2017

CAREER CORNER

Risky Reputation

Maintaining the organization’s image is part of your job

by Henry J. Lindborg

Corporate reputation requires more than traditional public relations. Davis Brand Capital, for example, takes a holistic view. According to its website, corporate reputation involves: "Integrat[ing] key intangible drivers of marketplace value: image and reputation; business performance and competitive position; innovation and intellectual property; cultural and human factors; and social responsibility and impact."1

Formerly the work of marketers, an organization’s image and reputation are now integral to quality and risk-based management systems. Like quality itself, they are everyone’s business in sustaining corporate integrity, and they deserve the attention of quality professionals.

Ethical risks

The biggest risks to reputation are ethical. The Baldrige criteria evaluate leaders’ commitment to "legal and ethical behavior" and their role in "promot[ing] an organizational environment that requires it."2

Enterprise risk management (ERM) begins with an ethical "tone at the top," meaning the organization’s leadership sets the standard for ethical business practices, supported by an internal environment that sets the basis for how risk is viewed and addressed by an entity’s people, including risk management philosophy and risk appetite, integrity and ethical values.3

Distinctions between external and internal corporate relations have been disappearing for decades. "Networking, business process reengineering, flexible manufacturing, delayering and the new focus on customer service redefine what were previously considered matters of external relations as part of the daily activities of nearly all organizational members."4

Enmeshed in new sets of relationships, organizations seeking to establish enduring brands cannot afford gaps between vision and culture or culture and image.5  The quality movement has been at the forefront of ensuring what an organization shows to the world is what it is. I once asked Phil Crosby to help define a set of "quality values." His response: "Quality is integrity."

For example, after recently enduring a significant blow to its reputation for quality, Toyota appointed an advisory panel, which found disconnects between image and a culture that cared less about resolving issues raised by customers than those uncovered by employees. Worse, the organization’s vaunted Toyota Production System and Toyota Way were not always applied beyond its manufacturing processes in a way that helps it achieve optimal quality and safety throughout its business. And safety received lower priority than quality. Such gaps create a risky culture, but the panel found Toyota’s history and systems of customer engagement made long-term misalignment unlikely.6

In contrast with Toyota, Exxon Mobil had a terrible reputation, symbolized by the 1989 Exxon Valdez oil spill disaster, which drew decades of ire and mockery. In the book, Private Empire: ExxonMobil and American Power, author Steve Coll recounted the development of the organization’s operations integrity management system, intended to reduce risk at every level.

The Valdez became a present and conscious measure of the challenge. In fact, a culture of risk became so pervasive that, as Coll reported, "Group safety confessionals at Exxon offices and plants covered conduct beyond the workplace: The correct use of a ladder while cleaning gutters at home might be discussed, or the imperative of wearing seat belts during the daily commute, or the danger of getting too much sun on a beach vacation."7

At Pennsylvania State University, issues of safety and management responsibility were compounded by gross ethical violations when a sex-abuse scandal involving former assistant football coach Jerry Sanduski was revealed. Penn State had a great image in academics and sports, but more than one of its cultures—there are usually several in organizations, and even more in higher education—were deeply flawed, putting the university itself at risk.

The university engaged Louis Freeh, a former director of the Federal Bureau of Investigation, to investigate. Freeh’s 120 recommendations included a review of the Penn State culture, a revision of the board of trustees’ responsibilities, requirements for compliance in reporting risk and misconduct, and implementation of systems to monitor change and measure improvement. These recommendations—along with a call for accountability and transparency, better risk assessment, pervasive ethical decision-making and bolstered systems to support whistle blowing and legal compliance—closely parallel components of ERM.8

Culture of quality

How Penn State will implement these recommendations and repair its reputation is yet unclear. Certainly, it will not create a pervasive confessional culture of risk such as Exxon Mobil’s, and its quality systems lack the depth and resilience of Toyota’s culture.

By their nature, universities—especially large research institutions—are systems with competing values, bureaucratic challenges and a heavy reliance on perceived quality that the public sometimes associates with the big business of college sports. In their complexity, however, they require rigorous ERM, an approach that might enable Penn State to structure its response to Freeh’s report.

As the Committee of Sponsoring Organizations of the Treadway Commission said, "When ERM is determined to be effective … the board of directors and management have reasonable assurance that they understand the extent to which the entity’s strategic and operations objectives are being achieved, and that the entity’s reporting is reliable and applicable laws and regulations are being complied with."9

In crisis, addressing risk is the first response. In the long term, however, higher education also requires a fully integrated framework such as Baldrige’s.

In today’s business environment, sustaining a positive organizational image is just as much a concern for the quality department as it is for marketing or any other business unit within an organization. Quality professionals have a responsibility to lead the organization in quality management practices to create a culture that will help ensure the organization’s reputation and image are not at risk.


References

  1. Davis Brand Capital, http://davisbrandcapital.com.
  2. Baldrige Performance Excellence Program, 2011–2012 Criteria for Performance Excellence, p. 7.
  3. Committee of Sponsoring Organizations of the Treadway Commission, "Enterprise Risk Management Integrated Framework Executive Summary," Sept. 2004, p. 3.
  4. Mary Jo Hatch and Majken Schultz, "Relations Between Organizational Culture, Identity and Image," European Journal of Marketing, 1997, Vol. 31, p. 356.
  5. Mary Jo Hatch and Majken Schultz, "Are the Strategic Stars Aligned for Your Corporate Brand?" Harvard Business Review, Feb. 2001, p. 132.
  6. The Toyota North American Quality Advisory Panel, "A Road Forward: The Report of the Toyota North American Quality Advisory Panel," p. 6.
  7. Steve Coll, Private Empire: ExxonMobil and American Power, Penguin Group, 2012, p. 32.
  8. Freeh, Sporkin and Sullivan, LLP, "Report of the Special Investigative Counsel Regarding the Actions of the Pennsylvania State University Related to the Child Sex Abuse Committed by Gerald A. Sandusky," July 2012.
  9. Committee of Sponsoring Organizations of the Treadway Commission, "Enterprise Risk Management Integrated Framework Executive Summary," Sept. 2004, p. 5.

Henry J. Lindborg is executive director and CEO of the National Institute for Quality Improvement in Fond du Lac, WI, which provides consulting in strategic planning, organizational development and assessment. He holds a doctorate from the University of Wisconsin-Madison and teaches in a leadership and quality graduate program. Lindborg is past chair of ASQ’s Education Division, and of the Education and Training Board. He also chairs the IEEE-USA’s Career Workforce Policy Committee.


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