by Paolo Gallo, Author of “The Compass and the Radar”, and former Chief HR Officer at the World Economic Forum
We have been – and still are – in the middle of a crisis of epic proportions. But have we given any thought to the correlation between how companies are handling the crisis and the impact on their reputation?
I believe a crisis does not build character but rather reveals it. Crisis is the acid test of leaders and will reveal the true colors of organizations and societies at large. Since the beginning of the pandemic we have witnessed very different responses to the crisis. But among those, I found the example from Ferrari – one of the most recognized brands on the planet, and a powerful societal force in Italy – to be very revealing. Allow me to elaborate on it a bit more.
A few months after COVID-19 caused an emergency in Italy, Ferrari’s leadership realized it needed to get the company and its employees back on its feet. To do so, it launched a so-called “Back on Track” program (true to form with the racing reference). It started as an initiative to reopen the factory safely while keeping staff healthy. But the concept developed into an actual strategic program with a call to action to all stakeholders involved. The mantra, which would hold true for the next 18 months, was to ensure the safest working conditions, the best operative and qualitative checks and emotional support – true team work: a program involving all employees at all levels, strengthening even further their sense of belonging.
The program had been a while in the making. Ferrari learnt already in early January 2020 from colleagues in Asia and Ferrari Greater China offices of the potential impact and disruption of COVID-19. Well before any government action was taken, the team could thus anticipate the need by working with experts, health professionals, virologists, and regional authorities to draw up a detailed plan of action. This preventative planning also allowed the company to provide emotional support for all the staff, their families and partners in the ecosystem we share. By combining the capacity to anticipate and the agility to quickly react with substance and structure, “Back on Track” was implemented.
Ferrari backed up its health initiative with a number of additional key commitments too, including a substantial financial donation, a separate charitable initiative together with “Ferraristi” (Ferrari owners), and a matching program on charitable donations. It paid full salaries to all employees during this period (no furloughing, no state subsidies, no reduction of holiday allowances). And, the CEO was in regular contact with employees, sharing with them the steps that were being taken, showing care and support, and listening to what they had to say. “Back on Track”, in fact, became a strategic program in line with a sense of purpose and a sense of belonging for the entire Ferrari team, fully consistent with the traditional values embraced by founder Enzo Ferrari.
The “Back on Track” program thus worked for Ferrari, it seems. But can the ethical behavior that the Ferrari leadership displayed during the crisis also be measured in terms of reputation to attract and retain talent more generally? RepTrack, a company that measures reputation and how it evolves, provides helpful insights and data. There are seven factors that have an impact on a company’s reputation, they say: Products & Services, Innovation, Workplace, Governance, Citizenship, Leadership and Performance. And their findings based on a survey conducted in Italy at the beginning and in the middle of the Covid19 crisis are revealing.
Reputation, it turns out, is among the few corporate assets – if not the only one – that generally speaking has not eroded as a result of the crisis. It underlines and confirms that what companies have done in these first few months after the initial spread of COVID-19 responded to consumer expectations. But the drivers of reputation did change. In January – before the COVID crisis hit – they centered first and foremost around having a great product/service that met customer needs. Demonstrating transparent and ethical corporate behavior and, putting in action proactive support to local communities and respecting the environment came in second and third place.
By April however, as a result of the impact of COVID-19, consumers dramatically changed their expectations of companies, at a speed that RepTrak had never witnessed before. Now, the top ranking driver of reputation, trust and esteem revolves around how companies behave in the marketplace. In other words, ethical behavior is now driver number one. The quality of products dropped from the first spot to become driver number two, and in third place came the emerging importance of leadership. The reason why companies kept their reputation value intact, then, is that from January to April, most invested and prioritized helping and supporting the needs of the country, specifically on the health and safety needs arising due to COVID-19.
That doesn’t mean the work is done. Many strategic challenges remain for companies, including how to maintain employee engagement as well as “work-life balance” in a permanent “work from home” environment. Those companies that will be able to quickly adapt and embrace change, placing at the forefront a laser-focused ethical culture and strong leadership, will win in the redefined reputation economy. And in all of this, ethical leadership will not be a ‘nice to have’, but rather a tangible asset that will enhance a company’s reputation, with a profound effect on the perceptions of consumers and potential employees. Being ethical not only the right thing; it will also be the only way forward.
But it does indicate that the approach Ferrari and other Italian companies took, is the right one. Ferrari demonstrated with its “Back on Track” program how ethical leadership can be done right in a time of crisis. But as it knows all too well, in a race, it’s not only about getting “back on track” immediately after a pit stop. It is also – and mostly – about keeping up a strong performance until the end of the race. Let’s hope we can see that not just from Ferrari, but from all companies in the race for leadership.