Culture and a Company’s Most Valuable Intangible Asset – its Reputation
Corporate leaders and executives like to mouth the words surrounding corporate culture. It is part of the code they all use with each other. Few of them, however, really know what the word means or even dare to understand the importance to their business. Let’s face it – corporate leaders and executives like to talk the talk but they rarely if ever understand what they are saying.
As one of many commentators on the subject, this is the fundamental disconnect in the corporate world. Believe me, there are many failures to connect, but this is the big one. Business leaders like to focus on issues they consider “real” or “tangible” – something that has a number associated with it, something they can just decide, or re-organize or cut costs, or measure with direct and immediate results. These leaders are in fact the problem, the ones who are missing the boat. Unfortunately, because our corporate world is led by a self-selected narrow group of visionaries, our corporate leadership population is failing to meet basic demands of relevant stakeholders.
Let’s start with a few basic “facts,” “numbers” and measures. Studies have identified a company’s reputation and its culture as its most significant intangible asset, pricing it as roughly 30 to even 40 percent of the stock’s value. If you put this in concrete terms, 40 percent of the company’s current capitalization reflects its reputation and its culture. Now, this simple fact or estimate, whatever you want to call it, is a figure that warrants leadership attention and basic strategies.
Corporate leaders have to devote more time to this intangible asset, to monitoring it, measuring it, and promoting it. Assume that one product line was responsible for 40 percent of the company’s revenue, you would expect leaders to develop strategies to innovate, improve and expand this product line to respond to market demand, to improve productivity and to generate increased revenue. The same goes for corporate culture.
Any effective leader is able to quickly grasp that intangible does not mean unimportant. Visionaries know that intangible can be the most critical asset. A company has to manage this asset, attend this asset, and ultimately grow this asset.
Luckily, corporate leaders have the right person or function to help them, hopefully sitting right there in the C-Suite – the Chief Ethics and Compliance Officer. Let’s put aside one moment the ESG Officer, and let’s focus on the important function – how is our ethics and compliance program managing, protecting and promoting our most important intangible asset: our corporate culture and our reputation?
Corporate leaders who understand this issue are few and far between. But when they understand this, it is a sigh of relief, it is an opportunity, and ultimately, it brings about positive results. A leader who incorporates corporate culture into his/her strategic plan has a greater chance of success. Of course, it is no guarantee, but a strategic emphasis on corporate culture brings with it important corporate values – vision, empathy, humility, and interpersonal skills – that are important to other basic business skills of management, inspiration, and business acumen. Effective corporate leaders already understand the importance of all these attributes and recognize that corporate culture is an essential part of running a business – it is the lifeblood of the business.
CECOs have an important responsibility in this situation. They have to make sure that the conversation with the CEO includes adequate discussion on corporate culture, the measurement of it, the requirements to promote and maintain corporate culture, and the need for everyone to dedicate time and resources to this issue. Specific requirements beyond publishing platitudes and communicating ethics messages have to be adopted, tasks have to be assigned and responsibilities have to be mandated. After that, senior executives, middle managers and ultimately employees all have to be held accountable.
This is the challenge. Instead of focusing on the continuous tasks of building an effective ethics and compliance program with the multitude of functions, technologies, platforms, measurements, and reports, the CECO has to ask the fundamental question – how are we protecting, promoting, measuring and advancing our corporate culture?