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Wednesday, November 22, 2020

The Fragile Power of Reputation



In business, reputation is worth hard cash. Risking it for expediency, speed, or short-term gain (the hallmarks of Hamburger Management) is the height of folly. Yet that is what too many organizations and their leaders do today, often on a regular basis. If those in charge of your organization don’t see preserving or enhancing its reputation in the world for honesty and quality dealings with others as one of their primary duties, get out while you can. They are headed for a nasty fall someday soon—quite possibly much sooner than they think.


In business, a solid reputation is worth hard cash. The better your reputation, the more likely it is that bankers and investors will put money into your enterprise—and do so on favorable terms. Suppliers are more willing to allow you advantageous credit deals. Customers will seek you out and remain loyal in the face of attempts by your competitors to steal them away. High-quality staff will be quicker to find and easier to retain. In fact, all your costs will be reduced, while your ability to sell your products and services at better-than-routine prices will be enhanced at the same time.

So why would any sane group of executives ever put this priceless asset at risk? Everyone knows that while it can take decades to create a favorable reputation, you can destroy one almost in an instant. When that happens, the effect on the business is little short of catastrophic—and it lasts and lasts, maybe for decades. Outright dishonesty, like Enron practiced and tried to conceal, can wreck a business altogether. But any loss of reputation hurts. Credit tightens, suppliers drive harder bargains, talented staff flee, and customers leave you without a backward glance.

Lowered quality, cutting corners, driving employees every harder, and stepping away from moral, if not legal, obligations in areas like pensions and healthcare benefits may please Wall Street for a few days; but the longer-term impact on reputation can quickly turn any such benefit into a major liability.
A major part of the danger of short-term approaches like Hamburger Management is the threat posed to a hard-won reputation. To sacrifice peoples’ good opinion for the sake of short-term profit is the height of stupidity. Lowered quality, cutting corners, driving employees every harder, and stepping away from moral, if not legal, obligations in areas like pensions and healthcare benefits may please Wall Street for a few days; but the longer-term impact on reputation can quickly turn any such benefit into a major liability. Besides, who wants to build the kind of reputation that includes sharp dealing, disregard for customers, screwing suppliers and treating employees more like indentured servants—or even slaves? Look at the money Wal-Mart has been spending of late to try to counter a negative reputation; or how hard it has made it for them to gain agreement to build new stores in some localities.

Hamburger Management isn't a smart idea. It's a dumb way to destroy your reputation, like a group of greedy children frittering away the inheritance given to them by honest, hard-working parents. What will be the impact on international trade—and the nation's financial standing—if U.S. commerce as a whole throws away its reputation for honesty and high standards, in favor of a few years of easy money for fat cats?

You don't rate as a leader due to position, reward, or glamor. What makes you a leader—a true leader—is your reputation for honesty, high standards, wisdom, and the determination to set other's needs above your own.
Leadership doesn't only mean taking tough decisions in a technical or competitive sense. It means acting as a steward for the organization's values and reputation; and— if necessary—defending that reputation stubbornly against all the siren calls of those wishing to set short-term personal and organizational profit above everything else. You don't rate as a leader due to position, reward, or glamor. What makes you a leader—a true leader—is your reputation for honesty, high standards, wisdom, and the determination to set other's needs above your own. Lose that and you become just another wannabe fat cat, with ethics that are as laid set aside as a tart's underwear—and for much the same reasons.

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4 Comments:

Toby Getsch said...

Great image to convey your point.

3:15 PM  
Carmine Coyote said...

Thanks, Toby.

7:20 PM  
Ammar said...

Reminds me of something I heard recently about Zenith.

Apparently back in the day, Zenith used to be top of the line TVs, with a great reputation and brand. Eventually, though, the managers thought they could cut some costs by putting in second-rate components and bank on the brand for sales. Yea, right. Anyhoo, now Zenith is pretty much bottom of the barrel.

I'd have to look it up to verify if this is all true, but this is a tale that's been played too many times in the business world.

7:53 AM  
Carmine Coyote said...

Thanks for your comment, Ammar.

Even if that's not precisely true of Zenith, I'm sure it will have happened elsewhere. I have certainly found it with retailers who develop a strong brand, then start slipping in cheap goods at high proces, relying on the brand to see them through.

It always fails—often catastophically.

Keep reading, my friend.

8:01 AM  

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