Corner Office-Your Reputation
After many years in business, there’s little that surprises me anymore. But one thing can keep me awake at night: thinking about me and my firm’s reputation. It’s taken many years to build it, and one major slip-up, or a series of minor mistakes, could tarnish it forever.
When I think about this subject, I am reminded of an Ole and Sven story. The two friends were in Duluth, standing at the end of Canal Park Drive looking over the beautiful view of Lake Superior. “Sven, do ya see da big ships out in da harbor?” “Ya, Ole, I do,” said Sven. “Sven, I built dose ships, but do they call me Ole da Ship Builder?” “No, Ole, they don’t,” said Sven, shaking his head in bewilderment. They turned around to gaze at downtown Duluth. “Sven, do you see all dose big buildings?” “Ya, Ole, I do,” said Sven. “Sven, I built dose buildings, but do they call me Ole da Commercial Real Estate Developer?” “No, Ole, they don’t,” said Sven, again shaking his head. Then Ole said, “And Sven, do you see all dose homes on da hill?” “Ya, Ole, I do,” said Sven. “Sven, I built dose homes, but do they call me Ole da Land Developer?” “No, Ole, they don’t,” said Sven, shrugging his shoulders. “But Sven, don’t ya know. I only got one lap dance from a dancer at Lars’ stag party, and now they call me Ole da Minnesota Viking.”
The story makes a serious point: You can work a lifetime building your reputation, but one lapse of judgment can wipe out all the goodwill you’ve accumulated over those years. Leaders have a duty to not only protect their company’s reputation, but also their own.
The Most Valuable Asset
Ask chief executives what their company’s greatest asset is and they’ll probably reply, “Our people,” or “Our products.” Only a few more enlightened executives will answer, “Our reputation.” Don’t believe me? Take a look at company budgets and see how much is devoted to defending or growing market share versus defending or improving reputation. Most companies are penny wise and pound foolish when it comes to reputation.
Reputation should be top of mind in everything your company does, from the way the phone is answered and letters are written, to how products and services are delivered. All of these actions create your franchise value or reputation. I believe reputation is the most valuable asset of every business—providing it’s a good one. Your reputation is one thing that’s gained in inches, but lost in miles.
A Single Act
What comes to mind when you read these names: Kenneth Lay, Carly Fiorina, Bernard Ebbers, and Martha Stewart? All were successful business leaders who had reputations for brilliance until scandal filched away their good names and the value of their companies. Years of success were marred by a single act of greed, arrogance, or power mongering. What a shame.
These names may conjure up national news headlines, but the Land of Ole and Sven has a few tarnished reputations, too. What about George Kline, who was one of the Twin Cities’ premier angel investors, until he served time for trading on inside information?
Or what about William McGuire? McGuire became UnitedHealth Group’s leader in 1989, when its revenues were just over $400 million. He built UnitedHealth into a Wall Street darling, and was considered to have the Midas touch by shareholders who became wealthy as a result of their investments. McGuire became wealthy, too, and was one of Minnesota’s—and the nation’s—most highly paid executives. At the same time, he and his wife earned a reputation for philanthropy.
But in 2006, allegations that McGuire had backdated his stock options and that the backdating hadn’t been properly accounted for became public. He resigned in October, and agreed to re-price his stock options to eliminate any gain from backdating. The Securities and Exchange Commission has since launched a formal inquiry into the matter. At the time of this writing, it is unresolved. However, McGuire’s once stellar reputation has been tarnished forever. That’s a terrible fate for a man who had an incredible career and was on his way to leaving a wonderful legacy.
Your Face = the Company’s Face
Fortunately for UnitedHealth, the scandal has not ruined the company. That’s not always the case, however, as illustrated in the Arthur Andersen debacle, where the world’s premier professional services firm was destroyed by the poor judgement of one partner.
People in positions of business leadership must realize that when they accept the keys to the corner office, it is a privilege that implies certain responsibilities. Operating a profitable company that is responsive to customers, employees, and other stakeholders is the obvious stuff. What I’m talking about are personal behaviors that reflect the highest moral standards in all areas of your life.
Your image, behavior, and reputation are inextricably linked to the reputation of the company you lead. Business leaders set the tone for company culture and values, and define the company’s vision and strategic direction. Your face is the company’s human face.
Think about Bill Gates and you envision the face of Microsoft. Think about Jack Welch and you envision GE. Conversely, think about William McGuire or Bernie Ebbers. The latter two were the crÃ¨me de la crÃ¨me until they made one egregious error in judgment that brought their reputations crashing down, tarnishing their company’s image.
See what I mean? The mug that looks back at you from the mirror every morning is your company’s public image. That should make you straighten your shoulders!
Who is to blame when a company’s reputation is blemished? Some blame goes to the leader for his or her behavior. The company’s board of directors must act as a parent teaching a child to accept responsibility for his or her actions.
However, the blame game shouldn’t stop there. Too few boards of directors have the discipline to accept responsibility for the system that American business has created. I’m talking about the system that rewards aggressive, arrogant behavior. If you want to climb the corporate ladder all the way to the corner office, you need to develop certain personality traits to get there. People with big egos, who believe that rules don’t apply to them, are generally the ones who make it to the top. When they get to the top, they behave as if laws and accepted ethical rules don’t apply to them. It’s the responsibility of board members to make sure their company has good corporate governance and corporate values, and to enforce those laws and rules.
Board members need to protect the company’s physical assets, but they also have a responsibility to protect the intangible assets, including the company’s good name. After all, Ole taught us a lifetime of good deeds can be wiped out overnight by one selfish act of greed or pleasure.