot

“Reputation management needs to be done  systematically on a daily basis.”

Finding #5: Thematic Analysis of Reviews Highlights Operational Deficiencies

During the trial, we analyzed thousands of reviews of the client’s stores, including both Control and Managed groups, looking for words that were strongly correlated to positive or negative reviews.

By looking at the most positive and negative words found in the analysis, we can extrapolate global trends about the businesses’ customers. These are words that customers use repeatedly in reviews — in either a very glowing or a very critical way.

Top 15 most positive terms

• 14 of 15 are first names of salespeople who assisted the customer

Top 15 most negative terms

• 6 of 15 are about perceived dishonesty on the part of the salesperson
• 6 of 15 are about product defects
• Personal relationships with the customer are by far the most important factors to goodwill in this industry.
• The quality of products is also very important.

Finding #6: Posting to Social Media Generates Goodwill

We also saw a significant positive impact from social media activities conducted on behalf of the client’s stores. For each store, we created Twitter and Facebook accounts as required, posted new content, and interacted with social media users.

Social Media Campaign Snapshot for 18 Stores

• Social media management drives friendly interactions with customers and provides another way to promote positive reviews.
• Thoughtful social media posts help to grow a business’s online audience.

“Customer feedback in reviews and social media provides a valuable source of business  intelligence.”

Return on Investment

Over the course of the trial, we raised the average star rating of the Managed group by 0.9 stars (3.6 to 4.5 out of 5). According to the Harvard Business Review model, this should lead to a 5–9% increase in sales.

The client sent us sales figures for Summer 2012, contrasting the Control and Managed groups. The Control group saw a slight decrease in sales over the trial period, whereas the Managed group saw a large increase.

These results are significantly better than what would be expected, given the HBR study. The Reputation solution provides results that exceed best-case scenarios seen in the real world. This confirms the connection between online reviews and sales, and it underlines the importance of effective review management.

Projected vs. Real Increase in Sales

HBR = Increase in sales predicted by November 2011 Harvard Business Review study on the impact of online reviews.

Conclusions

• Reputation management has a tangible and significant impact on top-line sales.
• ROI from the Reputation solution is nearly double what studies on the impact of online reviews would predict.
• Actively asking for reviews significantly improves a business’s online reputation.
• Successful review management requires expertise, a robust technological infrastructure, and personnel trained in best practices.
• Reputation management must be undertaken systematically on a daily basis for maximum effectiveness.
• Analysis of online reviews provides valuable operational insights that can be leveraged to win over customer loyalty and drive new sales.
• Social media management complements and amplifies the positive effects of review management.

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Case Study 1: Corporate Citizenship and Social Responsibility Policies in America

• First Online: 28 February 2017

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• Mark Anthony Camilleri 2  

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This case study sheds light on the broad categorisation of social responsibility and environmental sustainability policies in the USA. At the same time, it outlines a non-exhaustive, disciplined research on corporate citizenship. Previous theoretical underpinnings and empirical studies have often indicated that social responsibility and environmentally sound behaviours are being embedded into core business functions and corporate strategic decisions. Notwithstanding, this research shows how major US institutional frameworks and principles have been purposely developed to foster a climate for social and environmental responsibility engagement. Policies and voluntary instruments include formal accreditation systems and soft laws that stimulate businesses and large organisations to implement and report their CSR-related activities. Several agencies of the US Government are currently employing CSR programmes that are intended to provide guidance on corporate citizenship and human rights; labour and supply chains ; anticorruption; energy and the environment; as well as health and social welfare among other issues.

Parts of this chapter have appeared in Camilleri, M.A. (2016) Corporate Social Responsibility Policy in the United States of America. In Idowu, S.O, Vertigans, S. & Burlea, A., CSR in Challenging Times (in press).

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Camilleri, M.A. (2017). Case Study 1: Corporate Citizenship and Social Responsibility Policies in America. In: Corporate Sustainability, Social Responsibility and Environmental Management. Springer, Cham. https://doi.org/10.1007/978-3-319-46849-5_6

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Trust Survey: key findings and lessons for business executives

Wes Bricker and Kathryn Kaminsky are US Trust Solutions Co-Leaders, and Kathy Neiland is Partner and Leader at the Trust Leadership Institute, at PricewaterhouseCoopers LLP. This post is based on their PwC memorandum.

