What is Reputation?

Everyone has a reputation. Every organization has a reputation.

GE is known for innovation, Swiss bankers for their privacy, and Southwest Airlines for low fares.

In fact, people often use that phrase, “XYZ company is known for ______,” when describing a reputation.

Managing reputation requires an understanding of how people fill in the blank.

Reputation is an earned expectation of behavior. Let’s break down the key terms.

Earned

Henry Ford said it best when he said, “You can’t build a reputation on what you are going to do.”

Reputations result from actions – good and bad.

Expectation

Reputations are about the past and the future at the same time. Your reputation is a prediction of what you will do in a given situation based on what you did in the past.

The rub is that the other party forms the expectation. You do not control the expectation, but you can influence it with your actions.

Behavior

Future action dictates the direction a reputation takes. The action has to be consistent with the past to maintain the reputation. Any inconsistency will create a new set of expectations and, depending on the degree of inconsistency, potentially a different reputation.

Layers of reputation

Reputations have several, if not many, layers. Take Southwest Airlines. It has a reputation for great fares and on-time arrivals. It also has a reputation for being a cattle car. The first two qualities dictate much of the company’s success. At the same time, the open seating drives away travelers who want the perks of first or business class.

Dot-coms offer another example. Companies were going public and earning insane valuations based on a reputation for cool ideas. Investors flocked to the coolest companies, even though few actually turned a profit. Making money was a secondary consideration—until the market correction eroded most all of the market values.

Managing reputation

Reputations can be managed like any desired business outcome. As with any business strategy, the formula includes planning the desired state, understanding the current state, and creating a plan to bridge the gap.

Every organization should have a desired reputation rooted in the criteria that will drive business. A hotel may desire a reputation for outstanding service. A government relations firm might want to be known for its ability to reach key legislators. A clothing designer might want to stand out for its ability to set trends.

Like mission and vision, the process of creating a desired reputation should involve as many people as makes sense. Quantity of ideas and information is often a good predictor of quality brainstorming. Each organization has to decide what works for it.

The next step is uncovering the current reputation. Companies can use a sophisticated survey method such as the Reputation Quotient developed by Harris Interactive.

There is another technique anyone can use. This approach involves asking as many clients as possible three questions:

What are we doing that you like?

What are we doing that you don’t like?

What do you wish we were doing right that we are not?

Feel free to ask additional questions for clarification as long as you make sure to ask these three.

Within the resulting raw data will be an accurate, perhaps even profound, assessment of your existing reputation.

Reputation is an asset

Warren Buffett understood the importance of a company’s reputation when he said “If you lose dollars for the firm, I will be understanding. If you lose reputation for the firm, I will be ruthless.”

Reputations determine preference. They predict loyalty. They create the opportunity for price premiums.

Companies rarely stumble on a good reputation. Companies with the best reputations understand that they must manage and invest in their reputation like they would with any other asset.

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