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This entry reviews the academic and trade literature on the concept of reputation with a focus on how it relates to the effective practice of communications. Readers are encouraged to build from this literature a proposed approach that will add value to the communications practitioner. Organizations of all types are under increasing pressure from a host of stakeholders to be more responsive to their needs and interests. At the same time, market forces and the objective of a publicly-traded corporation demand greater shareholder return-on-investment. These competing forces cause conflict within organizations about the value of reputation. One the one hand, most people would agree with the view that developing, building and maintaining a good reputation is important to virtually every organization in society, whether it be a for-profit or not-for-profit. The purpose of this paper is to review the academic and trade literature on the concept of reputation, in particular as it relates to the effective practice of communications, and then to build from this literature a proposed approach that will have value to the communications practitioner. We will not attempt to cover the literature or comment extensively on trust, ethics and crisis management, even though these topics are interrelated with reputation. These topics have already been well covered in other Essential Knowledge sections. While the communications profession touts the importance of reputation and wants to lead these efforts within organizations, there is little universal agreement within the profession on the definition of reputation, how one goes about building a reputation, and the role of communications with regard to reputation management. Communications professionals have, historically, focused on messages and programs with external stakeholders to build trust and reputation. Page Society that corporate communicators need to move from being reactive and responsive to becoming strategic and proactive. As this document notes, the current and future needs will be for corporate communicators who are able to work across the enterprise to influence values, not just articulate them, and to become full-fledged members of the senior management, strategy team. If communications professionals are to take the lead for their organizations on reputation, they will need to: A variety of definitions of reputation have been offered from a number of different academic and professional backgrounds. However, if one looks at the various definitions of reputation, one may note that the intersection or integrated view of the various definitions suggests that:. It is difficult to isolate one variable that influences perceptions to a greater degree than others across all stakeholders Schultz, et. Reputation is the collective representations shared in the minds of multiple publics about an organization over time Grunig and Hung, ; Yang and Grunig, , and is developed through a complex interchange between an organization and its stakeholders Rindova and Fombrun, Fombrun and Van Riel, ; Fombrun, et. Reputation is not normative for all companies. This differentiation is not necessarily the same for all attributes of the firm and for all stakeholders. Madhok noted that trust is essential in a world in which business operates through cooperation and relationships. Doorley and Garcia Bringing these various definitions together, we would suggest that there are two definitions of reputation, one from the perspective of the company and the other from the perspective of stakeholders. It is important, we believe, that organizations keep these two perspectives in mind:. From the perspective of stakeholders, reputation is the intellectual, emotional and behavioral response as to whether or not the communications and actions of an organization resonate with their needs and interests. To the extent that stakeholders believe that the organization meets their needs better than can competitors, they will behave toward the organization in desirable ways, e. Reputation is a core intangible asset of the firm and creates barriers to competitive threats. Established reputations impede competitive mobility and produce returns to firms because they are difficult to imitate Caves and Porter, A strong corporate reputation suggests that the products and services being offered by the firm are of higher quality Carmeli and Tishler, and that the firm is responsible and will treat its customers well. Moreover, intangible assets are very important for achieving a competitive advantage Ambrosini and Bowman, because they are valuable, rare, difficult or costly to imitate, substitute and transfer Barney, ; Dierickx and Cool, , Peteraf, ; Roberts and Dowling, In general, it is possible to argue that the intangible nature of reputation, its rareness and social complexity, makes it difficult to trade and imitate, and as a result reputation can contribute significantly to performance differences among organizations Barney, , Peteraf, Organizational market value has been moving from tangible to intangible assets. It is widely accepted in financial management that organizational reputation is an intangible asset Barney, ; Ferguson et al. Consistent with this perspective, reputation is a socially complex intangible resource that is valuable and non-transferable, and in which history plays a substantial role in its creation Mahon, This view of organizational reputation suggests that reputation is a result of interactions and experiences of firm and organizational stakeholders over time. Several authors have argued that good corporate reputations have strategic value for the firms that possess them Dierickx and Cool, ; Rumelt, ; Weigelt and Camerer, ; Roberts and