Nowadays the importance of reputation for organization’s effectiveness is extensively studied in the academic world, described in the business media and experienced by executives in daily business. Reputation management became an important discipline and the understanding of mechanisms that influence creation and maintenance of an organizations’ reputation are more relevant than ever in the modern business environment.
Therefore, all communication professionals aiming to manage a company’s communications should know what reputation is, its importance for the business, and the role of communication in reputation management.
The reputation value for the business is well-known: “a good reputation enhances the value of everything an organization does and says. A bad organization devalues products and services, and it acts as a magnet that attracts further scorn” (Dowling, G., 2001:8). As well as the relationship between high performance organizations and good reputations, the Reputation research published by the Institute for Public Relations confirm that “historical data compiled by Fombrun and Van Riel (2004) found that companies with good reputations outperformed companies with poor reputations on every financial measure over a five year period” (Schreiber, Elliot S.).
The Reputation Institute says that reputations are created through three different channels: first by “direct experiences” (e.g.: products, customer services, investments and employment) and secondly by their communications channels “what companies say and do” (e.g.: branding, marketing, public relations, social responsibility) and by “what others say” (e.g.: traditional media, social media, experts, leaders, family and friends).
Approaching the topic from another standpoint, reputation can also be defined from the perspective of the different stakeholders, as pointed out by Fombrun et al. (1999) their article to The Journal of Brand Management:
“To economists, reputations are traits that signal a company’s likely behaviors. To strategists, a company’s reputation is a barrier to rivals, a source of competitive advantage. To accountants, reputations are an intangible asset, a form of goodwill whose value fluctuates in the marketplace. To marketers, reputations are perceptual assets with the power to attract loyal customers. To students of organization, reputations are an outgrowth of a company’s identity, a crystallization of what the company does, how it does it, and how it communicates with its stakeholders.”
More broadly speaking, reputation can be described as “the set of meanings by which a company is known and through which people describe, remember and relate to it. It is the net result of the interaction of a person’s beliefs, ideas, feelings and impressions about the company”, as showed by Dowling (1986) and cited in Fombrun and Van Riel (2007:44).
In addition to this concept, in order to understand how reputations are created, it is also important to be acquainted with all the elements involved in the process:
- Desired Corporate Image:
- Corporate Brand – Organization’s promise to its public.
- Corporate Identity – Attributes chosen by the company to describe and/or present itself and by which the company is recognized.
- Real Corporate Behavior: Performance / Behavior / Quality Products and Services / Workplace / Governance / Citizenship
- Influencers of awareness and perception: Corporate Communication / WOM (world of mouth) / Media / Experts and analysts
- Perceived Corporate Image: General perceptions and evaluation about an organization, the immediate mental picture of an organization in the stakeholders’ minds
- Reputation Attributed: values evoked by corporate image that evolves over time as a result of consistent corporate behavior and communication, which leads to confidence, trust and support towards the organization.
Analyzing these elements, it’s possible to conclude that the way to construct a good reputation is through managing the “perceived corporate image”, by assuring the coherence between the “desired corporate image” and “actual corporate behavior”. It’s also necessary to make sure that this coherent behavior is properly and effectively communicated to the public using the “influencers of awareness and perception”.
Therefore, the first step to enhance an organization’s reputation is to analyze these aspects and the gap between the corporate image desired by the top management and real corporate image carried by stakeholders and public opinion. Based on the findings, a second step is to identify which aspects are the key drivers to positively influence the reputation building and close the possible gaps between desired and real image.
Regarding the identification of reputation drivers, an interesting tool to track and analyze corporate reputations, developed by the Reputation Institute called “RepTrak system”, highlights seven dimensions responsible for the formation of reputation: Performance (13.2%), Product / Services (20.3%), Innovation (14.2%), Workplace (12.6%), Governance (14.1%), Citizenship (13.5%) and Leadership (12.1%).
According to the Reputation Institute, each of these dimensions needs to be addressed by the organization, through proper activities and communication, and “top companies must exhibit strength in all seven areas” in order to “earn trust, admiration good feeling and support” (2010 Global Reputation Pulse Study – Reputation Institute).
In the next articles I will write more about the importance of reputation for the business and the role and impact of corporate communication in reputation management.