Reputation of a social entity (a person, a social group, an organization) is an opinion about that entity, typically a result of social evaluation on a set of criteria. It is important in business, education, online communities, and many other fields.
Reputation may be considered as a component of identity as defined by others.
Reputation is known to be a ubiquitous, spontaneous, and highly efficient mechanism of social control in natural societies. It is a subject of study in social, management and technological sciences. Its influence ranges from competitive settings, like markets, to cooperative ones, like firms, organisations, institutions and communities. Furthermore, reputation acts on different levels of agency, individual and supra-individual. At the supra-individual level, it concerns groups, communities, collectives and abstract social entities (such as firms, corporations, organizations, countries, cultures and even civilizations). It affects phenomena of different scales, from everyday life to relationships between nations. Reputation is a fundamental instrument of social order, based upon distributed, spontaneous social control.
Until very recently the cognitive nature of reputation was substantially ignored. This has caused a misunderstanding of the effective role of reputation in a number of real-life domains and related scientific fields. In the study of cooperation and social dilemmas, the role of reputation as a partner selection mechanism started to be appreciated in the early 1980s.
Working toward such a definition, reputation as a socially transmitted (meta-) belief (i.e., belief about belief) concerns properties of agents, namely their attitudes toward some socially desirable behaviour, be it cooperation, reciprocity, or norm-compliance. Reputation plays a crucial role in the evolution of these behaviours: reputation transmission allows socially desirable behaviour to spread. Rather than concentrating on the property only, the cognitive model of reputation accounts also for the transmissibility and therefore for the propagation of reputation.
To model this aspect, it is necessary to specify and understand a more refined classification of reputation.
A recommendation can be extremely precise; in the stock market, for example, an adviser, when discussing the reputation of a bond, can supplement his informed opinion with both historical series and current events. On the other hand, in informal settings, gossip, although vague, may contain precious hints both to facts ("I've been told this physician has shown questionable behavior") and to conflicts taking place at the information level (if a candidate for a role spreads defamatory about another candidate, who should you trust?).
Moreover, the expression "it is said that John Smith is a cheater" is intrinsically a reputation spreading act, because on the one hand it refers to a (possibly false) common opinion, and on the other the very act of saying "it is said" is self-assessing, since it provides at least one factual occasion when that something is said, exactly for the fact the person who says so (the gossiper), while appearing to spread the saying a bit further, may actually be in the phase of initiating it.
Gossip can also be used as an identifier only - as when gossiping about unreachable icons, like royalty or showbiz celebrities - useful only to show the gossiper belongs to the group of the informed ones. While most cases seem to share the characteristic of being primarily used to predict future behavior, they can have, for example, manipulative sub-goals, even more important than the forecast.
Considering, for example, the case of a communication between two parties, one (the advisee) that is requesting advice about the potential for danger in a financial transaction with another party (the potential partner, target), and the other (the adviser, evaluator) that is giving advice.
Roughly speaking, the advice could fall under one of the following three categories:
- the adviser declares it believes the potential partner is (is not) good for the transaction in object;
- the adviser declares it believes another (named or otherwise defined) agent or set of agents believes the potential partner is (is not) good for the transaction in object;
- the adviser declares it believes in an undefined set of agents, hence there is a belief the potential partner is (is not) good for the transaction in object;
Note the care to maintain the possible levels of truth (the adviser declares - but could be lying - it believes - but could be wrong - etc..). The cases are listed, as it is evident, in decreasing order of responsibility. While one could feel most actual examples fall under the first case, the other two are not unnecessarily complicated nor actually infrequent. Indeed, most of the common gossip falls under the third category, and, except for electronic interaction, this is the most frequent form of referral. All examples concern the evaluation of a given object (target), a social agent (which may be either individual or supra-individual, and in the latter case, either a group or a collective), held by another social agent, the evaluator.
The examples above can be turned in more precise definitions using the concept of social evaluation defined above. At this point, we can propose to coin a new lexical item, image, whose character should be immediately evident from the following:
Image is a global or averaged evaluation of a given target on the part of an agent. It consists of (a set of) social evaluations about the characteristics of the target. Image as an object of communication is what is exchanged in examples 1 and 2, above. In the second case, we call it third-party image. It may concern a subset of the target's characteristics, i.e., its willingness to comply with socially accepted norms and customs, or its skills (ways), or its definition as pertaining to a precise agent. Indeed, we can define special cases of image, including third-party image, the evaluation that an agent believes a third party has of the target, or even shared image, that is, an evaluation shared by a group. Not even this last is reputation, since it tries to define too precisely the mental status of the group.
