Leaders In the Know

Seven Performance Indicators Build Reputation

On Forbes.com today, Charles Fombrun, chairman of a group called the Reputation Institute  reports that corporate stakeholders attach importance to seven key indicators of performance: product quality, innovation, financial results, citizenship, leadership, workplace and governance. Further, a 1% increase in reputation produces a 1% increase in stakeholder support and a 1% increase in market value.   

It's not good enough to be strong in one and weak in another; competing interests cancel each other out.

He  illustrates the point by contrasting the reputation of  Johnson & Johnson with that of AIG.

A related article reports on the Institute's study of 600 companies internationally, which forms the basis for these conclusions.  You can check out the findings on the  Top 200 List. A separate list shows how the top 153 American companies fared.

It's impossible to maintain a positive reputation when inordinant attention is paid to shareholder value on a quarterly basis. This myopic focus means that those with a vested interest in the long term - customers, partners, employees (and as we've come to learn the hard way, everyone else in the economy) - loses. 

With the exception of financial results, six of the seven performance indicators are affected by how they are measured by influencers rather than hard numbers.  

Influencers with authority shape our perception of a company's reputation.

The difference between what "authority" means online  is very different than what it means offline, Online, authority is measured by links, hits and views of a website, while offline it refers to a person's expertise and experience. 

The same is true of "influence".  Online influence is measured in terms of how far a person's ideas or opinions spread over the internet, how long people pay attention to them. Offline, it's another matter entirely. 

Because of the reach, scope and speed of the internet, companies are right to be concerned about maintaining a positive reputation online.

On Leadership

The Washington Post has launched a new site On Leadership. It's worth a look.

The hook for the site is a "one stop shop" to find out what top thinkers think about a leadership issue of the week.  What a week to get started - what with the three auto maker musketeers and Rod Blagojevich to choose from. 

Another feature is a video that's a series of minute or two clips on leadership. So you can look at one or all; a title slide makes it easy to find a clip you might want to look at again if you missed it by going through your email or cleaning off your desk while watching.

This week's video is of Fed Ex CEO Fred Smith, who leads 300,000+ employees. One of the things he talks about is the importance of  fairness. He cares about it so much that the company posts a Guarantee of Fairness. Any employee who thinks a management decision isn't fair can get it reviewed by someone  higher up in the ranks - or by peers.  See the clip for more.

There are a couple of other features about this site that are particularly appealing to me. First, the panel is a diverse group of thought leaders - including my Wharton colleague, Mike Useem. (OK, I know I'm biased; but when Mike talks, I listen.)

The panel's question page is set up so that it's easy to quickly scan the one liners that sum up each panelist's opinion and link to the rest of their individual blog post.

In case you were wondering, the auto makers won. Maybe they'll get to the Illinois governor next week. 

The question: What More Could Auto Execs Have Done?  Some responses were along the line of "throw the bums out," others thought they should have come  to Washington with detailed plan in hand. Some may even surprise you... like the ethics expert and lawyer who says, "Executives shouldn't work for nothing: They need incentives to meet their new commitments." Huh?

But Barry Posner's observation struck a cord for me: 

They brought to the table a vision of the past,
rather than some sense of imagination about the future.

Words for all of us to live by.

Fed Ex's Smith (talking about self-discipline as a leadership trait) speaks of how hard it is to pick the right people, give them authority to act and then let them run with it - even if you don't agree with them. Something I really believe in.

But that got me thinking about what more the auto execs could have done. (And maybe the financial execs as well.) 

Empowerment is a wonderful thing. But shouldn't the leader have the discipline to seriously question faulty thinking, self-serving decisions and lack of imagination about the future that puts their organization at risk?

Whether it's selling subprime mortgages or bigger and bigger SUVs, it appears that some leaders who should have known better put their bonus ahead of  their judgment.