Fake honey, sandpaper and charging dead clients fees for services never delivered. There are no limits to the actions that can screw-up a company's reputation, but I am often asked what the findings from our many reputation studies have in common.
Are there a handful of recurring, cultural reasons why companies finish-up with poor reputations? I recently analysed the results of over 50 studies, and while the detailed findings were always company specific, the recurring cultural themes were clear; companies with poorer reputations generally exhibited at least one of three characteristics – they are; too busy, too bossy or too self-interested.
Companies that are ‘too busy’ don’t make time to listen to stakeholders; in fact, they actively avoid them, seeing stakeholders as a problem rather than as a source of problem solving.
There is no question these companies operate in dynamic sectors and face many competing demands on their time, but they don’t for one minute consider their stakeholders can make a constructive contribution to their progress. Instead, these companies display a strong preference to ‘run their own show’, even when faced with challenges that require collaboration to ensure the solution meets the needs of all parties.
Not surprisingly these companies don’t understand their stakeholder’s expectations, making it inevitable that they will frequently fail to meet them. Of course corporate reputations deteriorate when stakeholder expectations are ignored. Corporate affairs leaders of these companies are constantly reacting to the latest issue or event, working tirelessly to put out fires. They’re focussed on this week’s fire, with little forward planning or reputation risk management.
When they are dealing with stakeholders, it is often to patch-up differences with a hurt party and invariably, not for the first time. Their stakeholder relationships are punctuated with damaging events, disappointments and the perpetual loss of trust.
These companies are generally less strategic in their overall leadership style, they don’t attempt to formally identify their reputation risks and their overall strategic planning is poor, consequently they spend a lot of time fighting fires.
In contrast, we found that companies with healthy reputations are connected to their stakeholders. They spend time getting to know their stakeholder organisations, what they do and what their priorities are, meaning they understand the stakeholders’ perspectives and expectations. They often turn to stakeholders to develop solutions through collaboration.
They also designate their own leaders to act as key points of contact with those key stakeholders, proactively communicating and maintaining a dialogue. These conversations are not always happy, but they are constructive, respectful and ongoing. This is not a box-ticking exercise; these organisations work together as partners because it achieves real progress.
Bossy companies are often market leaders or in positions of significant clout. Fully aware of their own power, they are often controlling, sometimes secretive and frequently perceived to be unapproachable. Convinced they hold unique knowledge and influence, their engagement with stakeholders can be token, they ‘deal’ with stakeholders, but their conversations are largely one-way and instructive. Internally, they use the term ‘messaging’ a lot because they don’t really want to have two-way conversations, they prefer to issue statements.
These companies see themselves above their industry stakeholders by reason of their scale and strength. They consider themselves to be professional, hardworking experts, but externally are seen as disconnected, narrow-minded and lacking humility to tap into the capabilities of their stakeholders. They tend to be aloof bullies or intellectual snobs, either way they prefer to ‘tell’ rather than ‘listen’.
Consequently they’re quite friendless and while they are considered a force in their sector, that remains an unfulfilled force because they're usually disconnected from the sector. Instead of playing the role of industry leader, they're the industry ogre. Their bossy attitude serves to distance them from the very stakeholders they should be bringing together in industry collaborations. Then one day when they need to draw on their reputational capital, they suddenly discover they have little. They spent no time building their reputation by listening and responding to the expectations of their stakeholders; they didn’t need to - they were the industry ogre.
Companies that place themselves above their stakeholders underestimate the productive contribution those informed stakeholders can play. Those stakeholders would tell them:
“In state-of-the-art sectors, true leaders take advice, they never have the full story.”
They want to see them change their style and begin to “lead the orchestra” and “to grow-up to be a constructive and collaborative leader of the industry community.”
Smart companies use regular, constructive conversations to collaborate with their key stakeholders. They believe in the capacity of the partnership to solve many problems. Rather than present themselves as the dominant force within the industry they encourage and lead industry collaboration, giving others an important voice. Companies face many challenges, but they don’t have to wrestle with these on their own.
These companies often make choices to place their self-interest ahead of the interests of customers, communities and other stakeholders. They make these choices to achieve their profit goals, meet important KPIs or satisfy a benchmark, usually linked to their own recognition or reward. But the damage is done when the community suffers as a consequence, in fact too often, they win and the community loses. Greed, opportunism, selfishness or winning at any cost, these are the cultural signals of companies that are too self-interested.
The products and services they develop are often designed to meet their needs more than those of their clients, their performance reporting is often more self-serving than it is informative and their dealings with stakeholders are often opportunistic. In extreme cases they may break laws, more often they hide their actions, communicate secretly and secure their gain out of the public view, leaving others worse off.
Groupthink often makes this behaviour and culture seem ok. Peers and subordinates follow the behaviour of leaders of these companies, each in turn driven to meet their KPIs and secure their own rewards. Of the three commons pathways to a bad corporate reputation, this is the most damaging. The expectations of stakeholders haven’t just been ignored they have been taken advantage of.
Eventually these behaviours come to light, perhaps through a whistle-blower, an investigation, or a royal commission. The company’s value is reduced, the community loses massive trust, yet still the leaders struggle to change their culture for fear they will fall short of market expectations.
Place ‘best interest’ over self-interest
Companies with strong reputations never burn the interests of others, to meet their own self-interest. They recognise clients and stakeholders represent valued partners over the long journey. Those clients and stakeholders sometimes describe the relationship as ‘joined at the hip’, because the company is proactively engaged and makes time to understand their business drivers, strategic goals and plans. There will be occasions when the give-and-take of the relationship goes both ways, and these occasions serve to reinforce the respect they have for one another.
Has your company become too busy, too bossy or too self-interested? Take care, your reputation is vulnerable. Your key stakeholders are an informed, interested and strategic source of possible solutions to challenging problems. Fail to listen and you may be wrestling with those problems alone.