Quick – Name a company long considered a pioneer and one of the world’s most innovative organizations in its industry. Hint – it’s not a technology service provider, social media giant or electronic device manufacturer.
In fact, the company in question is Carnival Cruise Lines. Yes, the same Carnival Cruise Lines plagued with operational failures, passengers stranded at sea without basic conveniences, and ships prone to fire, breakdown and ignominious returns to port at the end of a tug boat tow line. This is the same Carnival Cruise Lines that just announced the cancellation of even more cruises, ruining family vacation plans, long-scheduled honeymoons and retirement getaways.
Carnival is the company that created the concept of The Fun Ships. It was first to recognize the potential for short-term, convenient and economical cruises whose only relationship to the grand Atlantic crossings of yesteryear was the fact that they occurred on the ocean. Carnival developed the market, built the perception of excitement and gained the deserved reputation for being the best of its class.
Somewhere along the line, company executives appear to have forgotten about the inherent power of reputation. This is the all too frequent failure of corporate leaders who while highly skilled at running daily operations and even responding to crises, are not so adept at the kind of proactive reputation management and enhancement that must take place long before crises occur.
Intellectually, corporate executives know a strong reputation gives them an edge. It helps attract the best people, the most loyal customers and the support of investors. The difficulty arises when the intellectual doesn’t convert to the practical. At that point, reputation is taken for granted. To be sure, reputation is an intangible asset, but its loss can wreak real and visible havoc. What is needed is a greater dedication to identifying and monitoring reputational risks and a process for aligning reputation with the company’s vision and values. In that regard, Carnival clearly missed the boat.
Reputation is inextricably linked to reality. For Carnival, the new reality is customer skepticism, competitor advantage, and media derision. Companies cannot claim to be something that is out of context with their actual behavior and performance or with customer experience. The emphasis must be placed on improving performance, owning up to failures and committing to do things differently and better.
Our client, Pepco, the electric utility in Washington, DC, was named one of America’s most hated companies as a result of its performance during prolonged service outages. The company didn’t shrink from the criticism, but accepted that mistakes were made and publicly committed to wholesale changes in procedure, posture and policy. A pledge to invest half a billion in improvements and a continual communication program that emphasized transparency resulted in significant and nearly unprecedented gains in customer satisfaction. Of course, improved service restoration times also helped. But so did the company’s willingness to embed reporters with emergency response crews allowing them to see first-hand what the company was doing to become better. Media derision was replaced with journalistic praise.
Further affecting reputation is the evolution of factors outside the company’s control, especially marketplace expectations. In just a few decades, for example, changing public attitudes about pollution led to a then novel concept called “Environmental Stewardship.” Very rapidly, enlightened corporations adopted the phrase and trumpeted their commitment to the ideal. A few went further and actually changed marketplace expectations by adopting compelling and innovative environmental policies and practices.
In the early 1990s, Levi Strauss championed environmental practices in supply chains, such as guidelines that governed water quality and the use of chemicals. These practices have since become standard in the apparel industry. Ford Motor Company, Novo Nordisk and Timberland were early to adopt environmental reporting. Today, a majority of S&P500 and Fortune 500 companies issue sustainability reports. Wal-Mart was the first company of its size to implement environmental efficiency practices that affected not only its own operations, but those of its extensive network of suppliers. Wal-Mart and others upped the ante for everyone else. As a result, the rules changed for everyone because a courageous few corporations’ made an environmental leadership pledge and stood behind it.
As is always the case, their actions spoke louder than words. When a major, global corporation commits to making its pledge tangible and establishes a high and measurable threshold for environmental protection, all other companies are compelled to take note. Customers, shareholders, environmental advocates and the media not only hold the company to its commitment, they also quickly recognize that if one company can make such a change, others not only can but truly must. Failing to pay keen attention to such changing beliefs and expectations of the marketplace puts corporate reputation at risk.
The methods for staying abreast of evolving reputational dynamics are well established. Monitor social conversations to gauge sentiment, track volume of discussion and assess customer response to company engagement. Perform thorough media content analyses. Measure tonality and compare coverage to emerging issues. Conduct in-depth stakeholder interviews. These should include employees who keenly wish to be part of a company with a strong and respected reputation. Perform competitive analyses to determine what peer group firms are saying and doing. Talk to analysts, financial and industry. Learn their perspectives before they lead others to opinions that may not align with corporate goals.
Today, Carnival executives are spending considerable time, energy and company resources to explain, respond and apologize. It is right and necessary that they do so. None of this, however, will restore the reputation the corporation once enjoyed and that buoyed it to a position of industry leadership. A new image for what the company must become has to be linked with a clear and compelling definition of the reputation the company wishes to gain for itself in light of marketplace realities and expectations. Until that vision and awareness is established, Carnival will remain at sea without a compass.