“Mastering the New Normal” – A Continuing Series
“It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.”
– Warren Buffett, Chairman, Berkshire Hathaway
To achieve sustainable success in the New Normal marketplace, leaders and their organizations need reputations that are prominent, robust and blue-chip quality. Anything less can impact loyalty among customers, employees and shareholders with immediate – and often enduring – adverse consequences.
Consider these distinguishing characteristics – and challenges – of business reputation today:
- Both company and CEO reputation make a solid contribution to a firm’s market value. One study attributes 60% of company market value to company reputation and 49% to CEO reputation. (Weber Shandwick CEO Spotlight 2012)
- CEO reputation has taken a big hit in recent years. Among the general public, only 25% trust business leaders to correct issues and even fewer – only 20% – trust them to tell the truth and make ethical and moral decisions. (Edelman Trust Barometer 2014)
- Rank-and-file employees, not senior management, are considered the more trusted source of information about their organizations. (Edelman Trust Barometer 2014)
Today stakeholder decisions are increasingly based on factors such as what the organization stands for and the standing of its senior leaders. Moreover, public access to executive and board actions and to third-party ratings and rankings has never been greater, thanks to social media, online search engines and whistleblowers.
REPUTATION ON THE LINE
In today’s interconnected global marketplace, an organization is only as admired as its weakest link. And the weakest link can come from down the corridor or around the world.
Recent examples of high-profile reputation damage – with bottom-line impact – include Toyota (auto safety), BP (operational safety), Lululemon Athletica (defective apparel), McKinsey (director misconduct), and Target (customer data breach).
By contrast, standout organizations and their leaders are passionately committed to acting in the best interests of their stakeholders, even if this comes at the expense of profits or making tough decisions. They also take quick corrective action in the face of strong customer reaction.
For example, Netflix CEO Reed Hastings saw the company’s share price drop from $298 to below $54 after introducing a price hike for its streaming video service in 2011. He quickly reversed course on the subscription increase, stemming a mass subscriber exit. In 2013 Netflix’s subscriber base surged, as did its stock price by over 400%.
FOUR REPUTATION ACTION ITEMS
Insure your reputation is game on with these winning actions:
- Make transparency a core personal and organizational value. As a corollary, assume that there are no enduring secrets in business matters any more.
- Factor “optics” into decision-making. Appearances matter as much as substance – and sometimes more. Current hot-button issues include executive compensation, labor practices and corporate taxes.
- Heed the company you keep. New hires, vendors and strategic partners all reflect on executive judgment and values. They should burnish management and organizational reputation, not diminish it.
- Supercharge employee engagement. A positively engaged workforce enhances the organization’s reputation and brand, making it more attractive to top talent and customers.
Next month: Risk Management is the fifth and final Leader Imperative.