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James joined a Tier 3 commercial bank as a Branch Manager. He was posted to a branch whose business was on a steady decline for over one year. Clients had left for the competition mainly due to poor service delivery and unethical conduct by the immediate former branch manager who they accused of defrauding them through diversion of loan repayment funds as well as collection of unauthorized fees in cash. As a branch manager, John, who was tasked with business growth, started off by visiting the major clients, the area’s opinion leaders as well as key business influencers. He experienced either hostility or indifference during his visits, an experience that greatly demoralized him. Several marketing initiatives later, client apathy and hostility did not subside while business growth remained well below targets.

One year into the job and minimal branch business growth, John’s time at the bank was up The employer decided against a second extension to John’s probationary period. His successor lasted only FIVE months and left for a competitor mainly due to fear of John’s fate befalling him. Both John and his successor went on to succeed in their new engagements. However, the business at their former branch as well as that of other branches of the former employer continued on a downward trend until, 3 years after the gentlemen’s exit, the Board of Directors sacked the Chief Executive and made wholesale changes to the senior management.

The entry of the new Chief Executive marked a new beginning for the bank. He started off by rebuilding the bank’s image through streamlining of processes, addressing customer complaints, ethical issues and reigning on unrealistic and extravagant promises by marketers amongst other issues. Though the bank did not recover its past glory overnight, a slow upward trajectory was clearly visible.

I have come across similar issues amongst micro, small and medium enterprises. Businesses stagnate or get into decline due to neglect of the “corporate” image. Some do so through poor product or service quality or unethical conduct by the employees or owners. Remember that mechanic who does a shoddy job or short-changes a client on a spare part? What about the tailor who will never deliver on time? Others do so through poor communication especially during crisis, breach of client confidentiality or poor handling of negative customer experiences.

In today’s highly competitive and interconnected world, where information travels rapidly and is readily accessible, a positive reputation can significantly impact a business’ bottom line while a bad reputation can have the opposite effect. A good reputation builds customer loyalty and trust, attracts and retains good talent and helps in building a competitive advantage. It can also help mitigate damage during a crisis for example when a business faces a public relations challenge such as a harmful product or unethical conduct by an employee. A positive reputation also increases chances of accessing trade credit and forming successful partnerships and collaborations with other organizations.

On the flipside, a negative reputation can have long-lasting negative consequences especially in regard to relationships with suppliers, employees, clients, the community and other stakeholders with resultant negative impact on financial performance. Rebuilding a damaged reputation can also be a complex and time-consuming process, requiring investment in time, human resources and finances, resources that would rather be invested in productive activities such as production, marketing and team building amongst others. Experts call it reputational risk management while Robert Greene says in his book The 48 Laws of Power stated that “Everything depends on reputation, guard it jealously.”

Dr. Weru Mwangi is the CEO & Lead Consultant at Ultimate Management Solutions, a firm specializing in training & consultancy in Finance, Governance, Strategy, Risk Management and Leadership Development.  He can be contacted on weru@umslgroup.com  

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