Reputation Management

Craig E. Carroll

Reputation management refers to the deliberate actions by organizational leaders, spokespersons, and agents to build, enhance, maintain, monitor, repair, or defend their reputations, including reputation risk management. This entry discusses these different types of management as reputation management strategies. In addition, the entry discusses reputational challenge strategies to exert social pressure on organizations to comply with the interests of stakeholders.

Reputation-Building Strategies

Reputation building and enhancement occur through new actions such as new-product introductions; winning awards and competitions; investments in human, social, and intellectual capital; and symbolic actions and communication, such as advertising expenditures and pricing strategies. Organizations can also build reputations through endowment by relying on the reputations accrued by their founders or top management teams. Founders have an impact on the reputation-building capacity of organizations through their instilling of the vision and organizational identity, the various strategies that a firm pursues, and the decisions that set organizational structures in place. In addition to actions, organizations can build reputations through strategic projections—that is, information about their strategies, competencies, and actions that they provide through their advertising, news releases, and annual reports.

Organizations can also build reputations by renting the reputations of prominent others. Reputation renting through organizational surrogates, such as partnerships and alliances, or through proxies, such as agencies (whether communication, accounting, or legal firms), can also be an effective strategy for firms to follow. The symbiotic sustainability model suggests that communicating about the existence and nature of partnerships and alliances to consumers, activists, and legislators is more important than the actual resources exchanged within the relationship. Nonetheless, there are valuable reputational benefits emerging from the linkages with stakeholders that increase the organization’s standing in society. Likewise, firms may gain political capital through relationships with legislators or regulators.

Reputation Maintenance Strategies

Strategy is linked to reputation maintenance through organizational action and performance, organizational and corporate communication, and decoupling. These linkages may be direct, indirect, intended, or inferred. Reputation maintenance is not just about exemplary behavior; it is also about mundane management and routine (but reliable) behavior.

Organizations can build reputation through consistent, reliable, and high-quality performance on actions that matter to the people they serve. By simply meeting expectations on metrics that matter (e.g., products that work, a great place to work, corporate citizenship and philanthropy, a strong stock price, exemplary conduct), with no lapses, disappointments, or shortcomings (e.g., organizational errors, misconduct, accidents, or crises), organizations can establish their reputations and build reputational capital.

Whether or not an organization’s performance is guided by deliberate or emergent strategy (or whether it denies the existence of competitive action as a strategy), audiences and observers may infer strategies through the organization’s patterns of behavior. First, organizational actions and performance must be simple enough so that people can recognize them. Second, the actions must occur frequently enough so that observers can infer a predictable pattern. Third, organizational actions should be grouped together close enough in time and physical proximity so that people can perceive a relationship among the actions. Finally, the sequence of actions should be enough to create a comprehensible motif that exhibits a sense of internal order and stability.

Reputation Repair, Management, and Defense Strategies

Organizations also use a number of reactive strategies to maintain, defend, and repair their reputations. These include preemptive actions, such as stealing the thunder from the news media (breaking bad news before the media do), and rectifying behaviors, such as corrective action, restitutions, and repentance. Organizations also engage in a number of defensive, offensive, and diversionary responses. Defensive responses include blame, denial, excuses, justifications, and even flip-flopping. Offensive responses include the use of attacks, litigation threats, and embarrassment bids against their attackers or critics. Challenges to the company brand must be undertaken with care to avoid becoming known as a brand bully. Diversionary responses include decoupling, ingratiation, disassociation, relabeling/reframing, and strategic ambiguity. Organizations may also use deliberate inaction as a strategy, such as through strategic inaction or strategic action. When using such strategies, organizations must weigh their choices against their social, moral, legal, ethical, and normative implications.

Reputation Risk Management

Firms can create reputation risks by appearing to have no strategies. Furthermore, mismatches between the strategies pursued by top management and those pursued by the board also create risks to a firm. Thus, strategy also applies to corporate reputation as it relates to investments in risk management and clarity of vision and direction. A company must define and communicate its risk tolerance and appetite for risk. It must also develop and communicate policies and procedures to guide employees’ decision making, and then stand by them. Strategy is (or should be) involved in the development of methodologies for assessing and responding to risks; clarifying roles and responsibilities; identifying, channeling, and acting on early warning signs; and monitoring and reporting on processes.

Reputation Monitoring

Firms support their reputation management strategies through the active monitoring of their reputations in the media. Media monitoring is the process of tracking, measuring, and evaluating media content for portrayals of aspects of the organization’s environment and the organization’s enactment of the environment. Organizations monitor the media because the media are the primary way by which people learn about organizations they do not have personal experience of. This also includes information about organizational activities, causes and issues, relationships with others, and characteristics that people are not able to observe firsthand. Evaluating media coverage allows firms to unobtrusively monitor their environment for factors that could affect their reputation, without altering the environment or public sentiment about them in the process, including the development of new criteria for the evaluation of reputation.

Various aspects of media have been shown to influence corporate reputation. For example, the volume of news reports about major corporations has been shown to influence the firm’s top-of-mind awareness and public prominence. The tone of media reports about the organizations, called media favorability, has been shown to relate to firms’ public esteem. Organizations use media monitoring to anticipate changes in public sentiment, benchmark against their competitors, track the dissemination of their key messages, and assess the motives ascribed to their behavior. They also use media monitoring to evaluate portrayals of the CEO and company spokespersons; their standing and positioning in relation to their competitors, partners, and activist groups; and the nature of their relationships with others. Organizations can tabulate these aspects and relate them to other measures of organizational performance and other measures of their campaign. Media reputation has been shown to influence firms’ financial performance, specifically their return on assets.

Reputational Challenges by Activists

Organizations are not the only ones that develop strategies related to their reputations. Activists also use strategies related to reputation to challenge organizations to take action on prosocial issues or to change organizational policies and practices. A common practice that activists use is “naming and shaming.” As a practice, naming and shaming helps draw attention to social issues where a company is failing (or where it could make a difference by taking action) and then motivates the company to respond in meaningful ways to protect its reputation.

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