Reputation, as distinct from image, is the process and the effect of transmission of a target image. To be more precise, we call reputation transmission a communication of an evaluation without the specification of the evaluator, if not for a group attribution, and only in the default sense discussed before. This covers the case of example 3 above. More precisely, reputation is a believed, social, meta-evaluation; it is built upon three distinct but interrelated objects:
- a cognitive representation, or more precisely a believed evaluation - this could be somebody's image, but is enough that this consist of a communicated evaluation;
- a population object, i.e., a propagating believed evaluation; and
- an objective emergent property at the agent level, i.e., what the agent is believed to be.
In fact, reputation is a highly dynamic phenomenon in two distinct senses: it is subject to change, especially as an effect of corruption, errors, deception, etc.; and it emerges as an effect of a multi-level bidirectional process. Reputation is also how others know and perceive you as an individual.
While image only moves (when transmitted and accepted) from one individual cognition to another, the anonymous character of reputation makes it a more complex phenomenon. Reputation proceeds from the level of individual cognition (when is born, possibly as an image, but not always) to the level of social propagation (at this level, it not necessarily believed as from any specific agent) and from this level back to individual cognition again (when it is accepted).
Moreover, once it gets to the population level, reputation gives rise to a further property at the agent level. It is both what people think about targets and what targets are in the eyes of others. From the very moment an agent is targeted by the community, his or her life will change whether he or she wants it or not or believes it or not. Reputation has become the immaterial, more powerful equivalent of a scarlet letter sewed to one's clothes. It is more powerful because it may not even be perceived by the individual to whom it sticks, and consequently it is out of the individual's power to control and manipulate.
More simply speaking for those who want a working definition of reputation, reputation is the sum of impressions held by a company's stakeholders. In other words, reputation is in the "eyes of the beholder". It need not be just a company's reputation but could be the reputation of an individual, country, brand, political party, industry. But the key point in reputation is not what the leadership insists but what others perceive it to be. For a company, its reputation is how esteemed it is in the eyes of its employees, customers, investors, talent, prospective candidates, competitors, analysts, alumni, regulators and the list goes on.
Image and reputation are distinct objects. Both are social in two senses: they concern properties of another agent (the target's presumed attitude toward socially desirable behavior), and they may be shared by a multitude of agents. However, the two notions operate at different levels. Image is a belief, namely, an evaluation. Reputation is a meta-belief, i.e., a belief about others' evaluations of the target with regard to a socially desirable behavior. To better understand the difference between image and reputation, the mental decisions based upon them must be analyzed at the following three levels:
- accept the beliefs that form either a given image or acknowledge a given reputation. This implies a believed evaluation gives rise to one's direct evaluation. Suppose I know the friend I mostly admire has a good opinion of Mr. Berlusconi. However puzzled I may be by this dissonance-inducing news, I may be convinced because of my friendship to accept this evaluation and share it.
- use image to decide whether and how to interact with the target. Once I have my own opinion (perhaps resulting from acceptance of others' evaluations) about a target, I will use it to make decisions about my future actions concerning that target. Perhaps, I may abstain from participating in political activity against Mr. Berlusconi.
- transmit my (or others') evaluative beliefs about a given target to others. Whether or not I act in conformity with a propagating evaluation, I may decide to spread the news to others.
Many businesses have public relations departments dedicated to managing their reputation. In addition, many public relations firms describe their expertise in terms of reputation management. The public relations industry is growing due to the demand for companies to build corporate credibility and hence reputation. Incidents which damage a company's reputation for honesty or safety may cause serious damage to finances. For example, in 1999 Coca-Cola lost $60 million (by its own estimate) after schoolchildren reported suffering from symptoms like headaches, nausea and shivering after drinking its products.
Despite the rising interest in reputation, few companies have reputation officers. Although many companies will say company reputation is the job of the CEO, managing reputation is a daily function and can best be given to an individual in the organization. There are only a handful of people in the business world with the word "reputation" in their titles – Dow Chemical, SABMiller, Coca-Cola, Allstate, Repsol YPF, Weber Shandwick, and GlaxoSmithKline (although no longer). Hoover's has a list of officers with the term "reputation" in their titles. Foro de Reputación Corporativa is a group of 11 companies in Spain that has reputation officers. Despite the great interest in reputation, there only remains 25 or fewer people as reputation officers. Some would argue reputation-building and protection is the job of the CEO and not any direct report. Others would say that the CEO has too many responsibilities to focus on reputation.
