~ A Pocket Guide for Leaders ~

For The Company Blues

15 Early Warning Signs of a

Company’s Failing Reputation
 Introduction
For nearly a decade, Burson-Marsteller has been examining how company
reputations rise, fall and stay true to course. Our groundbreaking global
business influentials research into this subject has identified the early
warning signs of organizational failure that are featured in this booklet.
Remarkably, our research shows that business leaders from around the
world – North America, Europe, Asia Pacific and Latin America – are in
accord with the order and magnitude of these warning signs.

Cures for the Company Blues identifies the 15 early warning signs that leaders
can watch for and shares practical, time-tested strategies they can bring
to their own organizations. The inspiration for this research came
from Max DePree, the former CEO of Herman Miller, Inc., whose
book, Leadership Is an Art (Doubleday, 1989), outlines the “signals of
impending deterioration.”

This booklet’s goal is to help companies recognize the telltale signs of

reputation failure and take immediate steps before the confidence of
employees, customers, the financial community and other constituencies
erodes. With Cures for the Company Blues, leaders will also discover that the answers
to the most pressing organizational challenges can be found right inside their
own company.
Dr. Leslie Gaines-Ross
Chief Knowledge & Research
Officer, Worldwide
Burson-Marsteller
January 2006
© 2006 Burson-Marsteller
Early Warning Signs of a Failing Reputation

1. There is low employee morale

2. Internal politics are more important than doing the job well
3. Top executives depart
4. CEO celebrity displaces CEO credibility
5. Employees speak of customers as nuisances
6. Employees stop telling positive stories about the company
7. Leaders stifle initiative
8. Leaders talk about growth but focus on cost-cutting
9. Bureaucratic procedures impede flexibility
10. There is a tendency toward superficiality
11. Problem-makers outnumber problem-solvers
12. Internal documents leak
13. There are few rewards and recognition
14. Management spends more time inside than outside headquarters
15. Employees spend too much time writing internal memos

Note: Understanding CEO CapitalTM survey was conducted among 685 global business
influentials in 65 countries. The early warning signs are shown as written in the
survey and in rank order.
 1 SYMPTOM
There is low employee morale
 PREVENTIVE REMEDY
~ Monitor employee satisfaction regularly
~ Optimize internal communications program
~ Walk the halls often and be approachable
~ Instill personal leadership responsibility

BEST PRACTICE
Supermarket chain Wegmans’ benevolent employee policies
result in 6 percent annual employee turnover compared to
the 19 percent industry average.
 2 SYMPTOM
Internal politics are more
important than doing the job well
 PREVENTIVE REMEDY
~ Promote a meritocracy
~ Communicate that performance will always
outrank politics
~ Incentivize teamwork across departments

BEST PRACTICE
To break down existing silos, Motorola CEO Ed Zander
had the marketing and public relations departments spend
a day in the company’s lab.
3 SYMPTOM
Top executives depart
 PREVENTIVE REMEDY
~ Update succession plans frequently
~ Develop one-on-one relationships with
rising stars
~ Act on exit interview comments

BEST PRACTICE
In a textbook case of succession planning, McDonald’s directors
were able to quickly announce a new CEO after two CEOs died
within one year.
 4 SYMPTOM
CEO celebrity displaces CEO credibility
 PREVENTIVE REMEDY
~ Avoid the temptation to position the CEO
as celebrity
~ Promote the C-suite as a team
~ Choose select exposure and avoid overexposure

BEST PRACTICE
When Steve Odland joined Office Depot, he created a
nine-member Executive Committee and 100-member
Global Officer Coalition to collectively plan the company's
strategy and Vision and Values.
 5 SYMPTOM
Employees speak of customers as nuisances
 PREVENTIVE REMEDY
~ Address causes of employee frustration
~ Begin all internal communications with a
customer story
~ Periodically have senior executives staff
customer service telephone lines

BEST PRACTICE
To stay in touch with the “fear and euphoria” of his clients,
Vanguard Chairman and CEO Jack Brennan mans the
company’s telephone lines for at least one hour every week.
Otherwise, he says “you don’t know who they are and they
don’t know who you are.”
 6 SYMPTOM
Employees stop telling positive
stories about the company
 PREVENTIVE REMEDY
~ Reinforce company accomplishments
and milestones
~ Weave positive company stories into
corporate folklore and employee
orientation program
~ Launch an internal blog to learn
employee concerns first-hand
~ Celebrate more and for reasons large
and small

BEST PRACTICE
HSBC trains new recruits in themed dormitories that represent
different stages of the bank’s history. New employees can flip
through a condensed HSBC history left next to their beds. Every
employee becomes an expert in the bank’s storied beginning.
7 SYMPTOM
Leaders stifle initiative
 PREVENTIVE REMEDY
~ Establish a “best ideas” program with
employee incentives
~ Reward entrepreneurial thinking in all
employee reviews
~ Be receptive to all ideas - even those that
may sound outlandish at first
~ Tolerate failure and celebrate the
unconventional

