Reputation Management

Reputation management is the strategic use of organizational resources to influence the attitudes, beliefs, and actions of various, and sometimes conflicting, stakeholder groups. Reputation management seeks to emphasize an organization's positive attributes while carefully managing its risks to reduce the likelihood of negative impacts on its overall reputation.

The importance of organizational reputation should not be minimized—96% of CEOs consider corporate reputation a vital component of business success. A positive reputation can yield benefits to an organization including employee recruitment and retention, shareholder returns, consumer support, and buffering from activist groups and other environmental disturbances. Over time, a positive reputation can minimize critics, solidify the organization's place in society, stabilize its workforce, and enhance its position within an industrial field. Conversely, a negative reputation can signal to stakeholders that an organization is not worth their support as a consumer, employee, or shareholder and may expose the organization to attacks from activist groups. If an organization continues to have a negative reputation, it may find itself unable to continue operations, exposed to undesirable litigation and legislative action, facing diminished stock price, and unable to attract and retain top talent.

Reputations are value judgments that are cumulative based on past organizational performance. Because reputations are based on past performances, an organization's reputation is not static. It ebbs and flows and is directly influenced by organizational behavior. An organization's reputation is inferred from past performance that in turn influences expectations for current and future performance. In other words, stakeholders use an organization's past actions (positive and negative) to determine what resources should be provided the organization now and in the future.

Reputations exist along a continuum and are highly susceptible to change based upon stakeholders’ direct (e.g., purchases) and indirect (e.g., word of mouth communication) interaction with the organization. Stakeholder groups determine reputations by their emotional, financial, social, and cultural attachments and activities related to the organization. Each stakeholder group has unique performance measures that influence their assessment of an organization's reputation. For example, consumers are most likely to base an [Page 791]organization's reputation on the quality of goods and services; whereas investors are likely to determine an organization's reputation based upon stock and management performance. Thus, organizational reputation is not a single, unified construct and different stakeholders may hold different assessments of organizational reputation. It is important to note, however, that stakeholder groups often overlap (e.g., employee and shareholder) and thus individuals may evaluate an organization on a variety of measures. Reputation management is complicated by the need to assess the evaluative premises of different stakeholder groups and determine how the organization is delivering on distinct performance measures.

Similar to legitimacy, an organizational reputation is communicatively coconstructed by the organization and its stakeholders. As such, reputations are carefully managed and monitored to ensure that the organization is meeting the expectations of its stakeholders. Reputation management, therefore, is an ongoing process whereby the organization monitors how its activities are perceived by stakeholders. In this regard, the organization may select particular activities (e.g., product introductions, employee benefits) that it knows will have a positive influence on its reputation. These moves can serve to enhance existing positive reputational attributes or improve a negative or neutral reputation. Stakeholders evaluate an organization's claims based upon their own experiences with the organization to determine the legitimacy of the reputational claims an organization is advancing. Further, stakeholders communicate with the organization and others about their perceptions of the organizations reputation. While stakeholder communication is typically informal (e.g., blogs, word of mouth) when compared to the highly strategic and stylized organizationally sponsored communication, it is still powerful in determining an organization's reputation. Reputation management should be cognizant of points of convergence and divergence with stakeholder impressions of reputation.

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