Reputation is a Fragile Asset

Back in June, I blogged about the risks of Inappropriate Tone at the Top, and what leaders can do to promote an ethical culture. Making it clear that unethical conduct will not be tolerated helps to avoid the costs of lawsuits, fraud, and decisions that are not in the best interest of the organization. I was reminded of that blog when I read the news reports about Kobe Steel, in the New York Times article, Kobe Steel’s Falsified Data Is Another Blow to Japan’s Reputation,  and heard about it on NPR.

For decades, Kobe Steel, Volvo, Wells Fargo, and other companies built and sustained reputations for quality, reliability, value – the attributes that made their brands. Having a great reputation generally results in having a larger market share. A great reputation could also mean commanding a higher price than competitors. Why not? Clients and customers are willing to pay a premium for that reliability and quality.

It is difficult to imagine why the leader of any organization would take risks with a long-established, stellar reputation and completely blow it up. On top of all the greed and hubris, another reason must be that those leaders do not recognize that a good reputation is a valuable asset. A good reputation is also an incredibly fragile asset, as evidenced by the Kobe Steel example. What was built over decades can evaporate in a day, or less.

I do not pretend to know what motivated the leaders of Kobe Steel, Volvo, or other companies to squander their stellar reputations. I do, however, offer five questions to ask before using sub-standard materials, lying about test results, enrolling customers in unrequested programs/services, or engaging in other compromising behavior:

1. Would I be 100% comfortable if my actions or decisions were disclosed in the news?

2. Is meeting profit goals more important than meeting customer/client needs?

3. Is my product or service safe enough for my parent/child/spouse to use it?

4. Do I want to risk all of the time and effort I’ve invested in building my organization?

5. Is my organization protected from prosecution or other claims of negligence or malfeasance, if necessary?

Answers to these and other questions are completely subjective, of course. But these are valuable questions to reflect on in order to uphold your organization’s reputation. Treat your good reputation as the incredibly fragile asset it is. Don’t blow up in a day what took years to build.