The context within which businesses have to operate is increasingly volatile, uncertain, complex and ambiguous. New technologies have become a prime driver of socio-political, economic and environmental change. A simple example is the reputed role of social networking in galvanising a whole generation in a number of Arab nations to protest against the incumbent ruler and seek political change. Another example is the way a company’s reputation which has been built up over decades, can be sullied in an instant.

Take the Toyota story of 2010. The issue spread pandemically across the media, accelerated by the internet. Toyota is still the No. 1 motor company in the world but the brake-system problem and how the executives handled the issue has tarnished the company’s reputation for safety and quality. The 2020 Vision for Toyota reasserts the importance of both safety and quality values with key phrases: “with the safest and most responsible ways of moving people” and “through our commitment to quality, constant innovation”.

Reputation cannot be controlled, it can only be influenced. Personal and business reputation is the perception of all who engage with you or your business. It will differ from one stakeholder to another and is contemporaneous. It evolves and moves, shaped by experience. Work at Henley Business School’s John Madejski Centre for Reputation has produced tools and practices that measure reputation by evaluating the strength of business relationships with customers, suppliers, employees, investors and communities. The measurement provides the insight to proactively influence and manage reputation.

This is the key strategic question: What do you want to be known for by all your stakeholders? Partly in response to the impact of quality problems on its reputation, the Toyota Global Vision 2020 clearly lays this out and places ultimate importance on their customers’ experiences. To deliver the vision requires constantly delivering experiences that enhances reputation not just for customers, but also for employees, suppliers, investors and other communities with an interest in Toyota.

Experiences are shaped by the actions, attitudes and behaviours of all employees and especially those of the managers and leaders. Making the right ethical and values-based decisions is crucial. Ethical and values-driven behaviour directly impacts reputation, which ultimately determines whether any stakeholder trusts your business. Trust is a critical intangible quality that enables a business to be sustainable, enduring in the long run. As Toyota put it: “This is what the Toyota Precepts mean in reminding us to ‘be kind and generous’ and to ‘create a warm, homelike atmosphere’. The idea is to earn as many smiles as possible. It means building relationships of trust and mutual respect with customers and also with business partners, with members of the community at large, and with our fellow team members at Toyota.”

So what is the role that HR needs to play in building trust and enhancing reputation through ethical, values-based behaviours? Through working extensively with HR leaders, researchers have identified six HR leader roles.

The resource provider interprets business strategies from an HR perspective and crafts an effective and “fully scoped” HR strategy. The diagnostic specialist undertakes systematic assessments of the business from an HR perspective to assist organisational analysis and assessment. The values leader advocates the importance of addressing business issues from several viewpoints – always including the people perspective, the organisation’s espoused values and culture. Meanwhile, as an executive coach and counsellor, HR practitioners support top team members in dealing with organisational and people issues, especially those that require specialist knowledge or have important consequences for people management. The top team developer promotes productive, effective interpersonal relations. Finaly, as a change management champion, an HR leader takes a lead in ensuring that change management programmes conform to best practice and incorporate the human dimension.

It is a complex, challenging job being an HR leader in any organisation. When you consider the range of roles that make up a really effective HR leader, then it takes substantial commercial, technical and political capability.

Being the values leader means acting as a guardian of espoused values. It means playing devil’s advocate to the business leaders. It means being able to challenge decision-making and decisions taken from the perspective of what is consistent with the values of the business. Good HR leaders have a core value set that is grounded in what is good for the employees, the business and society at large. Their driver is not “what’s in it for me?” or “onward and upward”. Rather, their motive is to be part of a winning team and grow a successful business. They are always asking themselves why they are doing what they are doing. By being this way, HR leaders are in the right position to provide that check and balance for those who lead the business. In order to fulfil this role, HR leaders ideally need to maintain a degree of distance or separation. 

In the case of some banks in Britain, there is a real reputational problem with what are perceived as excessive bonuses for staff. When it is the case in these banks that HR also receives significant bonuses, it is possible that this creates a conflict of interest when HR needs to challenge line decisions. The challenge may be for the right values-based reasons, but by doing so may impact performance which subsequently impacts bonuses.  This is an invidious position to be in when in the role of a values leader. It suggests that HR ought to be excluded from bonus schemes or at least be rewarded and incentivised against different criteria.

So HR leaders are in prime position to be guardians of the values and to promote ethical behaviour at all levels. To earn the right to take this place, a good HR leader needs a combination of three capabilities. Firstly, they should be able to deeply understand the strategy, commercial imperatives and drivers of the business. Secondly, they should be able to translate the needs of the business into an effective HR operational strategy. And finally, they must possess the political savvy to influence at executive level.

With these capabilities and the tools to measure reputation, HR leaders can take proactive steps to protect and enhance reputation, thus increasing the trustworthiness of their business through the eyes of all stakeholders as a whole.

Hugh Evans is the director of corporate learning for the United Kingdom-based Henley Business School