Why Organizations Succeed and Fail: A Corporate Reputations Perspective

For those of us interested in why organizations succeed and fail from a reputation management perspective, one of the books of the year is 'Taking Brand Initiative: How Companies can Align Strategy, Culture and Identity through Corporate Branding'. This book is especially timely because it helps explain important elements of the current crisis of financial services, and also helps us explain some of the problems being experienced in healthcare. The book's authors are two of the best academics in the field - Mary Jo Hatch and Majken Schultz. They have produced a practitioner-oriented work that should be read by all HR, corporate communication, marketing and strategy professionals. The book is based on an ongoing research programme and ideas that first saw the light of day in an article in the Harvard Business Review in 2001, material which we used in our corporate reputations, branding and managing people book. It is also based on an edited book written mainly for academics on organizational identity.

Using this lens and a theory of organizational identity, they restate their well-known idea that organizations should constantly work towards aligning their vision (for being different and legitimate), their image (or reputations among key stakeholders) and culture (how employees and managers think, feel and act) for corporate branding to work and for organizations to be sustainable in the long run. They cite many examples from their own research and the work of others to demonstrate the validity and usefulness of their model, as well as draw on a considerable body of sound theory that should give some comfort and to practitioners and academics alike. Though they don't use financial services companies as examples, their analysis, especially of organizational narcissism, should be required reading for banks worldwide, a line we took in a case in our corporate reputations and HR book questioning the future fitness of the financial services industry in 2006.

Some of the key messages of this book are as follows. First, the 'most successful corporate brands simultaneously communicate belonging and differentiation...' (p. 21), a simple but powerful message that applies to private and public sector organizations, including our current work on the health service which is faced with major difficulties in attracting talent in the longer term, in enaging its current employees and in having a lack of image among employees for being a patient-centred service. They argue that organizations which are able to manage the tensions between integration and differentiation, one of the key paradoxes in business, do so by conducting continuous identity conversations with employees, customers and other stakeholders to create strong organizational identities. These conversations attempt to reconcile the fundamental and ongoing questions of 'who are we' as an organization with 'what is their image of us'. The attendant identity dynamics often result in two different but related dysfunctional states - hyper adaptation and narcissism. The first of these is where organizations are over-reactive to what customers and the media (and sometimes employees) think of them, so they continuously search for 'coolness' and 'cutting edge' instead of having regard for their unique heritage and core competences. The second is where organizations fail to check their internal beliefs against what stakeholders, including employees, think. This is often associated with narcissistic, charismatic leadership, protected from reality by group think, which attributes past success to their own insightful decision-making rather than the often favourable contexts in which such decisions are made - the so-called fundamental attributional error. The limitations of charismatic leadership and problems of narcissism, the subject of a brilliant book by Rakesh Khurana, was behind Enron and other corporate governance distasters, and in also being used to explain the failure of many of our financial services firms in the UK and USA.

A second lesson concerns the valuation of brands (and by implication employer brands). They make an important point in highlighting the limitations of brand valuation models, which, among other problems, ignore the emotional and symbolic effects of brands. As recent research has shown, these are the two most important factors in making employer brands attractive to outsiders and engaging for insiders. To gain real insights into (employer) brand value they argue that brand equity and consumer research models are more appropriate because the uncover and account for symbolism and meanings through ethnographic research into how people (employees) interact with brands and qualitative research into the meaning that brands hold for them. Which is what we have been doing in the health sector in Scotland as a complement to large-scale quantitative research.

A third lesson that is especially important for HR is the nature of the endgame. Long terms effective and sustainable corporate branding is what most organizations are striving to achieve to remain successful. This requires organizations to go beyond (1) first wave branding, which is based on a marketing mindset and is dominated by marketing/communications departments, and (2) second wave corporate mindsets, which attempts to bringing together multifunctional teams of mainly internal stakeholders, but typically ends up being fragmented by incompatible models and mindsets. Instead they posit a third wave notion of enterprise branding, which is an interfunctional and and integrated way of bringing together internal and external stakeholders in the extended entreprise in constant cycles of identity conversations. They also flag the importance of Web 2.0 tools in conducting such conversations, a key message of our recent CIPD research in the field. This imagery of dynamic enterprise-wide conversation cycles is a particulary powerful one because it extends the notion of the corporation and gets us away from the typical brand 'programmatis', which is premised on the artifical notions of beginnings and ends of change. For HR, it also reminds us that employer brands are not the endgame but are merely an input into a continuous conversation of how organizations can remain successful.

