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Individual & Organizational Reputation Repair

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Jo-Ellen Pozner is an Assistant Professor of Management at Santa Clara University's Leavey School of Business. Dr. Pozner’s research focuses on questions of organizational ethics, corporate governance, social movements, and institutional change. She has a particular interest in organizational misconduct, specifically the ways in which misconduct at the organizational level impacts top management and boards of directors at the companies involved. Professor Pozner spoke with ExecEd 


ExecEd: Today we're talking to Dr. Jo-Ellen Pozner, who is a member of the Management of Organizations group at the Haas School of Business, University of California Berkeley. Her teaching focuses on leadership and organizational behavior at the graduate and executive levels. Professor Pozner graduated with a PhD in management and organizations from the Kellogg School of Management, Northwestern University. She holds an MBA from the Sterns School of Business, NYU, a Master's in Economics from the School of Advanced International Studies, Johns Hopkins University, and a BSFS in international economics from the School of Foreign Service, Georgetown University.

Dr. Pozner's research focuses on questions of organizational ethics, corporate governance, social movements, and institutional change.

Thank you for joining us today.

Jo-Ellen Pozner:  Thanks for having me.

ExecEd: Great. I'd like to talk to you about your work on individual reputation repair after scandals. What can you tell us about who can recover from a scandal and who cannot. Some examples perhaps?

Jo-Ellen Pozner:  Sure. One of the orienting examples that we had when we started off this body of research was the contrast between Hillary Clinton and Brian Williams. Both of them, if you remember, were found to have fabricated stories about being caught in enemy fire and active war zones, and the truth about that kind of untruth was revealed in both cases twelve years after the fact, and what's the result? Brian Williams is out of a job and Hillary Clinton is running for president, and I don't want to impugn Hillary Clinton, but what we realized was that there's a difference in both the way people judge how scandalous any given scandal is, and the way individuals affected by scandal are able to recover. That was our starting point for engaging in this research.

What we found was that there is a difference in the way that we adjudicate how bad a scandal is that's based on what we would call role congruence. If you're somebody who is in a position of fiduciary responsibility or where trustworthiness is really important to serving the function of your job, like a newscaster, like a lawyer, like a board member, like a CEO, we find that scandals that are related to trustworthiness are more damaging for those people's reputations, and we find that based on media coverage, so the tone of the media coverage for years following those kinds of scandals is really, really negative, and the consequences for people's careers can be really negative as well.

In contrast, when we think about politicians, we know that they all lie, so it's not surprising when we find out that one of them has told a story that's less than true, and so the consequences of that kind of scandal are much less severe.

That accounts for part of the difference in individuals' ability to repair their reputations after a scandal. It's just a matter of how bad we think the scandal is for that person based on the role that they occupied.

I guess a lot of what we know and what we can say about the ability of individuals and organizations to repair their reputations after they've been damaged from some sort of scandal is about the violation of expectations. If you've got an identity that's already off the hook, not towing the party line, somebody like Donald Trump, who we know is willing to just say anything, and we're not even sure that he believes half the things that he's saying, our expectations of his honesty, of the propriety of his conduct are really, really low, so what's going to stick to him, what kind of scandal would stick to him and really damage his reputation? It would have to be a really egregious business mistake, and, frankly, he's already filed bankruptcy several times, and that hasn't stuck. It's hard to see because he's known as a wild card, and positioned himself as an outspoken guy, it's difficult to see what could really damage his reputation.

ExecEd: I'm wondering if that relates to this overarching theme of authenticity, because he's authentically Donald Trump. He is what he is, right? If he goes rogue that's him. How does that relate to what we've been talking about today?

Jo-Ellen Pozner:  Yeah. Authenticity isn't my favorite word, but it's a good shorthand for this kind of concept. It sounds kind of academic, but I think about it as a consistency between your image and your identity. You're image is this outwardly facing what you present to people, and your identity is your inwardly facing who you are, what you know about yourself, what you value inside, and if we really want folks and companies to be authentic, we need some consistency between those two. That's very rarely the case. In fact, what we see is that "authenticity" which means an image that's consistent with certain standards of, for example, localism, or production purity, or outspokenness, or whatever it is, depending on the domain, is what's rewarded, and we very seldom scratch the surface to see what's lurking underneath.

