Reputation Repair

Reputation repair refers to the process by which an organization attempts to mitigate losses to its reputation. This entry covers reputation repair strategies, moderating influences on the reputation repair process, and the outcomes of organizational reputation repair.

Strategies

An organization’s reputation repair strategies are focused on managing stakeholders’ and other observers’ perceptions of a crisis. Ideally, an organization would like to mitigate not only its losses from wrongdoing but also those of its stakeholders. However, different repair strategies, like types of wrongdoing, affect different stakeholders in different ways. Thus, an organization likely faces trade-offs when deciding how to repair its reputation.

In simple terms, reputation repair strategies can vary from accommodative to defensive. More accommodative strategies tend to take steps to resolve the issues arising from wrongdoing by accepting responsibility and taking charge of the situation. In this way, they focus more on reaching out to stakeholders and encouraging their participation in the repair process. In doing so, however, an organization may be more deliberate in addressing the effects of wrongdoing, which may cause a delay in its initial response to stakeholders and the public. In turn, this more deliberate assessment may lead to short-term losses for an organization as it continues to gather information about wrongdoing and invites stakeholder dialogue on how to resolve the problem.

In contrast, more defensive strategies tend to be a form of self-preservation for an organization that deflect or deny responsibility for wrongdoing. Defensive strategies are typically delivered quickly and optimistically, with the goal of signaling to stakeholders that “all is well.” In this way, they may be less inviting to stakeholder participation in the repair process. By providing a more defensive response, an organization may limit its short-term losses from wrongdoing, but it may also not make efforts to encourage stakeholder dialogue, which could hamper resolving the problem over time.

Two, more specific reputation repair strategies, apologies and reticence, are worth mentioning. Whereas many scholars and industry experts encourage organizations to apologize for their wrongdoing, organizations often do not heed these calls, perhaps because of legal advice, stakeholders’ and the public’s demands for punishment and retribution, or a fear of financial and legal liability. In contrast, organizations often remain silent immediately following wrongdoing, which can be beneficial if the issue “goes away” but more problematic if the situation escalates. Given these perceived suboptimal responses, examining the costs and benefits of an organizational apology versus reticence could be an interesting area of further investigation.

Moderating Influences

The reputation repair process is affected by event-level, organizational-level, stakeholder-level, industry-level, institutional-level, and temporal factors. At the event level, organizational wrongdoing can vary in terms of type, severity, scope, and attributions of responsibility. In turn, this variance affects the reputation repair process. At the organization level, a firm’s past performance, incidents of past wrongdoing, and its accrued reputation with different stakeholders can affect perceptions of its recent wrongdoing as well as the strategies it employs during the reputation repair process.

At the stakeholder level, an organization interacts with multiple stakeholders with multiple expectations of an organization. Thus, the type, severity, and scope of wrongdoing and an organization’s response will affect their perceptions in different ways. For example, stakeholders’ responses to reputation repair strategies following wrongdoing may depend on, among other factors, differences among stakeholders, the significance stakeholders place on the organization’s goals and performance, and the degree to which they identify with the organization.

At the industry level, an industry’s relationship with stakeholders (e.g., with government, consumers, or other businesses) and a history of wrongdoing may affect stakeholders’ perceptions of a focal organization and the reputation repair process. Spillover and guilt-by-association effects as well as how “innocent” organizations manage their stakeholder relationships following wrongdoing (e.g., a product recall) may be more or less common in different industries. Thus, examining the variance in the prevalence and variance of these effects across different industries may prove worthy of investigation.

At the institutional level, examining the roles of activists, watchdogs, third-party certifiers, regulators, and local and national governments in the reputation repair process may be exciting avenues for future inquiry. Additionally, the role of traditional and social media in shaping stakeholders’ perceptions of wrongdoing remains fertile ground for unpacking the complex interrelationships in the reputation repair process.

Outcomes

The outcomes of a reputation repair strategy can vary across time, dimensions, and stakeholder groups. An organization’s choice of repair strategy is balanced between short- and long-term goals as well as how it will affect its own losses versus those of stakeholders. As a result, there is often no reputation repair strategy that offers a singular solution to a wicked problem such as organizational wrongdoing. Instead, an organization’s reputation repair strategies often weigh the trade-offs of such a choice.

The reputation repair process can generate positive financial and social outcomes. If an organization focuses on limiting financial loss, this choice may complement, or stand in conflict with, limiting its reputational loss. Thus, organizations must consider how this choice affects the repair process with different stakeholders. In turn, how an organization addresses the reputation repair process may attract some stakeholder groups and alienate others, making the probability of a singular solution low while increasing the probability of a more complex process.