Management,Corporate Reputation

Corporate reputation management refers to activities by organizational leaders and spokespersons intended to positively influence perceptions of the qualities of the organization among stakeholders (i.e., among persons or groups who can affect, or are affected by, the organization’s actions). Such activities then act as signals indicating that the organization has desirable characteristics relative to its competitors. Corporate reputation management covers activities traditionally listed under headings such as public relations, public affairs, corporate identity, advertising, and design. An important question for organizations is exactly which activities by an organization influence the organization’s reputation and how. This question has obvious relevance for organizations for whom their reputations are valuable, intangible assets.

The remainder of this entry discusses the main motivations that organizations have for employing corporate reputation management, the processes through which they implement corporate reputation management, and the concrete tactics that they use. Regarding tactics, this entry discusses the use of communication, behavior, and design to manage corporate reputation, as well as the effectiveness of these tactics. The treatment of the use of communication is further divided into discussions of the modes of communication, the forms of messages used, and the content of these messages.

Motivations for Corporate Reputation Management

Organizations can have different goals when applying reputation management tactics, such as repairing the company’s reputation after a crisis or preempting an expected crisis and also maximizing the reputational benefits from positive events. Increasingly, companies (especially large ones) use tools to monitor their reputations, in order to determine the need for specific reputation management activities. Corporate reputation management actions are often prompted by perceived (future) events that represent a threat or opportunity to the company’s reputation; however, companies also engage in such activities in the absence of such specific events. For example, research suggests that companies that observe a positive reputation gap between themselves and their business partners could be motivated to search for more reputable partners. Furthermore, organizations are more likely to engage in reputation management with those powerful stakeholders to which they are highly visible organizations, because the organizations are (or feel they are) more intensively scrutinized by these stakeholders.

By definition, the goal of reputation management is to be seen as having positive qualities among stakeholders, and research has indeed shown that managers regard “being seen” as the main goal of corporate reputation management. However, this does not always appear to be the case. One study among German companies reported, for example, that improving actual customer satisfaction and customer relationships can also be a goal of corporate reputation management activities.

Process of Corporate Reputation Management

To be effective, corporate reputation management should be part of a carefully planned process that starts with a careful consideration of the organization’s strategic position, identity, and existing reputation. Based on this consideration, the organization (ideally with the strong involvement of top executives) formulates a strategic plan for managing the organization’s reputation. Such a plan includes the stakeholder groups that the organization needs to target through corporate reputation management, the concrete goals that the organization needs to achieve among these stakeholders (e.g., increase in awareness, attitude, or quality of relationships), and what the key message to these stakeholders will be. Finally, the organization needs to ensure the implementation of the plan and to monitor its effectiveness. The latter can be done by monitoring the organization’s reputation among the relevant stakeholder groups, through polls, interviews, or (social) media analyses.

Although corporate reputation management activities can influence corporate reputation, this is clearly not a deterministic process. Indeed, there is some controversy among scholars and practitioners about whether organizations can actually “manage” their reputations. Stakeholder opinions about organizations are formed by the stakeholders themselves, not by the organizations. Besides, stakeholders use multiple sources of information to form an opinion about an organization, such as direct experience with company products or employees, corporate communication, communication from other stakeholders, and mass media. Furthermore, the individual opinions of stakeholders are combined to form a collective opinion (i.e., a corporate reputation) through a complex pooling process, which might lead not only to consensus among stakeholders about the attributes of an organization but also to the forming of factions by those who disagree with one another. The rise in the use of online social media since the early 2000s has tremendously increased the speed and complexity of these processes, including the increased importance of highly involved stakeholders (e.g., bloggers) as information intermediaries next to the traditional media. This trend is further increasing the challenges of successfully managing corporate reputation.

Challenges to managing corporate reputation might be even greater in the public sector than in the private sector, because of its dependence on the political process. The duality of serving the common good and serving politics can often create clashes, implying difficulty in presenting a clear image to stakeholders. Furthermore, due to the involvement of politicians, the top management of public agencies often has less leeway to determine a reputation management strategy for the organization. Politicians might pressure the organization into following a certain strategy or might sometimes even publicly criticize the organization for its strategy.

