September 3, 2020 • Bruce Weindruch
The following article first appeared in Chief Executive in September 2020.
Chief Executives have their hands full dealing with what’s directly in front of them—relentless cybersecurity risk, for example, or the pandemic that’s disrupting workplaces, supply chains and customer interactions—and what’s directly ahead, including a potentially devastating economic downturn and a turbulent election season.
As a CEO, I wouldn’t blame any of my counterparts who feel they have no time to think about the past. But I would caution them: just as the present and future are fraught with risk, a business’s past can also contain combustible elements—and in today’s world, they’re liable to blow up in their face at any moment.
A company’s history can contain some of its most valuable assets—the stories and characters that define the organization’s values, its mission, its identity and reputation. Unlocking the value of those assets is reason enough to conduct a historical review. But at a time when society’s norms and values are shifting, seemingly by the day—and when intangible assets, including reputation, account for larger portions of a company’s value than ever before—a CEO also has to be prepared to reconcile the company’s past with those evolving standards.
The longer a company has been around, the higher the likelihood that it was involved, directly or tangentially, in business practices or behaviors that may have been considered acceptable or even laudable at the time, but that would be viewed as questionable or even despicable by contemporary standards.
Slavery is the most obvious example. But what about lenders, homebuilders and other businesses involved in the housing market from the 1930s through the ’60s, when redlining was an acceptable business practice, sanctioned by federal policy?
Or consider the companies that processed the uranium and plutonium used in the atomic bombs dropped on Hiroshima and Nagasaki. The employees of those businesses worked around the clock, motivated by the belief that they were doing the greatest work one could do at the time: creating the means to free the world from tyranny.
But what the world saw as heroic in 1945, it now views in a very different light. We now know the toll that work took: radiation exposure that effected workers’ health, environmental damage from discarded production waste and, of course, the horrific human toll in Japan.
I could go on—the risks lurking in history are as numerous and varied as today’s headlines. (Of course, a company may also discover that its history contains stories it wants to tell, like the insurance company that learned it had provided coverage for the vehicles used during the bus boycotts during the Civil Rights movement.) And in today’s world, those risks are almost certain to come to light. It wasn’t long ago that a company’s history was securely locked away in an archives or record storage facility, buried in a box and assumed nobody else would bother with it. No longer: these days, anybody with an internet browser can go combing through your organization’s past.
The digital age has also contracted the time between when activists grab hold of an issue and when businesses are compelled to respond. Ralph Nader published Unsafe at Any Speed, a groundbreaking exposé of the auto industry’s efforts to fight off and undermine safety measures, in 1965. It took three years for Congress to pass legislation mandating seat belts in all vehicles, and 19 years before New York became the first state to require drivers and passengers to buckle up. This year Quaker Oats announced plans to rebrand its 131-year-old Aunt Jemima products less than a month after the murder of George Floyd sparked a nationwide racial reckoning.
Unlike present and future risks, there is nothing a CEO can do to avoid historical risks. What you can do is get ahead of them. The first step is simply knowing the historical facts – what actually happened, or what business historians Bradford Hudson and John Balmer have deemed a business’s innate heritage. Once you know what happened, you have to try to understand what the public will think happened. That’s your projected heritage – and it’s why your history matters.
Getting a handle on projected heritage requires figuring out all the ways consumers, employees, investors, media and other stakeholders might perceive your company, through their views of history and in light of what they know, or think they know, about the company’s past.
To start figuring it out, I recommend thinking about broad categories of risk you might encounter, then sorting the historical record according to those risks. From there you can evaluate the record to determine how it might be perceived by today’s audience.
Because the risks associated with brand perception are constantly changing, responding to current events, the latest corporate scandal or prevailing public sentiment at any given moment, it can be counterproductive trying to assess specific historical risks.
Instead, start broad. Think about the categories of corporate issues we’re all grappling with, and look for areas where your company history may collide with them. You might start with labor and workforce, a topic every business deals with, throughout its history. Are there incidents of harmful treatment of the company’s workforce? This is where you’d consider things like child or slave labor, workplace safety problems and discriminatory practices or gender-relations issues.
Once you’ve categorized everything by risk, you can evaluate your company’s past in a contemporary context. Applying today’s values, morals and standards to the decisions and behavior of another era is inherently subjective, and it can be challenging to keep personal biases and perceptions out of the process. So I’d suggest using objective criteria.
For instance, you could evaluate the historical behavior based on whether leadership had knowledge of it or not. You could assess whether it was illegal or just immoral. Or whether it was an isolated incident or a pattern of behavior.
The goal is to take the subjectivity and emotion out of a historical study, and simply to make it seem less daunting. Be warned, however: a historical audit is no easy task. A rigorous historical audit requires combing through massive amounts of materials – many of which will be scattered, disorganized or incomplete.
But they contain information and insights that can be invaluable to your company, its reputation and prospects moving forward. In this historical moment, when standards and expectations are changing continually, when reputation is more valuable, but more vulnerable, than ever, being forewarned is being forearmed.
That’s the bottom line: to secure the company’s future, it helps to understand its past.
For more information on how some of these past actions might be perceived by c-suite, investors and consumers today, download our “Perils of the Past” survey.
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