Why businesses fall from grace

Pariahs argues that self-serving leaders combined with an omnipresent media are the cause of companies becoming outcasts, but this isn't always the case.

by Ian Wright
Last Updated: 30 Mar 2016

In July 2007, Fred Goodwin offered me a job. As I waited to meet him I was kindly given tea in an office literally bigger than the entire floor I shared with my then team and bosses. 'Won't Sir Fred mind me sitting in his office?' I asked. 'Oh, this isn't his office,' his PA replied, 'it's mine. His is much bigger and it overlooks the golf course.' I didn't take the job: even then I could see that RBS had succumbed to the red mist, which was a natural corollary of their ruthless determination to make the everyday Scottish bank the largest in the world.

Matt Nixon's book Pariahs describes similar traits in many organisations. Just like RBS, it's the hubris of the leaders that lands businesses in the brown sticky stuff. They build corporate cultures where only yes-men (and they usually are men) thrive. They do hard-nosed, unpopular things (tolerated while all is going well) but ambition overtakes business judgement and results begin to fail. Then the leaders' behaviour comes under ever increasing scrutiny from social media, 24-hour news and NGOs. These 21st-century vigilantes catch the attention of the traditional media and of customers or the wider public who turn nasty.

At this point, leaders are unwilling to apologise or change course. Instead, they resort to crisis management rather than undertake the major cathartic change that Nixon suggests would renew their organisation. Nemesis overtakes them: think BP under Tony Hayward or Tesco under Philip Clarke.

Much of this is familiar ground. The book and film The Smartest Guys in the Room showed how this sort of carry-on destroyed Enron. Nixon has added a scholarly and illuminating analysis of corporate descent into the abyss. Actually, for a business book it's a bit overconcerned with its own erudition. If I was Mr Nixon, I would leave introducing today's audience to the mores of Ancient Greece and Rome to Mary Beard. Or Boris Johnson.

More important, I don't buy the book's central notion that all the circumstances described inevitably create outcast or disgraced companies. For 15 years, I managed the reputation of Diageo, the world's leading drinks business. Nixon would say that years of controversy generated by a Faustian alliance of NGOs, media and online critics defined us as 'Pariahs'. He would be wrong: to be unpopular with naysayers is fundamentally not the same as being consigned to the outer darkness.

The reverse is also true. There have always been CEOs – like Lord King or Sir Bob Horton – notable for their lack of the milk of human kindness. They ran their companies like tyrants. Very frequently they were a huge success for entire careers. The strong moral streak in the book is not a bad thing. However, it means that Nixon fails to appreciate the possibilities of such rebarbative souls prevailing, of business success marginalising NGOs and campaigners, or other stakeholders drowning them out with applause.

We are on stronger ground when Nixon examines the way staff react to becoming mired in controversy. He identifies three types of employee. Loyalists have a strong emotional connection to the business and are often close to customers or suppliers. They challenge the critics ('it's all got up by the media'). Mercenaries - they may be contractors - are those with much less invested in the business. They tend to be pragmatists ('makes no difference: I just get on with my job'). Finally, Heroes are change junkies who see the need to address what they perceive as organisational failings ('we must do something to change things').

You'd think it obvious that it's important to keep employees engaged through choppy waters, but this is often way down the batting order when senior managers are trying to navigate their way through prolonged criticism. That's deeply misguided: as Nixon points out employees are likely to be going through some pretty disruptive emotions. After initial shock, there can be anger and guilt. Or there may be denial, a siege mentality and resurgent loyalty. The book rightly argues that each of these needs serious attention.

At its heart, this is a worthwhile book about hubris. That acme of modest leadership Tony Blair had a novel observation: 'Roman emperors used to have a slave with a pig's bladder walk behind them, ready to hit them over the head if they succumbed to hubris. For that I have John Prescott.' All business leaders need one or the other.

Pariahs: Hubris, Reputation and Organisational Crises by Matt Nixon is published by Libri Publishing, £20

Ian Wright is the director general of the Food and Drink Federation and former corporate relations director of Diageo

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