“It takes many good deeds to build a good reputation, and only one bad one to lose it.” - Benjamin Franklin.
It’s such a well-known fact these days that reputation is essential to an organisation’s that it’s now steeped into a long-line of overused cliches in business… and there’s a lot of those out there! Rather than whip a dead horse, let’s get straight into it and talk about the reason why your reputation is a mystical force that will often get customers over the line, often without you - or the customer - even realising. There’s some powerful psychology working away in the background here, so let’s dive in.
The idea of an organisation’s reputation getting a deal over the line or convincing a would-be customer to pick up the phone or write an email to your sales team is inexplicably linked what we’ve discussed before here on the blog, an idea central to the work of Simon Sinek.
Sinek argues that customers don’t simply buy into what your organisation produces, the customer buys into the idea of why your organisation produces that end deliverable. Perhaps it’s the quality, or the speediness of delivery, the customer-centric means of communication, or the virtuous ethics in your supply chain. If you dive into Sinek’s principle of the customer buying into your organisation’s why, you begin to see just how essential your organisation’s reputation would be in terms of getting them over the line.
One of the most blatant examples of this in recent years is the Dieselgate scandal that rocked the automotive world five years ago, and while a significant amount of time has passed, the brand is in many ways still working tirelessly to repair its reputation. For those unaware, Volkswagen was found guilty of installing ‘defeat devices’ on some of its vehicles that would change the emissions rating of a car when put under specific conditions. Under test conditions, the device would come ‘online’ and fool the regulator into reading an emissions figure that was significantly lower than the real figure.
The aftermath was disastrous for Volkswagen, and claimed the head of its CEO, Martin Winterkorn, as well as its head of brand development, research and development at Audi and head of research and development at Porsche; all of which are under the Volkswagen umbrella.
Volkswagen’s stock price fell by one-third, A U.S. court ordered Volkswagen to pay a $2.8 criminal fine for “rigging diesel-powered vehicles to cheat on government emissions tests,” and former CEO Martin Winterkorn charged in the United States with fraud and conspiracy in the aftermath. In addition to this, there were widespread recalls, compensation payments to the owners of vehicles that were directly implicated, and while it’s difficult to put an exact figure on it, industry experts say the dieselgate scandal cost Volkswagen $33.6-billion, as well as a sizeable hit to its reputation.
It’s worth noting that before dieselgate, Volkswagen’s reputation was one of the best in the automotive game, and their diesel engines were even winning awards shortly before news of the scandal went global. To its credit, Volkswagen took full responsibility for the incident, and made a series of changes internally, most notably the firing of executives that had knowledge of the devices. The extent of these internal changes goes to show just how much work you need to put in to salvage your reputation, and luckily for Volkswagen, they had billions in spare cash to cover the monetary loses in the short-term.
Your organisation on the other hand, like many others might not have the luxury of billions hiding away in the couch cushions, and such a massive hit to its reputation might be fatal for the business overall. That’s why I’m stressing the importance of first acknowledging just how fragile an organisation’s reputation is, and why you need to be doing everything you can to improve your organisation’s standing in the market.
As Simon Sinek says - pun intended - customers are buying into the reasons why your organisation does what it does, so keep this at the forefront of your mind as you make important changes in the organisation, ensuring the quality of your end deliverable is the best in the market, or your price point is so attractive for a customer, your organisation is the most logical option.
If you use Volkswagen’s fable as a warning, you can see that short-term benefits will more often than not be irrelevant in the face of a large-scale scandal, and your organisation’s reputation can be eroded overnight. Shortcuts and unethical practices for whatever reason are counterproductive to building your organisation’s reputation, and instead, you should be focussed on serving your customers as best you can; do this, and your organisation’s reputation will grow with every transaction and happy customer.