This current crisis: you have only one fiche to play. Red or Black? Where reputation and relationships belong to two conflicting options…

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In these last two weeks -as I am sure each of you- I have been struggling to make some sense out of what is happening in the world, in order to advise clients, friends, colleagues, as well as my shareholders…. on how to interpret current events and act positively.
I have come up with this ‘story’:

You hold one final fiche in the Casino.
Rather than place it on any individual number, you will probably place it either on red or black.
If you lose you walk out; if you win you place one fiche on any individual number, and the other, once more, on either red or black…..

Black:

inspired by the last five/ten financial/economic crisis of the post war period (depending on the country), the organization will choose to focus efforts on consolidating existing strenghts and temporarily freeze engagements on innovation, out-of-the-box projects, expansions or accelerations….confiding that in a period of minimum 6 months to maximum 18 months, things will pick up again and….business as usual.

Red:

this crisis has nothing to do with the last five/ten financial/economic crisis of the post war period, but is a discontinuity of ‘business as usual..even in difficult times’.

The organization will choose to focus efforts on innovation, out-of-the-box projects, expansion and acceleration…will reasonably freeze the mere consolidation of existing strengths….in the expectation that a whole new ball game will come into place in a six to eighteen month period, in order to gain from the competitive advantage reached by not having exhausted energies on wasteful business-as-usual consolidation.

These two approaches clearly imply highly different consequences of stakeholder relationship and communication policies and programs.

The black approach (likely to be adopted by a majority of organizations, many of which will, however things turn out, inevitably end up changing their identities…. as they merge, are integrated, or simply disintegrate) and will need to focus on differentiation, reassurance and market expertise and competencies.

The red approach (likely to be adopted by a minority of mavericks, many of which will presumably get it wrong anyway and… proceed to extinction) will need to focus on emotional and engaging story telling, creating spirited conversations and attractive spaces in which to host stakeholder interaction.

As they say in Latin:
tertium non datur (i.e. no third option).

This because any organization cannot realistically and coherently focus on both in the same period: it will not succeed (besides, of course, which of the two interpretations proves to be right) unless it fully concentrates on one, as they are culturally in conflict…. specifically internally, but also on the market place.

At least one more specific consequence is relevant for us.
In both options the issue of trust is central:

° yet in the black scenario the intensity of stakeholder reputation is the true driver of trust, in the sense that by consolidating existing forces you are also consolidating existing and new stakeholder communication with the aim of increasing your reputation in order to maintain your strengths (..or, more sadly, peril);

° while in the red scenario, the quality of stakeholder relationships is the true driver of trust, in the sense that while innovating and out-of-the-box projects your need to engage your potential stakeholders so that they join you and support you along the discontinuity journey (…or, more sadly, bankruptcy…).

Does this make any sense to you?
I am sure many will not buy the need to choose an option but will want to play both games at the same time.
But, remember, you have only one fiche to play.
Otherwise there would not be a crisis going on…either way.

Eager to read your opinions.

2 COMMENTS

  1. Well, Toni, you asked for opinions, and, I have to confess, this might be a bit opinionated, simply because I am so cross about the whole thing. I’d have to say I am a red-chip girl myself, although I can’t agree with your observation that the red approach is likely to get it wrong and proceed towards extinction – I’d love to hear more on your rationale for that one. I think you can bet on the red not to gain competitive advantage in the months ahead, but to do things better and do things right. And while I absolutely agree that the central issue is trust, I can’t agree that reputation is the main driver of trust given that reputation is often so subjective; blown about by whim and opinion, whereas strong relationships can weather both crisis and reputational dents unless, of course, the trust that underpins a strong relationship has been betrayed either by inaction, inappropriate action, deliberate deception or broken promises.

    Recessions. I’ve been through two (not counting 1987 which was the klaxon sound for the 1991 one). The first was at the start of my working career and the launch of my own business was a direct result of the second – because it seemed to me at that time that strengthening relationships for the organisations I would serve and their stakeholder communities was actually a stronger, more viable strategy than cutting costs and freezing engagements – for all those involved. A strategy of trust creation and relationship building which might avoid the fragmentation of livelihoods I had witnessed and reported on first time round when trust was withdrawn. On that occasion, the withdrawal of trust led to organisational failures; failures that prompted the very human, individual misery of civil unrest, lost jobs, lost homes, fragile futures and no food on the table. And, if I remember rightly, even the dead went unburied for a while.

