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Home > Business Strategy Best Practice > Framing Reputation: Vague Concept or Measurable Business Asset?

Business Strategy Best Practice

Framing Reputation: Vague Concept or Measurable Business Asset?

by Rupert Younger and Genoveffa Giambona

This Chapter Covers

  • A way of thinking about reputation that differentiates it from brand, image, and identity.

  • A challenge to the traditional notion of reputation management, instead proposing a more nuanced narrative focused on behavior and influence strategies.

  • The role played by high-status reputation intermediaries.

  • An argument in support of the idea that companies in fact have multiple different reputations and that understanding and addressing this is a key task for leaders.

  • A way to answer the question “Can reputation be valued or measured?”

  • What managers can learn and apply in their workplaces.

Reputation

“One can survive everything, nowadays, except death, and live down everything except a good reputation.” Oscar Wilde

Everyone has their own favorite reputation quote. The most often cited in business is that attributed to Warren Buffett, who reportedly said: “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you will do things differently.” But what can you do differently? And is it possible to construct and implement a reputation management strategy that delivers the specific reputation you want?

Type the word “reputation” into Google, and you get over 600 million results. That is more than double the result for wealth, and more than three times the result for happiness. Why is there so much interest in this concept? Quite simply, because it matters. Concern about reputation is not just a modern thing. History provides us with many wonderful examples to illustrate how reputation has played its part in the life and times of the human race. 50 years ago, Groucho Marx, the American wit, filmstar, and comedian wrote to his club with the now famous words: “Please accept my resignation. I don’t want to belong to any club that will accept me as a member.” 150 years ago Abraham Lincoln, the 16th president of the United States, stated that “Character is like a tree and reputation like its shadow. The shadow is what we think of it; the tree is the real thing.” 400 years ago Britain’s William Shakespeare, in Othello’s famous scene, has Iago speak of reputation as “an idle and most false imposition; oft got without merit and lost without deserving.”

It is not only literature and history that provide evidence of the fact that reputation has provenance, impact, and authority. A big business in reputation analysis is emerging. Reputation surveys have multiplied—from Fortune magazine’s Global Most Admired Companies to the annual Delahaye Best US Corporate Reputations Index. Newspaper and other media headline writers now regularly include reputation in print articles—in headlines as well as in the main body of the text. And reputation has become a major buzzword in corporate publications—not just in reports on corporate responsibility and sustainability, but in mainstream corporate annual reviews. There can be little doubt that corporate reputation is in the spotlight. But, despite all this attention, reputation is a term that is too often loosely applied and too often confused with media relations or corporate social responsibility.

Defining Reputation

When considering how to manage your reputation—as an individual or as a corporation—you first need to understand the concept of reputation as distinct from other, related concepts.

Consider the following series of questions: Is reputation the same as image? Or brand? What about identity or legitimacy? Or status?

Scholars and practitioners disagree about many of these concepts, but on one point there is almost universal agreement. Reputation consists of perceptions—whether true or false—held by others about you. Extending this further, it seems reasonable to agree with economists who frame reputation as expectations about a firm’s future behavior or performance based on perceptions of past behavior or performance. Taking this as our starting-point, it becomes clear how reputation differs from some of the concepts mentioned above.

In one sense, image is similar to reputation. If you take image to be an impression of a company at a point in time, then it is perception-based. But it tends only to relate to snapshots of a corporation at any given moment. The corporate brand, by contrast, tends to relate to what the corporation wants to be and how it tends to differentiate itself from competitors, rather than what it is actually seen as being. Corporate brands—the brand of a corporation rather than its products—are also created to a greater extent by management action than by external perception. Take some of the United Kingdom’s major banks—their corporate brands are going to reflect to a great extent the advertising that defines them. The black horse for Lloyds TSB, the blue eagle for Barclays.

Identity also tends not to be perception-based. Various scholarly definitions exist around this concept, but one of the most commonly cited and used is that put forward by Albert and Whetten (1985) and Whetten (2006) who, in seminal papers, propose that identity is what you are as an organization, as defined by what is central, enduring, and distinctive (CED). This has been one of the most cited definitions of identity in the literature on reputation, and it is helpful as a way of distinguishing it from reputation and also in defining how it relates to the formation and destruction of reputation.

