REPUTATION RISK
A move from living off yesterday’s reputation is gradually taking over the market. One failure has come from the “best of breed” philosophy for hiring the best and paying the most. This attitude has been severely tested in an era of underperformance and corporate cost-cutting.
People are trying hard to forget the reputations of the prestigious accountants and the “best” investment banks. The fines against Wall Street and the investigations of Jack Grubman, Frank Quattrone, Martha Stewart et al. showed a belated attempt to rein in the corporate excesses. Should culprits try to destroy incriminating electronic evidence, then data recovery procedures will be able to retrieve much of the destroyed evidence. Email audit trails in forensic accounting procedures will find them out.
A star fund manager is no longer accorded the status, but earns it. Disappointing performance drops them into the satellite group of also-rans. The research done by actuaries, forensic accountants and other financial analysts offers sound ground for assessing staff selection. Background checks for finding real suitability, rather than professional skill listed in a glossy CV can find out the sad truth. Otherwise, risk and return appetites become more estranged.
Similarly, the reputation of a “top” services company can be just as short-lived and cheap as a bacon-lettuce-tomato sandwich. Go for performance delivered. Give them a check-list or interview to see if they can show results and sincerity.