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Organizational Reputation: Defining the Indefinable

LEARNING OBJECTIVES

1. After reading this chapter, students will be able to define key reputational concepts: reputation, identity, image, and relationship.
2. After reading this chapter, students will be able to analyze reputations of the organizations they are familiar with.
3. After reading this chapter, students will be able to apply the reputational concepts to their own personal reputations and reputations of their classmates.

Have you ever thought about your personal reputation? What do people think when they hear your name? What about the reputation of a restaurant you are planning on going to? What do you know about it? What do others think about it? What does it even mean for a restaurant to have a good reputation? And do you think it matters at all what kind of reputation a restaurant may have?

Let us think about it. Would you go to a restaurant known for giving people food poisoning? I think most people would avoid going to a restaurant known for poisoning its customers - even if the food looks good, the building is clean and welcoming, and the staff is smiling (see Figure 1.1). Thus, reputation in that case would mean a difference between getting customers' business and not getting it. In other words, it would be a very important factor for the restaurant's success and even survival.

The same may also be true for cars, phones, clothes, hotels, universities, sports teams, political parties, and even countries. Take for example a case when the Dominican Republic experienced a decline in bookings and an increase in cancellations of already-booked reservations in 2019. A Washington Post story reported only 30 people on a private beach at one of the most luxurious Dominican Republic hotels of more than 400 rooms and suites (Krygler, 2019). The story concluded that the country's reputation had a potentially devastating problem after the shooting of David Ortiz, a famous baseball player, and the death of several U.S. tourists. In fact, the reputational impacts were so severe that the country launched a #BeFairWithDR social media campaign in order to restore its reputation as a safe and enjoyable tourist destination. But why did a few negative cases overshadow millions of tourists who traveled to the Dominican Republic over the years and had amazing experiences? To answer that question one must seriously consider how reputations are built and maintained, and what can harm reputations.

Figure 1.1 Food in a Restaurant.

Source: GoodLifeStudio/Getty Images.

Most often reputation research focuses on corporations, and study after study concludes that reputation is among a corporation's most valuable assets (Gomez-Mejia & Balkin, 2002). In fact, customers of corporations with positive reputations will become loyal to their products and services, employees of corporations with positive reputations will be more likely to stay in their jobs longer and be more productive, and even investors will be more likely to invest in corporations with positive reputations (Goldberg and Hartwig, 1990; Laskin, 2013; Raithel and Schwaiger, 2015; Rao, Agarwal & Dahlhoff, 2004; Roberts and Dowling, 2002; Shapiro, 1983).

Thus, reputation becomes an important concept to study and define. When it comes to defining reputation, it seems like everyone knows what it is. Indeed, we use the term reputation in our casual conversations without much hesitation. Yet, reputation is one of those words that are easy to use but hard to define. In addition, there is a plethora of terms that seem similar to reputation and sometimes even used interchangeably with reputation. See, for example, if you can differentiate reputation from organizational identity or an organization's image. This chapter reviews definitions of reputation and compares reputation with similar terms.

Identity

Identity is the starting point when defining a reputation. It is also what organizations have the most control over. Simply speaking, identity is how you want to be perceived. For example, Walmart may want everyone to think of it as a place where you can find the best prices on everything, the best place for a bargain, while Neiman Marcus, instead, may want to be perceived as an exclusive shopping venue for exclusive few customers - pricey but with a great shopping experience (see Figures 1.2 and 1.3).

Figure 1.2 Shopping at Walmart.

Source: PJiiiJane / Shutterstock.

Does it mean that customers would feel exactly how the organization wants them to feel? Not necessarily. A person may go to Neiman Marcus to find a bargain, while another person may go to Walmart because they enjoy the shopping experience there without even looking at prices. In other words, identity is the story the organization tells about itself, whether others would agree with it or not. Identity is not limited to organizations - this can be extrapolated to products (product identity), brands (brand identity), people (personal identity), and so on.

How do organizations build their identities? It starts with the goals, values, and mission of the organization. Neiman Marcus's mission statement, for example, declares, "we have continually transformed and elevated the luxury shopping experience, offering the finest in fashion, shoes, handbags, jewelry, beauty and decorative items for the home." Compare it with Walmart's mission statement, "to save people money so they can live better." If these statements were the starting points for two organizations, no wonder they needed to make very different choices about the types of their stores, products they sell, people they hire, and pretty much everything else.

It may be an interesting exercise to compare mission statements of several organizations working in the same industry and then analyze how the different visions of the organizations' mission lead to different results. For example, Table 1.1 lists mission statements of several automakers producing very different brands of cars.

Figure 1.3 Shopping at Neiman Marcus.

Source: Dfwcre8tive / Wikimedia Commans / CC-BY 3.0.

The mission statements and other essential statements are not the only documents shaping an organization's identity. Every communication from the organization makes a statement about what that organization stands for. Annual reports, CEO press conferences, appearances on national and local news, emails to employees, and all other communications project the organization's identity. That's why it is important for all communications to be guided overall by the organization's mission and be done in coordination with each other. Sometimes organizations have different divisions responsible for different types of communications - the investor relations department may produce annual reports, the marketing department may work on advertisements, the public relations department may write news releases, and the social media team may manage Facebook and Twitter activities. Without close coordination between these teams, their communications may pull an organization's identity in different directions, harming the efforts of each other instead of complementing and enhancing each other's work.

The organization's identity is built on not only what it says but also what it does. In fact, a proverb states that actions speak louder than words! This means actions of an organization may have a stronger effect on its identity than its released statements, advertisements, and social media posts. Imagine a Neiman Marcus store with unfriendly employees, dirty floors, and clothes lying around in unorganized piles. It is unlikely that such a store would be projecting an identity of an exclusive and luxury shopping experience no matter what its managers say. Or, imagine Walmart selling items with significantly higher prices than other local retailers. It may seriously threaten the store's identity despite all the communications to the contrary. Thus, it is very important for an organization to weigh all its decision against its mission statement and other key principles to make sure every action is aligned with the company's vision of itself and with what it wants to project to the outside the world.

Table 1.1 Mission Statements of Select Car Manufacturing Companies.

BMW
BMW creates driving pleasure from the perfect combination of dynamic, sporty performance; ground-breaking innovations; and breathtaking design. Ferrari
Born of the spirit of racing, Ferrari epitomizes the power of a lifelong passion and the beauty of limitless human achievement, creating timeless icons for a changing world. Ford
To help build a better world, where every person is free to move and pursue their dreams. Honda
At Honda, The Power of Dreams drives us to create intelligent products that enhance mobility and increase the joy in people's lives. Kia
Respecting people and practicing environmental management to maximize value creation and pursue balanced and shared growth with stakeholders. Lucid
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