The takeaway for individuals is that you want to be your authentic self in domains where it's important, with your family, with your friends, in meaningful personal interactions. What you want to be in public is your best self that reflects the local norms and mores of the environment in which you're operating. I'm not saying to be phony. I'm saying to be intentional about the way you conduct yourself, so that you appear to adhere to the local norms around you, and that's what will make you be perceived as authentic, and even better if that's consistent with what you actually believe and value personally, but striving for that complete consistency might be a fool's errand for many of us.

For organizations, we want to be good. We want to do good. We don't want to be evil, right? That's the mantra of the area in which we live. There are compromises that need to be made every day in any kind of decision making process, and so what we want to do is be consistent with ... We want our actions to be consistent with the image that we're putting out there. We want what we state publicly to be consistent with what we do privately, but does that necessarily need to be the way we make every single decision? It doesn't. We just need to create a consistent narrative that's projecting this sense of a pure image.

ExecEd: How about the consistency with the consumer identity, with what that brand is, whether or not it's real or not. For instance, Apple, or other brands that certain groups identify with, and then you hear of certain alleged problems with sweatshops and different things. I'm sure you have examples where that's happened, and it's challenged the brand identity.

Jo-Ellen Pozner:  Yeah. I mean I think that's all about the life cycle of the company, and the product, and the social movement or the identity movement that goes along with consuming those products. Apple is a great example. If in the late 1980s, when Apple was really, really revolutionary for the first time, frame breaking for the first time, it had come to light that Apple was sourcing its products from sweatshops in developing countries, the people that were Apple consumers, who were interested in technology, who were interested in frame breaking, who were interested in something progressive and thinking differently, might have boycotted the brand.

What we've seen recently is that these allegations of labor mispractice don't really stick, don't really make a huge difference to the bottom line, because Apple has become something different than it once was. It still has cutting edge products, but it's not the cutting edge organization in terms of breaking the way people think about computing and our relationships with technology that it used to be. It's still there, but that's not so fundamental. Now we want a slick iPhone in rose quartz.

ExecEd: Maybe it goes back to what you were talking about, role congruence. For instance, if TOMS were the one that was using a sweatshop.

Jo-Ellen Pozner:  Right. If TOMS were using a sweatshop or if TOMS had told out to a major consumer package goods company thirty years ago, it would not be what it is today, but now most of us want something for our kids that's not full of chemicals, although it's all chemicals anyway, and so TOMS has an image that's consistent with the way we want to parent, or the way we want to be clean, and that's good enough for most people.

ExecEd: Also, the notion of giving back, which seems to be key for a lot of millennials. I don't know if you've done research on that.

Jo-Ellen Pozner:  Yeah. I haven't done research on millennials specifically, but there does seem to be a different motivation in the way that they consume, and, also, a striving for this authenticity, this ever elusive authenticity. Again, I'm not sure how deeply it's felt, and how consistently it's applied in their consumption. What people want, and this applies to millennials and everybody else, is an appearance of consistency between their espoused values, what they talk about, and what they buy, and how they live their lives, but, again, they're not scratching the surface that deeply and creating an uproar when they find that TOMS has been sold off.

ExecEd: I wanted to focus a little on that whole diesel dupe, as they call it, and talk a little bit more about that. That does relate to trust, so what's your take on all that?

Jo-Ellen Pozner:  Yeah. I think that it has the potential to be a very damaging scandal for Volkswagen in the long run. Volkswagen's reputation is based on reliability of engineering, and here is a case of exactly the opposite going on. You could make the argument that this was high reliability engineering, just not of the kind that we wanted to see. They were very successful for a while in hiding this very sophisticated hack essentially from the consumer and the public. My sense is that lots of people who own Volkswagens are very disappointed, especially those who were making their purchase decision based on environmental concerns, which is a large portion of the population that's interested in that sort of vehicle, but I don't get the sense that the company is going down because of the scandal.

ExecEd: But is there any kind of brand negative rub off effect? As you know, people, they buy cars as it relates to their identity and their brand, and here they were, lying about emissions.

Jo-Ellen Pozner:  Yeah. I would be surprised if there were none, but I don't think that we're seeing the kind of image or identity rejection that we might hope, right, and that's the ideal. In fact, that's what motivates me in this research is the hope that we're going to find some grand reaction, some really noisy anger and discontent that corporate malfeasance, but over and over again we see that it's not really what results. I think there will be consequences, and the consequences might be more stock market based, right, where they might be about investing and making investment decisions rather than purchasing decisions, as long as Volkswagen proves to be reliable in its engineering across the board.