Dowling, ; Dowling, ; Aqueveque, Wartick concludes from his empirical research that even when confronted with negative information, it is difficult to change the perceptions of stakeholders. It is important that the communications practitioner be able to show that reputation has a financial impact on the company since there is an every increasing demand for proof of the return-on-investment ROI of communications programs. Historical data compiled by Fombrun and Van Riel found that companies with good reputation outperformed companies with poor reputations on every financial measure over a five-year period. Davis notes as support for this calculation that Exxon lost 5 percent of its revenues the year after the Exxon Valdez environmental disaster. Similar evidence of the relationship between reputation, financial performance and market value has been found by others e. Roberts and Dowling, , ; Carmeli and Tisher, ; Srivastava et al. Several other studies have confirmed the link between reputation and revenues. Bragdon and Marlin conducted a study of companies within the pulp and paper industry that used five different measures of financial performance. They concluded that the companies that had the best record on pollution control and the environment were also the most profitable. The results of several studies also support a positive relationship between corporate social responsibility and firm financial performance e. The intangible asset of reputation is valued— often implicitly, sometimes explicitly—in financial markets by analysts, in stock prices, in ratings by credit agencies and for private lender programs. Mechanisms for raising capital based on intangibles already exist, including securitization, lending, licensing, and outright sale. Despite these findings of the link between reputation and financial performance, the case for the communications professional with senior management, particularly those from the financial and accounting fields remains difficult. Gu and Lev highlighted the difficulties in making the case for the value of intangible assets, noting that the financial and accounting management of such assets are illusive due to normal accounting rules which do not allow intangible assets, other than goodwill, to appear on the balance sheet. Organizations can be seen as a nexus of relationships Jones, and the ability to have good relationships with multiple stakeholders may be a core value of an organization Phillips, The ability to manage multi-stakeholder relationships is critical to the communications function. Other than the CEO, the communications profession may be the only management function that takes a multi-stakeholder perspective, and this may be one of the distinguishing characteristics of the communications profession Grunig, et al, Philips of the Netherlands is one company that has put into practice an integrated, enterprise-side program with an objective to enhance corporate reputation. Philips has integrated its vision and strategy, brand and marketing, technology and innovations, values, and financial and performance goals toward common reputation objectives The company has put in place a Corporate Communications Council with responsibility for global management of communications, and for addressing strategic issues from the business sectors. Fombrun and Van Riel, The Relationship between Organizational Value and Reputation. Good leadership can drive company success and inspire a work force to reach its goals Gaines-Ross, A significant effort of the communications profession has been placed on enhancing the role of the CEO as both the leader of the firm and the major driver of reputation for the firm. Sarup and Wenger content that organizations function on the basis of two types of values: First-order values are embedded in the organization culture and shape everything that the company does and will not do. When there is a link between first and second-order values, the organization lives by, behaves and communicates its values consistently. For-profit organizations often have conflicts between their stated values and their business and market paradigm that are driven by increasingly demanding shareholders and investors. In many organizations values like human resource development or CSR are not believed to be useful in the marketplace. One can see in hindsight that these values were not first-order, or intrinsic to the organization. They were second-order values with no link to the business strategy and actions of the company. Ulrich and Smallwood suggest that companies with good values not only define them, but also build them into their managerial training and hold managers accountable for adhering to the stated values. Page Center for Integrity in Public Communications at Penn State University, is offering financial support for studies that show whether or not values statements influence the behaviors of companies. This appears to be a rich area for potential research and study for the field of communications. Communications practitioners should devote more attention to determining whether or not they are dealing with first-order or second-order values. The alignment of behavior with the values of the organization is essential in building reputation Gioia , et al. Strategies for integrating internal first-order and external second-order values has become a subject of increasing interest in the academic literature and amongst many companies. Codes of conduct, annual social reports, philanthropy, projects and business networks; they all underline this awareness Harold Burson Blog, ; Jonker and Schumaker, Whether these are second-order attempts to influence stakeholder perceptions of the company, or first-order statements of existing and prevailing corporate values depends on the