Reputational Risks, Company Culture, and Layoffs: Recession Necessities Or Ineffective Use Of A Company’s Intangible Assets…?

Michael D. Moberly   December 3, 2008

As companies increasingly find it necessary (during this recession) to reach deeper in their employee seniority ranks for layoffs; will their ‘company culture’ be adversely – irreversibly affected and come to manifest itself as another form of reputational risk?

The Economist Intelligence Unit (Reputation: Risk of Risks, 2005) characterizes reputation as ‘how a business is perceived by stakeholders, customers, investors, regulators, the media, and the wider public’.  They go on to say that ‘the most valuable asset in the capitalist economy is not cash, stock, or buildings, but trust, and, although a shortage of cash can bring a company to its knees, it is more frequently a loss of reputation that deals the final blow’.  Indeed, a very strong perspective about the importance and relevance of reputation to companies today.

When I think of ‘company culture’ on the other hand, without referencing a particular academia generated definition, multiple (Hollywood) films come to mind, one of which is ‘Castaway’ which conveys a clear and distinctive example, albeit a Hollywood version, of a company culture, ala FedEx.

In an opening scene of Castaway, a FedEx employee played by Tom Hanks ‘jump seats’ to what appears to be an eastern European city’s newly established FedEx facility where he (Hanks) endeavors to elicit – instill a sense of timeliness and efficiency to the employees’ (country nationals’) work ethic for sorting and loading boxes on a FedEx truck for on time delivery.

While it’s likely FedEx had some oversight – influence in the film’s screen play, particularly the not so disguised message in that closing scene, i.e., neither rain nor sleet or being a ‘castaway’ for four years will prevent the delivery of a FedEx package.  But, that’s precisely the point, FedEx, like thousands of other companies globally, do have a ‘company culture’ which underlies – produces its reputation, and in most instances, delivers value.

But, at what point (today) do layoffs that engulf employees, who quite literally embody the culture of a company, begin to manifest itself as (elevate) that company’s ‘reputational risk’?  In other words, at what point will layoffs…

   – irreversibly affect a company’s value, sustainability, and ability to lay the necessary foundations for future innovation and wealth creation?

   – influence/motivate economic and competitive adversaries (globally) to exploit those circumstances to (further) undermine, erode, stifle, or sabotage their rivals’ strategic planning, project momentum, product launches, etc., to the point the targeted company’s ability to recover – recoup (post recession) losses are more difficult and costly, if not impossible?

To be sure, not all ‘company cultures’ are positive and perhaps that was the message the relevant House and Senate committees were sending to the c-suites of the U.S. automobile manufacturers last week.  The message in this post is this; a company culture can be a dynamic and valuable intangible asset that is quite capable of change to reflect new products, services, and markets, so avoid turning your company culture into a ‘reputational risk’!

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