ExecEd: I wanted to ask you to talk just a little bit, too, about what it means for an organization. Why did that happen at Volkswagen? What's going on at the top that filters down to the troops, if you will, that would cause that?

Jo-Ellen Pozner:  Yeah. That's the million dollar question. Unfortunately, with an organization like Volkswagen, there's not a tremendous amount of transparency, because it's not a traditional American style publicly listed organization, so we don't know as much about the internal functioning of the organization as we might, but we can speculate, right? We have other examples of very similar problems going back decades and longer. What it seems to me that might have happened is that the top management over promised. They said we can deliver this sort of technology before the technology was actually created, and what happens when we get an over promise from the top is that everybody's attention is focused on that promise, not the series of engineering and managerial decisions that go into making that promise whole, and so the fear of damaging the organizational reputation is centered on fear of missing that promise, fear of not fulfilling that promise, and not delivering on the technology that we said we were going to deliver by a certain time.

When we have that sort of pressure within the organization, without a congruence between internal processes and culture that allow problems to surface and decisions to be made at the appropriate level, we can get a lot of scrambling that might involve hundreds and hundreds of people to deliver that promise rather than making a better decision. In this case, a better decision might have been to say, "In fact, we can't deliver that technology by this date. We can do something close, or we can do it in six more months," but if we're focused on that verbal promise that's part of the identity of the organization, then we've got a lot of maladaptive behavior below.

What we need to correct that is to make sure that there's a culture of openness, that tolerates defense, that tolerates product conflicts, that tolerates the raising of issues before they become scandals, and a culture that encourages people to make difficult decisions and difficult choices. That's a hard thing to accomplish.

ExecEd: Can you speak a little bit about the damage control then? How does one handle, as an individual or as a corporation? A lot of your research deals is with the individual damage control. Can you talk to that?

Jo-Ellen Pozner:  Yeah. At the individual level, my research focuses primarily on directors and top level executives, and the best thing that you can do as one of those folks is to leave the sinking ship. What you want to do is prevent your name from being too closely associated with that scandal. If you have the capacity to, dropping that board from your portfolio or looking for a new job might be a good way to protect your reputation. You might take a hit in the short run, but if you've done a good job at creating networks through which you can disseminate private information about your responsibility in what's going on ... You don't want to make huge public statements, but you can tell your friends, "It was a difficult choice. This is what I saw happening, and I just didn't feel comfortable there." If you can control your narrative and put out information through your network, so you can bounce back pretty quickly.

Staying and not drawing on those networks that you might have, and not putting out that private information that helps save your face, is a recipe for damage in the long run.

ExecEd: What about for those that maybe aren't as flexible to change their narrative? They need to keep their job and they can't leave that job, so in terms of indirect involvement, I know there may not be as much research on that, but what would be your recommendation that those that were still at the company?

Jo-Ellen Pozner:  Yeah. We don't have very much research at all. In fact, I know of no research about that kind of indirect involvement in scandal, and how especially lower level employees of organizations that are involved in scandal can repair their reputations, but there's, also, very little research to suggest that their reputations are seriously damaged in the long run.

The things that we know that you can do to improve your reputation and your status overall, are things like improving your educational credentials, creating ties to high status others or other organizations, just so you can reflect that halo rather than being sullied by the stigma of the organization that you're involved with, so creating connections, getting involved in civic organizations where you might have connections to prominent others, so that you can create those networks where you can disseminate private information, and where you can bask in that reflected glow can help.

ExecEd: I wanted to switch gears now, and I wanted to talk about a whole other area of research that you focused on, which deals with this intersection of social movements and what you call hipster products. Can you talk us through some of that?

Jo-Ellen Pozner:  Sure. This research is motivated by a theory called resource partitioning theory, which is pretty technical, but it basically says that in certain industries there will be a consolidation of production among generalist producers who give homogeneous goods to a heterogeneous population. What does that mean? It's a mouthful. What does that mean?

The classic setting for this is beer brewing, and it's not hard to remember the days when you had a choice of things like Miller, and Coors, and Bud, and maybe Molson, if you were stretching it a little bit, and there were about forty local producers that were not part of that big industrial complex in the late 1970s, early 1980s, so a really small population of specialist producers.