organization. Moreover, CSR becomes institutionalized with its own set of rules, norms and beliefs about how firms within a given industry or how firms in general should and should not act Bertels and Peloza, Similarly, Brexendorf and Kernstock believe that corporate brand can be used to build consistency between how the corporation wants to behave and how it actually does behave. Reputation is a holistic responsibility within the firm and may be the most important asset entrusted to the CEO by the board and shareholders. However, the management of the day-to-day operations of reputation is often a matter of debate between public relations and marketing. There has been a constant battle in many organizations between communications and marketing over responsibility for reputation. Product, Price, Place and Promotion. As such, they feel that not managing reputation divorces them from fulfilling their responsibilities to the organization. A brand, according to marketers, is a product, but one that is imbued with attributes that differentiate it in the minds of target audiences from competitive offerings. Brand Equity is the differential effect that brand knowledge has on the consumer response to the marketing of the brand Keller, As Keller notes, building brand equity requires having a brand with strong, favorable and unique associations. Public relations professionals have typically eschewed the term brand, perceiving it as a term marketing uses for products. This reluctance to understand and adopt brand management thinking may be a limiting factor in allowing the communications practitioner to have a greater leadership role in the reputation process. In addition, the focus of public relations on tactical issues like CSR, philanthropy and crisis management rather than on reputation as a strategic process, severely limits the ability to compete head-on with marketing for a greater leadership role. Argenti and Forman provide a diagram that that shows how brand is interpreted by various stakeholders, with reputation being the sum of their perceptions. However, it appears that reputation cannot be divorced from good brand management. They are essential to one another Porter, ; Schultz, et al, ; Keller, ; and Schreiber, AstraZeneca is one such company, which has a Council at its headquarters in London and in several of the regions globally. The Council has established a common set of objectives, determines what research is needed, works together on gap analysis and recommendations. The Council reports directly to the CEO and reports to the executive committee of the company on a regular basis Quinn-Mullins, Philips of the Netherlands has also integrated its vision, business strategy and communications activities in a Communications Council so that its internal and external activities are aligned Fombrun, In a national survey, Smith and Alcorn found that For example, when a marketing campaign linked American Express credit card usage to the centennial restoration of the Statue of Liberty, card usage increased 25 percent over a three-month period. As stated by one marketing and design consultant Neuborne, The Edelman Trust Barometer has found similar results. The age of the manager and the industry segment may affect the view of the importance of social responsibility. In an increasingly competitive and changing marketplace CSR can become a competitive advantage Karna, Hansen and Juslin, The best corporate reputations are built by helping stakeholders find ways to use the corporate brand in their own lives. Globalization of markets is pressuring companies to develop codes as public statements of core principles that are universally applicable. Carasco and Singh, Corporate performance, then, is related to reputation and includes the distribution of value to all stakeholders Clarkson, ; Waddock and Graves, Reputation must be taken within the context of the industry or competitive group of the organization. Many organizations properly seek high rankings in rankings in respected publications. The survey is conducted on the ten companies with the largest revenues within each industry group SIC code. Questionnaires are sent to executives, directors and financial analysts within the industry segment so that there is a level of familiarity with the companies in question. Eight attributes are analyzed: These attributes are scored by respondents on a scale with 10 being the highest. However, doubts about the validity of the Fortune rankings in particular have been raised Fryxell and Wang, ; Sabate and Puente, , for several reasons. First, since the early development of the Fortune study, the index was not intended for scientific research Deephouse, Finally, evidence of financial bias of the valuations published in Fortune Fryxell and Wang, ; Brown and Perry, has shed shadows over the results of previous studies, suggesting the possibility of artificial relationships between corporate reputation or corporate social responsibility measures and financial performance. This scale is used to determine how the organization is perceived by stakeholders and then to help it make changes to better match stakeholder needs. The Reputation Institute uses a measure called RepTrak, which has been developed through factor analysis with respondents among the general public in about 25 countries. The instrument has found seven drivers of reputation products and services, innovation, workplace, citizenship, governance, leadership, and financial performance. There also are 23 attributes of reputation within these drivers. The Reputation Institute survey is published yearly in Forbes. Doubts about the RepTrak survey have focused on the fact that it was developed with a focus on the general public. There are two problems with this development: Questions about the