Leadership’s Role in Reputation

Organizational leadership plays a role in corporate reputation. The reputation of a company can be assessed by its financial performance, leadership, citizenship, culture, innovation, products and services, and governance. However, leadership is a crucial factor that governs the rest. It shapes stakeholder perceptions about the company, its core values, achievements, governance structures, and culture.

The credibility of an organization is directly proportional to its leadership skills, which help it secure a superior position and recognition in the market. Development of leadership skills is important in the journey of an organization. A company with a strong leadership team and a good vision and mission is able to sustain its market position, address complex behavioral issues, and manage environmental constraints. The success of a company’s leadership can be measured by customers’ willingness to invest, purchase, and make recommendations that directly build reputational capital for the company.

This entry discusses leader reputation and how it is perceived from the lens of stakeholders, public perception management through a leadership style, the importance of leader reputation, the use of storytelling to build reputation, and managing reputational capital in moments of stress or crisis.

Building Leader Reputation

A successful leader creates and builds an image that resonates with that of the organization. A reputation of credibility, authenticity, and integrity helps in building bridges with multiple stakeholders, who can be categorized as internal and external. Internal stakeholders are the company’s employees, who are part of the organizational culture and are comparatively easier to appease than external stakeholders, such as customers, investors, government, and the media.

The leader achieves this task by crafting a vision that converges with organizational goals and ceaselessly following the practice of “walk the talk” and “talk the walk.” In this process, connections with stakeholders are established through communication of policies and rules presented in a value framework with ethical moorings. As most of these strategies hinge on the attempt to build or manage reputation, the leader has to exercise extreme caution, for reputation takes years to build but can, at the slightest provocation, take a hit that may be difficult to repair.

A beginning point for communication with stakeholders is to identify the major stakeholders (internal and external) and comprehend their concerns before deploying strategies to secure their buy-in. Internal stakeholders or employees can be addressed by developing a good and conducive culture with optimal work conditions.

In the category of external stakeholders, the critical mass for any company is its consumers or customers. Most of the customer concerns are managed by companies through credibility and ethics in management of issues, processes, and products. Showing productivity and profitability appeases the investors. Adhering to governmental norms, rules, and regulations and conducting business within this framework establishes good connections with the government. Providing regular information to the news media increases the likelihood of coverage that reflects well on the company.

All these techniques of building connections with stakeholders by being committed and inspirational are global practices, acclaimed universally as mandates for reputational enhancement. These practices are developed and shared with the stakeholders to instill pride in being part of the organizational growth story. These practices can promote employee loyalty, lower the rate of attrition, and build external stakeholder trust and conviction in the organizational processes and governance practices.

The success of these global leadership practices can be measured by applying four sets of criteria. Two of them directly measure leadership skills, and two are consequences of effective leader performance. The leader’s commitment and enthusiasm are a function of his or her involvement in day-to-day processes. Adaptability and innovation are often cited as important drivers of excellence. A leader who possesses these is likely to amass reputational capital for the company. The top line and bottom line of the company, also referred to as profitability and financial performance, respectively, are often cited as crucial measures of organizational success in the market. Additionally, continuity and efficiency in the existing performance systems reflect leader competency in performance. Leadership measured against these sets of criteria demonstrates a leader’s behavioral complexity, or the ability to use a variety of behaviors to meet a goal, and showcases the leader’s ability to perform.

Leader Reputation and Public Perception Management

An appropriate display of leadership skills develops an image and a perception in the minds of stakeholders where both the leader and the organization are associated with values, ethics, and sustenance. However, this is a long process and requires addressing issues related to actual, conceived, communicated, ideal, and desired identities.

Public perception is developed and influenced by the leader’s behavioral complexity and role adaptability. Demonstration of any one or some of the leadership skills at the cost of others robs the leader and the organization of perceptual credibility. For instance, overemphasis on short-term financial gains, at the cost of employee satisfaction or organizational culture and ethics, may appease the investors but will distance the employees, leading to attrition and low engagement. Similarly, excessive focus on procedural norms and rigidity in approach can lead to bureaucratic control and create perceptual barriers, stifling multiple growth opportunities.

