GM’s Character Lapse

Professor John Doorley

Abraham Lincoln:  “Character is like a tree and reputation like its shadow.  The shadow is what we think of it; the tree is the real thing.”

GM’s Character Lapse

If there had been in place at General Motors a rigorous, audited,   reputation management and reporting process– including objectives and strategies for accentuating the company’s accomplishments in engineering and safety, as well as for  addressing its problems and vulnerabilities – chances of admitting and addressing the ignition switch problem early would have been enhanced.  Instead, per The New York Times of May 22, 2015: “(U.S.) Justice Department investigators have identified criminal wrongdoing in General Motors’ failure to disclose a defect tied to at least 104 deaths, and are negotiating what is expected to be a record penalty, according to people briefed on the inquiry. A settlement could be reached as soon as this summer. The final number is still being negotiated, but it is expected to eclipse the $1.2 billion paid last year by Toyota for concealing unintended acceleration problems in its vehicles, said the people, who did not want to be identified because the negotiations weren’t complete.”

The faulty ignition switch is linked to more than 100 deaths.   For sure, many people in the company knew about the problem for many years before it was reported and corrected through a massive recall that began in early 2014.  How could that happen?

One reason I cherish the Abraham Lincoln quote is that the tree’s shadow can be shaped, by fertilizing and pruning for instance. The shadow (reputation) can be shaped and even controlled, at least to some degree, despite the wind, the sun, pestilence and so on.  It is hard to argue with the proposition that the continued existence of the shadow is more likely with cultivation of the tree than without.

The other reason to like the Lincoln quote is its emphasis on substance:  “Character is like the tree…the tree is the real thing.” In other words, if an organization takes care of the important things – performance, behavior, communication and intrinsic identity (what it stands for) – then reputation will flourish, at least over the long term. Reputation may get blown around and even distorted from time to time, but the alternative to care and nurturing of the things that matter most is scandal, failure, unemployment,  poverty, a loss of faith in corporations, government, religions, and on and on.  A kind of reputational anarchy.

Reputation Research & Trends

Over recent years the intuitive has been proven true. It has been shown that companies with better reputations attract more and better employees, pay less for goods and services, can charge more for their  products, and accrue measurable competitive advantages.  Since the early 1980s the ‘Most Admired’ surveys, have been providing what is generally seen as reliable   benchmark data for comparing how one company is viewed versus others.   Over the last several years, the growing desire to measure, analyze and manage reputation  has spawned  thousands of firms that claim to do so – a Google search of ‘reputation management’ now yields millions of references – but most such firms do little more than monitor for what is being reported and opined. The major public relations agencies and some of the large consultancies also list ‘reputation management’ in their portfolios but they usually stop short at measurement or analysis.

The good news is that the growing market is also producing thoughtful ways of helping to build and protect reputation, including a way to value it as a percent of market capitalization. The 2014 Reputation Dividend Report showed that the reputations of the S&P 500 companies accounted for 21% of the combined market cap of those companies.  http://reputationdividend.com/who-we-are/#!prettyPhoto

Reputation can be managed, not perfectly but well.   The fact is that some companies are undervalued on certain drivers of reputation—for instance, long-term investment value or corporate social responsibility – and such a problem can be addressed through a targeted communication strategy. In other cases companies are overvalued on such drivers, which then presents a performance or a behavior challenge. To manage the components of reputation – performance, behavior, communication and intrinsic identity (what the organization stands for) – is to manage the whole. To manage relationships with groups and individuals that have a stake in the company is to manage the sum of those relationships, something called reputation.

Stay Tuned

Per The Detroit Free Press of May 23: “The (faulty ignition switch) saga has damaged GM’s bottom line and quality reputation. It spent about $3 billion on a record of nearly 30 million recalled vehicles in the U.S. last year.”

New GM CEO Mary Barra has been rightfully applauded for accepting responsibility and taking corrective actions. Still, in this bedrock American company… how did it happen?  (This blogger thinks he may know why and will discuss that in the next post.)

Takeaways

  • Reputation is an asset. You must establish a process to protect and enhance it.
  • The very existence of a reputation management process and plan will ensure ongoing vigilance and accountability.
  • The surest way to improve the shadow is to nourish the tree.
This entry was posted in Opinion.