In recent years, among institutions we tend to take for granted — our airport, the library, the Kentucky League of Cities, the Kentucky Association of Counties, the Bluegrass Area Development District — Lexington has experienced controversies that have shaken faith in leadership, highlighted lax board governance and, most painful of all, damaged reputations.
Alan Stein is the namesake and founder of the Lexington-based business consulting firm, SteinGroup. The firm just passed its two-year mark. Its services cover a variety of areas: management, branding and public relations, capital development, sports marketing, local food systems. Tom Martin spoke with Stein about a recently added line: Reputation Management.
Tom Martin: What is reputation management?
Alan Stein: It's a process by which you in advance look at the things you're doing within your organization — personal and corporate. You analyze whether those things are within the mission that you're appointed to do and then, how you manage all the way through that process making sure that you don't trip over potential land mines, public relations issues, just making mistakes that we all can tend to make. And if you manage that process, then when inevitable minor and sometimes major mistakes occur you are prepared to deal with those issues.
Martin: So you're preventing the need for crisis management?
Stein: That's exactly what we would be doing. We would analyze all of the systems and processes that an organization might have and make sure that they are appropriate, tied to their mission, are in place to accomplish their goals, and make sure that they don't get into situations that might damage their reputation. Martin: What kinds of organizations do you anticipate having as clientele?
Stein: We anticipate that we're going to be working with and have already begun to work with groups that are nonprofit, quasi-governmental groups. We're defining a lot of those groups as organizations that actually get public dollars or other people's money to manage and accomplish their missions, but in some cases there too will be for-profit and private enterprises who will also need to manage their processes through this reputation management.
Martin: We're talking about an intangible asset here.
Stein: To me, reputation and/or brand are the most important asset that they can have. In business, your word is your bond, but beyond that, the perception of your ability to give that word is even more important.
Martin: Transparency has become a very popular word these days. What does it imply for an organization or a company and the behavior of its leadership?
Stein: A lot of folks will respond to that differently. Transparency in some cases, without taking it to a negative connotation, instills fear. People don't want to get in the crosshairs of public opinion and debate. They don't want to be in the middle of a conflict between or amongst employees, shareholders, and customers. Transparency is critical to managing one's reputation because the more light that is shed on any subject, the less likely it is to deviate from the norm. And at the end of the day, when and if inevitably you fall into a bad situation, transparency frankly is the only way out. There are hundreds of examples in contemporary news as well as in our history where folks get into way more trouble because they're trying to cover up the deed. The deed is often less onerous and less damaging than the cover-up itself. With transparency, that never happens.
Martin: Entrepreneurs are risk-takers, willing to roll the dice with their reputation and their money, perhaps others' money as well, put it on the line in support of their idea or their enterprise. Is there tension between that risk and reputation?
Stein: I've been a serial entrepreneur literally since I was in third grade. Risk-taking is incredibly important. Risk and entrepreneurism go hand in hand, but it doesn't have to be the kind of risk that would get one into trouble. Failure is not a terrible thing as an entrepreneur. As someone who's had multiple business successes over the years, I can tell you I've also had failures. Never once did it occur to me to cut corners or to be less than open and honest with the public, my customers, my employees, my staff, or most importantly those who have invested with me. Never once did I try to cover something up or cut a corner that would put them at risk, not just for their investment, but for being associated with a negative company. It's not worth it — it's not right.
Martin: Does that discipline come from developing a pretty healthy level of self-awareness? I'm not talking about vanity here, but about being aware of who you are and what your limits should be?
Stein: Any entrepreneur frankly had better know himself very well. What's your tolerance for risk? What's your tolerance for loss and failure? You have to be self-aware and self-analytical enough to know when you're at the end of a road and you have to, you know, as they say in football, you have to drop back and punt. Self-awareness is really important in that time.
Martin: You've served or are serving on a long list of boards in Lexington. They include Commerce Lexington, Bluegrass Sports Commission, Fayette County Education Foundation, the Minor League Baseball Board of Trustees, and that's a reminder that you quite famously brought minor league baseball to our town, founding the Legends. So, you've seen a lot of leadership come and go. Have these experiences played a role in the decision to create this service in your firm?
Stein: There are a lot of things that have occurred in my life that have spurred me on: my relationships with some folks who have gotten into some hot water. In some cases the culture of their organization was not what it ought to be, and I felt badly that I couldn't help more than what I tried to. In some cases, those folks really didn't do anything in the normal set of circumstances that would be looked at as immoral, unethical, certainly not illegal, and yet they didn't manage their way through what we would call a crisis of reputation management, and they suffered significant consequences personally and corporately. Not just the individual, but the corporations or the groups themselves really take a body blow when these things happen. It just strikes me as so odd every time I hear a leader, whether they'd be political or corporate, in denial about what they may have been perceived to have done, and they don't get it. They don't get that there's a path forward. Even in the worst of circumstances, there's always a path forward. Not everybody figures that out.
Martin: That series of crises that I cited earlier was quite a wakeup call about board governance and perhaps a reminder to board members that they have more of a responsibility than just showing up for the meeting. There was a lot of discussion about board governance for a year or so. Has that been lasting, or has it been too easy to default to the way that it was done before?
Stein: We've done four board governance reviews and processes. People coming to us saying, 'Would you help us make sure that our by-laws, our best practices, our methodologies, our selection for board processes, all those things are appropriate and in place and that they meet general standards?' I will give fabulous credit to our former auditor, Crit Luallen, and now our current auditor, Adam Edelen, for establishing what those guidelines are for boards. It's really important if you are a board member to understand it's more than putting your name on a letterhead or writing a check for a contribution. There are responsibilities — in many cases legal and fiduciary — that folks don't always know about. Some of the processes that we're building in reputation management are not about the nuts and bolts. You know, the list of 33 suggestions from Auditor Luallen's office that any board should follow and adhere to. Ours is more about, how are you adhering to those? Why are they important?