Reputation Management Through Communication

Communicating with stakeholders is one important way by which organizations strive to manage their reputations. Organizations can communicate with stakeholders using different modes of communication, different forms of messages, and different types of message content.

Mode of Communication

Communication scholars often distinguish modes of communication based on the balance of power between the organization and its stakeholders. Communication modes range from pure propaganda, where the sole goal of the organization is to persuade the stakeholder, without necessarily being completely honest and without incorporating the stakeholders’ standpoints, to pure co-creation, where stakeholders and the organization engage in an open dialogue aimed at joint decision making. In a true dialogue, there is no limitation regarding who can participate and the viewpoints that participants can put forward. In addition, the conversation has to follow specific rules to ensure that all arguments are judged on their merits, such as the rule that each participant has the opportunity to counter another participant’s propositions or arguments (but not something else) and the opportunity and obligation of challenged participants to defend their viewpoints. Next to true dialogue, there are communication modes that provide a more limited sharing of power between the organization and its stakeholders. For example, providing honest (but one-way) information already gives stakeholders more power than propaganda, because they receive accurate information. In addition, organizations can share power with stakeholders to a limited degree by consulting stakeholder opinions (with questions determined by the organization), by engaging in conversations to generate mutual understanding (without joint decision making), and by engaging in building a joint framework or conceptualization (without any actions flowing from the joint decisions).

Scholars such as James Grunig have argued that more dialogue-oriented approaches, in which there is more of a balance of power between the organization and stakeholders, are more ethical than approaches moving more toward the propaganda end of the spectrum. This argument is mainly founded in the moral philosophies of Immanuel Kant and Jürgen Habermas. In addition, Grunig and others also argue that dialogue-oriented approaches are more effective for managing an organization’s reputation in the long run. Whether the latter is indeed the case would still need to be determined through more empirical studies. However, studies in leadership suggest, for example, that employees see managers who consult them before making decisions and who stimulate them to participate in the decision-making process as more trustworthy than managers who do not engage employees in decision making in such a way.

Form of Communication

When using communication to manage their reputations, organizations usually respond to negative or positive events or to anticipated negative or positive events.

When responding to an (anticipated) negative event (e.g., a crisis), the form of communication depends on the degree to which the organization is willing to accept responsibility for the event. When an organization is not willing to accept any responsibility, it may deny the existence of a crisis or argue that the organization is not to blame. When the organization is willing to accept some (but not all) responsibility, it might attempt to distance itself from the negative event by putting part of the blame on other parties, by arguing that the damage done is not that bad, or by shifting attention away from the negative to the positive. The latter can be done by highlighting the positive characteristics of the organization, by praising stakeholders (e.g., for their response to the crisis), or by seeing the event itself as a part of a broader, positive development (e.g., by arguing that the crisis was an unfortunate event in the context of a larger project that will benefit society). Finally, when the organization is willing to accept full responsibility, it can apologize for the crisis, which implies acknowledging responsibility, expressing remorse, and pledging to take measures to prevent similar crises in the future.

When responding to a (anticipated) positive event (e.g., the launch of a new product), effective corporate reputation management would imply that stakeholders provide the organization with the credit that is due for the event. Organizations can stimulate such attribution of credit by emphasizing their responsibility for the event—for example, through linking the event with previous corporate actions that seem to have caused it. Organizations can also attempt to highlight the positive nature of the event, for example, by explaining the positive consequences it has for stakeholders and society or by citing praise from other stakeholders for the event.

Content of Communication

In using the broad modes and forms of communication described in the aforementioned two sections, organizations can still make several choices regarding exactly how they will phrase their message. The field of rhetoric has devoted a lot of attention to the way the detailed content of communication affects persuasiveness. In his book on rhetoric, Aristotle (384–322 b.c.e.) has argued that to be effective, speakers need to persuade an audience of their personal credibility (ethos), present logically compelling arguments (logos), and appeal to the audience’s emotions or values (pathos). These three aspects complement and reinforce one another. For example, compelling arguments are more convincing when they are made by a credible speaker and are combined with emotional appeals.

