Still wondering why your reputation is so important?

Currently, organizations are more and more exposed to an increasing pressure from its stakeholders to better respond to their needs and interests. This pressure is generating important conflicts within organizations in terms of reputation.

Much of society agrees with the idea that development, construction and maintenance of a good reputation is important to all companies. However, some still believe that the main objectives of an organization are to increase profits and create wealth for investors, understanding reputation as an asset that is only “desirable to have”.

In any case, the biggest problem of reputation is its definition because, ultimately, the perception of what is and is not a good reputation depends on the beholder. A wide variety of definitions have been brought out from the academic and professional fields. However, if one examines them, it can be seen that coexist two great visions, one which focuses on the perspective of the company and the other that focuses on the perspective of its stakeholders.

From organizations point of view, reputation is an intangible asset that allows the company to better manage the expectations and needs of its stakeholders and to create the necessary legitimacy so that it can develop its activities in the society where it operates.

From the perspective of stakeholders, reputation is an attitudinal concept that refers to the ability of the company, through what it says and does, to give a response to the needs and interests of those who interact with it.

Whatever the approach chosen, there is now a consensus around the fact that reputation is an intangible asset of great value for the company since it is able to create barriers against the existing threats that exist in the environment. Thus, and as most of you already know, a solid reputation brings benefits to companies that are difficult to imitate, contributes to the quality perception of the products and services offered by the organization and suggests that the company cares about its employees and customers, among other things.

Moreover, there is also a consensus when considering intangible assets as an important source to achieve competitive advantage since they are valuable, difficult to imitate, replace and transfer. Thus, it is possible to argue that the intangible nature of reputation, its rarity and its social complexity can contribute significantly to the differences in competitiveness among organizations.

In addition, organizations can be understood as a set of relations. Therefore, the ability to maintain good relations with different stakeholders is fundamental to create value for the organization. The skills to manage these relationships are vital to the function of communication, whether from the perspective of the perceptions that the different stakeholders receive due to the variety of relationships and exchanges with the company, the emotions they have towards it or the collective beliefs that exist within the company about the identity of a firm and its relevance. Indeed, how the different stakeholders perceive the company’s performance and communications influence the configuration of reputation.

However, in practice the management of reputation depends on creating real value for organizations through their relationships, their legitimacy and positive results, as well as improving their own capabilities. And in this sense, there have been doubts surrounding the existing methodologies that will eventually contribute to achieving this goal.

Therefore, organizations still have much work to do around this important issue. We cannot forget that as an intangible asset, reputation improves the expectations, needs and interests management. But, as many companies experience every year, it is also difficult to reconstruct because it is based, primarily, on perceptions and expectations. Consequently, all the stakeholders of the organization must understand its objectives, and reputation should act in support of them.

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