54. Managing Corporate Reputation

Reputation, reputation, reputation! O, I have lost my reputation! I have lost the immortal part of myself, and what remains is bestial, wails Cassio in William Shakespeare’s Othello. Tongue in cheek, a Chinese proverb enjoins: Don’t consider your reputation and you may do anything you like. Should we heed that facetious advice?

Reputation is not about likability: it is the aggregate estimation in which a person or entity is held by individuals and the public against a criterion, based on past actions and perceptual representation of future prospects, when compared to other persons or entities.¹ Since we cannot develop a personal relationship with every entity in the world, the regard in which a party is held is a proxy indicator of predictability and the likelihood the party will meet expectations, a useful earmark that facilitates sense and decision-making against alternatives. Everyday, through what amounts to a distributed means of social control, we assess and judge with effect² the competence of individuals and organizations to fulfill expectations based on such social evaluation.

If individuals have often worried about their reputations to a fault,³ organizations (as opposed to small businesses) only really began to do so from the 1950s, which saw the materialization of consumer products and growing attempts at product and image differentiation, originally by way of public relations⁴ and marketing. These days, however, even successful public relations do not suffice to nurture an organization’s reputation.⁵ The convergence of globalization and widespread computing since the 1990s,⁶ bringing immediate news and online journalism including by the general public, magnify blunders and wrongdoings.⁷ Beyond corporate images ⁸ and efforts to realize value from brand equity, beyond more recent endeavors at differentiation through innovation, operational excellence, or closeness to customers, and beyond even exertions to foster key behaviors for a one-company culture, many organizations now also try to nurture reputational capital, that is, all intangible assets including business processes, patents, and trademarks; repute for ethics and integrity; and quality, safety, security, and sustainability.⁹ Put differently, they strive to enhance corporate citizenship in the way they relate to direct clients, audiences, and partners; other stakeholders in society at large; and, more and more, themselves. Are we there yet?

It is a given that perceptions¹⁰ shape behaviors to drive results. However, nearly all organizations are such complex entities one can hardly expect them to be naturally proficient at gaining and maintaining the trust of sundry clients, audiences, and partners. (Many find it perennially difficult to just build trust in the workplace.) Enter reputation management, the process of tracking an entity’s actions and other entities’ opinions about these, reporting on those actions and opinions, and reacting to reports through feedback channels to build, maintain, or recover reputation.

To be sure, much of what passes as reputation management is public relations with a twist. An empirical study of corporate reputation management in 653 major German businesses sheds light on the state of affairs in the private sector in that country (and presumably elsewhere in the West) (Wiedmann and Buxel 2005). From a 20% response rate, the study found that eight times out of 10, responsibility for reputation management is vested in boards of directors and management; elsewhere, it is (as one might have thought) assigned to offices or departments serving corporate communications and marketing functions. Further, the sample showed a differentiated system of objectives. According to 76% of respondents, the primary objective of reputation management is to develop a positive image. This was immediately followed by heightening of customer satisfaction and loyalty (73%) and improvement of customer relationships (66%). Value was also placed on creating a positive corporate identity (60%), acquiring new customers (57%), and heightening employee motivation (57%) and satisfaction (53%). Predictably, the mix of measures used to achieve reputation objectives was both internal and external: the most important external measures were use of the internet for communication directed outwards (47%), the performance of audits and issuing of certificates of quality (47%), press releases (37%), and company brochures (34%); the most important internal measures were use of the intranet for internal communication and information (44%), encouragement of suggestions for improvement by employees (40%), and a wide range of advanced training and seminars to employees (24%). In a run-of-the-mill way, the controlling instruments favored were measurement of customer satisfaction (55%), classical monetary analysis of financial ratios (55%), and evaluation of customer complaints (48%).

If much of the foregoing is redolent of public relations, self-avowedly full-fledged approaches to corporate reputation management are distinctly risk-based.¹¹ Griffin (2009), for instance, holds that an organization’s reputation is the result of how it manages issues, crises, and corporate social responsibility.¹² (Schwartz and Gibb (1999) wrote an early exposé of the need to reperceive corporate social responsibility in the context of globalization. Good companies must go beyond merely being good, they argued; they must have integrity and a strategy aligned with it.) In the twenty-first century, however, such compartmentalized logic cannot attend to the dynamism of risk in knowledge-based economies: there, it cannot be contained and demands active, “on the go” management. Much as the topic of corporate governance, this makes corporate reputation management (including latter day public relations and reputation risk management) increasingly and inextricably interdependent with other fundamentals of day-to-day management.

If strengths and weaknesses have always been relative, opportunities and threats in the globalized economy clearly only exist in terms of what knowledge is at hand about them.¹³ From this modern perspective, the two main approaches to corporate reputation management can be seen for what they are, viz., static, asset-focused, and reactive (when they are not marginal). If, as Scott and Walsham (2005) recommend, we focus on potential we can shift attention from fixing the present–past to managing the present–future with reputable action. For this, they advise, high-performance organizations need to (i) reconceptualize reputation as a strategic boundary object—which offers a lens through which to analyze tensions between local values, reputation, and the inputs and outputs needed to uphold coherence across intersecting communities; (ii) clarify expectations and conduct ongoing reflective assessments—which help recognize the increased demands placed on strategic reputational boundary objects by changing trust relationships; and (iii) define their stakes—which, by shifting away from fixed notions of stakeholders, makes possible a social constructivist perspective of stake-making and stake-breaking.¹⁴

More prosaically, but certainly not less usefully, the Reputation Institute has also identified specific forward-looking good practices: