Reputation Change

Reputation change refers to a change in the state of perceptions, evaluations, or claims about what an organization is to its stakeholders. A reputation change may be a matter of type (from a good to a bad reputation) or degree and can result from a minor alteration to a reputational crisis. Corporate reputations face many challenges because of the rampant digitization of communication and media. Specifically, the emergence of new communication technologies has intensified the ways in which corporate reputation changes. Shifts in the political, social, and economic environments have also fostered changes in firms’ reputations. This entry discusses the pace of reputation change and various reputation change archetypes. It then discusses reputation change as a social process and reputation change in the era of somedialization, or adaptation to the logic of social media.

Corporate reputation is aimed toward continuity, stability, and basic operations that are permanent in nature. Reputation links all the positive and negative aspects of a subject, creating a perception of a company, and the focus on progress is conservative in nature. Reputation is a process that happens over a period, not instantly. This provides a basis for describing reputation as “sticky” and difficult to convert.

Occasionally, however, reputation can shift rapidly. A positive and well-framed reputation reflects an organization’s ability to change over time. Reputation demonstrates the development of a company in terms of its objectives and strategies. A good reputation will propel a company toward achieving its targets and better operations. The level of change might be overwhelming, because reputational communication can progress more swiftly than a company can react. However, when an organization’s reputation is bad, the entire organization’s operations have a possibility of crashing. The firm might find itself in the midst of a negative cycle, which could destroy the entire business.

Reputation Change Archetypes

Several factors can sometimes alter the stickiness or persistence of a reputation. One way to approach the dynamics of reputation change is by classifying companies on the basis of their reputation as either stable, or solid, reputation companies or unstable reputation companies, sometimes referred to as fluid reputation companies. One of the profound attributes of reputation is its uniqueness. No identical “reputation replica” can be found in two different companies; the reputation profile shows the distinctness of each company, though at times, similarity emerges in the detailed descriptions of such profiles. When classifying companies, archetypes, which are expressions of certain general characteristics, might be included. Companies that show similar attributes are classified under the same archetype. In this sense, a full description of a reputation change always includes transition, level, and variability to describe the different archetypes.

Research carried out in Finland by Pekka Aula and Jouni Heinonen applied the idea of reputational archetypes to a study of reputation change and how reputation correlated with different financial indicators. In the study, firm reputation was elaborated, and different levels of reputation were classified:

• Solid reputation: Companies whose reputation is stable at a high level, with no variation
• Neutral reputation: Companies whose reputation is stable at an average level, with no variation
• Chronic reputation: Companies whose reputation is stable at a low level, with no variation
• Improving reputation: Companies whose reputation is on the rise
• Deteriorating reputation: Companies whose reputation is on the decline
• Varying reputation: Companies without any clear reputation trend

The research indicated that only 5 out of the 100 companies studied had a solid reputation. Their state of return on investment was a bit higher compared with other companies. Further investigation showed that only 22 of the companies studied had a neutral reputation, while 16 possessed chronic reputations. Chronic reputation companies are particularly interesting, because they are kept stable by multiple components of reputation. A company can have several strengths, but one of the dimensions of its reputation keeps the company’s overall reputation low. There were 29 companies whose reputation varied significantly. The available nine years of data identified 15 companies with a deteriorating reputation out of the 100 companies. They had not succeeded in improving their valuation in the eyes of investors.

The use of reputation archetypes gives an understanding of how firms can be approached based on their long-term reputation change. The implicit assumptions behind the study are based on the so-called research-based view, where reputation is an asset for companies and thus can be categorized and analyzed in the same way as any other company asset. The same belief is behind the numerous reputational rankings conducted by various consulting firms and business magazines. This approach, however, does not reveal much about reputation change as a social process. This is important because, after all, corporate reputation is a social construct.

Reputation Change as a Social Process

In a so-called social constructivism framework, reputation is defined as a process of continuously developing sets of beliefs, expectations, and narratives held and shared by the public. It also involves modifying the dialogical communication between the members of the public and an organization. It is imperative to note that the proponents of reputational narratives do not only describe their goals and objectives; they also place value and emotional importance on their narratives and thus the firm’s reputation. Company managers in charge of reputation should be aware that reputation is the result of both direct and indirect communication with the public. The messages being communicated should provide details of the actions that an organization intends to utilize to promote its effectiveness and efficiency in meeting customers’ needs. Reputation keeps changing depending on the actions being undertaken by the organization.

The social constructivist view on corporate reputation asserts that an organization’s reputation could be amended or changed via employing narratives in the social context. The view implies that an organization’s reputation is built or vandalized through dialogue between the company and its stakeholders. An organization’s reputation is not something that can be easily observed and measured with certainty; rather, it depends on the discourses created and disseminated by the public and the firm itself. Various reputations tend to be given to a firm depending on the number of participants involved.

In practice, this means that it is impossible to manage and convert the reputation of a company directly. Among the numerous narrators of a company’s reputation, the company itself echoes merely one voice that determines the reputation. In this context, no organization can easily manage its reputation change. The interpretation of the corporate reputational messages goes beyond the cultural discourse that is specific to each interpreter. However, reputations can be influenced. Thus, reputation change management is always an indirect activity, because reputation is built on the experiences and opinions of the public.

When reputation change is approached as a social process, it should be underlined that reputation change management should not be the unilateral communication of what the organization does to stakeholders but involves constant dialogue with the stakeholders about the meaning of those actions. Reputation is not something an organization can just inform others about; it is always under negotiation and as such is contested every day in different forums.

Reputation Change in the Era of Somedialization

Communication and media are digitalized, and this digitalization is revolutionizing reputation management and the ways in which reputation change is considered. Under the concept of medialization, institutions have to adapt to the intention and operations of media logic. Companies have become dependent on the media and the public sphere it creates and maintains. Because media publicity is important to modern firms, these firms need to plan and execute the plans while bearing in mind the preferences of the media. For decades, the realm of reputation management—and more important, reputation change management—has been governed by legacy media, such as radio, television, and newspapers.

However, legacy media have been seriously challenged by social media. As a vital outcome of the digitalization of communication, the media and business spheres have entered the era of somedialization. This means that both companies that are the subject of public attention and the legacy media have been forced to adapt their behavior patterns, such as content production and news dissemination, to meet social media’s logic. Legacy media reporters share their content through social media services and brand themselves with tweets and personal social media updates. News stories are promoted and shaped so that they fit social media’s literacy, to lure social media users to click and go to the news organization’s website. In addition, legacy media are partly dependent on social media as a source of news. To keep their content up-to-date and thus interesting and appealing, legacy media need active surveillance of public opinion and expectations, which emerge from and are disseminated and amplified on social media.

The rise of social media and the decline of legacy media can be seen as part of the logical evolution of media and communication technology, but when it comes to reputation management, the change is revolutionary.

Conclusion

Reputation change has been approached from two perspectives: (1) from the resource-based view and (2) from the vantage point of reputation as a social process. Both perspectives offer different but complementary viewpoints. The former positions reputation changes in the context of companies’ intangible assets and their management, and the latter places change in social contexts, where reputation changes happen not only with but also within communication between the firm and the public. The resource-based view is a useful tool when, for example, categorizing and analyzing companies based on their reputation and reputation change. The social process framework helps explain the power of communication and the meaning of the multiple narratives that create and challenge the reputational status quo. Both of the viewpoints should be utilized to expand the knowledge of reputation change, especially when the reputation of companies is challenged not only by medialization but also by somedialization.