What is this thing we call ‘reputation’ and how does it impact the way we do business? A Google search reveals an array of possible definitions that impute characteristics to both people and organizations. Among others are:
- repute: the state of being held in high esteem and honor notoriety for some particular characteristic; “his reputation for promiscuity”
- the general estimation that the public has for a person; “he acquired a reputation as an actor before he started writing”; “he was a person of bad report
- Reputation is the opinion (more technically, a social evaluation) of the public toward a person, a group of people, or an organization. It is an important factor in many fields, such as business, online communities or social status.
- The strategic standing of the organisation in the eyes of its customers.
The nuances are important to understand because very little can be done to suggest process improvement or change without understanding how the company sees these issues. This almost always leads to issues of conflict because just as in real life, it is almost impossible for anyone to be objective about the qualities they articulate when trying to explain what ‘reputation’ means to them. Also, it seems that there is a very different view of personal reputation compared to that of business reputation. The two can clash, usually with catastrophic results. An example should clarify the point:
The Scoble case
Right now, there is a scramble among publicly visible social media players in Silicon Valley for pecking order positions in the reputational stakes. Each player knows that the higher up the perceived pecking order they go, the better their chances of securing economic success. Certain social norms have emerged that define how the group operates and presents itself to the public. A significant part of how they present themselves is through ensuring they operate in as publicly transparent a manner as possible. A good example is Robert Scoble, who famously rose to prominence by showing the world what it is like inside Microsoft through his personal weblog and the videos he produced. While he was constrained to talk about issues that encroached upon intellectual property, he exposed the culture of the organization to the outside world for the first time. This allowed him to attract a significant personal following from those anxious to gain ‘the inside track’ on Microsoft. Today, he lives his life in the public domain, having declared on many occasions that he wants his life to be an open book. This is an extreme case but then Scoble is both extreme and extraordinary. In this post, he talks about the human-ness that inevitably impacts his response to the many controversial situations into which he puts himself:
Hey, I had a bad weekend, OK? I answer 10s of thousand of comments, most of the time I’m a nice guy with a thick skin and take all the crap that’s thrown my way. Last week I had enough. I bit back. I made mistakes. I was wrong.
I was human…
We aren’t machines. Sorry, Nicholas, if you expect corporate bloggers to be machines that’ll always smile and always take the crud that’s out here without making mistakes then you’ll be sorely disappointed.
The blogosphere worked. I[t] told me violently and quickly I was wrong.
Scoble likes to be seen as a trend spotter and has established a reputation that generates and sustains its own gravity field. It is almost entirely dependent upon him maintaining his particular form of transparency and being associated with operating an open door policy. At another level he presents as both a student and a teacher, passing on the insights he gains from others in the process. His ability to communicate between the worlds of business and technology makes him a conduit for the passing of information between those two worlds – even when he gets it spectacularly wrong. Today that is allowing him access to some of the biggest names in industry, not just the tech industry but industry, period. That access adds to the power he wields and the currency of trust that he can trade for hard cash.
In other words, Scoble’s obsessive attention to building reputation, albeit outside the norms most people might operate has differentiated him, developed a brand and afforded him a level of power that very few can attain or might even aspire towards. His constant obsession with the transparency of his life and implicit understanding of the value that reputation and personal branding provide, arguably puts him in a different league to other people within the context of the ‘market’ in which he operates.
Doing a Ratner
Contrast this with Gerald Ratner, the man who by publicly ascribing the quality of ‘total crap’ to products sold by the company that used to bear his name, single handed managed to wipe out some £500 million (€725 million $980 million) in shareholder value almost overnight and forced the company to change its name. Up until that point, Ratner had been considered the ‘poor boy who made good’ While his company had a tacky image, it provided the jewelry consumer with what he/she wanted: affordable luxury at a price point competitors struggled to achieve but in a profitable manner. Ratner’s name will forever be associated with the expression: ‘Doing a Ratner,’ or committing a hideous gaffe that has long term consequences. This too is an extreme case that illustrates how the activities of a single or small group of individuals can have dire consequences.
SOX and reputation
Another example might be Enron. While it is widely believed that Enron traded in a fraudulent manner, the defendants have always argued that they acted within the law. As we now know, Enron’s case [along with others involving fraud] gave rise to the Sarbanes-Oxley Act. It is reasonable to argue that SOX imposed improved reputation on a segment of management deemed to be out of control through the imposition of new processes. More recently, The Societe Generale rogue trader scandalhighlighted how an individual could wreck reputation and cause a crisis by exploiting weaknesses in processes and exercised through design flaws in both the known processes and the informal customs and practices that had grown up around those processes. While SocGen survives, the fallout has been extensive for management and stakeholders. (This will be examined in depth in a later article.)
As we move the clock forward to 2008, the general reputational picture has changed. According to NGOs concerned with the emerging issue of ‘sustainability,’ another term that, according to James Farrar has definitional issues, we find that despite the plethora of regulation that might impact upon reputation, the one issue that crops up time and again is climate change. This is the single most important factor exercising the minds of those in the C-suite. It would be naive to assume this is out of some sense of altruism because as we know, companies exist to make profit. Business knows that it can drive profit while enhancing its reputation if it is able to carve out a differentiated position on climate change.
What do these anecdotes tell us?
However you choose to define reptutation, its loss can have dire consequences. Of themselves they may, or may not, be causal factors in cases of business failure. The balance of opinion among those with whom I have discussed this issue is that reputation is not usually a causal factor although it may well be a contributing factor. However, when thinking about risk as a component of governance, risk and compliance, it can be an under-rated factor.
On the other hand, a solid reputation can have very beneficial side effects. To me that suggests that when thought about as ends of a continuum, reputation is an extremely important grounding factor that leads towards the amplification of both positive and negative outcomes arising from either well thought out or defective processes. Therefore, while it is the business process expert’s natural inclination to consider the articulation of process as a way of delivering value or minimizing negative impacts, I suggest this should have as its precursor a business examination of the reputational issues that both drive an organization but which also serve as potential contributors to failure. So for instance, in the assessment of establishing (say) a new invoicing process, I would always encourage business process experts to not only consider the way in which GRC issues are impacted by those processes, but I would also suggest that the flip side be considered in what if? scenarios. That’s because while business processes are the articulation of what management sees as desirable outcomes, they only answer a part of the rationale behind doing things ‘right.’
In other words, when considering the pressing issue of sustainability as a broad topic of immediate concern, not only should there be an assessment of the financial impact of making certain choices, there should also be an assessment of the risk impact on reputation of those same choices. In doing so, I believe that not only will reputational risk be mitigated, but reputational value will be enhanced.
That will require a much more thorough examination of the issues involved in consulting engagements but imply a clear need to carefully assess value across multiple dimensions that lead to a positive financial conclusion. It will require the exercise of business skills that speak directly to the quality of the relationship between BPX’ers as business aware persons capable of articulating issues in a manner that customers can accept. It will also require that those same BPX’ers be able to be able to negotiate the technical hurdles that arise when developing software solutions.