Reputation often plays a seemingly obscure role in the functioning and success of an organisation. reputation is a complex term, with many interpretations, and at least two separate models. It is often very easy to forget about the importance, and the role that, reputation, and it’s management, plays in the success and continued existence of an organisation in times of affluence and financial progress. One is often reminded too little too late of its actual importance during crises, and in the midst of the collapse of one’s company grown through blood, sweet, and tears.
reputation is one of the many silent, stealthy forces at play, governing the direction an organisation goes, and determining its likelihood of future survival. The recent crisis with Volkswagen has demonstrated how incredibly powerful and important reputation is.
What is reputation?
Aula and Mantere (2008) define reputation as a measure of the goodness of a company. Goodness, in this case, being the subjective interpretation of the stakeholders. This denotes a very important aspect of reputation: it does not exist within the company, but is a construct, created in the interactions and narratives told and shared between the organisation and its stakeholders, and among the stakeholders themselves. Reputation, thus, is a communicative interpretation, subjective to those that perform the interpretation. it is not something the company can strictly control.
Despite reputation being outside of the control of the organisation, it can be influence by the organisation. Aula and Mantere (2008) break the influenceable part of reputation into three section, the three goods of an organisation: 1) Good communications, 2) Good relations, and 3) Good deeds. In order for an organisation to have a good reputation, it has to have all three of these goods.
Aula and Mantere (2008) do not clearly state what they define to be ‘good’, but by what criterion it can be measured, but from the nature of reputation as they define it (a subjective, communicative interpretation), it can be deduced that ‘good’ is that which the stakeholders in question see as being ‘good’. It is thus a reflection of the ethics and morality of the spatial, situation, and temporal context.
Aula and Mantere (2008) explain that an organisation cannot simply communicate the good of the organisation, they need to act in accordance with what they wish to communicate. In order for an organisation to say they hold certain values, they must first demonstrate those values. This is a radical paradigm shift from the ‘classical’ reputation management and public relations paradigm of ‘tell them what they want to hear (and keep the rest secret)’.
In the classical paradigm, a company need only communicate to the masses how good it is, and maintain a proper image, in order to build and maintain a good reputation. This is, however, no longer possible. This paradigm relied on a strict control of the flow of information. It relied on there being limited means by which people could gain information, could educate themselves, and on being able to control those means to ensure only that which would reflect positively on the organisation managed to reach their ears. This approach is no longer viable.
With the emergence of the internet, social media, and direct, person-to- person communication and sharing of information – the democratisation of information – organisations have lost all control over the information channels. People can easily verify that which they read, hear, or see in traditional media.
This drastic democratisation of information, has gone to the extent that just good deeds themselves are no longer enough. An organisation can no longer simply do a few good deeds and argue for its good nature based on those. It needs to be good.
Being good refers to the identity, the self-definition, of the organisation. It needs to hold as sacred the same values that its stakeholders do. It needs to respond in its very self-concept to the changes in its stakeholders. It must define itself, ironically, through an identification with its stakeholders. (Afrikaans has a beautiful word for this: ‘Vereenselwiging’, which comes from the terms ‘vereen-‘ – to make one – and ‘self’ – the self – and translates to being able to assimilate of the experiences, values, ideas, positions, and arguments of another into oneself, to make the disparate selves one.) Should one thus understand this process based on the Afrikaans term ‘vereenselwig’, this identification is a continual process of self-definition through the assimilation of the experiences, values, ideas, positions, and arguments of the stakeholders into the self-definition.
From this assimilated, socially integrated, self-definition good deeds can naturally emerge. An organisation, thus, needs to see itself not as separate, or outside of society – or the community – but as embedded within its complex and interactive structure and matrices.
Aula and Mantere (2008) explain that good relations refers to the relationships built between the organisation and its stakeholders. This may seem simple at first, but this as well, is an inversion of the previous paradigm. The classical paradigm to reputation management saw the stakeholders as points of sale, as holes down which to dump their products and services, and out of which the corresponding funds would jump. There is little need to build or maintain a relationship with a whole that will take products as long as they are presented nicely.
However, in around the same time as the emergence of the internet, there came a radical shift in public weight of consideration. They no longer considered an organisation as merely a source of products and services, but instead began to see it as an integrated part of the community, of the society. In essence, organisations became citizens just like any individual person, with the same responsibilities.
As part of this shift in view, came a shift in what was expected of organisations. As integrated members of the community, they can no longer simply ship in products and ship out funds, they have to contribute to the improvement of the community. They have a responsibility to help solve the challenges the community face, and find new and innovative ways of helping to build the community, to take it from strength to strength.
Again, because reputation is a subjective, communicative interpretation, the relationship between the organisation and its stakeholders needs to reflect the relationship the stakeholders hold as ‘good’. In the current era, this relationship is that between equals. Because an organisation is a member of the community, it has all the responsibilities and obligations normally escribed to a person-member of the community.
Building good relations, thus, is dependant on the organisation fulfilling these responsibilities, and meeting these obligations. (As a side note: It is from the recognition of this that modern CSR (Corporate Social Responsibility) was born).