validity of the RQ survey are similar to those for RepTrak, since both were developed similarly and have common origins with Professor Charles Fombrun. This approach looks at the various pillars of reputation, in a similar manner to the Ogilvy Mather approach to brand management. Companies would then measure how they are perceived by stakeholders on each of these pillars and then assess and close the gaps between current and desired perceptions. The rise of Web 2. Marketing, like communications, is experimenting and learning from the new media. The lines between marketing, advertising and public relations are becoming blurred. As marketing looks for new ways to reach customers, they may well inadvertently do damage to the corporate reputation. For example, on-line ads are found to not only be ineffective, but also annoying. In addition, many marketers who are interested in using cell phone advertising to reach target audiences. With the capabilities offered by GPS systems, marketers can know exactly where a customer is at a given point in time and advertise to them. How this fits with the reputation management approach of the company will need to be considered. It is important that communicators know what is being said about their company on the Internet and that they participate in communicating their positions on key issues in forums, blogs, podcasts and other ways that reach their intended stakeholders. Employee blogs and e-mail are increasingly a means of enhancing corporate reputation or they can be a problem for the company. From a reputation perspective, there are few studies that look at the differences, if any, between on-line and traditional communications in building, maintaining or retaining reputation. However, Alwi and Da Silva , found some interesting differences between the way corporate brands were perceived on-line versus off-line. Their research confirmed the view of Clauser that the Internet may be more informal and may be different from traditional reputation management approaches. There has been much discussion about how to deal with crises arising over issues on the Internet. However, there also are new challenges arising for corporations as they deal with even their most loyal customers. Hasbro sued the on-line developers for trademark infringements, setting off a controversy that has escalated over the Internet. The result was an angry backlash against Ford by some 9, people on-line Mason, Clearly, companies are just beginning to learn how to deal with the new technology, and the learning curve is as steep or steeper for our legal colleagues than it is for communicators. It is clear that anyone with a computer linked to the Internet can influence public opinion about a company or product. The profession is beginning to understand how to determine if these on-line critics have any credibility or influence with stakeholders. In terms of proactive reputation management, much of the focus has been on Search Engine Optimization, since data have suggested that those showing up on the first page of a search engine are perceived to be the most important reputable. These assumptions have not been confirmed empirically. This paper reviewed reputation from a variety of perspectives, looking at how it should be defined, the connection between brand and reputation, the importance of stakeholder relations, and the power of employee commitment. Reputation may be the most important asset entrusted by shareholders and boards to the CEO and management team. As an intangible asset, reputation can help frame and manage expectations, needs and interests of stakeholders, and can be used to create barriers to competition. Squandered, it is an asset that is difficult to rebuild since it is based primarily on perceptions and realized or unrealized expectations. The objective of reputation is not to be liked, but rather to build value for the organization through business outcomes. As such, social responsibility or philanthropy programs must be judged as tactics in support of an overall reputation program and not as the reputation program. We have noted in this paper that values are the foundation of reputation, since they lead the organization to make decisions on what businesses to enter or not to enter, how it treats its employees, whether it fully respects its critics and how it works with its various stakeholders. While communications is an important part of reputation management, the most important way an organization builds reputation is through its actions. In this regard, everyone in the organization must understand the reputation objectives and have the willingness and the ability to act in support of these objectives. Bowman , Tacit Knowledge: The International Journal of Business in Society , 5: An International Journal , 4 4 , — The company and the product: Should you Compete on Yours? University of Chicago Press. The social virtues and the creation of prosperity. Identity, image and issue interpretation: Sensemaking during strategic change in academia. Administrative Science Quarterly , 41, Harvard Business School Press. Research agenda using strategy and stakeholder. How reputation, credibility and. Network Data and Measurement. Annual Review of Sociology , Network Studies on Social Influence. Punjaisri, K and Wilson, A. Strategic Management Journal , Analyzing a ranking system, Corporate Reputation Review, 4 1 Wiedmann, K-P and Prauschke, C. The role of corporate communication in reputation building, paper submitted to the 10th Reputation Institute Conference, New York. An excellent article byone of the top experts on brand. Aaker notes that companies must not only invest in their brands, but also have a system in place to manage them within the context of the corporate strategy. He gives countless