Not a week passes without headlines that excoriate some corporate executive for mishandling an operational crisis that has mushroomed into a public relations disaster. Despite impeccable credentials and accomplished careers, many chief executives find themselves looking foolish after responding obtusely to common and inevitable threats to their companies' reputations.
From Warren Buffet attempting to explain away insider trading at Berkshire Hathaway (BRK/A) to Tony Hayward, formerly of BP (BP), complaining about getting his life back, the litany of gaffes certainly changes public perceptions and corporate reputation—along with company valuations and career trajectories. Why then, aren't even the highest-ranked MBA programs doing better at preparing graduates for eventual responsibilities in reputation management?
An analysis of highly ranked MBA programs by the Public Relations Society of America showed that only 16 percent offer a single course in crisis and conflict management, strategic communications, public relations, or whatever label one chooses to describe management of a precious organizational asset: reputation. Even that course is likely to be an elective. So glaring is this omission that it's typical for MBA-holding executives to assume "reputation management" or "public relations" is the black art of spinning an alternative version of reality, as though that works in today's wide-open, relentlessly scrutinized, electron-speed information environment.
No Substitute for Authenticity
One can't blame organizational leaders for not understanding that the way they operate the business is inseparable from the way they communicate about the business, inside and outside the organization. They're not educated sufficiently to know these are inextricably linked leadership requirements: You can't have effective leadership without an effective communications strategy. The latter is based on authenticity and transparency because nothing else works.
The delusional separation that exists between what companies do and what they say is not examined in most MBA programs. Yet we wonder why so many company stakeholders—customers, shareowners, government officials, activist groups, community residents, employees, the news media, and so forth—don't trust businesses.
Trust in companies and their leaders has never been lower. Peter Peterson, co-founder of the Blackstone Group (BX), noted: "What matters is what the public thinks and the public trust is what's really crashed." Yet the course content that would directly address building trust, including ethics and communications strategies, is commonly absent or marginalized in MBA programs.
Ignoring the worth of reputation management is an entrenched academic tradition at most business schools, despite compelling reasons for change. Why? "Reputation" and "communication" are the soft stuff, referred to derisively in an environment where spreadsheets rule and financial measures take precedence over less immediate, nonfinancial indicators such as trust, despite the obvious connection between the latter and sustainable financial performance.
Between Academic Silos: Reputation
Higher education's rigid organizational silos separate the variety of academic disciplines needed to deliver even a primer on the related topics of ethics, social responsibility, reputation management, public affairs, interpersonal dynamics and organizational behavior. Therefore, typical MBA graduates have paid scant or no attention to their future responsibilities in forging and defending organizational reputation.
They barely know enough to listen to advisors who have seen disasters play out in the media, literally destroying companies and careers. Naïve executives are much more likely to heed the corporate attorney who tells them, "don't say anything," because they fear legal consequences. They took business law at some point and understand the valid implications of that advice. They discount the corporate communications officer's counsel to "get the truth out fast and say what we're doing to fix the problem" because they're unschooled in the business consequences of disregarding this time-tested formula for long-term success.
There is a substantial academic body of knowledge—including planning models and frighteningly compelling case studies (think BP, Toyota (TM), or Enron, to name a few examples)—that would provide business students with at least an orientation on what works in reputation management and what doesn't. Every MBA student deserves this briefing. Were business schools to deliver it, there would ultimately be more business leaders who could knowledgably weigh the values of legal protection and public trust and then decide more reliably on actions that produce lasting value.
Good Reputations Bring Strong Returns
The reason to add this to the curriculum is not that transparency and accountability are admirable values. It's because knowing how to manage reputation creates value. Research by Paul Argenti, professor of corporate communications at Dartmouth's Tuck School of Business (Tuck Full-Time MBA Profile)—one of the rare institutions that exposes MBA students to communications beyond "how to do a PowerPoint presentation"—has shown that reputation is favorably influenced by strategic communications that are rooted in behavior, not hype. Consequently, well-regarded companies realize favorable returns along several metrics, including product pricing, stock price, revenue stability, and customer loyalty.
Increasingly, today's executives realize they're not communicating effectively. They may start to demand more accountability for reputation management from their direct reports and MBA programs. "Wall Street executives have awakened over the past few years of the financial crisis," said Jennifer Prosek, CEO of CJP Communications, a New York-based consultancy. "When they saw the way that Goldman Sachs (GS), AIG (AIG), and so many others hurt themselves by mismanaging their own reputations, it was an ah-ha moment. Five years ago, investment banks, venture capital firms, and hedge funds didn't devote strategy, resources, and positions to a strategic communications function; now they do."
It remains to be seen if MBA programs will follow suit, notwithstanding the answers that will one day be angrily demanded of their graduates.