Credibility (Ethos)

Usually, the credibility (ethos) of an organization is seen as having three components: (1) trustworthiness or honesty, (2) benevolence or community, and (3) expertise or competence.

Regarding trustworthiness, research in corporate communication has examined the role of consistency in the way in which companies communicate to different stakeholders as well as consistency among perceptions, actions, and communication. For example, scholars emphasize the importance of using a corporate story as a basis to coordinate corporate communication efforts, in order to ensure consistency between communication efforts over time, from different functional areas and to different audiences. The importance of such consistency is suggested by research that shows that when a company’s actions are seen to be inconsistent with the way in which the company portrays itself in its communication, the organization loses credibility and, hence, reputation. Similarly, when stakeholders see a company’s communication as inconsistent with what they see as the company’s key promise to stakeholders, a credibility problem arises. Regarding consistency among different audiences, research seems to paint a more nuanced picture. One study shows that if the employees of a store perceive the organization in a much more negative way than the store’s customers do, there is a risk that the negative perceptions of the employees can eventually trickle down to the perception of customers. The reason is that stores involve direct contact between employees and customers, and employee and customer emotions are likely to influence one another. On the other hand, the study also shows that when employees have a much more positive perception than customers, there is a chance that the customer attitudes will become more positive. So it seems that consistency among stakeholder perceptions in itself is not necessarily good or bad for an organization’s reputation, but only when employees have a more negative view than customers.

An organization’s benevolence or community is the degree to which stakeholders see the organization as concerned about the welfare of its stakeholders and the broader community. When stakeholders see a company as purely self-interested and egoistic, they are likely to regard its communication efforts with suspicion. Organizations often engage in communications about philanthropic donations or other actions that signal their good intentions toward the community. However, such communication can also backfire if it is seen as insincere or dishonest—for example, because of a lack of consistency with the company’s perceived identity or key promise. In such a case, stakeholders might see the communication and the activities themselves as purely motivated by a reputation management motive, leading to a more negative opinion about the company’s benevolence than they had before. A well-known example is the critique aimed at the Philip Morris campaigns in the early 2000s highlighting its philanthropic activities and encouraging youth not to smoke. Critics claimed that the company spent more on the campaigns than on the activities themselves and that the antismoking campaign actually would promote smoking—in spite of the fact that Philip Morris had been an important contributor to good causes for decades.

Expertise or competence is of obvious importance to corporate reputations because it is one of the key dimensions or attributes on which stakeholders judge the company. In addition, however, a company’s expertise can act to provide credibility in communication in other domains. For example, when a company advocates a certain position on a social issue it is involved with, stakeholders might be more likely to believe the company if they see it as an expert in its field. If they see the company as lacking expertise, they may reason, for example, that it engages in a discussion of the social issue to mask, or to compensate for, its lack of expertise.

Argumentation (Logos)

Regarding arguments (logos), the communication literature has devoted a lot of attention to framing. Framing involves making some aspects of a situation or object more salient than other aspects, thereby suggesting a certain view of the situation or object. For example, when a product harm crisis occurs, involving harm suffered by consumers as a result of using a company’s products, the company’s spokesperson might highlight the fact that in cases where such harm occurred, consumers seemed to have used the product in a wrong way. In doing so, the spokesperson suggests that the crisis is due to the inappropriate use of the product rather than a design or manufacturing error. Such an attribution of responsibility, if sufficiently convincing, would then limit reputation damage as a result of the crisis. Another example of the use of frames is evoking archetypical images, such as that of a technical adviser, an environmental steward, or a champion of civil rights. For example, during the controversy over the proposed sinking of the Brent Spar in 1995, Shell seemed to put itself in the role of the trusted technical advisor who knew which decision would be best for society. Organizations can also frame themselves as members of certain categories of organizations, such as research institutions, multinationals, members of a specific industry, or residents of a specific country.

