Daniel Diermeier: An interview by Bob Morris

Daniel Diermeier

Daniel Diermeier is the IBM Professor of Regulation and Competitive Practice, a Professor of Managerial Economics and Decision Sciences at the Kellogg School of Management, and a Professor of Political Science at the Weinberg College of Arts and Sciences, all at Northwestern University. He is director of the Ford Motor Company Center for Global Citizenship and co-creator of the CEO Perspective Program (Kellogg’s most senior executive education program), a joint venture between the Kellogg School of Management and the Corporate Leadership Center. Diermeier’s work focuses on reputation management, political and regulatory risk, crisis management, and integrated strategy. His work has been published in numerous academic journals in management, economics, and political science.

He is the author of the recently published book, Reputation Rules: Strategies for Building your Company’s Most Valuable Asset (McGraw-Hill, April 2011). Diermeier’s work has been featured globally in media outlets such as the Wall Street Journal, the Economist, Business Week, the Financial Times, Newsweek, the Chicago Tribune, De Telegraaf and many others. In 2001 he was named Kellogg Professor of the Year and in 2007 was the recipient of the prestigious Faculty Pioneer Award from the Aspen Institute, named the “Oscar of Business Schools” by the Financial Times. In December 2004 he was appointed to the Management Board of the FBI.

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Morris: Before discussing Reputation Rules, a few general questions. First, other than a family member, who has had the greatest influence on your personal growth? Please explain.

Diermeier: When I was an undergraduate student in Germany I had received a fellowship from the German Konrad Adenauer Foundation. This required attending a few seminars on philosophy, critical thinking, rhetoric and other topics. These seminars were conducted by Konrad Krieger, the director of the graduate program. His thinking, values, and approach to scholarship had a profound influence on me in every aspect of my work. He also taught me how to be a professional.

Morris: The greatest impact on your professional development?

Diermeier: Before I came to Kellogg and Northwestern I was an assistant professor at Stanford’s Graduate School of Business. My training had been in game-theoretical models of politics, but at Stanford I learned to apply these tools to business. David Baron, now emeritus at Stanford, had a tremendous influence on my development in this area.

Morris: Was there a turning point earlier in your life (if not an epiphany) that set you on the career course that you continue to follow? Please explain.

Diermeier: There were two. I had originally been a graduate student in philosophy, but realized that I was not suited to be a professional philosopher. That happened during a year at USC. The second turning point was my time at Stanford and the influence of David Baron.

Morris: To what extent has your formal education proven invaluable to what you have accomplished during your career thus far?

Diermeier: My background has always been inter-disciplinary. I had a very good education in logic and then game-theory, but also had studied philosophy and even a year of musicology. Recently, I have become interested in psychology and linguistics. A topic like corporate reputation is multi-faceted and helps dramatically to be able to view in from different perspectives and integrate these perspectives into a new holistic view.

Morris: In recent years, MBA programs – even those offered by the most prestigious business schools, such as Kellogg – have been severely criticized. In your opinion, what is the one area in which there is greatest need of immediate improvement?

Diermeier: Business schools have failed to understand and reflect on the role of business in society. Corporations have become the main engines of economic, social, and cultural change, and are being held accountable for the consequences of these changes by an increasingly skeptical public. Companies need to address these challenges whether they want to or not. Corporate leaders thoroughly understand this, but many business schools still act as if these issues can conveniently be ignored.

Morris: Look ahead (let’s say) 3-5 years, what do you expect to be the single greatest challenge that CEOs will face? Why? Any advice?

Diermeier: To overcome an ongoing erosion of trust at a global scale. To counter these trends companies need to develop reputational management capabilities.

Morris: Now please shift your attention to Reputation Rules. When and why did you decide to write it?

Diermeier: I had the good fortune of serving for seven years as the academic director of the CEO Perspective Program, a joint venture between Kellogg and the Corporate Leadership Center. This program is designed for direct reports to CEOs of large, complex organizations. As part of the program we invited CEOs of the world’s leading companies into the classroom for a candid dialogue with our participants. I was struck by how often these CEOs mentioned “reputation,”“brand” or “trust” as one of their main concerns. “People” was the only other topic that came close. That said, at the same time we all saw one reputational crisis chasing another. And in contrast to the accounting crises a decade ago (Enron, WorldCom, Arthur Andersen), these crises could be connected to any aspect of the business such as supply chain management, quality, safety, but also executive compensation or board governance. Together this suggested to me that (a) CEOs are right to put reputation on the top of their agenda, and (b) most companies do not know how to build and defend their reputation effectively.

Morris: What differentiates it from other books that also examine reputation management?

Diermeier: I think there are two main differences. First, reputation management is still largely viewed as part of corporate communication. That is, it is essentially about communicating in the right way. Of course, effective communication is a critical component of reputation management, but effective reputation management needs to be integrated into business practices. It is about doing things differently. Companies need to think about reputation management as a capability, like quality management and customer-focus. That requires the right mind-set as well as processes and a matching culture and values. Second, many reputation and crisis management books are based solely on the experience of practitioners. This book draws heavily on rigorous research, some my own, some from various areas of the social sciences. My sense is that we need to take this area as seriously as other areas in management and developing new insights that go beyond best practices is critical. That said, I worked hard on making the book easily accessible with many case studies, examples, and practical tools.

Morris: Were there any head-snapping revelations while writing it?

Diermeier: I was struck how underdeveloped the reputation capabilities of many companies are. Managers love to build brands and reputations but they fail to build capabilities to defend and sustain them.

Morris: To what extent (if any) does the book in final form differ from what you originally envisioned? Please explain.

Diermeier: There were few major changes. I had been thinking about this topic for a while and had developed a successful course on crisis and reputation management. What did happen was that processes and culture starting playing a more important role.

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To read the complete interview, please click here.

Daniel Diermeier cordially invites you to check out the resources at these websites:

http://www.kellogg.northwestern.edu/Faculty/Directory/Diermeier_Daniel.aspx

http://www.kellogg.northwestern.edu/reputationrules/

http://www.ceoperspectives.net/CEO-Perspectives-Daniel-Diermeier.html

http://www.youtube.com/watch?v=ThDG89I1Jn4
http://reprules.wordpress.com/author/danieldiermeier/