There are multiple rewards and risks that stem from how we manage our reputation, from the macro level for countries and governments through to the meso level for organisations and to the micro level for leaders and managers.
Reputation has rewards for those who engage and costs for those who abscond. The virtual events company, Hopin started with four employees in 2020 and was valued at $2 billion in less than a year but has recently struggled to live up to the hype of virtual events post-pandemic. The downfall for organisations and leaders can be steep. Theranos, the American health technology corporation, was valued at $10 billion in 2013 and 2014, but when people started to question the validity of its technology, the company nosedived and was eventually dissolved. The Founder and CEO, Elizabeth Holmes, will shortly be reporting to prison for defrauding investors.
Alongside the day-to-day challenges of leading organisations, there are existential threats that leaders face, including geopolitical tensions, climate change, and unprecedented levels of inequality. Leaders have a moral duty to act responsibly and if the public sniff they are being misled, as was the media’s response to Boris Johnson’s denial of a Christmas Party in December 2020 when there was a UK-wide coronavirus lockdown, which the House of Commons Committee of Privileges found he misled the House, or Liz Truss’s infamous mini budget in 2022 that triggered financial market chaos, then the reputation implications are unforgiving, as both former UK Prime Ministers found through being ousted.
Growing emphasis on purpose
Organisations such as the Business Roundtable, the World Economic Forum, and the British Academy are advocating businesses to be purpose led. This means leaders must ensure that their organisation’s purpose is aligned with relevant external movements like #MeToo and Black Lives Matters.
“A failure to ensure alignment between an organisation’s purpose and societal expectations risks reputation damage.”
Understanding who our different stakeholders are and reflecting on how they are important is an essential mechanism to ensure external and internal alignment. We may not always like what stakeholders say or do and at times we may decide to push back, but they are nevertheless a vital source of data that we need to understand, reflect on, and respond to. P&O’s firing of staff via videoconference showed a disconnection between the expectations of society and their actions, which created ill feeling among multiple stakeholders and undermined its reputation.
There has been a lot of rhetoric around purpose from investment in ESG to promoting diversity on leadership teams. The public are now more discerning and impatient for change, which is a reputation threat if the rhetoric leaders give is not matched by action. This was captured by Greta Thunberg’s 2021 “blah, blah, blah” statement to world leaders when their comments about building back better in response to the climate emergency were not perceived to have been matched by their policies.
The risk of reputation damage
When we witness the likes of Sam Bankman Fried of FTX being arrested, our impression is this is another prominent leader who has gone rogue. However, my research with Navdeep Arora on white collar inmates in a United States Federal Prison suggests an uncomfortable truth: our behaviours stem from our personal circumstances, the organisational culture in which we work as well as the wider regulatory and industry environment in which we operate. It is the layering of these three levels: the individual, organisational, and environmental that escalates the risk for individuals to act unethically and unlawfully and succumb to reputation damage.
All organisations and leaders face various forms of reputation damage.
“While character and capability reputation play an important role in how others make judgments about us, they are also limiting because they are both based on our past actions.”
Instead. our contribution, how we propose to provide value to others in the future, is an important part of the recovery process. Different stakeholders may not like what you or your organisation has done in the past, but their future interaction will depend on their perception of and willingness to let you provide value for them in the future.
Having no engagement with reputation is a risky strategy because you run the risk of letting others control the narrative, whether you are a CEO trying to persuade investors or a politician attempting to send positive signals to the electorate. An obsession with reputation causes problems as Billy Macfarlane found with the hype around the Fyre festival in the Bahamas with the social and mass media attention causing an over-confidence with his abilities and a disconnection from the reality of the situation, with catastrophic consequences for the event and him personally.
Some cautionary recommendations
Building on the evidence and examples from Reputations at Stake, I provide 10 cautionary recommendations for leaders. The reputation stakes are high and require all leaders to take collective responsibility, whether they are government or business leaders, managers, employees, volunteers, members of communities, or many of these. While reputation is not something to unduly obsess over, leaders must attend to reputation proactively and meaningfully. If managed effectively, our reputation can have positive and sustained outcomes for wider sets of stakeholders, future generations and our planet.
10 cautionary recommendations
- Proactive reputation management without over-engineering
- Engaging with broader sources of information promotes innovative solutions
- Feedback from different stakeholders makes us aware of the opportunities and risks related to our reputations
- Multiple reputations recognises that different groups have a stake in your organisation
- Show tangible initiatives to demonstrate commitment to responsibility and give less vacuous statements
- Work with others to support your reputation claims
- Aspire for building a positive reputation with multiple groups, but avoid preserving your reputation at all costs
- External events provide clues of areas that require change in your organisation’s purpose
- Responsible leadership can prove costly in the short-term, but will reap reputation rewards in the long-term
- Reputation damage is a time of frustration and regret, but can mark a turning point for learning and betterment
Feature image by Jason Goodman via Unsplash (public domain)