Your reputation is just as important as your revenue!

Warren Buffett is one of the most outstanding business leaders and is famous for his corporate leadership, which teaches many business, investment and life lessons. The business magnate is renowned for his unique leadership approach and celebrated as one of the most successful investors in the world. Mr. Buffett was known for sending periodic letters to his leadership team, but one theme featured in many of these letters – his obsession with reputation management.

For Mr Buffett, an organisation’s reputation is critical and necessary for business success. A good leader recognises the power of reputation, while a great leader works actively to build and sustain it. As a great business leader, Warren Buffett exemplified this – In his letters, he spoke carefully to his management team about their responsibility towards safeguarding the organisation’s reputation.

In 1991, while addressing a sub-committee at the US Congress as the investment bank — Salomon Brothers’ chairman, Warren Buffett delivered one of the most famous references to the importance of reputation management. Mr. Buffett, in his testimony, said his message to the Salomon Brothers employees was, “lose money for the firm, and I will be understanding. Lose a shred of reputation for the firm, and I will be ruthless”.

Salomon Brothers had been caught in a scandal, including one involving treasury bonds and were in trouble. The investment bank was given the largest fine ever levied on an investment bank at the time. Warren Buffett, who was the chairman and made the CEO the same year, is considered the reformer and saviour of the investment bank. For many, his principled approach to the scandal made him a hero.

Warren recognised the PR crisis Salomon Brothers slipped into when the investigation began. The company’s action was dangerous to its reputation, and it is a well-known fact that reputation lost can hardly be regained. In fact, Mr. Buffett said in one of his letters that “it takes 20 years to build a reputation and five minutes to ruin it”. This explains why the great business leader would place the organisation’s reputation on the same pedestal as the organisation’s financial performance.

It may be hard to quantify the monetary value of an organisation’s reputation, but it sure is meaningful when one of the world’s most outstanding business leaders says it is essential. In one of his memos, Mr. Buffett said, “we can afford to lose money — even a lot of money. But we can’t afford to lose reputation — even a shred of reputation.” He went on to say, “we must continue to measure every act against not only what is legal but also what we would be happy to have written about us on the front page of a national newspaper in an article written by an unfriendly but intelligent reporter.”

It is said that Warren likes newspapers. In fact, Berkshire Hathaway invested in the newspaper industry in 2012. But Warren’s sentiment towards reputation management and his attention to what is said in the media about his organisation reveals that public relations must be a management function. Mr. Buffett, who was not a public relations professional, understood the importance of being involved in the organisation’s public perception.

In the same memo, he said, “As a corollary, let me know promptly if there’s any significant bad news. I can handle bad news, but I don’t like to deal with it after it has festered for a while. A reluctance to face up immediately to bad news is what turned a problem at Salomon from one that could have easily been disposed of into one that almost caused the demise of a firm with 8,000 employees.”

If you check, the best-performing organisations have built a structure that maintains PR as part of the management team. For example, Nigeria’s biggest ICT company has its Chief Corporate Services Officer (CCSO) as a critical part of the executive team. This is because the CCSO, who leads PR and communication for the organisation is also responsible for managing its reputation among all its stakeholder groups.

In some other organisations, public relations have been relegated to the background to merely support marketing activities. This opens the organisation to some risks which can affect its business. Most times, public relations is only consulted in moments of crisis. Interestingly, these crises could have been avoided if the public relations representative had been involved in management decisions and consultations.

At the end of the day, this is a lesson for us all.