The importance of reputation in business
This year brought a raft of crises that destroyed personal and corporate reputations. These crises and shattered reputations had a direct and negative impact on share prices, company profitability and business operations.
The personal reputations of senior leadership teams within those companies - and sometimes the health of those individuals - also suffered. Because increasingly, when a crisis emerges, senior leadership figures are facing blame, which may explain the rapid rise in the number of risk executives on company pay-rolls.
We no longer do business in an environment where brands bear the brunt of reputational fall-out. This was dramatically illustrated recently when Oliver Schmidt, a US-based Volkswagen executive, was sentenced to seven years in prison and fined $400,000 for his role in a diesel emissions crisis that is estimated to have cost the German car manufacturer around $30bn.
Volkswagen had already pleaded guilty to charges that it installed secret software in its cars to elude emissions tests, to mislead US regulators and to violate clean-air laws. But US District Judge Sean Cox, who sentenced and fined Schmidt, turned a blow torch on the corporate culture that allowed Schmidt and his colleagues to flourish. He described Schmidt as a ‘key conspirator’ in a scheme to defraud the United States and someone who saw this cover-up as an ‘opportunity to shine…and climb the corporate ladder at VW’.
Schmidt apologised for making ‘bad decisions’ and will be deported after his stint in jail. And there will be more cases to come as a series of current and former VW executives face similar offences.
The Schmidt case clearly links brand reputation with personal reputation in a crisis.
But recent research papers show an alarming disparity in what boards and executives say, and what they do, when it comes to preparing for a crisis.
SenateSHJ’s report - Reputation Reality: Trans-Tasman Perspectives on Reputation and Crisis, surveyed 150 business and corporate communication executives across Australia and New Zealand. It found that while 98% of executives said corporate reputation was a primary asset, only half had a budget line item for reputation management, and only half were planning to invest in crisis simulation training.
This echoes the findings of the Deloitte Crisis of Confidence report that surveyed 300 board directors across the globe and found only 49% of companies have playbooks for likely crisis scenarios and only 32 per cent engage in crisis simulations or training. Only half of those surveyed said board members and management have specific discussions about crisis prevention.
My experience of dealing with corporate crises clearly illustrates that leadership in a crisis comes from senior management and, in some instances, the board. Good crisis management requires at least one or two executives and board members with crisis experience who can soundly navigate the storm - and emerge with the brand reputation, and their personal reputation, intact.
In the 21st century corporate world, these elements are unavoidably intertwined.
As Oliver Schmidt would attest, no longer can executives hide behind the brand during a crisis. It’s time to clean up those smouldering issues...before they turn into a crisis on a Volkswagen-scale.
Craig Badings, Partner, SenateSHJ
How innovation is transforming government
According to Washington Technology’s Top 100 list, Leidos is the largest IT provider to the government. But as Lieutenant General William J. Bender explains, “that barely scratches the surface” of the company’s portfolio and drive for innovation.
Bender, who spent three and a half decades in the military, including a stint as the U.S. Air Force’s Chief Information Officer (CIO), has seen action in the field and in technology during that time, and it runs in the family. Bender’s son is an F-16 instructor pilot. So it stands to reason Bender Senior intends to ensure a thriving technological base for the U.S. Air Force. “What we’re really doing here is transforming the federal government from the industrial age into the information age and doing it hand-in-hand with industry,” he says.
The significant changes that have taken place in the wider technology world are precisely the capabilities Leidos is trying to pilot the U.S. Air Force through. It boils down to developing cyberspace as a new domain of battle, globally connected and constantly challenged by the threat of cybersecurity attacks.
“We recognize the importance of the U.S. Air Force’s missions,” says Bender, “and making sure they achieve those missions. We sit side-by-side with the air combat command, intelligence surveillance, and reconnaissance infrastructure across the Air Force. There are multiple large programs where the Air Force is partnering with Leidos to ensure their mission is successfully accomplished 24/7/365. In this company, we’re all in on making sure there’s no drop in capability.”
That partnership relies on a shared understanding of delivering successful national security outcomes, really understanding the mission at hand, and Leidos’ long-standing relationship of over 50 years with the federal government.
To look at where technology is going, Bender thinks it is important to look back at the last 10 to 15 years. “What we’ve seen is a complete shift in how technology gets developed,” he says. “It used to be that the government invested aggressively in research and development, and some of those technologies, once they were launched in a military context, would find their way into the commercial space. That has shifted almost a hundred percent now, where the bulk of the research and development dollars and the development of tech-explicit technologies takes place in the commercial sector.”
“There’s a long-standing desire to adopt commercial technology into defense applications, but it’s had a hard time crossing the ‘valley of death’ [government slang for commercial technologies and partnerships that fail to effectively transition into government missions]. Increasingly we’re able to do that. We need to look at open architectures and open systems for a true plug-and-play capability. Instead of buying it now and trying to guess what it’s going to be used for 12 years from now, it should be evolving iteratively.”