examples of companies that have managed their brands to maximize their value and provides frameworks for creating brand strategy within companies. Aaker has typically focused on brand strategy. In this article, he focuses more on the emotional site of brand and examines the personality of brands and how to develop brands that have more resonance with customers. Alsop is a Wall Street Journal writer who writes about what companies should do, from his perspective as a reporter, to build their reputation. This paper provides a good discussion of how brand images must adjust to the Internet. This article reviews the resource-based view of the firm and of the concept of core competencies, intangible resources, and tacit knowledge in particular have been argued to occupy a central place in the development of sustainable competitive advantage.. This paper sets out to define the term tacit knowledge and proposes to redefine it, within the context of the resource-based view of the firm, as tacit skills. A methodology based on causal mapping, self-Q and storytelling for empirically researching the subject is outlined. This article posits that consumers determine the values of a company through its actions, including transparency and social responsibility. This paper examines how reputation builds trust and how trust translates into corporate value in terms of enhanced relationships and greater financial value. In this article, the authors look at a variety of examples of how organizations have built their reputations through well designed corporate brand initiatives. This book is a primer on corporate communications and the power of managing and implementing the function well within organizations. In this article, the authors demonstrate that having a good corporate identity program that is well managed and maintained can create advantages for the company. In this article, the authors make the case that cause-related marketing can build relationships and can be a source of competitive advantage. In this article, the authors suggest that it is becoming increasingly difficult for companies to differentiate and build value through CSR programs because stakeholders have such high and often impossible expectations. In this article, Deephouse confirms the position of Michael Porter that it is insufficient to be as good as others; strategy requires that one establish differentiation. In this paper, Dowling argues that the board, not just the CEO and management team, should be responsible for reputation risk since it puts the assets of the organization in jeopardy. How Successful Companies Build Winning Reputations, Prentice Hall, Upper Saddle River, NJ, This is one of the more important books in the field of reputation management, which pulls together the primary literature and perspective of how leading companies build financial value through reputation. This article in the first issue of the publication is a review of the literature on reputation from a variety of disciplines, including economic, strategic, management and game theory. This is the preeminent article by the father of capitalism, which established a perspective on the corporation for an entire generation of leaders. In this paper, the authors note that reputation is built over time and becomes a cognitive frame for stakeholders when thinking about an organization. This frame influences not only how people think about the organization, but also how they behave towardit. This paper is one of the definitive pieces on intangible assets from two of the most notable academics in the accounting profession. This article suggests that reputation builds credibility for the organization, but that a firm can have a multitude of reputations, i. Companies cannot hope to have a good reputation in every area and need to make certain that they are building their reputations in areas that are meaningful to the customers and other stakeholders. This is one of the most important books by one of the leading thinkers on product and corporate brand. Keller investigates all aspects of developing, building and managing brands. This article provides a review of research on corporate reputation and suggests that reputation is an intangible asset that can be leveraged for competitive advantage. In this article, written in German, the authors suggest that corporate identity is a means by which companies can estalbish market leadership vis-a-vis competition. In this article, Phillips suggests that the key to building corporate value is the establishment and maintenance of relationships with key stakeholders. This article focuses on the importance of having an employee brand for both new recruits and existing employees, and the link between employee branding and external branding. This article suggests that firms do not develop their reputation on their own, but rather do so in concert with their stakeholders. The interactions and relationships that develop and how competitors react determine the outcome of reputation efforts. In this article, the author focuses on brand strategies for non-consumer products companies, providing a way for companies to decide on the best brand strategy based upon a matrix with two variables: In this article, the authors suggest that rankings are important sources of reputation, especially because they provide context. This paper makes the case that the greatest impact of corporate public relations is not its reliance on messages, but rather is its ability to build relationships. These relationships, according to the authors, are what shape the way stakeholders perceive an organization. Share this article Email. Posted in \\\\\\\\\\\\\\[Research Library\\\\\\\\\\\\\\] , Reputation and Trust. Join the Discussion Cancel reply. Sorry, your blog cannot share posts by email.