Outsourcing the BBC's reputation?

The BBC is in deep water again.

On 2 November, a flagship news programme 'Newsnight' carried allegations that an unnamed "leading Conservative" was a paedophile.  A media frenzy identified the alleged perpetrator.  On 9 November, his accuser, apparently shown the alleged perpetrator's photograph for the first time, sorrowfully announced that this was not the right man.  Result: an abject apology by Newsnight and discussion whether the BBC's Director General's head should roll.  In true BBC style these included an interview with the BBC's Director General on 'Today', BBC radio's flagship news programme.

The BBC is still reeling from a second recent 'Newsnight' scandal, in which another paedophile investigation, into the former BBC star Jimmy Saville was canned - only for its commercial rival ITV to broadcast the allegations. As I wrote here, many of the issues are shared with the Jimmy Saville episode, but a new one has emerged.

It seems that the latest Newsnight debacle emerged from a "collaboration" with the Bureau of Investigative Journalism. To what extent, and why, the BBC outsourced or subcontracted its investigation to outsiders is not yet known.

One of the many lessons of lessons of the Deepwater Horizon explosion and the UK rail crashes of 2000 and 2002 is that outsourcing and sub-contracting are more risky than leaders recognise.

There is little doubt that outsourcing can save money.  But particularly if it involves 'core' operations, outsourcing often saves money now at the cost of increasing risk for the future.

This is not only risk of those core operations causing harm to the outside world.  Outsourcing puts the risk of causing severe reputational damage to the company into the hands of its sub-contractors and outsourcers. But particularly where core operations are concerned, the public never allows an organisation to outsource its responsibility if things go wrong.

This trade-off is often overlooked and too infrequently discussed by leaders under pressure to 'save money now'.

Outsourcing is fashionable and can save money.  But poorly managed it can led to short term gain at the cost of long term pain.  The  wise prefer short term pain for long term gain.

Anthony Fitzsimmons
Reputability
London
www.reputability.co.uk

Teachers aren't the only cheats!

Are teachers cheating when marking public examinations?  Ofqual, the UK exams regulator, thinks so - though it invented the term "overmarking" to describe the phenomenon.  It ranged from giving pupils too much  'benefit of the doubt' through to giving pupils marks calculated to lead to the highly coveted "C" grade.  The full report is here.

This is a classic case of incentives positively encouraging unacceptable behaviour.

In England, there are very strong incentives for schools to have as many students as possible get at least a Grade "C" in the English GCSE exam.  In interviews of about 100 schools, Ofqual's press release reported:

"While no school interviewed considered that it was doing anything untoward in teaching and administering these GCSEs, many expressed concern that other nearby schools were overstepping the boundaries of acceptable practice.

The report states: “The pattern of marks – the unprecedented clustering around perceived grade boundaries for each whole qualification – is striking”."

Cheating is far more widespread than you think.  We don't recognise much cheating because we rationalise it into 'normal' or 'acceptable' behavour. 

Dan Ariely, a behavioural psychologist/economist, has made a special study of the subject.  He has summarised the core of his findings in an entertaining short RSA Animate.  For more read his book "The (honest) truth about dishonesty".  It should be compulsory reading for business leaders and regulators.

So watch  out!  Teachers are far from the only people who cheat!  Most people do it to levels they rationalise as 'acceptable'.  But there's no need to design incentives that positively encourage cheating.


Anthony Fitzsimmons
Reputability
London

Anthony Fitzsimmons is Chairman of Reputability LLP and author of “Rethinking Reputational Risk: How to Manage the Risks that can Ruin Your Business, Your Reputation and You”

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

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

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

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

Anthony Fitzsimmons is Chairman of Reputability LLP and author of “Rethinking Reputational Risk: How to Manage the Risks that can Ruin Your Business, Your Reputation and You”

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'oh!  This is hardly a new issue.

Anthony Fitzsimmons
Reputability
London
www.reputability.co.uk

 Anthony Fitzsimmons is Chairman of Reputability LLP and author of “Rethinking Reputational Risk: How to Manage the Risks that can Ruin Your Business, Your Reputation and You”