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A discussion on the role of reputation in society

Schreiber 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. Introduction 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. 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, 2002 ; Yang and Grunig, 2005and is developed through a complex interchange between an organization and its stakeholders Rindova and Fombrun, 1999.

Fombrun and Van Riel, 2003; Fombrun, et. Reputation is not normative for a discussion on the role of reputation in society companies. This differentiation is not necessarily the same for all attributes of the firm and for all stakeholders. Madhok 1995 noted that trust is essential in a world in which business operates through cooperation a discussion on the role of reputation in society relationships.

Doorley and Garcia 2008: 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.

Why a Good Reputation is Important 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, 1977. A strong corporate reputation suggests that the products and services being offered by the firm are of higher quality Carmeli and Tishler, 2005 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, 2001 because they are valuable, rare, difficult or costly to imitate, substitute and transfer Barney, 1991; Dierickx and Cool, 1989, Peteraf, 1993; Roberts and Dowling, 2002.

Reputation

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, 1991, Peteraf, 1993. 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, 1991; Ferguson et al.

  • The objective of reputation is not to be liked, but rather to build value for the organization through business outcomes;
  • These assumptions have not been confirmed empirically;
  • Communications practitioners should devote more attention to determining whether or not they are dealing with first-order or second-order values.

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, 2002.

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, 1989; Rumelt, 1987; Weigelt and Camerer, 1988; Roberts and Dowling, 2002; Dowling, 2004; Aqueveque, 2005. Wartick 1992 concludes from his empirical research that even when confronted with negative information, it is difficult to change the perceptions of stakeholders. The Financial Value of Reputation 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 2004 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 a discussion on the role of reputation in society market value has been found by others e. Roberts and Dowling, 1997, 2002; Carmeli and Tisher, 2005; Srivastava et al. Several other studies have confirmed the link between reputation and revenues. Bragdon and Marlin 1972 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.

Discuss briefly the theme of reputation in Beowulf and provide examples from the text.

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 2001 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.

The Value of Relationships Organizations can be seen as a nexus of relationships Jones, 1995 and the ability to have good relationships with multiple stakeholders may be a core value of an organization Phillips, 2006. 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, 1999. 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, 2004: The Relationship between Organizational Value and Reputation Good leadership can drive company success and inspire a work force to reach its goals Gaines-Ross, 2004. 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 1996 and Wenger 1998 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 a discussion on the role of reputation in society 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.

  • The objective of reputation is not to be liked, but rather to build value for the organization through business outcomes;
  • There also are 23 attributes of reputation within these drivers;
  • When there is a link between first and second-order values, the organization lives by, behaves and communicates its values consistently.

Ulrich and Smallwood 2007 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. 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 Gioiaet 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.

  • However, Alwi and Da Silva 2007 , found some interesting differences between the way corporate brands were perceived on-line versus off-line;
  • As such, they feel that not managing reputation divorces them from fulfilling their responsibilities to the organization.

Codes of conduct, annual social reports, philanthropy, projects and business networks; they all underline this awareness Harold Burson Blog, 2008; Jonker and Schumaker, 2005. 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, 2008.

Similarly, Brexendorf and Kernstock 2007 believe that corporate brand can be used to build consistency between how the corporation wants to behave and how it actually does behave.

  1. 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.
  2. Many organizations properly seek high rankings in rankings in respected publications. Argenti and Forman 2002 provide a diagram that that shows how brand is interpreted by various stakeholders, with reputation being the sum of their perceptions.
  3. AstraZeneca is one such company, which has a Council at its headquarters in London and in several of the regions globally. Roberts and Dowling, 1997, 2002; Carmeli and Tisher, 2005; Srivastava et al.

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, 1993. 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 a discussion on the role of reputation in society 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 2002 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, 2006; Schultz, et al, 2005; Keller, 2003; and Schreiber, 2008. 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, 2007.

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, 2004.

Economic Responsibility—this is the basic need of all organizations. For profit companies must make a profit and not-for-profit organizations must secure adequate financial support Legal Responsibility—all organizations are expected to operate within the applicable country, state and local laws Companies seeking to establish better reputations typically see two other responsibilities: In a national survey, Smith and Alcorn 1991 found that 45.

  1. Wartick 1992 concludes from his empirical research that even when confronted with negative information, it is difficult to change the perceptions of stakeholders. Reputation management should advance the core values of the organization, and make certain that these values are reflected in the behavior of the organization both to its employees and its external stakeholders.
  2. Public relations firms, in particular, should begin to integrate their organizational change activities with their reputation building activities. 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.
  3. The result was an angry backlash against Ford by some 9,000 people on-line Mason, 2008. 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.

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, 1991. 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, 2003. The best corporate reputations are built by helping stakeholders find ways to use the corporate brand in their own lives.