Strategic impact of reputation
In this posting I refer to Paul Walsh, former CEO of Diageo, who has written about reputation. He emphasizes that representational risk is one of the top issues on the minds of most board of directors. His concern, however, is that there are plenty of books about reputation management, but they present advise as medicine that only focuses on treating the illness rather than prevention.
Walsh suggests that the situation is result of management's obsession with performance optimisation and business process re-engineering etc. The artificially induced and the unbalanced approaches cause problems sooner or later.
Moreover, he stresses that if we look at companies which last, they all have strong reputations that are rooted in strong values focused on developing healthy and balanced organisations. They don't focus on trying to achieve quick short-term results. They focus on achieving a level of performance that is sustainable. Such companies have strong values that they live by. They are not vision statements that are nothing more than meaningless rhetoric.
Customer’s perception of an organisation influences their decision to buy its products or services. Investors and lenders are increasingly making judgements using various reputation measures to decide which companies they will support. A new generation of employees are deciding who they are prepared to work for and are not only looking for the best terms, but also considering the reputational impact.
The paradox is to balance consistency with flexibility.
David L. Deephouse has written much about media reputation. Here is one of his articles Media Reputation as a Strategic Resource: An Integration of Mass Communication and Resource-Based Theories (2000). He proposes that reputation is a resource leading to competitive advantage. He has also written other very interesting articles about the subject; you can find them in here.
I also discussed some media writings about Finnish airline and flag carrier Finnair, which is struggling with financial constraints. I referred not solely to the significance of reputation management but also of board work, since the major battle is between management and cabin personnel.