Originally posted on The Horizons Tracker.
A tarnished brand can have a terrible impact upon the success of an organization, but what about those who work there? What impact does working for a discredited brand have on individual careers? That was the question posed by a recent Harvard Business School study1.
“It can affect people who had nothing to do with the scandal,” the authors say. “It’s almost as if someone is rewriting your CV 10 years after you leave a company.”
The study examined how corporate scandals affect the starting pay of executives when they enter the market for a new job. It emerged that the guilt by association was pronounced.
Guilt by association
Data was gathered from a global headhunting firm to first determine how many executives had resumes containing at least one ‘stigma’. The number was surprisingly high, with 18% of the 2,000+ executives they analyzed having at least one such organization.
When all other factors were controlled for, it emerged that guilt by association would knock around 4% from the cash compensation offered to executives, which in real terms was probably around $12,000 per year. What’s more, this negative impact can be sustained for some time.
“The growth of compensation will be lower since it starts from a lower starting point,” the authors say. “That’s a big deal when you are considering it over a lifetime.”
So what causes this to happen? The study suggests it’s primarily down to a lack of information in the marketplace. Hiring companies often only have the CV to go on, so it’s hard to accurately gauge whether an executive was involved in the incident[s] that tarnished the reputation of their firm or not, so they tend to get tarred with the same brush regardless.
Overcoming the past
So what can you do if you’re got a potential black mark on your own CV? During the course of the study, a number of candidates stood out that seem to have overcome the effect seen on their peers. All were overtly transparent about their past and didn’t try to hide anything.
They also tended to find advocates within their networks that can speak well of them and sponsor them in the eyes of potential new employers. You’re in effect piggy backing off of their reputation, so the more prominent the better.
Last, but not least, such resilient candidates would also often make lateral moves, or even a step back in terms of compensation in order to work for companies with incredibly strong reputations.
“It helps to create a persuasive story that competes with the scandal story,” the authors explain. “Working for a firm that is beyond reproach can help executives buy time, putting distance between themselves and problematic companies, until they are ready to once again climb the corporate ladder with a cleaner record.”
Article source: The Impact Scandal Has On Your Career.
- Groysberg, B., Lin, E., & Serafeim, G. (2017). Does Financial Misconduct Affect the Future Compensation of Alumni Managers?. ↩