What this theory says is that when we get these huge organizations that are serving watered down beer to people who are fine with it, then we get space opened up in the market for specialist producers to serve specialist audiences, so we get very local brew pubs popping up, or very small micro-breweries that serve really local populations that are interested in something different. At that stage of market development, we get the people that are interested in those products, also, being interested in the identity of the producer, so they're really looking for purity of what I would call organizational form, which we think about as authenticity.

In that case, it's not so much about the characteristics of the product, but the way that it's produced. This might come to light a little bit better if I use another example, which is organic agriculture, organic produce. In the twentieth century in the United States, we had huge agro industrial farming take over, and very little small scale farming for decades, because it was efficient, because there were government subsidies, because we had advances in technology, because we had a booming population to feed, so lots of reasons why that came to pass.

Then we got these fringe hippies, people who were really interested in the purity of the food, which had to be a function of the purity with which it was produced. They were interested in no pesticides, because they didn't believe in chemicals, and no fertilizer, because they didn't believe in damaging the earth, and crop rotation, because that's the pure way. There are a lot of components of that production process that are ideologically driven.

Early consumers of organic food were really driven by that ideology, and, in fact, that ideology was a turn off to lots of other consumers, so when Earthbound Farms, one of the biggest producers of organic greens in the United States, first started selling its products through Walmart, Walmart asked that they take the word organic off the label, because people had a generally negative association with that word, right, that organic connoted something hippie, dirty, alternative, weird, and, in fact, I remember growing up with one health food store. Those of us who were born in the seventies the remember health food stores, and they always looked grimy and a little bit dirty around the edges, and you had to pull your amaranth from the bulk bins. There was a strong connotation and image of what that meant. The population that was interested in purchasing that was really very limited.

Over time, the number of people that become interested in buying less chemically treated, less genetically modified, cleaner produce became much broader, and it became less about the ideology of the producer and the purity of that production process, and more about the product characteristics, so what I want as an organic consumer, if you're an every day person, is an apple that tastes good and doesn't look perfect. What I want is not that perfect Red Delicious apple. I want something that's different from that homogeneous bland product. It's not that I'm driven by this really deep ideology. It's really just about the product characteristics, and maybe a bit of it is about expressing an identity that's different from this mass consumerism homogeneous production.

ExecEd: How does that intersect with sustainability? I'm thinking of TOMS. There's so many examples of other companies. What's happening first? Is it the social movement that's crying out for it, and the brands jump on the bandwagon? How does that work?

Jo-Ellen Pozner:  In many, many cases, so I'm thinking about TOMS. I'm thinking about Burt's Bees, even Ben and Jerry's. The social mission preceded the popularization of that production, of that consumption pattern. My friends, I remember in college, who used TOMS products I thought were really weirdos. Why were they using this smelly toothpaste, or why were they interested in organic bee products? Why wasn't the Jergins lotion good enough for them?

That social mission really preceded, built up the consumer base, and then over time, people's consumption preferences catch up with that vanguard, so over time, the scale of production becomes so great, and the social mission becomes so diluted by the popularity of the product itself, that we get a totally different market dynamic, and so that's why we now see competition, going back to my original example about beer. Thirty years ago, you didn't see major industrial brewers with successful micro-brew lines, because people who were interested in micro-brews would find out and make sure that nobody drank them, and the people that were not interested in micro-brews, didn't think they were tasty to begin with, so there was no market for them.

Now what we see is those large producers are coming out with micro-brew lines, and they're kind of sneaky about it. They're kind of secretive about it, or they're buying up ownership stakes in successful local breweries, and what you find is, if you ask even people who are devoted craft brew drinkers, whether they know who produces their favorite beers, they're not really so interested. They're more interested in consuming this as an expression of who they are as people, as a mark of discernment, because they like the taste of this rather than that, and because kind of as an afterthought it's not that homogeneous product.

The motivation changes, and when that motivation changes, we get a lot of freedom to change our ownership structure, to change our organizational structure, and really to move away from that original mission without many people noticing.

ExecEd: From a brand marketing standpoint, then the people who were interested in the micro-breweries from the beginning, if they learned that Budweiser is actually the one producing it, would they walk away from it, and what is a Budweiser or a big conglomerate do in terms of the branding of these products?

