At a time when leadership is under heightened scrutiny as people reel from the missteps of leaders across the globe, a positive reputation for solid leadership is increasingly important to economic health.
Benjamin Franklin once said, “It takes many good deeds to build a good reputation, and only one bad one to lose it.” This holds true for personal reputations as well as for the collective reputation of an organization’s leadership. The Enron scandal highlighted the errors in judgment and behavior of individual leaders at Arthur Andersen, but the resulting damage was to the company’s reputation and ultimately brought down the accounting giant that was known for “Think straight and talk straight.”
On the other hand, the positive reputation of an organization’s leaders can help a company acquire and retain major equity investors, high-quality customers and top talent. Overall, it increases the value of the company, according to a survey conducted by Oliver Wyman and the Economist Intelligence Unit (Figure 1). What is more, 78 percent of all survey respondents reported their companies’ leadership had been talked about in the press: Leadership attracts public attention. So, for most companies, the leadership’s reputation — good or bad — already is in the public domain.
Reputation, like a wildfire, is difficult to manage since it’s not always clear what triggers it, how rapidly and where it will spread, and what consequences can be expected from it. But just as fires are sometimes started by man to bring about a certain outcome, such as clearing land, the same principle can be applied to reputations: Organizations can intentionally and proactively build a positive leadership brand to generate economic value deriving from their positive reputation.
The underlying concept behind a leadership brand is that there are distinctive and specific leadership traits that can help a company execute its strategy. This unique combination of skills and characteristics emerges from the nature of the company itself and what it has to do to achieve its strategic objectives. What are the critical success factors in the organization? What must it get right to succeed?
The answers to such questions will suggest behaviors that leaders across the organization need to demonstrate to make the company successful, which then translates into the implicit or explicit promise that leaders make to all of a company’s stakeholders. That promise, stated succinctly, is the leadership brand. For example, Southwest Airlines’ leadership brand embodies this concept and is part of who it is and what it stands for.
Fiona Macleod Butts, director of talent at Southwest said, “You could probably stop any of our leaders in the hall and say, ‘What are our leadership expectations?’ and they could recite them to you: ‘The warrior’s spirit, servant’s heart, fun-loving attitude. Build great teams, think strategically and get excellent results.’ That’s our leadership brand, and it is very well-understood.”
Leadership Brand and Corporate Success
For many, leadership brand is still a new idea. Despite the considerable value associated with positive leadership reputation, many companies haven’t built well-known leadership brands. But for those that have, there appear to be ties to better performance. Survey results suggest the best-performing companies are also those that pay attention to leadership brand. Respondents were asked to rank their companies relative to peers in terms of revenue growth, net income growth, and if public, share price performance. Those who ranked their companies in the highest quintile were characterized as top performers. Not surprisingly, these top performers were 90 percent more likely than the other survey respondents to say their organizations are well-known for their leadership brands. And the top performers were more than twice as likely to affirm strongly that the companies’ leadership qualities drive their economic value. Figure 2 illustrates the strong correlation in the survey between a recognized leadership brand and corporate performance. The conclusion is clear: Leadership-branded companies outperform those with unknown leadership brands with regard to revenue, net income and share price.
Leadership Brand in Challenging Economic Times
The value of leadership brand increases even more significantly in a tough economy. According to the study, 3 out of 5 business leaders said that while a reputation for solid leadership is important when selecting vendors or prospective employers, it becomes even more critical during difficult economic times. And the response was amplified for selecting an investment opportunity: 4 out of 5 business leaders said it becomes even more critical when making such decisions.
Not unlike the notion of spending more on advertising during a recession, it may seem counterintuitive to focus on building leadership brand value while in survival mode. However, just as advertising in a down economy is done to outdistance competitors in sales and market share, so too does investment in building a leadership brand result in a competitive advantage as the company comes out of difficult times.
Building Leadership Brand Equity
The initial challenge for the CLO is to help the organization realize it cannot afford to ignore leadership brand any more than other assets, especially at a time when asset values are under intense pressure. In the survey, 87 percent of business leaders felt it was important for their companies to raise the quality of their leadership brands; yet, 54 percent said their companies were taking no initiative or, at best, were pursuing only moderate action to build their leadership brands.
So what is the best way to build equity in a leadership brand? Some companies already enjoy a significant leadership brand, which enhances their overall value. Many others, however, have yet to build a distinctive brand. For them, there is a four-component process (Figure 3) that they can apply systematically to enhance the equity in this key corporate asset.
Define your leadership brand. Identify the specific leadership attributes that are integral to the success of your business and unique to your organization.
Live the leadership brand. Attributes and promises inherent in the brand need to be consciously and consistently embedded throughout the organization by building them into job descriptions, targets, development activities and evaluations.
Project the leadership brand. Efforts should be undertaken to ensure stakeholders — internal and external — recognize the brand as part of the firm’s unique value proposition.
Manage the leadership brand. Finally, there is an ongoing need to manage the leadership brand as circumstances change. This is done by applying the appropriate metrics and tools, which are deployed to preserve and enhance the company’s reputation for leadership that drives sustained corporate success.
Self-Diagnostic: How Healthy Is Your Leadership Brand?
As you consider the opportunity to build leadership brand equity in your company, it’s useful to know where to begin. Your responses to the following 11 questions will give you an idea of the current state of your leadership brand and help you decide where to begin improving it.
1. Can you describe the distinctive characteristics of the leadership of your company?
2. Would others across all levels of your company come up with a similar description?
3. Is the description generally positive?
4. Is your corporate strategy clear and understood across the organization?
5. Do leaders in your company have the attributes necessary to accomplish company strategy?
6. Is there a general, consistent quality of leadership across your organization?
7. Has your company’s leadership reputation been instrumental in attracting top talent?
8. Is your overall company leadership a significant factor in retaining top talent?
9. Does your leadership have impact in swaying customer decisions in a positive direction?
10. Is the effectiveness of your leadership mentioned in analysts’ reports about your company?
11. Does your company’s leadership reputation positively reinforce your company’sbrand?
Not only will this provide a snapshot of the state of your leadership reputation, but answering no to any of these questions gives a focus for beginning to build a strong leadership brand going forward.
CLOs are in a pivotal position to foster a leadership brand that drives equity for their firms. To ensure success in optimizing value from leadership brand efforts, there are a few critical principles to keep in mind. First, the work needs to be grounded in the organization’s vision, strategy and culture. Your leadership brand will position you for the future and is an outgrowth of the best of what already exists. Second, sponsorship from the top leaders is critical: Before the attributes of your leadership brand can be cascaded and embedded throughout the organization, the executive team has to own the brand and must be the first to live it.
In addition, key processes, such as talent development, performance management and reward systems, need to be aligned to support the brand. The final principle is that your leadership brand needs to be part of the leadership fabric across the organization before it has the power to be a competitive external driver of equity.
Investment in building your organization’s leadership brand can realize the value of untapped equity, which is critical in these difficult and uncertain times. As challenges mount on every side, the full potential of corporate value needs to be mobilized and directed toward the fundamental goal of surviving and ultimately thriving in the economy of the future. Recognizing, optimizing and deploying the value inherent in a company’s leadership brand can be critical to tipping the balance toward success.
- 5 Forces Shaping the Future of HR
- Why ‘Leaders Eat Last’
- What’s holding inclusion back? Leaders’ behavior.
- Psychological safety: an overlooked secret to organizational performance
- Designing virtual learning for application and impact: the missing ingredient
- Brain-based leadership in a time of heightened uncertainty
- Creating an environment for effective learning measurement