Wednesday, January 04, 2006

Reputational Failure

I would be remiss if I did not mention that an article I wrote (with my colleagues' help) about the early warning signs of organizational failure ran in The Wall Street Journal Manager's Journal on December 27th. It is below.

As the new year begins and leaders return to their offices, it is important for chieftains to recognize internal signs of wear and tear that could halt their progress in 2006. Some of the telltale signs are mentioned in the article and eight more will be released later in the month.

Equally important, employees who see these early warning signs should speak up now and get their message to the right people. Every organization has people who are receptive to hearing about trouble and who will effectively deliver the message. No sense in sending out your resume unless you have tried to get the message upstairs or have tried to do something about it. Some companies provide anonymous hot lines and confidential e-mail addresses. Put them to use!

As the new year moves forward, get your house in order so that your company's reputation is safe from harm.

Manager's Journal
On Business Storm-Proofing
By Leslie Gaines-Ross
895 words
27 December 2005
The Wall Street Journal

AFTER PHIL PURCELL resigned from Morgan Stanley, he spoke not of opportunities lost but of warnings missed. "It was many, many little waves," he said. "It wasn't one storm."

He might as well have been speaking of the ebb and flow of the reputations of companies and the people who lead them. In the end, a good reputation is the most competitive and valuable asset of any individual or institution, but it can be easily eroded. In our ongoing survey of 685 global business leaders in 65 countries, some 81% report that there are more company reputation threats today than there were two years ago.

Great reputations are not accidents; they are not the result of good luck or built overnight. They are carefully planned, nurtured and managed as the vital asset they are. Likewise, reputations are not always destroyed outright, but are often gradually eroded by a ripple effect.

However, there are clear warning signs -- or little waves -- that signal a company or leader is in trouble. The good news is that in corporate life, as elsewhere, early detection is critical in damming against the oncoming surges. If leaders can identify the signs of oncoming reputation failure, they can take immediate steps to halt its progress.

This is not as difficult as it might sound. In Burson-Marsteller's research, we were struck by the near universal agreement of the order and magnitude of the early warning signs. Remarkably, business leaders across all regions -- North America, Europe, Asia-Pacific and Latin America -- listed virtually the same seven conditions in virtually the same order: (1) Employee morale is low. (2) Internal politics are more important than doing the job well. (3) Top executives are departing. (4) CEO celebrity is displacing CEO credibility. (5) Employees speak of customers as nuisances. (6) Employees stop telling positive stories about the company. (7) Management spends more time inside than outside headquarters.

If any of these signs sound familiar, then it's time to take an objective look at your company and begin the challenging process of protecting your company's reputation while there's still time.

According to published reports, these signs should have been evident to Mr. Purcell toward the end of his tenure at Morgan Stanley. Top executives were bailing out; others were politicking internally by anonymously bad-mouthing Mr. Purcell to reporters. And, customers complained of feeling unappreciated.

Yet every one of these issues can be resolved if management heeds the warning signs. Take the issue of low employee morale. Companies need to keep a closer eye on employee satisfaction and make better use of internal communications. It also doesn't hurt to have an approachable boss who regularly walks the halls. Internal politics can be minimized when leaders set -- and adhere to -- a policy that is based on a meritocracy and incentivizes employees in different departments to think of themselves as teammates. Motorola CEO Ed Zander had this type of silo-busting in mind when he had the company's marketing and public relations employees spend a day in the company's lab.

Talented executives are always in demand, so some high-level departures are inevitable. However, companies can stem the turnover tide by frequently updating their succession plans, developing one-on-one relationships with their rising stars and, when high-level people depart, seriously considering and acting on exit interview comments. Companies should also avoid the temptation to turn the CEO into a celebrity. Instead, they should choose select exposure -- rather than over-exposure -- and promote the c-suite as a team so that continuity is protected in the event of a CEO departure.

Know any positive customer stories? Then begin every internal communication with one to remind all employees that customers are not annoyances. Having senior executives staff the customer service lines now and then, and listen in on disgruntled customer calls, are other good ways to keep the focus on the customer. As Wharton Professor Robert Mittelstaedt reminds us, for every one lost customer you hear about, there are 10 more you don't.

Spreading the word on upbeat employee stories is another way to help keep a reputation afloat. They should be woven into the company folklore and play a key role in employee orientation and the Intranet. People also speak more positively about their company when accomplishments large and small are acknowledged and celebrated. Finally, keep in mind that a successful reputation can never be built within the four walls of the executive office. Former GE Chairman and CEO Jack Welch always reminded himself that "headquarters doesn't make anything or sell anything."
Being accessible to customers, the media and other audiences, and delegating to qualified management team members, can put a company on course for a long and successful journey.

When a company's reputation suffers, so do the company's culture and bottom-line. By keeping these warning signals in their line of sight, leaders can avoid being pulled under by the intensifying waves of reputation failure and successfully navigate their way through 2006 and beyond.


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