While organizations can offer their frames to stakeholders, for any situation or object, multiple competing frames can exist simultaneously, leading to a “frame contest” in the media, in which one frame eventually prevails over another. For example, in the case of the product harm crisis, a nongovernmental organization or government agency might offer a competing frame pointing to tests conducted showing design flaws. Similarly, when an organization (like Shell) tries to evoke the archetype of a trusted technical adviser in its communication, a nongovernmental organization (e.g., Greenpeace) might counter by evoking the archetype of the profit-driven multinational (as happened in the case of the Brent Spar). Eventually, the media might adopt one of these frames, usually followed by other stakeholders. Such contests are more likely to end in an alignment of the frames of organizations and of the competing frames when organizations engage in a dialogue with journalists.

To be convincing from an argumentation standpoint, frames usually need to be supported by evidence that is sufficiently convincing. To determine whether such evidence is convincing, stakeholders can look at the information they have from other sources. For example, stakeholders will probably see evidence that matches with the company’s previous communication and reputation as more convincing than evidence that is inconsistent with previous communication and reputation. For example, Apple, when faced with criticism on a new product in 2010, appeared to avoid admitting that there was a problem, and when it was finally forced to do so, the company appeared to avoid blaming external circumstances. A study suggested that one driving force behind these choices might be Apple’s reputation for being “in control” over everything it does, so that stakeholders might not be convinced by arguments blaming external circumstances. In addition to other information, the way in which the evidence is presented can also make a difference. Particularly, when an organization makes only very abstract, general statements (e.g., broad appeals to values), stakeholders often see this as less convincing than when the organization provides concrete, factual statements (e.g., descriptions of specific activities and outcomes). The sources of evidence can also be important. For example, an independent research institute that specializes in industrial design might provide a more convincing source of evidence than a market research agency can to find out whether a product crisis was due to a design flaw.

Emotional Appeals (Pathos)

In addition to highlighting facts or observable aspects of a situation or object, framing often involves appeals to emotions, by referring to abstract constructs such as needs and values. Needs are goals that people want to achieve. For example, when describing their products and services, organizations may explicitly state which customer needs they are aiming to fulfill, such as the need for safety, convenience, status, joy, or doing good for society. Similarly, when faced with a crisis, organizations refer to the need for physical safety or security. By suggesting that the organization is able to satisfy the needs of stakeholders, stakeholders derive value from their relationship with the organization, leading to a favorable reputation.

Values are beliefs that general states or behaviors are more desirable than others. In contrast to needs, they are cognitive—that is, a belief that something is good (as opposed to merely being a drive). For example, the desire to feel secure is a need, but the belief that feeling secure is important is a value. Organizations can appeal to values by directly stating their values—for example, by stating in a mission statement that they value reliability, quality, and integrity. In addition, organizations can imply their values more indirectly by supporting good causes or by praising other people or organizations who demonstrate certain values. For example, when an organization provides support for disadvantaged children, it suggests that the organization values universalism (promoting welfare for all people). Similarly, when an organization praises a person or organization for espousing patriotism or environmental consciousness, it suggests that the organization itself has these values as well. When stakeholders believe that an organization has the same values as they do, they might be more likely to agree with the arguments that an organization puts forward in a discussion about other topics. For example, when environmentally conscious stakeholders know that an organization also values environmental conversation, they might be more willing to believe the organization when it has to defend itself during a crisis.

By appealing to stakeholder values, organizations might not only be more likely to agree with what a company says, but they may also derive more value from their relationship with the organization because it satisfies a specific need, namely, the need for identification. People have a general need to be a part of a social group that provides them both with a sense of belongingness and with some degree of esteem. When an organization suggests that it has the same values as those of a stakeholder, this overlap in values provides a means for the stakeholder to identify with the organization. Besides suggesting an overlap in values, there are other actions that can stimulate feelings of identification: creating a “common enemy,” using the word we as referring to both the organization and the stakeholder, and using easily recognizable symbols. When stakeholders identify more with an organization, their opinions about the organization and hence the organization’s reputation will improve.

