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Can your reputation survive a wildfire?

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Can your reputation survive a wildfire?

By: Steve Sadler, CEO, Allegiancy

October 30, 2015

At Allegiancy, our most valuable asset is the company’s sterling reputation for passionate service to our clients and a fierce defense of their financial interests. When you hire an asset manager to take an active role in protection your real estate investments, that is what you want, right?

There are two scary things about having a great reputation: 1) How easy it is to lose it and see decades of effort go up in flames; and 2) The frightening number of companies that seriously don’t care a whit about their reputation and will do, literally, anything for a buck (cough, cough…Goldman).

Speaking of flames, across the American West this year, a staggering 11.2 million acres of forest have been burned in forest fires. Just for perspective, that’s an area that is about 1 1/2 times the size of the state of Maryland and an amount that’s nearly double the average of the past 10 years.

The costs of fighting the fires, as estimated by the U.S. Forest Service, will top more than $1 billion. That figure doesn’t include the billions in losses to property owners or the billions in costs to taxpayers to rehabilitate the scarred forests.

Forest fires are immensely destructive natural disasters that start small — often it’s a single smoldering tree, or bush, or clump of dry grass struck by lightning. The fires out West follow distinct patterns and are generally lumped into three categories, according to learnforests.org.

There are ground fires, which essentially smolder on the ground in combustible material but don’t flame up and move only a few feet per day. These you can stomp out in your boots, or at worst a shovel.

Then there are surface fires that burn in leaves, grass, plants, shrubs and downed wood such as logs or branches. The intensity of these fires can be low, but they can also flame up and become very intense depending on circumstances such as heat, humidity levels, wind and available combustible material. Bring a crew with shovels and a fire engine and you can knock these fires down before they get too big.

The third category is the deadliest. These are crown fires that flame up and spread through the tops of the trees. If winds pick up or they are moving through steep slopes, these fires can envelop thousands of acres a day — they voraciously consume the available oxygen and actually create their own weather systems — and are virtually unstoppable. There’s not much you can do to stop these until the conditions change or the fire runs out of fuel.

Of fires and reputations

These types of fires remind me of business reputations. Or maybe business reputations remind me of these types of fires.

A ground fire is similar to a business that had a customer who had a bad experience. That customer may tell other people about their bad experience, post something on social media, or generally vent. But the customer can be appeased by some semblance of a peace offering — a discount or freebie, an attempt to correct bad service, or some other measure — by attentive employees or management.

Just like a ground fire that can be stamped out, a customer’s bad experience can be contained and damage to the business can be limited or, at worst, sharply curtailed. This is why during summer months across the American West there are fire crews at the ready so at the first sign of smoke, firefighters can be dispatched to extinguish the fire before it really gets started.

Good businesses operate the same way. Employees are trained to recognize the first signs of “smoke” from customers and be able to quickly and adroitly defuse any tension or problems.

The second type of fire, the surface fire, is similar to what companies such as Target, Home Depot, or others experience when they suffer data breaches, for example. Maybe they were handled poorly at the outset by management, but eventually the damage can be contained and the companies can recover and even flourish. It may not be pretty and there will be losses along the way, but the fire does not decimate the landscape.

Do things differently

Before we get to the third fire, I want to take a pause and look at the big picture. One of Warren Buffett’s more famous quotes goes like this: “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that you‘ll do things differently.”

And I think plenty of people in business like you and me do think about that. There is plenty of evidence that the closer the company is to the ground level, the more often they come face-to-face with the customer, the more they care about service and reputation.

It’s my theory that you could draw a matrix where you map the “localness” of a business and find a direct correlation to management’s and ownership’s ethics. I think the average American has a rather keen sense of fairness and justice, so when you are across the checkout counter with someone and they have been mistreated, you will know about it.

Just like in the forest when someone on the ground level in a hard hat, fire-resistant clothes and with the knowledge, skill and equipment can put out a fire. It’s not going to be the federal government bureaucrat in Washington D.C. who takes care of it, but that young guy or gal in boots and Nomex shirts tromping through the forest.