The book is not without its shortcomings. In tantalising us with the notion of enterprise branding, I don't think they go far enough in fleshing out what this may look like - maybe they want us to write what we want into this open space? They also seem to misinterpret employer branding to mean recruitment, when it is usually taken to apply to both the attraction of new employees and engagement (read identity management) of existing employees. However, these are minor points and should not detract from an important book which should be read by for all practitioners, particularly chief executives and HR directors, interested in this field.

The Dangers of Branding Leaders (and Roy Keane)

Julie Hodges and myself are in the middle of writing an article on leadership branding, so I was intrigued by a recent post on the Australian HR online magazine (5th December, 2008, HR Daily), which appeared with the headline ‘Strong CEO brand improves candidate attraction and retention’
Citing a study by Minolta in Australia, ' Richard Branson (Virgin), Bill Gates (Microsoft) and Steve Jobs (Apple) are the business leaders Australian workers are most inspired by. Westpac CEO Gail Kelly was the only Australian CEO to make the top five list. Workers were also asked to identify which of the world's biggest companies they would most like to work for. Google topped the list, followed by Microsoft, Virgin, IBM and Apple. Locally based banks Macquarie ANZ, Westpac, followed by BHP Billiton, a mining company, ranked sixth, eighth, ninth and tenth respectively.

This headlining of leaders is further testament to the notion of ‘celebrity firms’ being tied up with celebrity leaders. Violina Rindova, and her colleagues in a 2006 article in the Academy of Management Review entitled ‘Celebrity Firms: The Social Construction of Market Popularity’ argued that a celebrity firm is developed from the media’s search for organizations that symbolize important changes in society by taking bold or unusual actions and which attempt to create distinctive identities. These firms are natural targets for ‘dramatized realities’ created by the business press. Google is one such firm that has become one of the most widely discussed success stories in the business press; also Apple whose products define the industry standard.

Most of the business press coverage focuses on the founders. For example, Google is often reported by referring to Larry Page and Sergey Brin. An Economist article of January 2006 portrays Page as the ‘visionary geek-in-chief', pronouncing at software conferences on the range of new products that will help Google achieve its ambition to ‘organize all the world’s information’. The storyline portrays the firm’s celebrity through Page’s missionary fanaticism, claiming that visitors to Google feel they are in the company of religious zealots rather than ordinary employees. Much the same story could have been written for Apple in the 1980s and, to a lesser extent, for Virgin over the last decade or so.

Though employees and the business press may feel the need to put leaders on a pedestal because of their requirements to find simple solutions to the complex problems of explaining why firms (and football teams!) are successful, are there dangers in doing so, and in having a corporate brand so closely linked to celebrity leaders?

My answer is yes. Much of the academic evidence points out that senior leaders don’t have a major impact on organizational performance. For example, Jeff Pfeffer and Robert Sutton claim that the hard evidence shows the impact of leadership on performance are modest under most conditions, strong under a few conditions, and absent in others. ‘Studies from leaders from large samples of CEOs…, university presidents to managers of colleges and professional sports teams show that organizational performance is determined largely by factors that no individual - including a leader - can control’ (‘Hard Facts, Dangerous Half-Truths and Total Nonsense’ p.192) Like a number of writers in this field, they also point to the dark side of leadership – narcissism, ruthlessness, group think and risky decision-making by people believing themselves to be all powerful. So, is it better to have leadership brands that are less reliant on powerful individuals and more on distributed leadership throughout the organization, i.e. build organization systems and brands where the actions of powerful and skilled individuals matter least. And should leaders act more wisely by knowing when to get out of the way so others can make contributions?

My own football team, Sunderland, provides a dramatic recent example of the problems of celebrity and wise leadership. Roy Keane, its talismanic manager, was over-loaded expectations by success-starved supporters seeking ‘instant pudding’ and a sports press always on the lookout for celebrity stories. Keane acted wisely by resigning when there were no calls for him to do so. He rightly expressed his self-doubt that no sane person could live up to such expectations (and implicit leadership theory –see earlier post) and resigned in as low key a manner as he could. Good for him and a lesson to other leaders (and firms seeking to brand themselves on the basis of individual leaders).