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The biggest risk is the destruction of relationships

The worst risk is therefore not in the loss of reputation but rather in the consequences of a bad reputation – the destruction of relationships. So you could argue that managing reputation is actually about managing the risks around the intangible asset of relationships – for it is upon these relationships that the future of the company depends. And if it is all about relationships, we need to spend more time fundamentally understanding those relationships and the drivers of trust within them. That means a great deal more time measuring and monitoring (the Science). With that understanding, we can put more positive emotion into how we relate to people and how we communicate with them (the Art).

Trust is an emotion, and essential to our future economic well-being. Trust is a positive feeling, not the absence of a negative feeling. We won’t restore it unless we remember that we need to put more emotionally intelligent thinking into our decision making.

Most importantly, it is about what organizations and leaders do rather than just what they say. It is how people behave, how they treat each other and how well they deliver on promises. And so it is that great leadership is becoming more important in determining the reputation of organizations. Market perceptions of leaders actually move share prices. A report published in 2012 by global accountancy practice Deloitte Touche Tohmatsu, entitled The Leadership Premium, reveals that effective leadership can raise company valuations by as much as 16 per cent.

Based on a survey of leading market analysts in the United Kingdom, the United States, China, India, Japan and Brazil, the report found that the quality of senior leadership – including core capabilities as well as personal qualities such as honesty and integrity – has a direct and measurable impact on analysts’ assessments whether companies have been successful and will be successful in the future.

According to the report, the quality of leadership could affect analysts’ valuations of companies by 16 per cent positively, and by up to 20 per cent negatively. The gap between the value of a company with good leadership and that of a company with weaker leadership could be more than 35 per cent.

Commenting on the report, Deloitte said:

‘To succeed in the long term, an organization needs a clear and inspiring vision of where it wants to be and the resources, ability, and drive to get there. It also needs a culture that supports new ideas and that fosters a strong sense of belonging and purpose. These conditions aren’t developed accidentally. Effective leaders design them in and analysts recognise that.’

Leaders worth their salt know that whatever kind of organization they lead, no matter how big the team, it is intangible assets that create the platform for success. These intangible assets include: skills and competencies, processes and systems, knowledge, culture and values, relationships, reputation and trust. Whether these assets are fully realized depends on what I believe are the most important intangible assets of all: leadership and communication.

And if it is all about leadership and communication, then I believe that it boils down to this: do you communicate well enough to inspire the people in your key relationships to support you, to commit to your vision and goals, and to go that extra mile to achieve superior results?

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