REPUTATION AND GOOD GOVERNANCE

There used to be a saying, “My word is my bond”, which is perhaps in the light of quite recent events, somewhat ironic since it tended to be associated with the world of banking and finance. Reputation and, by implication, trust is hard won, but easily lost:

The damage done to the reputation of the global banking industry by the financial crisis of 2008 will, I believe, take decades – perhaps a generation, or more – to repair.
Who can measure the reputational cost of the UK’s ‘horsemeat’ scandal of 2013 to amongst others, Tesco?
What are the long-term reputational costs to Bangladesh as a country and its economy of the Rana Plaza disaster of 2013?
What was the reputational cost to the staff of the News of the World, following the phone hacking scandal (2005 – 2011)?
What was the reputational cost to UK MPs following the expenses scandal of 2009?

The list is pretty well endless and anyone reading this blog can doubtless offer their own examples. For me the key issue is that this loss of reputation was largely attributable to the actions of individuals, whether acting alone or collectively, which is part of the reason that your people are not just your greatest asset, but also, potentially, your greatest liability. Organisations, I would suggest, unless they are not concerned with their reputation, which would be worrying indeed, need a clear set of values.

An organisation’s values are neither something created by the board and promulgated like the Ten Commandments, nor are they the creation of the HR Department. If you want your people to take ownership of your organisation’s values, you should involve them in their formulation. The board, which has ultimate responsibility for an organisation’s governance needs to show leadership and should develop the first draft for discussion; this also serves the useful purpose of showing all their people that this is something that they (The board) consider important. We are not talking War and Peace here, a values statement should summarise the organisation’s core values in language that all your people, together with your customers and suppliers, can understand. You are probably talking about no more than a list of 8–10 bullet points, so no more than a single A4 page in large type. If in doubt, apply the ‘KISS’ principle; ‘keep it short and simple’.

So how do you involve your people in the definition of your organisation’s values? My suggestion would be to include it as a ‘big ticket’ item in your regular team briefings (You do talk to your people on a regular basis don’t you?). In larger organisations there may well be some form of employee consultation forum, if so then get it on the agenda for that body. Once you have a final draft, then you might consider circulating it to customers and suppliers for any comments. Ultimately this is about reputation and how your values will reinforce it and underpin it, so why not involve customers and suppliers in the process?

There is a major problem with having a statement of values and that is that everyone, and I do mean everyone, particularly the board, has to ‘walk the talk’ and their behaviours have to reflect the values. Employees, customers and suppliers will quickly notice if the Board and Executive are not walking the talk, which does nothing for their credibility and your organisation’s reputation. However, given time, they will become part of the organisation’s culture, ‘The way we do things here’. This then has major and long lasting benefits for the organisation:

It promotes a culture of good corporate governance;
It helps with recruitment. It enhances the organisation as an ‘employer of choice’. Applicants have some understanding of the culture of the organisation, before they apply;
New starters understand the values and behaviours expected of them;
Deviation from the values will invariably result in peer group pressure;
Customers and suppliers will appreciate being associated with an organisation with clear values that it adheres to; and,
Reputational risk will be reduced.

So what might your values statement contain? I am not going to be prescriptive, every organisation must develop its own values, but here are some general thoughts to start the process moving:

We value our people and our people value our customers and suppliers.
We treat all our people with dignity and respect and our people treat their colleagues and customers with dignity and respect.
We act with honesty and integrity in all our business dealings.
We actively encourage openness and honesty within our organisation.
We encourage initiative, coupled with responsibility.
Our reputation is critical to our success. Our people are actively encouraged to protect our reputation.
We encourage our people to voice their concerns when they believe that colleagues are not acting in accordance with our values.

There have, in recent years, been a number of cases – the horsemeat scandal being just one –where organisations have suffered significant reputational damage because of failures in their supply chain. Those same organisations very often make extensive use of audits of their suppliers. Such audits, which undoubtedly have their place, tend to rely upon the honesty of the auditors and the honesty of suppliers, neither of which can be assured. I do not doubt the honesty and integrity of most auditors and suppliers, but if a supplier is cutting corners are the auditors/you going to get honest answers? As my former colleagues at Responsible Trade Worldwide (RTW) would say, one part of the answer is to “Give the People a Voice”.

Reputation is, of course, not just about organisations, it is also about individuals and even nations. It is also inextricably linked with good corporate governance; failures in corporate governance can have a massive and negative effect on an organisation’s reputation and may even imperil its very survival. Like good corporate governance, reputation is not about compliance (legislation and regulation); it is about people, their actions, behaviours and values.