Jo-Ellen Pozner:  Yeah. What we're finding in our research is that there's still a core group of people who are going to walk away from that product if they find out that it's owned by Bud or AmBev or whatever it is, but those people are generally newbies, so they're the twenty-three year old who just discovered what craft beer is, and decided that they're really curious about it, and over time they become less ideological, and, also, over time the modal consumer becomes a lot less ideologically driven.

If you're a Bud brand manager, and want to hide the fact that your micro-brew is actually an industrial brew or kind of an industrial brew, then you can do things to just prevent that association from being made, which is not really difficult. You just don't put Bud on the label. You have the same corporate headquarters, but no mention of it in any of the marketing or customer facing identity statements for the micro-brew.

On the other hand, if you're a really "authentic" micro-brew, you can capitalize on this by advertising that you are independent, that you've been independent for X number of years, that you have a really pure production process, and even for people that are not really ideologically discerning, that ought to make a difference at the end of the day.

ExecEd: The key is to know your audience then, right?

Jo-Ellen Pozner:  For sure the key is to know your audience.

ExecEd: In terms of the consumption patterns. Is there a life cycle or a life span where it becomes uncool?

Jo-Ellen Pozner:  To drink micro-brews?

ExecEd: Yeah. Is that original group is starting to get the sense of it's less authentic.

Jo-Ellen Pozner:  That's a great question. I don't think we've seen the market develop for either organic food, or micro-brews, or the new products, micro-distilled bourbons or whiskies, those sorts of hipster products that are lifestyle products. We haven't yet seen a backlash, so it's hard to say. There is a period where backlash is really a problem, and it's in that middle period where the movement, the consumption movement, the identity movement is really taking off and becoming popular. At that stage, you are easily tainted by association with some unhip, homogeneous generalist producer, but I don't know that there's a longer term effect of that. It will be interesting to see.

ExecEd: You're saying what started as a pure social movement, then can get somewhat diluted over time as bigger and bigger corporations take over?

Jo-Ellen Pozner:  It's not just as bigger and bigger corporations take over. It's as more and more people get interested. It's a curse of success. We're interested in healthy food and food purity, and as more and more people get interested in food purity, which seems like a win from the movement's perspective. Now we've got all the support. Now we can make something happen. All of a sudden, most of those people don't care as much as those first few adherents cared, and so the power that they bring with them becomes a power for dilution rather than a power for adherence to those ideology goals.

ExecEd: What can we do as business leaders to address that discrepancy?

Jo-Ellen Pozner:  It depends which side of the aisle you're on. If you're a big producer that wants to come to scale, take it and run with it. If you're a more ideologically motivated producer, then your goal should not be to get to scale. Your goal should be to serve your consumer base really, really well, and to know who they are and what drives them, and to respond to that. I'm a big supporter of local business for that reason. There's an important component of supporting the people in our actual communities, but buying local means that you know what people are doing, and they know you, and they know how to serve you really, really well, and you're not going to get that same kind of service from an industrial potato farm in Idaho. You're just not.

I know that what I'm saying and the kind of research that I do seems kind of cynical, but it's not really cynical. I'm not a cynical person. I actually have a lot of hope. I think most of us are trying to do well, and whether that means that we're trying to do good in the world, or trying to do well for our families, or trying to be our authentic selves, whatever it is, the motivation behind that is pure. It's just that we're willing to make lots of compromises in enacting that, and whether that's about corporate social responsibility or individual consumption, we don't often question our choices very deeply, and that gives us lots of opportunities to improve ourselves as people if we're interested in doing so, to improve our marketing, to improve our brand positioning, to improve our organizational leadership in a way that's consistent with that trend.

ExecEd: I have to ask this, because we're here at Berkeley, so question the status quo being one of the founding principles for Haas. Do you ever think about that in terms of the research that you're doing, or how that might relate?

Jo-Ellen Pozner:  Everything I do is about questioning the status quo. We have these institutionalized myths. We believe that buying Toms shoes is doing good for the world. We believe that drinking craft brews is better for us for business, for localism. We believe that we are trying to be good people, but, at the end of the day, it might or might not be true, and so questioning even our pure motives I think is a really important function of an academic and an intellectual and for all of us as humans.

ExecEd: Thank you so much for joining us today.

Jo-Ellen Pozner:  Thank you. It was a lot of fun.