From the Desk of My Guest: Can You Outsource Reputation?

From the desk of Prof. Saku Mantere:

The topic I would like to discuss today reputation management, a topic which has been studied stateside for instance by such people as Charles Fombrun and Violina Rindova, and in Europe by Majken Schultz and others. I’d like to introduce a phenomenon which Pekka Aula, my co-author and I have been looking at lately, the outsourcing of reputation management by some firms.

Reputation building: doing good stuff

At the intuitive level, you create a good reputation by

  1. Doing good stuff
  2. Doing it to parties who are in a good network position to spread the word
  3. Being communicative about the good that you do.

Charles J. Fombrun begins his book Reputation, which many consider the rallying call to managers regarding the importance of reputation:

“Do you recall the last time you hired a contractor to make improvements to your house or apartment? Or the last time you called on a travel agent for assistance in planning a trip? […] If you are like most people, you didn’t just pick their names out of a phone book. You probably went to them because they were recommended to you by a family member, friend or someone else you trust. If so, you hired them based on their reputation.” (Fombrun, 1996, p. 1)

Choosing hairdressers, dentists, carpenters, real estate agents and so on in our personal lives is a tangible example of, not just how reputation can be an asset to a business, also how it is built in a network. Herein lies one of the key messages of reputation management (I think): when building your reputation, do not try to communicate promises that you will not keep, either now or in the future. In a recent paper in Strategic Organization (5/1, 2007) Rindova, Petkova and Kotha build an inductive account of how new businesses build reputations in the media. They argue that firms build reputation on three kinds of action patterns:

  • Symbolic actions
  • Innovative actions
  • Action level and composition

Read the Rindova et al. paper if you want to know these mean, and how the process or reputation building is mediated by stakeholder cognitions. My point is just that reputations are built fundamentally on actions, not in PR or marketing. Indeed, my coauthor Pekka Aula once noted that: “marketing increases reputation risk.”

Can you outsource the good stuff?

That’s the moral we would like to believe, isn’t it? You get rewarded for doing good things and punished for doing bad things. Indeed, reputation can be used as a motivator for corporate social responsibility and other forms of business ethics: do good stuff or pay for it. The soup thickens somewhat when we look at the arrangements companies make to “buy reputation”, or “outsource reputation.” Indeed, I would argue that there is a whole business for reputational outsourcing. I am not talking about PR or marketing agencies who make companies look good, but assurances that you can acquire that your actions are moral or benevolent.

Read the complete entry and the discussion here.