Reputation Change Management
Reputation change management refers to the actions or patterns of action that organizations take to change the state of their reputation. This entry discusses five strategic possibilities that may be used to modify reputation: (1) discarding, (2) concealing, (3) redefining, (4) transferring, and (5) creation.
To discard means to dump or to shed. The dumping or shredding strategy to manage reputation most commonly occurs through brand redeployments or name changes. Name changes can also be used to avoid associations with public issues that have emerged that can create stigma if a company is too closely linked or attached to it. Examples include Arthur Andersen changing its name to Accenture after its association with the Enron scandal and WorldCom returning to its previous name of MCI after an accounting scandal. Even though WorldCom had strong components to its reputation, the scandal created uncertainty, instability, and lack of confidence among the public about its future.
To conceal means to shield or hide, often through obfuscation. One way in which companies attempt to change their reputation using concealment as a strategy is to use holding companies. For example, in 2001, Philip Morris changed its name to Altria, which was used as a holding company for the tobacco company and for the other companies that were part of the conglomerate, which at the time included Kraft. Concealing involves more than simply a name. The company reorganization also helped protect Kraft from any reputation spillover effects from being directly tied to Philip Morris, as there were no direct linkages. The linkages were indirect through the parent company of Altria. Thus, the tobacco side of Altria could be hidden from the more positively associated Kraft company and its product line.
Redefining usually involves reframing or relabeling. Here, the same facts and observations may be involved, but a new word, phrase, or “frame” can be used to change the definition and thus the meaning associated with the organization. There are numerous examples. For example, the U.S. National Rifle Association does not choose to be known as an opponent of gun control but as a defender of the Second Amendment. Oil companies became “energy” companies. Xerox became known as the “document” company. Banks became financial services companies. A recent example came in 2014, when CVS changed its corporate name from CVS Caremark to CVS Health.
There are four types of reputation transfer. These are identified by examining the valence of reputation (positive or negative) against the venue of reputation (inside the organization or outside the organization).
Outsourcing is a strategy used to take advantage of a positive reputation. That is, elements inside the organization that have positive reputational components are transferred to audiences outside the organization. This is often known as “extension.” For example, new organizations can be created with features that have already been vetted or identified as producing positive reputations. Consider, for example, the former Federated Department Stores. Federated Department Stores purchased Macy’s, which has the popular Thanksgiving Day parade in New York City, which is broadcast nationwide in the United States. Federated merged with Macy’s and then changed the names of all of its stores to Macy’s.
Off-loading is a strategy used to take advantage of a negative reputation by spinning it off, such as when subsidiaries are spun off another organization. An example of off-loading comes from the asbestos industry. Firms that were involved with asbestos litigation could spin off an asbestos company, off-loading all of the involved corporate liabilities. If the legal defenses were to fail, then the asbestos company could be put into bankruptcy court and liquidated. Another example of off-loading is through scapegoating. A company that is attempting to escape a negative reputation may attempt to create a link between an actor or entity and the negative reputation and devise reasons for why the negative reputation should be “contained” to the entity. Then, once the entity is sufficiently linked to the negative reputation, the organization will attempt to break its ties and association with it. Thus, a typical occurrence for a company involved in a scandal or crisis is for the CEO to be tarnished and terminated.
Insourcing occurs when organizations bring elements outside the organization that already have a positive reputation into the organization. Types of insourcing include co-optation, appropriation, importing, bonding (merging), or socialization. For example, business leaders who have favorable reputations may be recruited more frequently to join corporate boards. Activists with favorable reputations who may be antagonistic toward the firm may be invited in to join a dialogue or stakeholder engagement with the firm. Or organizations may adopt management philosophies (or fads) that are well received or popular, or contain aspects of thought leadership that may be brought into the company.
Some research has shown that mere public talking about the adoption of such practices is enough for the company to derive legitimation benefits, even if the practice is not fully adopted. Another example of insourcing is when an employee inside the organization who has a recently developed positive reputation is promoted within the organization in ways that he or she gains more visibility and more responsibility for other units within the organization. In addition, companies may enact training and socialization programs designed to adopt the traits, behaviors, and appearances of prominent individuals or organizations that have positive reputations.
Firewalling is similar to a classic management strategy of buffering. Firewalling is designed to contain, protect, and limit the exposure of an organization or one of its subunits to an issue or actor who has a tainted reputation. Another example is when an organization produces conflicting evidence that helps weaken the effects of a negative reputation. For example, Philip Morris has created links on its website for parents to discuss smoking with their children and has links to experts on its website for people who want to quit smoking. While Philip Morris implicitly supports smoking, these positive activities enabled it to create alternative evidence to mitigate the negative reputational damage done.
Growth and Creation
Firms may generate new positive reputations using fertilization or manufacturing strategies. A fertilization strategy is when companies take the time to build up competencies or resources from within and then use aggressive publicity tactics to promote them. A manufacturing or sculpting strategy is when organizations acquire a competency, resource, or strategy the way Major League Baseball teams use the minor leagues as farm teams.
Many of these strategies may sound questionable. The point is to be able to recognize them when they occur and to look for them when organizations face ethical lapses. The real question concerns what happens after organizations attempt such strategies and the outcomes for their stakeholders and for society.
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