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The Recruitment Lessons To Be Learned From Toshiba’s Accounting Scandal

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Toshiba’s accounting scandal that had reportedly been occurring between 2008 to 2015 has done great damage to the profitability and reputation of one of the most well-known Japanese companies.  Its CEO and president resigned after it was learned that Toshiba’s profits had been overstated by a factor of three to $1.2 billion.  Eight other senior officials also left, including the prior two CEOs.  In the last few years, Toshiba has largely withdrawn its presence from the US consumer laptop market, and it eliminated several of its most popular laptop models, including the mainstream Satellite line and the gaming-specific Qosmio line.  Additionally, Toshiba has had to liquidate several of its assets, including its memory chip business and its Visual Solutions business, as a result of the scandal.

There are many lessons that can be learned from this scandal.  One of the reasons why the Toshiba accounting scandal occurred was too many of the employees were too worried about Toshiba’s bottom line and making it look better at virtually any cost, partly because the CEO’s decisions couldn’t be challenged and that he encouraged employees to alter the numbers so that Toshiba’s financial position was better than it actually was.  Employees who were more concerned about accountability and honesty probably would have prevented this scandal from occurring as long as it did and lessened the damage the brand took, both in financial terms and in reputation terms.

Another lesson to learn is to encourage good character in employees.  When an employee goes out of his/her way to do good for the company’s customers, that employee should be recognized and awarded for his/her deeds.  If a customer loses something of value or if he/she is confused by the legal terms of a contract, an employee who goes out of his/her way to make things right or clearer should be promoted and put in a leadership position, as this is what can make companies stronger, both in terms of financial stability and in terms of reputational status.

A company’s reputation and trust is critical to success, especially in a world where competition is fierce and information can be spread rapidly through social media.  As noted investor and Berkshire Hathaway CEO Warren Buffett has said, “It takes twenty years to build a reputation and five minutes to ruin it.”

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