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Reputability LLP are pioneers and leaders globally in the field of reputational risk and its root causes, behavioural risk and organisational risk. We help business leaders to find these widespread but hidden risks that regularly cause reputational disasters. We also teach leaders and risk teams about these risks. Here are our thoughts, and the thoughts of our guest bloggers, on some recent stories which have captured our attention. We are always interested to know what you think too.

Friday, 26 October 2012

Starbucks' crisis management

Hit by a story of unfair tax avoidance, Starbucks has hit back. By rubbishing its UK management and undermining the truth of earlier analyst briefings that the UK business is profitable.  Its rebuttal has drawn excoriating criticism from "Hephaestus of London" in a post on the FT report on the story.

Is it better to grow a reputation for misleading analysts?  Or for avoiding tax to a socially unacceptable degree?  Or for public denigration of senior management?  Or none of these? 

Time for Starbucks' leaders to take a coffee break?

Anthony Fitzsimmons
Reputability
London
www.reputability.co.uk

Thursday, 25 October 2012

Barclays Board "Clear-out"

Sir David Walker is going to "clear out" the board and bring in the new.

Two questions:
  • Will he bring in people with 'soft' of 'people'skills - Credit Suisse now has a specialist in human behavour and psychology, Iris Bohnet on its board.
  • Will he bring back Alison Carnwath?
Anthony Fitzsimmons
Reputability
London
www.reputability.co.uk

Tuesday, 23 October 2012

Fixing the BBC

The BBC has its back to the wall.  Again.  Why?

It's well established, by 'Roads to Ruin', that behavioural and organisational risks both cause crises and tip them into reputational catastrophes.   Igonorance of these risks, which is widespread, leaves leaders living in a rose-tinted bubble.  Until the bubble bursts.

To judge by what has emerged so far in the Savile debacle, it's likely that fundamentally important risks at the BBC include:
  • poor internal communication that leaves leaders in the dark about important information
  • a culture that leads to turning a 'blind eye'
  • a culture of "what's normal around here" that doesn't stand external scrutiny
  • inability to see themselves as outsiders see them 
  • inability to learn from past mistakes
  • incentives not to 'rock the boat'
  • inability to see or deal with fundamental risks to their licence to operate
  • reluctance to recognise the potential toxicity of their track record.

It took decades for the BBC to build its reputation.  But as the FT once wrote of BP, one more bad step could send the BBC to oblivion.

The BBC will only set its reputation back on solid foundations if it fixes the fundamentals. But first it has to find them.  Systematically.  The current enquiries won't get near that.

Anthony Fitzsimmons
Reputability
London
www.reputability.co.uk

Sunday, 21 October 2012

Tax Saved costs Reputational Damage

It's becoming the latest theme for international companies.  Not paying a fair amount of tax in countries where you trade makes you a bad citizen and damages your reputation.  The first of the recent batch was Starbucks.  Now its Ebay and Paypal.

As Anthony Hilton quoted the senior tax partner at a Big Four accountant recently,  "I think  I have done a good job for my client saving £10m on their tax bill.  Then I find it cost them £100m in reputational damage."

 D'oh!

Anthony Fitzsimmons
Reputability
London
www.reputability.co.uk

Thursday, 18 October 2012

Taxing reputations



Starbucks has UK sales of £400m annually but arranges its affairs so that it has paid no UK corporation tax in the last 3 years.  It has paid £8.6m over 14 years.  Whitbread's Costa turns over less but pays about £15m annually.  It's all legal but is it right?  And who decides?

Before social media, companies could make tax avoidance decisions confident that their ultimate customers wouldn't find out, or if they did, they wouldn't be able to do anything about it.  So the company's decision was left unchallenged.  As long as it was legal, that was fine.  End of story.

No more.  A second question now has to be asked: 'Is it right?'

It's not the company's resident ethicist who has to answer.  Particularly when customers can easily defect (coffee), the stakeholders that matter most are the ultimate customers. Even where defections aren't easy (banks) politicians can dispense plenty of damage if they think their constituents don't like what they see.

For Starbucks, now roundly made a subject of mochary even in the FT, and apparently facing a "brand catastrophe",  retail customers matter most.  The internet makes it easy to organise boycotts against those seen as bad citizens.  If it ain't right in the public's eyes, beware of customer defections.  Or having to spend a small fortune avoiding them. 

Anthony Hilton quoted the senior tax partner at a Big Four accountant yesterday.  "I think  I have done a good job for my client saving £10m on their tax bill.  Then I find it cost them £100m in reputational damage."

As Homer Simpson would say, D'ohThis is hardly a new issue.

Anthony Fitzsimmons
Reputability
London
www.reputability.co.uk

Friday, 12 October 2012

Cover-ups laid bare

The revelation that Jimmy Savile, formerly a popular DJ and charity fundraiser, was an industrial grade paedophile has shocked the UK.

But more disturbing is the revelation that what must have been hundreds, perhaps thousands, knew or suspected his wrongdoing over periods said to be as long as decades - but did nothing.  Accusations of 'turning a blind eye' or inaction have so far been levelled at the BBC, three hospitals, the UK's Crown Prosecution Service and the police among others. 

Passive covering-up of important but unwelcome information is commonplace.   Ask yourself what unwelcome news wasn't promptly passed on up to your organisation's leadership over the years.  The reasons vary, but they are typically a combination of culture, power, incentives such as fear and a lack of leadership, particularly on ethos.  Groupthink, particularly among the organisation's leaders often contributes too.

Sadly Jimmy Savile isn't the only cover-up in the news.  It's alleged that a number of the UK's police forces have been involved in a masssive cover-up following the 1989 Hillsborough Disaster in which 96 died.  It's so bad that the Independent Police Complaints Commission is investigating whether there was a concerted effort by two police forces to pervert the course of justice over more than 20 years. There are also investigations under way into whether the police should now be charged with manslaughter. 

If proven, this goes far beyond passive covering-up and raises the question why multiple police forces  set out systematically to cover up the truth.   If proven it would be  a small step for the IPCC to conclude that the police showed institutional dishnonesty that has a parallel in the institutional racism found in the Metropolitan Police following the Stephen Lawrence Enquiry.

Getting to the root of this kind of problem is difficult and can be painful.  Unresolved, it exposes the organisations concerned to one of the most potent destroyers of reputations - that the organisation comes to be seen as dishonest or dysfunctional. 

It will take courage to get to the root of these problems and leadership to solve them.  The question is whether leaders are up tothe task.

Anthony Fitzsimmons
Reputability Partners LLP
www.reputability.co.uk