Last means worst

The challenge for the big companies is that with the super-sized, national corporations, everyone involved loses a sense of direct accountability. An example that comes to mind is Goldman Sachs, distinguishable by finishing dead last in “The Reputations of the 100 Most Visible Companies Among the General Public” according to the Harris Poll’s The 2015 Reputation Quotient.

Let me say that again: Dead last. People really don’t like Goldman Sachs. And I know why. In negotiations, there’s a thing called the “bazaar mentality” that refers to the Persian — Iranian, really — mindset. Bruce Laingen, a U.S. diplomat among those taken hostage in Iran in 1979, described it in cables he wrote that were among the WikiLeaks disclosures in 2010.

As reported in the National Review, Laingen jotted down his musings on negotiating with Iranians just a few months before being taken hostage in Tehran. He states in one cable, “Perhaps the single dominant aspect of the Persian psyche is an overriding egoism. Its antecedents lie in the long Iranian history of instability and insecurity which put a premium on self-preservation. The practical effect of it is an almost total Persian preoccupation with self and leaves little room for understanding points of view other than one’s own…”

I read that cable and replaced the word “Persian” with “Goldman” and “Iranian” with “banking.” Suffice it to say, it’s a seamless switch in my mind. At Goldman Sachs they almost have this mentality where it is celebrated when you rip off your counterpart in a negotiation. Goldman Sachs guys like to feel smarter than everyone else and what better way than to trick you, deceive you and then have you willingly give them your money. Taking that mindset down to the citizen level, people don’t feel bad about stealing from Walmart in the same way they would if it was taking something from George the neighbor.

Symptoms of a wider disconnect

Yet the anonymity and disconnectedness of our ‘modern’ culture, combined with a general erosion of the moral and ethical foundations, has created a very ugly “me first” selfishness and self centered-ness and self absorption that extends to the highest levels of corporate America. Like all the way up to Goldman Sachs even. It’s horribly toxic stuff.

Which brings us to the third type of fire, the crown fire that can’t be contained. It burns out of control and is unstoppable, just like Goldman Sach’s bad reputation. Just this month, Goldman Sachs was ensnared in another dose of bad news involving inquiries by the FBI and Department of Justice into its practices in Malaysia that would seemingly further harm the company’s reputation — if that’s possible.

Does anybody care at that company? Or is it so bereft of a moral compass that it’s simply, as Rolling Stone writer Matt Taibbi famously described Goldman Sachs, nothing more than a “great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.”

For some businesses, particularly smaller mom and pop outfits, when a crown forest fire strikes it damages the company’s reputation so destructively that the business goes up in flames. In this day and age, with social media and self-righteous shaming vigilantes, it is easier than ever to have your reputation (and your company) go up in flames. The best antidote is to operate with INTEGRITY — and that is precisely what we do at Allegiancy.

Connecting character and reputation

It seems to me, though, that companies like Goldman Sachs don’t really care. When you are a customer of a business with consistently bad service, it’s pretty clear they don’t care about their reputation. For a lot of us, though, our character defines our business and is reflected in our reputation.

It’s why there’s a commitment to good service and treating customers well, the hallmark of companies like Amazon, Wegmans, Chick-fil-A and others that consistently rank at the top of customer service charts. For companies that have a genuine concern for and desire to serve the customer, it can easily distinguish you from the pack.

I have an analogy of a business that practices ethical, customer-first business practices. It’s like the ponderosa pine tree forests on the slopes of the West’s Cascade Mountains. With unusually thick bark and branches situated high off of the ground, ponderosa pines can withstand ground fires; you can actually walk through forests where the brush has burned and there are burn marks on the tree bark.

But the ponderosa pine trees are still standing and thriving.

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The foregoing does not constitute an offer to sell or a solicitation of an offer to buy securities, and no money or other consideration is being solicited hereby, nor will be accepted. An offer to purchase or a solicitation of an offer to buy the securities can only be made or received and accepted once an offering statement is qualified by the Securities and Exchange Commission as exempt from the registration requirements of the Securities Act of 1933 (the “Act”), as amended, pursuant to Section 3(b)(2) of the Act. Any such offer to purchase securities may be withdrawn or revoked, without obligation or commitment of any kind, at any time before notice of its acceptance given after the qualification date of the offering related thereto, and any indication of interest to purchase securities involves no obligation or commitment of any kind.

 

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