Why Leadership Reputation Management Matters to Organizations
The proprietor of a small-town store, the CEO of a publicly traded corporation, and the leader of a nation all have one thing in common. Their communities support or spurn them on the basis of their personal reputations.
Research shows that leadership reputation directly influences organizational and brand value. The reputation of a business or organization executive lends weight to public goodwill and animosity. The effect results in both windfall value and guilt by association.
That is why people often call upon embattled leaders to step down, because the greater good may be better served by severing a relationship before it becomes toxic. But the best leaders steer carefully through the turbulent waters of conflict and controversy. For a marketing manager or adviser, the question is whether the leadership is still a good match for the organization.
Although executive changes aren’t decided by marketing and communications specialists, it is they who must shape the message that reflects the resolve and leadership style of whoever is in charge. The message must resonate with a doubtful audience to have a chance of helping.
Leadership Reputation Begins before There Is a Crisis
Every successful person begins life with virtually no reputation, no record of good or bad deeds. One’s reputation sprouts from a seed of one task completed, one act of kindness, one moment of foresight.
From these early moments in a leader’s career, the road to a great reputation is long and challenging. By the time a person is elected to the national office or chosen to lead a great corporation, he or she has faced many challenges.
Every news report, every personal anecdote, and even all the dry facts of a person’s career are bricks in the walls of a personal reputation. These are the moment’s writers and publicists use to craft the public image of someone who steps onto the stage of public scrutiny.
A past filled with successes and steady accomplishments serves as a grand entrance to the stage of public scrutiny. It is only from that moment on that the past becomes less relevant. The leader must lead or step aside, ceding the stage to someone else.
And yet in a moment of crisis all of one’s past sins and faults – usually overlooked in glowing introductions to new positions of power and influence – are brought out into the open. The fewer past sins one brings to the stage, the less intense public scrutiny feels during a crisis.
A Reputation Is a House Built from Many Labors
A simple axiom of reputation management is that everything you do contributes to your reputation. What other people do also contribute to your reputation.
Benjamin Franklin reportedly said, “it takes may good deeds to build a reputation and only one bad one to lose it.”
While it’s not clear that Franklin actually said such a thing, the oft-quoted phrase is usually attributed to him. The attributions themselves contribute to Franklin’s reputation even more than 200 years after his passing.
The smallest quote can take on a life of its own. Brilliant leaders may be pithy and eloquent, but often their reputations for pithy eloquence are crafted by others. Those simple quotes may come from casual conversations or comments prepared for small audiences, but they can be heard for generations in the right circumstances.
Proper attribution is a fundamental part of the reputation building process. People are remembered for quotable expressions, but only if they are given proper attribution.
Many wonderful sayings and turns of phrase have enriched language and culture, but those who first shared those thoughts have been forgotten because they lacked the reputation of proper attribution.
Executive Reputation Is Always Attributed to the Organization
Unlike a random quote whose origin no one is sure about when a company or organization is in trouble all eyes turn to whoever holds the chief executive position. The stock market buys or sells in part on the basis of the executive’s leadership style and reputation.
In a 2006 paper titled “Marketing the Image of Management: The Costs and Benefits of CEO Reputation”, a research team led by Annette L. Ranft and Robert Zinko found that CEOs are often treated like celebrities.
An organization’s reach into the public sphere through its products, services, and the news it generates creates an aura of celebrity for its most visible executives. It’s now commonplace for executives to speak at conferences, appear on TV news shows, give personal interest interviews to the media, and sometimes even appear in their companies’ advertising.
As the executive’s visibility grows so does his or her reputation. And that reputation helps to build public trust, sales, and investor goodwill. The Ranft and Zinko’s team wrote in their conclusion: “Celebrity is created through mass communication and the media’s strategically orchestrated efforts to manage impressions of organizations for an adoring public.”
The media associate the individual (“John Smith”) with the organization (“CEO of xyz …”). The relationship is inseparable. And therefore the reputation of the individual leader contributes to the relationship of the organization.
The reverse is also true to a lesser degree. Having served as CEO for a smaller organization enhances the executive’s personal reputation, but more for the purpose of seeking a new position of leadership. In a post-CEO capacity, which organizations one has led contributes to the professional credibility of a person who serves as a media consultant or topic expert.
Executive Reputation Has Real Economic Value
The media is complicit in the creation of CEO celebrities, although their motives differ from the executives’ motivations. The media may be selling news or entertainment, but they are selling information to the public in exchange for advertising market share.
The very act of creating a reputation creates economic value for the media. But there is also economic value for the organization whose executive’s reputation is growing.
Writing in the Summer 2000 issue of Public Relations Quarterly, Prema Nakra cited a number of studies from the 1990s and earlier about the economic value of CEO reputation in an article titled “Corporate Reputation Management: ‘CRM’ with a Strategic Twist?”.
In her paper, Nakra argued that “the long term impact of ‘do whatever it takes managers’ who push themselves and others to achieve ever escalating stretch goals without regard to the tendency of such practices to spawn illegal and unethical behavior, is always negative (Wah, 1999).” Recent corporate history bears that out.
The Wells Fargo Bank scandal – where mid-level banking officers created unauthorized accounts for customers – resulted from corporate leadership pressuring employees to deliver sales. The company was forced to change leadership and begin rebuilding its reputation.
The negative impact of a leader’s behavior leads to drag on reputation value, which in turn harms the economic value of the organization. Fewer people want to do business with or invest in a company with a tarnished reputation.
The positive impact of a popular leader is also reflected in sales and stock prices. Lee Iacocca famously brought the Chrysler Corporation back from bankruptcy as much by his personal dynamism as by his decisions about what the company should do next.
Dave Thomas, the founder of fast food restaurant chain Wendy’s, built the corporate brand and value through years of dedicated promotion and representation. Occasional negative publicity about Thomas (such as his differences with his own family) was overshadowed by his immense popularity with the public. The restaurant chain’s growth is still cited as an example of founder-driven success in schools and the media.
Executive Reputation Influences Public Opinion of Companies
One need only look at common news headlines about major corporations to see how much their leaders’ personal reputations influence public opinion.
Steve Jobs was regarded with awe and respect by the public for founding and then returning to Apple, Inc. with inspirational leadership. Although Apple had its ups and downs as a corporation, its reputation was uplifted by Jobs’ reputation for brilliant insights into technology and its uses.
But there’s no simple formula to follow for that. Apple’s reputation came mostly from the success of its own products. If you asked a random number of people what company Steve Jobs founded, most will tell you Apple Computers.
But how many of those people know he founded Next Computers, too?
Next was not a wildly financially successful company but it sustained itself and influenced many other tech companies including Apple, Dell, and IBM. Next was eventually purchased by Apple. But when people think of Steve Jobs’ career, they think of Apple and not Next.
Reputation management isn’t just a crisis response methodology. It’s a full career, organizational life-long responsibility. The details of reputation management become more complicated as an executive becomes better known to the public.
Every organization that needs to engage with the public needs to manage both its own reputation and the radius of its executives’ reputations that including the organizational persona. The collective value of all leadership reputations is impossible to quantify.
What is easy to quantify is the difference in cost between pre-emptive reputation management and reactive management. One bad deed may undo a lifetime of achievement, but if the lifetime of achievement is highly celebrated, the bad deed usually must be very bad indeed. The public is often willing to forgive small sins or mistakes if they don’t loom over a small reputation.