Legitimacy, by contrast, has been generally defined as generalized perceptions or assumptions that the actions of an entity are desirable, proper, or appropriate (Suchman, 1995). However, it differs from reputation in that it tends to be a bipolar concept, as opposed to a more nuanced concept of reputation. According to Deephouse and Carter, “legitimacy emphasizes the social acceptance resulting from adherence to social norms and expectations whereas reputation emphasizes comparisons among organizations” (2005: 329). It would seem clear that a corporation or industry can be legitimate but have a poor reputation—take the telesales industry, for one. Perhaps more interesting is the fact that a corporation can be illegitimate but still have a good reputation—consider the illegal file-sharing industry, whose reputation with consumers remains high despite the efforts of the music industry to highlight the damage done to the creative industries as a result.

And, finally, status. Is this the same as reputation? Paraphrasing Podolny’s (1993) belief that status is the perceived quality of a producer’s products in relation to the perceived quality of that producer’s competitors’ products, we can say that status sees organizations or industries being ranked as high, medium, or low—or any point in between—giving a clear definition of status as a ranking system that places organizations in some form of hierarchy.

Unlike all the above, reputation is the relationship between a set of expectations about a firm’s future behavior or performance based on perceptions of past behavior or performance.

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Further reading

Books:

  • Albert, S., and D. A. Whetten. “Organizational identity.” In L. L. Cummings and Barry M. Staw (eds). Research in Organizational Behaviour. Vol. 7. Greenwich, CT: JAI Press, 1985; pp. 179–229.
  • Bernstein, David. Company Image and Reality: A Critique of Corporate Communications. Eastbourne, UK: Holt, Rinehart & Winston, 1984.
  • Sauerhaft, Stan, and Chris Atkins. Image Wars: Protecting Your Company When There’s No Place to Hide. New York: Wiley, 1989.
  • Smythe, John, Colette Dorward, and Jerome Reback. Corporate Reputation: Managing the New Strategic Asset. Century Business, 1992.

Articles:

  • Barnett, Michael L., John M. Jermier, and Barbara A. Lafferty. “Corporate reputation: The definitional landscape.” Corporate Reputation Review 9:1 (Spring 2006): 26–38. Online at: dx.doi.org/10.1057/palgrave.crr.1550012
  • Chun, Rosa. “Corporate reputation: Meaning and measurement.” International Journal of Management Reviews 7:2 (June 2005): 91–109. Online at: dx.doi.org/10.1111/j.1468-2370.2005.00109.x
  • Deephouse, David L., and Suzanne M. Carter. “An examination of differences between organizational legitimacy and organizational reputation.” Journal of Management Studies 42:2 (March 2005): 329–360. Online at: dx.doi.org/10.1111/j.1467-6486.2005.00499.x
  • Lange, Donald, Peggy M. Lee, and Ye Dai. “Organizational reputation: A review.” Journal of Management 37:1 (January 2011): 153–184. Online at: dx.doi.org/10.1177/0149206310390963
  • McMillan, Keith, Kevin Money, Steve Downing, and Carola Hillenbrand. “Reputation in relationships: Measuring experiences, emotions and behaviors.” Corporate Reputation Review 8:3 (Autumn 2005): 214–232. Online at: dx.doi.org/10.1057/palgrave.crr.1540251
  • Podolny, Joel M. “A status-based model of market competition.” American Journal of Sociology 98:4 (January 1993): 829–872. Online at: www.jstor.org/stable/2781237
  • Popper, Nathaniel. “Goldman Sachs grows stronger even as reputation slides.” Los Angeles Times (April 7, 2010). Online at: tinyurl.com/3vgou2r
  • Rindova, Violina P., Ian O. Williamson, Antoaneta P. Petkova, and Joy Marie Sever. “Being good or being known: An empirical examination of the dimensions, antecedents, and consequences of organizational reputation.” Academy of Management Journal 48:6 (December 2005): 1033–1049. Online at: www.jstor.org/stable/20159728
  • Suchman, Mark C. “Managing legitimacy: Strategic and institutional approaches.” Academy of Management Review 20:3 (July 1995): 571–610. Online at: www.jstor.org/stable/258788
  • Weigelt, Keith, and Colin Camerer. “Reputation and corporate strategy: A review of recent theory and applications.” Strategic Management Journal 9:5 (September/October 1988): 443–454. Online at: dx.doi.org/10.1002/smj.4250090505
  • Whetten, David A. “Albert and Whetten revisited: Strengthening the concept of organizational identity.” Journal of Management Inquiry 15:3 (September 2006): 219–234. Online at: dx.doi.org/10.1177/1056492606291200

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