Leadership ensures a valuable reputation

Shakespeare had it half right. A rose by any other name would smell as sweet. But without the name that brings the scent and sight of it to mind, a rose would be just another flower.

It's the same for people. A person who forges a good name for himself or herself will go to extraordinary lengths to keep it intact. That's because nothing has more intrinsic value than personal integrity.

Our personal reputations -- whether good, bad, or undeserved -- have an uncanny knack for both preceding and following us in life. A good name will open doors almost as quickly as a bad rep will slam them closed.

In legal terms -- and most importantly, in the minds of consumers -- corporations are people, too. Whether it's with the local newsstand, your truck fleet, or a monolith like General Electric, people like to do business with people they like.

Although behaviorist types will contend people like those they are most alike, when it comes to business that is most assuredly a crock. Rather, we tend to like those we admire and respect. After all, it's human nature to strive for excellence, to reach the next level, and in the meantime, rub elbows with those already on a higher plane. That's what marketing experts call the appeal of association.

Ask people why they use a certain brand of laundry detergent or long-distance phone service -- or even why they use your trucking firm -- and the answers will fall into just two categories. In the first group will be the usual skinflint comebacks about using the "cheaper" offering. But all the other responses -- ranging from "good value" to "good service" -- will be factors that make up a company's good name in the marketplace.

No one has yet come up with an "admirable reputation" quotient to insert into financial reports. The lack of such handily charted variables didn't stop Fortune from again ranking what it calls "America's Most Admired Companies."

It's an exclusive club of just ten name-brand companies. Winning the top honor was General Electric, followed by that upstart Microsoft, and the ever-youthful Coca-Cola Co. Chip-maker Intel came in fourth and computer firm Hewlett-Packard fifth. Landing in sixth was Southwest Airlines, followed by Warren Buffett's Berkshire Hathaway, and then Michael Eisner's Disney. In ninth place was venerable Johnson & Johnson, and in tenth drug-maker Merck.

What do all these companies have in common? At first glance, not much -- besides making tons of money. According to the report's author, Thomas A. Stewart, as the ten "stand above the rest of corporate America in reputation, so do they tower over it in performance."

He figures that a ten-year, $10,000 investment in these companies would have yielded shareholders nearly triple the return of the same amount put in "S&P 500" stocks, giving them a portfolio worth $146,419 vs. just $51,964.

However, the writer also holds that top performance is necessary but not sufficient to make for a top reputation. Instead, he contends that leadership is the one factor that makes the most difference in how admired a company is.

In Stewart's view, that leadership comes from the top. He goes so far as to declare that the CEOs of the top ten possess "more talent than any lineup since the 1927 Yankees." For example, he points out that admiration for GE should be credited to Jack Welch, "who has rewritten the book on management while keeping GE huge, nimble, and immensely profitable" during 17 years in command.

Yet to have lasting impact, leadership can't end at the top. Indeed, GE understands that. It spends over $800 million a year -- about half what it spends on R&D -- on training and leadership development.

A quote in the article perhaps best sums up the value of leadership in the marketplace. "People are voting for the artist," says Berkshire Hathaway's master investor Warren Buffett, "not the painting."

People usually don't know everything about the products and services they buy. But just as with art, they know what they like.