According to Joachim Klewes and Robert Wreschniok, reputation can be managed, accumulated and traded in for trust, legitimisation of a position of power and social recognition, a premium price for goods and services offered, higher customer loyalty, a stronger willingness among shareholders to hold on to shares in times of crisis, or a stronger readiness to invest in the company's stock. Therefore, reputation is one of the most valuable forms of "capital" of a company.
- "Delivering functional and social expectations of the public on the one hand and manage to build a unique identity on the other hand creates trust and this trust builds the informal framework of a company. This framework provides "return in cooperation" and produces reputation capital. A positive reputation will secure a company or organisation long-term competitive advantages. The higher the Reputation Capital, the less the costs for supervising and exercising control."
Building reputation through stakeholder management
The stakeholder theory says corporations should be run for the benefit of all "stakeholders," not just the shareholders. Stakeholders of a company include any individual or group that can influence or is influenced by a company's practices. The stakeholders of a company can be suppliers, consumers, employees, shareholders, financial community, government, and media. Companies must properly manage the relationships between stakeholder groups and they must consider the interest(s) of each stakeholder group carefully. Therefore, it becomes essential to integrate public relations into corporate governance to manage the relationships between these stakeholders which will enhance the organization's reputation. Corporations or institutions which behave ethically and govern in a good manner build reputational capital which is a competitive advantage. According to Fombrun, a good reputation enhances profitability because it attracts customers to products, investors to securities and employees to its jobs. A company's reputation is an asset and wealth that gives that company a competitive advantage because this kind of a company will be regarded as a reliable, credible, trustworthy and responsible for employees, customers, shareholders and financial markets. In addition, according to MORI's survey of about 200 managers in the private sector, 99% responded that the management of corporate reputation is very (83%) or fairly (16%) important. Reputation is a reflection of companies’ culture and identity. Also, it is the outcome of managers' efforts to prove their success and excellence. It is sustained through acting reliably, credibly, trustworthily and responsibly in the market. It can be sustained through consistent communication activities both internally and externally with key stakeholder groups. This directly influences a public company's stock prices in the financial market. Therefore, this reputation makes a reputational capital that becomes a strategic asset and advantage for that company. As a consequence, public relations must be used in order to establish long lasting relationships with the stakeholders, which will enhance the reputation of the company.
Causes and consequences
According to Kevin Money and Carola Hillenbrand, there are many different and often conflicting models of reputation. Terminology such as reputation, branding, image and identity is often used interchangeably, or to distinguish differences between related constructs. Much of this confusion has been alleviated by recent work integrating reputation models in terms of underlying psychological theory. According to Money and Hillenbrand reputation models can be placed in a framework that relates to reputation, its causes and its consequences. In this approach it is important not only to understand reputation, but also to identify the causes of reputation and its consequences.
Causes of reputation are seen to reside in stakeholder experiences. Stakeholder experiences relate to a company's day-to-day business operations, its branding and marketing and "noise" in the system, such as the media and word of mouth. Further causes of reputation may include the perceived innovativeness of a company, the customers' expectations, the (perceived) quality of the company's goods and services and the subsequent customer satisfaction, all of which differ according to the respective customers' cultural background.
Reputation is seen to reside in the beliefs that stakeholders hold about a company (the cognitive element)and the feelings that stakeholders have about a company (the affective element). While the cognitive element of reputation can reflect the uniqueness of a company or of products in term characteristics such as brand attributes (whether an organisation is delivering high quality products, is international, friendly etc.), the affective element is always evaluative. In other words, it gives an indication of whether stakeholders like, admire or trust a company and its attributes. A unique and distinctive cognitive evaluation of a company only has value if this results in a positive affective evaluation and positive consequences of reputation.
The consequences of reputation reside in the behaviors (supportive or otherwise) that stakeholders demonstrate towards a company. Behaviors such as advocacy, commitment and cooperation are key positive outcomes of a positive reputation.