Too much focus on employee concerns can create a perception that the organization or leader is involved in morale building of employees at the cost of product enhancement and profitability. This can have a detrimental effect on the financial performance of the company. Finally, efforts to innovate, when unrealistic, can destabilize work processes and result in low returns, upset investors, and create a breeding ground for competitors.

A successful strategy to manage public perception can result in a positive global reputation and a competitive edge in the marketplace. Leaders are often confronted with the task of devising a strategy for long-term competitive benefits rather than short-term gains. A strategy based on the company’s value framework, derived after rigorous dialogue with the senior leadership team, is difficult to replicate by competitors and creates positive perceptions among stakeholders. A company can gain strategic competitive advantage by building on leadership skills combined with reputational assets based on the core capabilities it possesses or has acquired over time. This creates a perception of an organization whose worth or merit cannot solely be measured in terms of book or market value.

Significance of Leader Reputation

The leader is the brand ambassador for the company. Leader skills drive innovation, enhance the product portfolio, affect performance, change culture, manage governance practices, and foster an attitude of citizenship. The credibility and integrity that the leader carries translates into respect for the company. Additionally, strategic communication with different stakeholder groups creates a positive perception about the organization. Many studies point to the positive correlation between CEO and company reputation, which is one reason why companies strive to bring on board a strong leader.

The first step for the leader is to target internal customers or employees. They help the leader in setting the vision and managing the mission, creating the value framework, and carrying the company image to the outside world. A discordant note between the leader and the employees can create disharmony in the work culture, affect productivity, and affect reputation—all of which lead to lower profits. An organization where leaders appreciate the fact that the company is larger than the individual and formulate policies, rules, and regulations keeping the larger organizational goal in perspective is often rewarded with strong employee engagement and a positive reputation among the stakeholder group.

The customers are the next set of stakeholders to be addressed. The personal charisma of the leader, his or her strength of character, and his or her ability to withstand adversities create perceptions about the leader and draw customers to the company. Leader values and ethics and how they amalgamate with those of the organization and its governance practices directly and indirectly affect customer decisions. Studies have indicated that almost two thirds of customers assess company reputation on the basis of leader reputation.

The third set of stakeholders, in order of importance, is the investors, who focus on the financial performance of the company. Leaders regularly communicate the organization’s growth strategy with a reiteration of past financial performance and success stories. The underlying theme borders around value orientation, commitment, and integrity, through which growth has been and is targeted to be achieved. Honesty in communication helps the leader gain acceptance among this crucial set of stakeholders, who wish to see the leader at the helm of affairs, sharing praise and shouldering blame.

One of the toughest constituencies to address is the government. Established norms and regulations need to be followed by organizations. However, as the environment in which companies operate is dynamic, procedural detours are a norm. If connections with the government have been established and maintained, perceptions may be favorable, with government officials having a positive disposition toward shifts in company policies or norms. Organizations and their worth or merit in the market are recognized by the government on the basis of the reputation and rapport established by the leader.

Addressing media concerns to gain recognition and appreciation is a relatively simpler task. The focus of the news media is mostly on presenting new stories at regular intervals and securing eyeballs. Organizations generally create dedicated teams to address media queries and proactively provide them with required information. A strategy of allowing the media to score short-term wins is found to affect long-term relationships, as media organizations then have greater perspective on the company and provide more balanced coverage in cases of accidental reputational loss, such as a liquidity crunch for a bank, or instances of problems related to product quality.

All these competencies to attract divergent sets of stakeholders are not learned in a day. The learning is progressive, with the leader building and developing a reputation that is almost synonymous with that of the organization. This is important, as almost two thirds of a company’s market value is attributed to its reputation.

In this journey of building reputation, it is important to note that only a leader can help a company acquire reputational capital, an intangible resource, by behavioral complexity and constant communication with multiple constituencies. This communication mostly follows a storytelling technique.

