Posts Tagged ‘Wharton’

One of the reasons that reputation has become so complex has to do with the vast portfolio of stakeholders that companies are asked to engage with. Years ago, companies primarily worried about financial analysts and labor unions. Today the stakeholder audience is deep and wide, ranging from one to many. Some companies have to consider the entire general public and others only 25 people whose opinions and perceptions count. The question that often arises is what's external engagement worth?  For that reason, I like what I read in some research by Witold Henisz at Wharton, Sinziana Dorobantu, senior research fellow at Wharton, and Lite Nartey at University of South Carolina ("Spinning Gold: The Financial Returns to External Stakeholder Engagement") As they said, external engagement pays.  "The researchers' goal was to figure out what role these stakeholder events played in companies' efforts to maximize profits. The answer: a very large role." The researchers looked at 26 gold mines over a 15 year period and coded over 50,000 stakeholder events covered in the media.  Stakeholder events included actions or expressions about cooperation or conflict with mine owners.  As for stakeholders, they included just about everyone..."local and national politicians and community leaders to priests, war lords, paramilitary groups, NGOs and international bodies like the World Bank."  The researchers designed a stakeholder index that revealed the level of stakeholder cooperation or conflict. Communicating and building bridges with their stakeholders led to profitability according to the researchers' anlaysis.

"We found in our research that the value of the relationship with politicians and community members is worth twice as much as the value of the gold that the 26 mines ostensibly control."

 Stakeholder engagement and cooperation helped companies deliver on budget and in a timely manner leading to competitive advantage and profitability. When cooperation was blocked, they found that mines were are open to delays, unrest and additional costs that led to closure or suspension. 

"It used to be the case that the value of a gold mine was based on three variables; the amount of gold in the ground, the cost of extraction and the world price of gold," he states. "Today, I can show you two mines identical on these three variables that differ in their valuation by an order of magnitude. Why? Because one has local support and the other doesn't."

This research can be applied to other industries and does a fine job of making the case for engagement and dialogue. A reputation for cooperation and meeting stakeholders half way at least is critical. It is good to have data to back up the importance of minimizing conflict and its link to financial performance but I agree with the authors who say "it is not just corporate social responsibility, but enlightened self-interest."

  It seems that Checklists are all the rage. Everyone seems to mention the Checklist Manifesto by Atul Gawande which I now have on my vacation reading list.  Along these lines, Michael Useem, Wharton management professor, has written The Leader's Checklist which is out now. I think I will have to read that too because it is a subject that I follow regularly and I've always liked his work.  Useem provides the 15 mission critical principles that help leaders navigate the stormy waters of crisis and personal success. In an interview with Useem, he talks about the need for a checklist to avoid "unforced errors." I was not sure what that meant so I looked it up and quickly found that "unforced error" is a sports term (which is why I had not heard it).

Forced Error- A forced error is when your opponent hits a really good shot (powerful groundstroke, angled volley, drop shot, lob, etc), that you have to run, stretch, dive or scramble to get. Once you get there you are unable to put it back into the court or you hit the net. Technically, you made a mistake but since the your opponents hit a superior shot, they "forced" that error. Basically, if you hit a shot on the run and it doesn't go in, it's a forced error. Unforced Error- An unforced error is a mistake that you make due to simply hitting the ball incorrectly (shanks, mishits) or using improper positioning, lack of precision or just bad luck (such as hitting the let cord and having it drop back on your side). In other words, if you are playing a neutral rally and your shot goes out of bounds or hits the net, that is an unforced error.

The point is that Useem is telling leaders to keep a checklist so that they don't make a mistake such as forgetting to remind employees about following ethical guidelines or how to treat a customer everytime they walk into a room.  When it comes to a Reputation Checklist, we actually have one -- 99 Tips to Safekeeping Reputation. Although there are 99 of them, they are all worth reading and takes about four minutes. Take a read. I keep mine on my bulletin board behind my desktop at work as a reminder that reputation needs to be managed daily, if not hourly.