Reputation Gaps

A gap, by definition, refers to an undesirable chasm, difference, or separation. In the context of reputation (management), a gap may be understood in a variety of ways, for example, the difference between desired and actual reputation, between stakeholder expectations of and experiences with an organization, and differences in perception among internal and external stakeholder groups. Premised on the centrality of reputation for corporate survival and success, any gap is deemed problematic and a potential risk to creating and maintaining a favorable reputation.

This entry begins by outlining the various ways in which reputation gaps have been conceptualized and ends with recommendations from scholars and industry practitioners on how to address the perceived risks arising from reputation gaps.

Definitions

Reputation gaps have been conceptualized in several ways. One definition focuses on the gap between who an organization really is (identity) and how it is perceived (image). This conception highlights the identity-image conundrum, where image refers to how external observers view a firm and identity is understood as the perceptions of internal observers (e.g., employees) or the collective sensemaking about “who we are” as an organization. In many accounts, reputation is seen as a combination of internal (identity) and external (image) stakeholder perceptions, and the assumption is that a harmonious alignment between the two will lead to reputational gain.

A related view of reputation gaps focuses on the difference between employee perceptions and customer perceptions, or internal and external reputations, respectively. The assumption is that incongruity between internal and external reputations is problematic, as when firms attempt to create hype via advertising when the organizational realities are very different. This could potentially heighten the risk of reputation crises and affect firm performance, whereas a harmonious equation would yield positive corporate outcomes. Not all gaps may be damaging for organizations, however, and the valence (positive or negative) and magnitude (size) of gaps need to be taken into account in identifying the appropriate course of action.

Furthermore, the AC4ID reputation framework, which builds on John Balmer’s AC4ID framework, allows for the examination of the differences between the actual, constructed, communicated, covenanted, construed, ideal, and desired reputations of an organization. The actual reputation refers to the organization’s actual reputation from the perspective of one person. The constructed reputation refers to the sensemaking between two or more people. The communicated reputation refers to what the organization says about its own reputation. The construed reputation refers to what top management thinks outsiders think is the reputation of the firm. The ideal reputation refers to the product of market research and empirical data that indicates the optimal positioning an organization can gain in light of market realities. The desired reputation refers to top management’s aspirations for the organization’s reputation. Focusing on the gaps between these different reputations enables conversations about organizational satisfaction, the desire for change, and pathways for change.

Fleishman-Hillard focuses on how the difference between consumers’ expectations of and experiences with an organization constitutes an authenticity gap in which brands (what they say and how they behave) and reputation (what others say about a brand based on shared perceptions) are misaligned, creating the need for corrective measures.

The sampling of the perspectives just discussed highlights the different dimensions and levels of analysis at which reputation gaps are conceived. All of these also underscore the roles of perceptions, while contrasting perception with some form of reality—of what is said or done. The (perceived) reputation-reality gap poses a risk to organizational legitimacy and/or survival. Failure to adapt to the changing expectations, values, and beliefs of stakeholders could also result in reputation gaps with the potential to escalate into full-fledged crises, especially in the digital age.

The 2015 scandal at Volkswagen over manipulative emissions testing of its diesel vehicles illustrates the reputation-reality gap. Affecting more that 11 million vehicles, and expected to cost the firm as much as USD 87 billion in financial damage, the revelation of the fraud is a severe blow to Volkswagen’s reputation, goodwill, and brand loyalty. In his “Letter to Shareholders” from the 2014 Annual Report, then CEO Martin Winterkorn had proclaimed the firm’s commitment to “strength, reliability, and long-term success—even in less favorable conditions”; the crisis will test Volkswagen’s reputation and the firm’s ability to deliver on this claim.

Closing Reputation Gaps

The consensus around reputation as a source of competitive advantage is pivotal to the concern over gaps as a potential risk that must be corrected and addressed. Year after year, industry surveys confirm the value of reputation and highlight reputation risk as the single most important issue that plagues management. The impact of reputation risks can be wide-ranging, from damage to relationships with stakeholders and declining trust and confidence (as in the case of Volkswagen) to financial costs, loss of brand valuation, legal implications, and regulatory and other forms of scrutiny.

The fragility of reputation is amply evident in the digital age. Once ranked high in the reputation echelons, BP’s journey since the 2010 Gulf Coast oil spill has highlighted the risks associated with reputation gaps and their lingering effects on brand value, reputation, and financial performance.

The question, then, is how might organizations anticipate and reduce reputation risks? While this is a broad question, here we specifically look at the ways in which organizations may manage reputation gaps (understood as the difference between internal and external perceptions, expectations and experience, and rhetoric and reality). Put differently, how might organizations create alignment to eliminate reputation gaps? Some recommendations to this end include the following:

• Reputation management needs to be an ongoing and continuous process, not a one-time activity, at the highest levels of the organization.
• Although reputation gaps, and consequently the need for reputation repair, will become most salient in a crisis, scholars and practitioners recommend that organizations need to regularly scan their environment to identify emerging risks and threats.
• Inviting and listening to stakeholder feedback—formally and informally and across communication platforms and forums—is suggested as a way to gather meaningful intelligence about how an organization is perceived.
• Assessing organizational performance against strategic objectives ensures that actions are aligned with agreed-on goals.
• Conducting regular risk assessments can serve as a reality check and form the basis of midcourse correction.
• Monitoring shifts in stakeholder expectations, values, and beliefs as well as institutional developments that could pose a reputational challenge can provide early signals.
• Frequent gap analyses of stakeholder perceptions across different groups, including employees, consumers, the media, and nongovernmental organizations, is a way to “have your finger on the pulse.” Although reputation scores are aggregate measures, monitoring within-group perceptions can not only reveal budding problems and harsh critics but also help identify the champions of the organization.
• Differences between an organization and its competitors or benchmark organizations can also constitute a source of gaps. Therefore, undertaking comparison checks against benchmark organizations in the same industry can be a useful exercise in self-awareness and demonstrate the organization’s relative standing across reputation dimensions such as leadership, innovation, citizenship behavior, product and service quality, workplace practices, governance, and performance.
• Alignment of key stakeholders is recognized as a decisive cornerstone of successful business outcomes. Internally, this implies a shared identity and a common understanding and acceptance of organizational values. However, this is easier said than done. With external stakeholders, alignment necessitates understanding stakeholder expectations from and beliefs about the organizations and acting in accordance with these.

In conclusion, it is important to reiterate that there is no clear definition of reputation gaps. Conceptions of gaps—their source and dimensions—are varied and reconfirm that there is no one-size-fits-all approach in reputation management. Because reputation is accepted as a valuable intangible organizational asset, reputation gaps—in all their manifestations—are seen to threaten organizational goals and therefore must be closed.