Restoring a good name is harder than it seems, as a host of British companies are finding
Of all the courses at leading business schools, none is hotter than reputation management. In a world where banks and food companies seem routinely to cheat customers, understanding what’s behind a sustainable reputation has overtaken financial wizardry as the aspiring executive’s must-have attribute. RBS (LSE: RBS.L - news) , Barclays (LSE: BARC.L - news) , Tesco (Other OTC: TSCDY - news) , Findus and many others are learning the hard way that reputation management is not just a form of crisis management. If done properly, it’s crisis avoidance. As the Harvard Business Review points out: “Knowing about first-aid is not the same thing as protecting your health.”
Neither is reputation management a version of public-relations sophistry. The message matters, but only if it’s authentic. Those who think they can improve a company’s reputation without imposing higher values are confusing form with substance. Aggressive rebuttals are not a substitute for integrity. Steve Marshall, who became Railtrack’s chief executive soon after the Hatfield rail crash, which killed four people in 2000, concluded: “The fundamental truth, which you discover only when you have gone through the fires of hell, is that your reputation will always mirror the absolute reality of what you are.”
In the short run, a positive image can be conjured up by over-exuberant PR. But when it creates undeliverable expectations, the risk of disaster rises. Reputation enhancement is not about saying what you are. It’s about doing what you say you are especially when the regulators are asleep.
After the Libor scandal had blown away Barclays’s chairman, chief executive and chief operating officer, one of the bank’s remaining directors, Rich Ricci, admitted: “We’ve always scrutinised our businesses based on their ability to generate returns. Now, however, I feel it is appropriate to modify that assessment by explicitly looking at reputational risk.” This is hardly a new idea. More than 2,000 years ago, the philosopher Socrates said: “The way to gain a good reputation is to endeavour to be what you desire to appear.”
Antony Jenkins, Barclays’s chief executive, should reflect on that. His priority is to close the gap between what the bank claims to be and what it really is. As part of the effort to rebrand itself as an ethical business, Barclays has identified five key buzzwords, or “values” as its spin doctors prefer to label them: Respect, Integrity, Service, Excellence and Stewardship. They sound like something dreamt up by David Brent in The Office. Indeed, Mr Jenkins accepts customers will be sceptical until they see good intentions turned into action.
In Britain, we judge liars particularly harshly. In 2005, when Lord Browne was running BP (LSE: BP.L - news) , the oil company’s Texas City refinery suffered a catastrophic explosion, killing 15 workers and injuring 170 others. The company was hit with a record fine for hundreds of safety violations, yet Lord Browne kept his job. Two years later, he slipped out a falsehood in court about his private life and was forced to resign. The conclusion is unavoidable: perjury is regarded as a more serious failing than presiding over the death of 15 employees.
When it comes to destroying a reputation, Chris Huhne, the disgraced former energy secretary, is the example we should all dread becoming. Unrestrained by a lack of self-esteem, he made just about every mistake in the book. It’s as though Mr Huhne had read an analysis by Wharton Business School of a typical reputational wipeout and then decided to use it as a step-by-step guide for dismantling his career. It proceeds like this:
1. There’s an initial mistake, often minor, that goes uncorrected. 2. A subsequent problem compounds the error. 3. Efforts to correct the problem are often half-hearted, either because there is no recognition of the seriousness of the situation or executives are in denial. 4. When the problem becomes too big to ignore, attempts are made to hide the truth. 5. Finally, there is the awful moment of acceptance that the situation is completely out of control.
Unlike Mr Huhne, Tesco appears to have taken sound advice, as it tries to salvage a reputation that has been holed badly by the horse meat scandal. This observation, I know, will not play well with many readers who wish the retailer only misfortune, but it has, against the odds, clawed back some credibility. With only itself to blame for a failure to monitor suppliers effectively, Tesco acted swiftly, sent a director to face the cameras and published a no-nonsense apology in national newspapers with a promise of an update. It was open and contrite. That said, Tesco is still in a terrible place because it seems unable to bottom out the problem. First (Other OTC: FSTC - news) it was burgers, then bolognese what about sausages and pies?
In contrast, Findus was slow to own up, perhaps deliberately so, and then muddled in its response. “Who’s in charge?” is not a question readily answered, as the trail of responsibility extends across borders. Only yesterday did one of Findus’s private-equity owners pluck up the courage to explain itself properly. It was too late. In a few traumatic days, the myths of others had become its reality.
Case studies of reputational disasters are often laced with management-speak and techno-babble. Strip them down to bare essentials, however, and there is one enduring truth: honesty is at the core of all good reputations. Deceit does more lasting damage than a thousand unfortunate mistakes and a botched cover-up is usually judged more harshly than the original sin. Ask Lance Armstrong.
'Jeff Randall Live’ is broadcast Monday-Thursday at 7pm on Sky News