Reputation Management Through Behavior

The actual behavior that an organization demonstrates is an important antecedent of its reputation, even more so than communication. Through actions, organizations deliver benefits to stakeholders and signal that they have underlying qualities that stakeholders value. Stakeholders learn about organizations’ actions not only through organizational communication but also through direct experience with the organization’s products or employees and through the media.

Organizational actions that can influence corporate reputation can relate not only to the company’s core business (e.g., introducing new products or new executives) but also to programs related to employees (e.g., programs to balance work and family life), communities (e.g., philanthropic activities), or any other stakeholders. In addition, actions can include seeking collaboration or affiliation with prestigious organizations. Organizations can also use activities directed at one stakeholder group as signals for another stakeholder group. For example, engagement of organizations in solving current social problems might signal that the organization is good at monitoring its environment for issues and at constructive collaboration with stakeholders.

As with communication, the actions undertaken by organizations after a crisis depend on the degree to which they are willing to accept responsibility for the crisis. When an organization does not want to accept responsibility, it might do nothing, or even sue the stakeholders who accuse the organization of misdeeds. When the organization is prepared to accept responsibility, it may offer compensation for the victims of the crisis and/or try to prevent similar crises from happening in the future by planning and implementing organizational changes. One such change is the replacement of top executives, which can signal that the organization is going to change the way it operates. For example, research on the ways in which organizations react to earnings restatements has suggested that organizations often replace their CEO and/or chief financial officer and are likely to hire new top managers with experience in organizational turnarounds and with degrees from elite educational institutions.

Reputation Management Through Design

As stated earlier, organizations can use symbols (e.g., buildings and logos) to facilitate identification of stakeholders with the organization. Besides serving as an “anchor” for identification, these symbols can also be used to signal specific qualities. For example, large modern office buildings can signal prestige and success. In addition, studies have found that certain office layouts signal an authoritarian culture (e.g., chairs positioned opposite to each other), whereas other types of layout signal an informal culture (e.g., chairs positioned at 45-degrees angles from each other). Similarly, the use of wooden materials appears to signal innovativeness and energy. Corporate logos can also be used to represent certain organizational characteristics. For example, in the late 1990s, BP changed its logo to one resembling a sunflower, to signal its new commitment to renewable energy. On the other hand, Shell’s logo mainly refers to its history, with the shell representing the company’s historical roots as a trader in seashells, while the colors (yellow and red) originate from its historical link to California.

Besides signaling specific qualities, design can also help support the more general objectives of corporate reputation management. For example, having an appealing, distinctive logo can help distinguish an organization from other organizations. A brand architecture that clearly shows how the organization’s brands are interrelated (e.g., through the display of the corporate brand on communication by subsidiary brands) can help create transparency about the organization’s structure. Finally, using the same logos, colors, and layout in all communication materials can help create consistency in the way in which the company presents itself to stakeholders.

Because of the relatively stable nature of many design characteristics (e.g., logos, buildings, and offices), organizations often use design for reputation management in the longer term. However, design can also be used in more fleeting media (e.g., ads or invoices) to deal with an existing or anticipated negative or positive event.

Conclusion

Corporate reputation management, consisting of activities intended to positively influence perceptions of the organization among stakeholders, is often conducted in anticipation of or in response to negative or positive events. The corporate reputation management process involves formulating a reputation management strategy based on the organization’s overall strategy, identity, and current reputation; implementing the strategy; and monitoring its effectiveness. Reputation management activities include communication, behavior, and design (symbols). Communication can take different forms (e.g., distancing the organization from a crisis, claiming credit for success), use different modes (e.g., propaganda vs. co-creation), and use different types of content (e.g., signals of legitimacy, logical arguments, and appeals to emotions). All these different activities can be used in conjunction to manage an organization’s reputation. However, consistency among the activities is usually vital. For example, when an organization’s behavior and use of design are not consistent with what it communicates, the communication is likely to be less effective or might even backfire. In addition, control over corporate reputation ultimately lies with the stakeholders, for whom the organization is only one source of information.