Reputation and risk: a fine balance

As Warren Buffet said, “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.” Professionals must constantly balance the need to capitalize on their reputation with public expectations of responsibility. Here are some observations on how to get it right.

Have a reputational goal in mind

I recently watched a PBS special about Johnny Carson. Now-famous comedians interviewed said they thought of their careers as B.C. (before Carson) and A.C. (after Carson). Being called over to chat with the legendary host after their first stand-up appearance “made” their careers.

When you began practice, did you daydream about working with a well-regarded specialist? An influential client? The esteem that comes from being respected by others, and from having your work recognized is known as ‘reputational capital’.

To build reputational capital, you need to be clear about what you want your reputation to be in the first place. Some people want to be known as good leaders, or creative strategists or even as quiet technical experts known for reliable, superior quality work.

Some professionals will even openly admit that high income is a goal, as discussed in Daniel Kahneman’s  book, “Thinking Fast and Slow”. In a study of medical students, many who aspired to earn a high income had achieved their goal 20 years into their career. They were also more satisfied with their lives than their classmates.[1]

This is where risk enters the picture…

Professional practice – whether private, public or even in an academic realm – implies certain expectations. Clients, employees, employers, colleagues, partners, regulators, media and your community all expect you to behave ‘professionally’.

Your reputation balances what you say about yourself with what others say about you. It’s the latter half of this equation that causes anxiety among many professionals.

Once patients leave your office, once an employee departs or once you speak publicly, lasting perceptions and judgments are made of you. If opinion makers such as media quote you, those who not have met you might also have an opinion. (Consider your own opinions of leaders in your profession whom you haven’t met, for example.)

The risk of being unaware of your reputation far outweighs the risk of finding something that you won’t like.

Find out what people expect. Ask questions of patients and clients. Know the regulations governing promotion of your practice and your business operations. Gather feedback from seminar attendees. Ask your team what they value in a workplace. Set up a Google alert for your name and practice. File media clippings in a central location so you can determine reputational patterns and risk. Survey clients regularly, not just when you’re looking for referrals.

Reputational capital funds growth. It’s the security used to attract employees, clients and investors. It keeps you competitive in a crowded marketplace. Like any capital account, you can also draw on it for emergencies.

Have a plan for when things go wrong

A disgruntled former employee publishes an unflattering opinion of your practice online…
A partner leaves, taking a significant client base with her…
A media crisis exposes vulnerabilities in public perceptions of your profession…

These situations happen every day in practices and firms throughout North America. Some recover quickly, others suffer long term damage.

If you’ve built enough reputational capital, your response will be perceived as credible. This is known in p.r. parlance as the ‘halo effect’. The halo shields your reputation from damage. Clients, for example, will be inclined to give you the benefit of the doubt. They are more likely to say, “There must be more to the story” instead of “That isn’t surprising”.

Daniel Diermeir, Ph.D., professor at Kellogg School of Management at Northwestern University, says that during a crisis, most organizations tend to forget the basis of their business model– the need to maintain trust. Instead, they focus on technical and legal issues, and on assigning blame.[2]

I agree with him. When making public statements during a crisis, professionals tend to rely on their position as subject experts instead of trying to understand how others view them. It’s understandable. But it’s also a mistake.

If you can cite statistics of satisfied customers, your corporate or professional leadership, or if you have sound policies in place, your response when your reputation is threatened will be quicker and your risk reduced. You will appear more caring (and less villainous).

Final thoughts on reputation and risk….

Regulatory organizations are positioned to protect the public from business practices that ‘do harm’. Their natural inclination is appear to be vigilant in this role. When their attention is called to negatively perceived activities, they will respond – sometimes harshly – to make an example and to protect their own reputations.

Consider Goldman Sachs. Diermeier discusses how respected Goldman executives became pariahs and targets of SEC investigations after the economic meltdown of 2008. “…regulatory officials [who once would collaborate with executives] would no longer pick up the phone…public outrage after the financial crisis created pressure to act…”.

It’s also important to recognize that the more widely known you are, the more exposed you are. Think back to your reputational goals. Consider the scale of your communications as well as the intended audiences and expectations. Becoming known for something implies equilibrium, balancing proactive reputation building systems with uncontrollable threats.

Conclusion

Professionals and practices have reputations whether they’re deliberately managed or not. Building “reputational capital” requires an honest assessment of the forces that influence its value. If you put a system in place to do this, you’ll develop a strong position from which to grow or defend your reputation and enjoy the residual benefits long into your career.