This is the third time we’ve conducted a trust survey and one thing continues to hold true: Consumers, employees and business executives overwhelmingly agree that trust in business is imperative. The trust that businesses build with their stakeholders can boost profitability: 91% of business executives agree (including 50% who strongly agree) that their ability to earn and maintain trust improves the bottom line.

Conversely, a lack of trust can erode brand value, hurt financial performance and limit a company’s ability to attract and retain talent. In the current environment, companies have to work harder than ever to earn trust among their core constituents. And while our latest survey shows that many companies are falling short, it also highlights opportunities for companies to build trust — and create value by doing so.

1. Trust creates value

Nearly all (92% of business leaders, 92% of consumers and 94% of employees) agree that organizations have a responsibility to build trust.

Why? One reason is recommendations and referrals. Fifty-eight percent of consumers say they have recommended a company they trust to friends and family, and 64% of employees say they recommended a company as a place to work because they trusted it. We’ve also found in  previous research  that levels of consumer trust are linked to performance.

2. But business leaders haven’t captured the opportunity

While there’s general agreement that trust is important, there’s far less agreement on how much companies are trusted. Among respondents, 84% of business executives think that customers highly trust the company, yet only 27% of customers say the same. Employees show a less dramatic trust gap: 79% of business executives say their employees trust the company, but only 65% of employees agree. In both cases, this gap in perceived trust remained just as large as our  June 2022 survey  — 57 percentage points for customers and 14 points for employees.

The average level of consumer and employee trust in business has fallen slightly since June 2022 (by 2% for each group). Similarly, executives’ average perceived level of stakeholder trust has fallen about the same over the same period (down 2% for how much they think consumers trust them and 3% for how much they think employees trust them).

3. Trust is a moving target

When we asked executives to cite their top challenges when it comes to building trust, we see that the trust landscape has shifted in the past year. For example, executives’ inability to change supply chain processes dropped to No. 5 from the No. 1 spot in 2022 (when executives rank their top 3 challenges).

While executives continue to rank consumers, employees and investors as their most important stakeholders, in that order, this can oversimplify the complexity of building trust in today’s environment. Executives say one of the biggest challenges to building trust continues to be conflicting stakeholder priorities, including within stakeholder groups. In fact, diverse stakeholder perspectives comes in second. With trust in business slipping in the past year, it’s even more important for executives to understand and address stakeholder expectations.

The only challenge that ranks higher is current company culture, which moved up two spots from 2022. For many companies, remote or hybrid work arrangements have become the norm. As a result, corporate culture may be strained as employees no longer meet regularly at the office, see management face-to-face or engage with each other in person. As companies continue to embrace remote and hybrid work, executives should recognize the possible need to make culture adjustments. It’s crucial to set the tone for the organization and make sure that employees understand the company’s values and their role in driving the company’s purpose.

4. Trust breaks down more often than executives think

Trust can take years to build and yet can be damaged in an instant — and such events are far more common than business leaders may think. About half of consumers (50%) and employees (54%) report experiencing a trust-damaging event. But only 20% of business executives say their organization has been involved in this type of incident.

Why such a difference? Consumers and employees both identify more personal experiences that have had a major impact on their trust. These examples highlight the degree to which small issues can — and do — damage trust in big ways. The most common type of event consumers experience relates to customer service (36% experienced), followed by lack of transparency (23%). The majority (63%) ended the relationship with the company by no longer purchasing its products or services. For employees, 33% say bias or mistreatment caused a loss of trust — the most commonly cited event. More than half (53%) report that they left the company after the experience.

To executives, on the other hand, large-scale headline-grabbing events are more likely to define trust-damaging events. They cite security (15%), legal and compliance (11%) and, to a lesser extent, financial issues and system failures. Executives cite the most common response as correcting the problem (32%). They also cite disclosing the reasons for failure, committing to taking steps to rebuild trust and improving transparency.

5. Employees may hold the key to trust blind spots

So how do businesses get smarter at building trust to create value? Constantly listening, starting within their own four walls. Employees are eyewitnesses to customers and operations and can help uncover what businesses should be paying attention to. Among employees who say that their company experienced a trust-damaging event in the past 12 months, almost half (46%) say they expected it. Through their day-to-day work, employees have firsthand information about potential blind spots that companies may face regarding trust. Business leaders can capitalize on those insights to proactively head off future issues — but only if they take steps to actively listen and get that information from employees.

