July 6, 2011 8:51 pm
Villainy is the fate of most big companies
By Michael Skapinker
Henry Kissinger once suggested it was a pity that both sides couldn’t lose the Iran-Iraq war. In the looming confrontation between Waitrose, grocer to Britain’s middle classes, and Ocado, online deliverer of its products, it seems a shame that one of them is likely to.
On current showing it will be Ocado. Waitrose’s internet arm has begun competing against Ocado, its long-time partner, in the lucrative London market. This is happening just as Ocado is struggling to maintain one of its key attractions, its delivery record by its personable drivers. In the first half of this year, on-time deliveries fell to 92.7 per cent from 94.9 per cent in 2010.
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It is disconcerting to see Waitrose acting so aggressively – a little like watching a cat-stroking, rose-tending neighbour giving someone the finger as she roars down the motorway.
Waitrose is part of the John Lewis Partnership, respected for the service standards of its staff who own the business. John Lewis was, for the fourth successive year, voted the UK’s favourite retailer in a poll conducted by Verdict, a consultancy. Waitrose was rated top supermarket in a survey by Which?, the consumer magazine. Will Waitrose and John Lewis suffer a dip in their benevolent reputations if they are seen to be bullying Ocado?
Any examination of how much-loved companies can forfeit people’s affections needs to start with the realisation of how few much-loved companies there are. Businesses are more often the villains, as Daniel Diermeier of Northwestern University’s Kellogg management school points out in his insightful new book Reputation Rules.
This is partly the result of the financial crisis, which has sullied the name of business generally. A recent Gallup poll in the US found that while 81 per cent of respondents trusted nurses, only 15 per cent trusted business executives. (Seven per cent trusted car salesmen.)
But mistrust of business long predates the financial crisis. It could be seen in the Brent Spar incident in the 1990s, when Shell, bowing to vituperative public criticism and a consumer boycott, broke up its Brent Spar oil storage facility on land rather than sinking it at sea. Its technical studies showed that deep-sea sinking was the better option environmentally, but this was swept aside by campaigners who peddled a simpler line. As a Greenpeace leader told the company: “Joe Six-Pack won’t understand your technical details. All he knows is that if he dumps his can in a lake, he gets fined.” Greenpeace later admitted to getting some of its own figures wrong, but the damage was done.
Corporate choices are complex. Campaigners and the media often deal in simplicities. As Prof Diermeier says, every story requires heroes, villains and victims, adding: “Companies are not well cast as victims.”
John Lewis’s employee ownership and good service have allowed it to escape public disdain, but there are other techniques. Rather than trying to evade vituperation, Michael O’Leary, head of Ryanair, the Irish low-cost airline, has cast himself as a stage villain, mock-threatening to charge passengers for using the toilet and saying that his ideal customer is one with “a pulse and a credit card”. All this helps people focus on what matters at Ryanair: its tickets are cheaper than full-service carriers’. As long as they remain that way, Ryanair can ride out complaints like the recent one from the UK Office of Fair Trading that airlines, including Ryanair, delay revealing additional charges.
Sir Richard Branson’s Virgin group of companies has, by contrast, successfully presented itself as the plucky upstart taking on powerful interests, particularly British Airways. This self-portrayal seems to have survived Virgin’s admission that it and BA conspired to fix fuel surcharges, which resulted in it paying refunds to thousands of passengers (including me).
Companies such as Apple and Google have also presented themselves as challengers to the establishment, but they have struggled to sustain that image as they have grown. Google has faced criticism over privacy intrusions. Apple has come under fire over conditions at suppliers’ factories.
Few chief executives have Sir Richard’s Peter Pan chirpiness. For most companies, finding public love is hard. Those that have it need to take care not to lose it. John Lewis and Waitrose should tread carefully. And Ocado needs to get those groceries delivered on time.
Copyright The Financial Times Limited 2011