Let’s have a look under the hood:
- Because reputation relies on perception, it’s easily skewed. Over time, failure to live up to your billing will become apparent and your reputation will suffer. For example, the oil company BP portrays itself as environmentally friendly, but a series of scandals—among them a refinery explosion in Texas and a preventable pipeline leak in Alaska—hurt the firm’s value.
- Standards and beliefs change. Take your pick of practices once considered acceptable that won’t fly today, such as appointing friends of the CEO to boards as “independent directors,” or “smoothing” earnings.
- Bad timing may look like hypocrisy. A few years ago, American Airlines negotiated a sizable pay cut with workers at the same time it approved a big payment to protect executive pensions. Because the CEO hadn’t ensured that his team was acting in tandem, he lost his job.
What should you do? Using your loudest in-house critics along with your wisest diplomats, assess your company’s reputation, evaluate its real character, close the gaps in its reputation, stay on top of changing beliefs and expectations and put somebody in charge of monitoring the situation and warning you.
Safeguarding your reputation is not only right, it’s smart. As Ben Franklin said: “It takes many good deeds to build a good reputation, and only one bad one to lose it.”
—Adapted from “Reputation and Its Risks,” Robert Eccles, Scott Newquist and Roland Schatz, Harvard Business Review.