BEST PRACTICE
Google CEO Eric Schmidt has an innovation formula:
spend 70 percent of your time on the core business, 20
percent on related projects and 10 percent on new things.
 8 SYMPTOM
Leaders talk about growth but
focus on cost-cutting
 PREVENTIVE REMEDY
~ Ensure that speeches, internal memos and
actions are consistent with one another
~ Demonstrate balance between growth
and cost-cutting strategies

BEST PRACTICE
Tesco CEO Sir Terry Leahy increased the number of checkout
lines to better serve primary customers (homemakers), signaling
that he was willing to increase labor costs to drive growth.
 9 SYMPTOM
Bureaucratic procedures impede flexibility
 PREVENTIVE REMEDY
~ Remove unnecessary layers between leadership
and employees
~ Streamline approval process
~ Put a price tag on productivity and the cost
of inefficiency

BEST PRACTICE
The number of chief operating officers (COOs) has fallen
as CEOs get closer to business units. Motorola, General
Motors, IBM and Procter & Gamble have all abolished their
COO positions in recent years to de-layer management,
speed decision making, simplify communications and
reduce costs.
10 SYMPTOM
There is a tendency toward superficiality
 PREVENTIVE REMEDY
~ Get real…have senior executives answer
their own telephones for a day
~ Eat in the cafeteria
~ Require volunteerism
~ Schedule specific “office hours” for
employee visits

BEST PRACTICE
Wolters Kluwer’s CEO Nancy McKinstry remarked on her early
tenure: “I’ve created a much more informal atmosphere…it took
six months for people to get comfortable stopping in my office,
talking to me in the cafeteria or calling me by my first name.”
 11 SYMPTOM
Problem-makers outnumber problem-solvers
 PREVENTIVE REMEDY
~ Promote problem-solvers and confront
problem-makers
~ Silence problem-makers with good news
~ Reinforce accountability to transform
problem-makers into problem-solvers

BEST PRACTICE
By suspending wide receiver Terrell Owens, the Philadelphia
Eagles made clear they were willing to pay a high price for
teamwork and not willing to tolerate those who did not
contribute to the organization’s overall good. Likewise,
Cincinnati Bengals’ football coach Marvin Lewis says he is
always willing to let talent go for the sake of the team: “I call
it addition by subtraction.”
12 SYMPTOM
Internal documents leak
 PREVENTIVE REMEDY
~ Ensure that employees know they have
a stake in the game
~ Set clear distribution guidelines for
internal and external communications

BEST PRACTICE
CEO Carlos Ghosn became tight-lipped about his plans when
he found that confidentiality was often breached by Nissan
employees at the highest levels. “Why was I so adamant about
leaks?...[improperly disclosing information] results only in
frightening people.”
13 SYMPTOM
There are few rewards and recognition
 PREVENTIVE REMEDY
~ Create a culture of “thank you”
~ Promote a company-wide employee
rewards and recognition program
~ Require that spot bonus funds be spent
each year

BEST PRACTICE
FedEx Freight’s quarterly awards for safety and on-time
performance allow the winning departments to choose their
own rewards — a department dinner, weekend trip or raffle
with large prizes.
14 SYMPTOM
Management spends more time
inside than outside headquarters
 PREVENTIVE REMEDY
~ Be accessible to customers, media and
other audiences
~ Track time spent inside and outside
HQ and re-evaluate
~ Delegate to qualified team leaders

BEST PRACTICE
As former GE Chairman and CEO Jack Welch said: “I always
remind myself: Headquarters doesn’t make anything or sell
anything.” Successor CEO Jeff Immelt does not need
reminding — 60 percent of his time is spent on the road.
15 SYMPTOM
Employees spend too much time
writing internal memos
 PREVENTIVE REMEDY
~ Ban all unnecessary internal memos
~ Limit use of the cc: e-mail line
~ Keep copy Blackberry-friendly

BEST PRACTICE
To refocus employees on customers, former IBM CEO Lou
Gerstner banned internal distribution of all press releases
about the company.
 Mark J. Penn
CEO, Worldwide
+1 212.614.4446
markjpenn@bm.com

Patrick Ford Bill Rylance

President & CEO, U.S. President & CEO, Asia Pacific
+1 212.614.4412 +852 2963 5602
patrick_ford@nyc.bm.com bill_rylance@hk.bm.com

Heidi Sinclair Santiago Hinojosa

President & CEO, Europe President & CEO, Latin America
+34 91 384 67 17 +1 305.347.4352
heidi_sinclair@es.bm.com santiago_hinojosa@mia.bm.com

Per Heggenes Dr. Leslie Gaines-Ross

President & CEO, UK Chief Knowledge &
+44 20 7300 6436 Research Officer, Worldwide
per_heggenes@uk.bm.com +1 212.614.5181
leslie_gaines-ross@nyc.bm.com
 Cures for the Company Blues
~ A Pocket Guide for Leaders ~

“result
Great reputations are not accidents, the
of good luck or built overnight.
They are carefully planned, nurtured
and managed as the vital assets they are. ” For The Company Blues

Burson-Marsteller
15 Early Warning Signs of a
www.bursonmarsteller.com Company’s Failing Reputation
Copyright © 2006 Burson-Marsteller