Storytelling for Reputation Building

The leader’s skill as a storyteller enables effective communication with internal and external stakeholders and the environment, influences stakeholder perception, and helps build reputational capital. Leaders use this technique to pitch their ideas and influence customers, clients, and shareholders through stories of success, mission, and social stewardship.

The stories developed and narrated by leaders can change stakeholders’ mind-sets and reinforce trust and confidence in the leader and the company. This influence is reflected in the development of positive perceptions of the products and services, in decisions to invest, and in willingness to consider the company as a potential employer. Storytelling as a tool for securing stakeholder faith becomes more effective when supplemented by the strong communication skills and credibility of the leader.

Stories can be built around the mission, vision, values, and strategic intent of the organization. The most commonly told stories revolve around financial and human-interest aspects of the organization. Number-centric or financial performance–related stories proclaim organizational achievements and are used to reinforce external stakeholders’ positive perceptions of the organization. On the other hand, those based on organizational mission, vision, values, and culture are designed to unite employees and are crafted such that the employees are able to relate to them. Many involve knowledge sharing or capability development and act as guiding posts for negotiating with the external environment, more specifically in moments of crisis.

Leaders emphasize reputation in the storytelling process by using techniques that demonstrate the choices made by protagonists. They may use the springboard technique, where the company mission is emphasized and the listener reaches his or her own conclusion, or tell corporate brand stories that connect the actions or image of the leader to how the company fulfills the promise of its brand.

It may not always be possible to use the same story for all stakeholders. Those advocating mission, values, and ethics may be repeated across categories, while those focusing on specific behaviors and commitments may need restructuring or customization to achieve the desired objectives. To use stories for a longer duration, leaders ensure that these stories are attuned to the company’s moral compass and are strong enough to withstand attacks from rivals or activists.

Leaders in reputed and successful organizations understand the importance of ensuring a collaborative process for developing stories. The process usually begins with leaders narrating a story to influence their team and align them to organizational goals. Once employees become attuned to the strategic vision, they transmit relevant stories to multiple stakeholders at individual points of contact. This larger stakeholder group then shares their own perceptions of the story at various structured and unstructured venues and formal and informal gatherings. Leaders then complete the loop by analyzing employee feedback to gauge the levels of acceptance of the organization’s values and culture and use that feedback to amend the existing stories and reshape future strategies.

The biggest advantage that storytelling offers is the opportunity to provide stakeholders with insights into company values, enabling them to judge the trustworthiness of the company and thus contributing to reputational capital. Leaders who appreciate the potential of stories in defending and extending the core philosophy, building on the company’s growth possibilities, and exploiting new opportunities are able to successfully use this technique to build and maintain reputation.

Managing Reputational Capital

As discussed earlier, competitive advantage can be gained by enhancing leadership skills that directly affect reputational capital. A conducive corporate environment for developing leaders and leadership skills is most important. This can be done by developing and nurturing leaders who are able to demonstrate commitment and integrity to all stakeholders. Training of leaders to manage environmental concerns helps organizations overcome the associated risks and maintain perceptual balance.

Organizations in their life cycle may face a reputational loss or disparity in stakeholder perceptions when a lapse or oversight leads to a crisis. It is in these critical moments that leaders take a proactive stand, create a team, manage reputation, and resurrect stakeholder faith and confidence. These steps serve two functions: First, there is a methodical review of reputational processes, and second, the required changes are instituted for competitive advantage. Additionally, audits spearheaded by the leadership team are conducted to “unfreeze” the established practices and processes that led to the crisis situation and diagnose procedural and behavioral issues before “freezing” on the required changes. This process, as is the case with any change mechanism, facilitates careful monitoring and implementation of change.

In sum, managing reputational capital requires leaders who understand the need to move ahead with speed and alacrity to achieve organizational accolades and participate in rankings that proclaim their reputational capital and help in securing competitive advantage. For instance, it is important to perform well in reputation rankings based on overall performance, quality, and sustainability. Institutionalizing resources, devoting time and energy, and planning strategically are the building blocks for managing and gaining reputational capital.