Companies should evaluate whether workers feel safe in surfacing and escalating issues. This goes far beyond written policies and whistleblower hotlines. Managers and leadership have to create a culture where workers feel empowered to speak up — and feel heard and supported when they do. By engaging in this way, companies can get a better sense of where potential trust issues may lurk.

When we asked business executives and employees whether or not company leadership gives appropriate attention to earning trust in the business, less than half (45%) of business executives say they do, and only one third (34%) of employees agree. This highlights another opportunity that executives can take to boost employee trust.

6. What drives trust with consumers and employees now

Earning trust comes down to understanding what’s important to your stakeholders at any given moment in time. Our current survey shows a disconnect between the trust drivers that consumers and employees view as very important and those that executives think they are executing well.

For example, when it comes to trusting a company, consumers are most likely to consider data security and high-quality customer service, products and services as most important. Fewer focus on attributes that have less of a direct impact on their experience as a customer.

Purpose and values have increased in importance for employees and companies alike in recent years. As a result, many companies have prioritized communicating what their company stands for, and employees may now view these changes as table stakes. However, our survey shows other things at the top of employees’ list of what’s important now. The most important trust-building issues are paying appropriate wages, protecting employee data and communicating clearly.

When we examine what business executives think they do well for both consumers and employees, over three quarters give a very high rating to their organizations’ performance across all areas. This is yet one more illustration of the disconnect between executives and their stakeholders around what it takes to build trust and how well they’re doing.

Two thirds of both consumers and employees say it’s very important for companies to disclose data privacy policies, but only 42% of organizations say they do. Over half of employees believe it is very important for companies to be transparent about hiring practices and operational risks, but this is close to the bottom of the list of what companies disclose. Only 40% disclose hiring practices and 38% disclose operational risks. It should be noted that our business executive panel includes respondents from private companies (59%) that aren’t subject to many of the same requirements as public companies.

7. Weighing the pros and cons of taking a stance on social issues

With more polarization and competing stakeholder expectations, sticking to what’s relevant to your business may be the ideal path when it comes to speaking out on social issues. In fact, one out of two consumers (49%) and employees (50%) say companies should take a public stance on social issues only if they’re related to the core business.

At the same time, two thirds of business executives tell us that taking a stance on social issues builds trust among customers (64%) and employees (66%). Taking a stance on social issues can be a double-edged sword. When viewpoints align, it can foster company trust with consumers (59% trust more when they agree) and employees (69% trust more when they agree). At the same time, adopting an unpopular stance can diminish trust. However, there appears to be a net benefit in taking a stance as the positive impact when stakeholders agree outweighs the negative impact when they disagree.

Regardless of whether your company decides to take a stance on a social issue or not, the  workplace can often be a forum  for employees to share their opinions and ideas. One approach to consider: Educate and train managers to provide an environment that fosters psychological safety in which employees feel empowered to speak up, regardless of their views.

8. The newest trust risk: AI

Artificial intelligence (AI) is changing the way businesses operate, and those that don’t evolve to incorporate the technology into their business may fall behind. Yet  generative AI  brings up new risks and considerations, so it’s vital that AI implementation occurs in a responsible, trustworthy, fair, bias-reduced and stable manner.

Many companies plan to take a variety of steps to confirm that the security, quality and performance of these systems are monitored and optimized. Nearly all business leaders say their company is prioritizing at least one initiative related to AI systems in the near term. Compliance (41%), especially as it relates to privacy, is the top focus for business executives over the next 12 months. Fewer executives (35%) say their company will take the following steps:

• Improve the governance of AI systems and processes.
• Confirm AI-driven decisions are interpretable and easily explainable.
• Monitor and report on AI model performance.
• Protect AI systems from cyber threats and manipulations.

Just under half (46%) of executives say they’re very prepared for an AI algorithm risk or failure, and 48% say they’re making efforts to reduce the likelihood of such an event a high priority. Those responses are a positive first step, but there’s  much more to be done . Given the attributes of AI — the lack of human oversight and its reliance on potentially insufficient historical data — leadership teams should prioritize understanding potential risks and how to address them. In our view, executives should prioritize this as highly as they do potential data breaches and cybersecurity incidents.