The convergence of globalization, instantaneous news and online citizen journalism magnifies any corporate wrongdoing or misstep. Barely a day goes by without some company facing new assaults on its reputation. Reputation recovery is the long and arduous path to rebuilding equity in a company's good name. Research has found it takes approximately 3.5 years to fully recover reputation. James C. Collins of Good to Great fame says it takes a company seven years to go from good to great. The path is clearly long. The reason reputation recovery has risen in importance is that the "stumble rate" among companies has risen exponentially over the past five years. In fact, 79% of the world's most admired companies have lost their number one positions in industries in that time period. Companies which were once heralded as invincible no longer are.
In the context of brand extension strategies, many companies rely on reputation transfer as a means of transferring the good reputation of a company and its existings products to new markets and new products. Consumers who are already familiar with other products of an established brand, exhibiting customer satisfaction and loyalty, will more easily accept new products of the same brand. In contrast to brand extension, the general concept of reputation transfer also requires the transfer of a company's values and identity to the new products and/or services and the related brands when entering new markets. It is important, however, to pay attention to the image fit between preexisting and new brands, for this factor has been proven to be critical for the success of brand extensions. In contrast to the special case of brand extension, the general concept of reputation transfer also requires the transfer of the values and identity of a company to the new products and/or services and the related brands when entering new markets. A strong image might therefore even hamper the introduction of new product lines if customers do not associate the competences relevant to the new market/category/product line with the existing company or brand. A company's reputation is furthermore influenced by culture, as nationalities differ with regard to how valued specific aspects of the company's brand identity are in the respective national culture (e.g. environmental concerns or work ethics) as well as with regard to popular cultural dimensions (e.g. Hofstede). Subsequently, these differences impact the success of reputation transfer significantly.
Online reputation is a factor in any online community where trust is important. It affects a pseudonym rather than a person. Examples include eBay, an auction service which uses a system of customer feedback to publicly rate each member's reputation. Amazon.com has a similar reputation mechanism in place and merchants develop their reputations across different dimensions. One study found that a good reputation added 7.6% to the price received. In addition, building and maintaining a good reputation can be a significant motivation for contributing to online communities.
One strategy that organisations and individuals employ to ensure that they keep up with their online reputation is monitoring. Given the number of sites on the Internet, it is impossible to try and manually monitor the entire Internet for pages that may affect one's online reputation. Free tools such as Google Alerts can be used to keep tabs on online reputation on a small scale, while larger businesses and clients may use more featured and powerful analytics dashboards to keep track of and monitor online interactions and mentions.
Paid tools for online reputation management focus on either brand protection or online reputation. These tools track mentions of a brand or product on the Internet, on Facebook, Twitter, blogs, and other social networking sites and websites.
Online reputation can be evaluated by how well it is being managed. This form of reputation is usually called web or digital reputation to distinguish it from the online reputation. Indeed, digital or web reputation does not concern the virtual online reputation only, but the whole real reputation of a person or a company as it is affected by the Internet. Online reputation furthermore should not be confused with a company's digital identity.
An online reputation is the perception that one generates on the Internet based on their digital footprint. Digital footprints accumulate through all of the content shared, feedback provided and information that created online. Due to the fact that if someone has a bad online reputation, he can easily change his pseudonym, new accounts on sites such as eBay or Amazon are usually distrusted. If an individual or company wants to manage their online reputation, they will face many more difficulties. This is why a merchant on the web having a brick and mortar shop is usually more trusted.
According to one study, 84% of responding business leaders saw the greatest reputation threat online to companies as negative media coverage. The next two greatest threats are customer complaints in the media or on grievance sites online (71%) and negative word of mouth (54%). This negative word of mouth could be from dissatisfied customers but from employees as well. With the power of business review websites and customer forums, a company's online reputation can be damaged anonymously online.
Employers have begun using the online reputations of job applicants to help their hiring choices. By checking a candidate's social networking profiles on sites such as Facebook, Twitter and MySpace, employers gain insight into a candidate's character and suitability for a job.
Some individuals and organizations hire reputation management companies to attempt to hide truthful but unflattering information about themselves. A recent alleged example is that of Dr. Anil Potti, who resigned from Duke University after it was discovered that he had misrepresented himself on his resume and became the subject of a scientific misconduct investigation.
- Digital identity
- Face (sociological concept)
- Id, ego and super-ego
- India's Most Reputed Brands
- Reputation management
- Signaling game § Reputation game
- Social capital
- Social map
- Social software
- Virtual community
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