Aula and Mantere (2008) explain that good communications are very hard to maintain. The organisation is constantly under suspicion; no matter what they do, they will always be thought to have an alternative motive, some hidden, nefarious goal as yet unknown to the public.
It is difficult to define what ‘good relations’ are in a way that is not abstract and quite theory bound. This problem stems from the fact that ‘good’ is a subjective term, bound by the whims of the public. However, there are several basic principles that ‘good’ communications must adhere to. These principles stems from understanding the nature of the relationship between the organisation as that which exists between equals, co-members of the community.
1) Communicates the deeds of the organisation
Good communication informs the public of what the organisation is, has been, and will be doing. It is a source of information.
2) Tells the organisation’s story
Communication is the voice of the organisation. It allows the organisation to tell the world its story, to let them know where it stands on issues, and how it feels regarding certain matters.
3) Is honest
Good communication is communication that is open and honest. It admits the mistakes the organisation has made, and where improvements could be made. Only when communication is open and honest, can it help building trust and a good reputation with the stakeholders.
The role of reputation (why organisations should care)
By this time it should be clear that reputation isn’t something quite so easily defined. It is complex and often quite abstract. It be quite surprising to notice that despite reputation being defined within the context of organisations (i.e. money), there hasn’t been referred to any monetary gain from a good reputation. This is mainly because reputation isn’t easily directly linked to monetary gain. This is part of the reason why it is so often undervalued by organisations geared towards making profits and performing financially. But reputation has a definite influence on the financial strength and performance of organisations. it plays key roles in several major processes within the organisation directly related to financial performance.
One of the three cardinal processes in any organisation, is that of customer attraction. An organisation cannot flourish if it cannot build a customer base, which is dependant on attracting individuals who were not previously inclined to shifting their purchasing behaviour towards the organisation.
Nearly three quarters of consumers actively investigate the organisations they consider spending their money on – whether investment, or product or service purchase – and over half decided not to do business with the organisations because of something they learned about how the organisation conducts itself (its deeds) (Harris Poll, 2015).
This clearly demonstrates how reputation plays an important role in customer attraction, and why deeds are as important as communication. A good reputation inclines customers more to choose the organisation to do business with rather than any other.
Reputation, specifically the relationship built between the organisation and the stakeholder, improves customer retention. A stakeholder who is confronted with negative information regarding the organisation (such as a mistake made by the organisation), is more likely to trust the organisation to correct itself if they have a good relationship with the organisation than if theirs is shaky and uncertain.
This is applicable especially in two cases: 1) Confrontation with competition (brand loyalty), and 2) crisis.
1) Confrontation with competition
Customers are more inclined to remain with an organisation that they trust and have a history of good relations with. And are more easily shaken loose should that not be the case.
As explained prior, are more inclined to trust an organisation to correct itself if it has a strong reputation and a good relationship with the stakeholder, than if it doesn’t.
Reputation isn’t something very clear. It is abstract, and often functions in silent stealthy fashions. Operating behind the scenes and obscuring its tracks. This has resulted in countless organisations underestimating its influence and importance.
Reputation is the measure of the goodness of an organisation by the standards of the stakeholders within the spatial, situational and temporal context they operate. It is not something easily linked directly to financial performance and represented in the form of monetary value. It is a subjective, communicative interpretation made by the stakeholders, and as such it is not strictly controllable by the organisation.
The organisation can, however, influence its reputation in three key areas. These areas are also the three key aspects of what reputation is. Reputation consists of three ‘goods’, three fundamental aspects of the organisation, three continuua on which the goodness of an organisation is measured.
Good deeds is the first of these three goods. It refers to the conduct and actions of the organisation, and stems from the organisation defining itself as good. This good self-definition, because of the subjectivity of reputation, and its dependence on the stakeholders, must be a ‘vereenselwiging’, an assimulation of the experiences, values, morals, etc. of the stakeholders.
Good relations is the second of these goods. It refers to the need for organisations to build relationships with their stakeholders on their stakeholders’ terms. Their relationships must reflect the expectations and values of their stakeholders.
Good communications is the third and final of these goods. It refers to communications that takes on the characteristics of what the stakeholders define as good. Currently it is communication that communicates clearly the deeds of the organisation, tells the organisation’s story, and is honest and open about both the strengths and weaknessess, the good and the bad of the organisation.
Finally, reputation plays a very important, if obscure, role in the functioning and success of organisation. It aids in customer attraction, helping to attract more customers to the organisation, and in stakeholder retention, decreasing the rates at which stakeholders abandone the organisation when confronted with competition or crises.
It is clear that reputation is a very important, if frequently overlooked, part of the functioning of organisations. It is certainly something that deserves far more attention in both the eyes of the public and the boards of directors of companies than it currently does.
Aula, P. & Mantere, M. 2008. Strategic reputation management: Towards a company of good. London: Routledge.
Harris Poll. 2015. 2015 Harris Poll RQ® summary report: A survey of the U.S. general public and opinion elites using the Reputation Quotient®. https://skift.com/wp-content/uploads/2015/02/2015-RQ-Media-Release-Report_020415.pdf Date of access: 13 March 2017.