    As a child, I can remember having a very lively argument with my Dad, who patiently tried to explain to me that I could not take my first ever bank note to London and claim my ‘gold’ from the bank. “I promise to pay the bearer on demand” has been on Bank of England notes since 1870 and, even as a child, I felt a promise is a promise and a Bank of England promise seemed a pretty fundamental one to me. He finally convinced me that they stopped giving out gold in the 1930s and explained that it was linked to something called ‘bank securities’. Bit like word association isn’t it – trust, promise, security. Trust is secured because actions are taken and promises fulfilled. Ultimately it is trust that has the value, not the notes, the gold, the oil or salt (for the historians). Once trust breaks down, the relationship falters and the risk that we all take when we commit to a relationship becomes too great. System failure results as we run a probability analysis through our heads and realise it just isn’t worth the bother. Promises unkept, actions not taken – suddenly self-protectionism takes over and the black square may start to look more attractive – but only in the same way that a burning ladder has potential when you are stuck on a flaming roof.

    Your reputation is subject to influencer opinion – accurate or otherwise – but your relationship is founded on actions and reactions to the things you do. Influencers may be for or against you, disengaged from direct involvement with you, perhaps just bystanders to your business. Those with whom you have an active and committed relationship are able to judge for themselves. Their trust is based on their experience rather than a bystander view. Yes of course they are interlinked, but in my red-chip world, which is influenced by many sources and mostly personal ones in this day and age, I am *governed* more by the validity of the relationship than by others’ opinions. My experience guides me, rather than what I have heard. If I worked on reputation alone I would have long since stuffed the mattress full of cash and been worse off for doing so (not that I think many of the financial institutions deserve my trust, but that is another can of rant entirely).

    In previous recessions ‘the public’ were ‘instructed’ as to what they should do, how to react and how to feel. In 2008, the ‘public’ is empowered to change, engage and challenge in a way that has not occurred previously, which in itself presents new conundrums. As a result, tertium non datur might not be the case. This time around I think there will be a significant difference of opinion as to the best way forward between those doing the telling and those doing the listening. This means that business cannot be continued ‘as usual’ and we have to play a very different game – in fact, we may well find that we do away with the notion of casinos, stocks and the gambling ‘winner takes all’ economy all together, in the same way that the salt-driven economies were consigned to history. And what a salutary lesson that would be.

    But if I was to place one last bet, I would put my money on the fact that organisations focusing on self-interest and profit rather than creating societal capital, or the so-called ‘leaders’, who feel they can walk away from their failed companies with a few million in their trouser pockets while leaving their stakeholders homeless and jobless have – absolutely and definitely – had their chips.

  2. Ok Catherine, you win: your arguments are alwasy forceful.

    Let me however note that -from yours and other more ‘private’ reactions I have received- it seems to me that, a good two weeks into the tsunami, we still fail to understand what is actually happening and (whether the result will be the ‘salutary’ bankruptcy of casinos and therefore our last fiche will remain in our drawers or not…:), if we should interpret this as the most serious of recessions, or as a more radical discontinuity for our society.

    Let me in any case explain:

    a) when I wrote that if you choose to put the fiche on the red you increase your option to potential extinction, I imply that this choice involves (other things being equal) a much higher risk, but clearly the rewards by gaining a competitive advantage before others (if you get it right..of course) may be well worth that risk;

    b) your idea of reputation is different than mine, and there lies the reason why you don’t agree with the relationship/reputation issue: i.e. the first being more relevant for the black option, and the second for the red one.

    Let me explain:
    rather than believing that the reputation of an organization is mostly determined by a myriad of factors which are not controllable, I am convinced that there are certain organizational behaviours (where communication is only one of many horizontal variables) which contribute and, allowing for other less controllable variables, determine an organization’s reputation (quality of management, of services and products, attraction of human resources, corporate governance…etc…). If this is so, then the reputation of an organization is the end result, while the quality of stakeholder relationship systems are always a necessary and more governable intermediate channel to a stronger reputation.

    This implies that in the black option, reputation is the driver of trust; while in the red option, where the issue of trust has much more to do with ensuring active support and participation of relevant stakeholder groups, without whose support the game is much riskier, is its real driver.

    Hope to have better clarified…

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