Executives are optimistic about their response plans should a trust-damaging event occur. The vast majority (89%) agree that their company is prepared to respond within days to a situation that could damage trust. But does the company’s crisis response plan include an AI failure? Given the situation, do you need to respond within hours rather than days? Executives need to regularly update their plans to keep up with the quickly changing technology and risk landscape.

9. Executives miss opportunities to retain trust while doing layoffs

In our  August 2022 Pulse Survey , 50% of executives said they had either implemented or had plans in place to reduce overall headcount. In our current survey, that number remains unchanged.

However, when we dig deeper, the percent saying that they have already implemented headcount reductions increased to 28% from 23% in August 2022. Of course, this can’t be equated one-to-one with layoffs, as headcount reductions could be the result of other measures such as offering early retirement or not replacing employees who leave. Perhaps more importantly, we see signs that executives are taking steps to avoid layoffs wherever possible, with hiring freezes jumping to 32% from 21% in August 2022.

Most employees (80%) agree that layoffs in general negatively impact trust in companies. However, their perspective changes when it comes to their own companies. Only 55% of employees say the way their company has implemented layoffs has damaged trust. Meanwhile, executives seem to be harder on themselves, with 72% saying the way their company has done layoffs has damaged trust. This may indicate that executives have a broader view of what is happening across the organization, and employees may not know how layoffs are being handled unless they’re personally affected.

Even in difficult situations such as layoffs, there are opportunities for companies to build trust. Employees identify some specific actions that companies can take to help build trust. For example, 58% say encouraging managers to increase communications with remaining team members can build trust and 57% point to generous severance packages. Yet only 38% of executives have increased communications, highlighting a very tangible and effective step that is currently being overlooked. Performing layoffs virtually is an unpopular option as 32% of employees indicate doing so would erode employer trust (versus only 19% who say it would build trust).

The trust playbook for leaders

Take ownership of trust..

Trust matters. Building trust can create value for your organization and improve the bottom line. Embed trust into your corporate strategy and all of your business processes. Consider a variety of  potential future situations  to prepare for whatever may come your way. When a crisis hits, you’ll have a roadmap in place that aligns your response actions with your organization’s strategic goals.

Treat trust as a team sport.

Get executive team alignment on trust — what it means to your company and stakeholders. Embed trust in all areas of the business and confirm that leaders of those areas are committed to earning and maintaining trust. Understand who your stakeholders are, and recognize that their needs and expectations will shift — and may compete with one another. Keep this in mind as you prioritize your trust focus areas. It’s important to focus on issues that are material to your business, customize your message accordingly and not be all things to all people.

Build your stakeholder engagement plan.

Assign relationship owners to your stakeholders. Encourage those owners to listen closely so they can anticipate shifts in views and perspectives. Map your stakeholders by issue and be strategic about tradeoffs that may be necessary, especially given that trust isn’t static. This mapping can help connect dots across the company and drive better alignment, understanding and coordination. Seeing the full picture can help mitigate a trust-busting event and help you earn and maintain trust that lasts.

Focus on outcomes.

Building trust can be an opportunity to differentiate your company. Embed it in how you measure success of the business, and evaluate whether the metrics you’re using are based on the appropriate qualitative and quantitative data. Think about how you can drive better business outcomes on things like social issues. Align trust to your core capabilities and stakeholder expectations. Use trust to help build your brand.

Activate trust.

To earn trust, every person in the organization has a role to play. Underscore the importance of management living your company’s purpose and values and showing up as  trusted leaders in every interaction . Find ways to make trust personal. Determine your nonnegotiable behaviors that earn or erode trust. Don’t overlook the small things. As we’ve seen, consumer and employee trust can be lost in small day-to-day moments. For example, empower your front-office employees and customer call center representatives to act when appropriate to help solve customer issues.

Prepare your crisis plans with trust in mind.

Put processes in place to  prepare for a crisis  and understand the possible implications that an event may have on trust in your company. Review your crisis response plans to see if they include new potential threats, such as an AI algorithm failure. The evolving risks you face may outpace the plan you have. When you do experience an issue, take the time to do an objective  review of how your company responded . Identifying challenges and gaps is the first step to overcoming them.

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