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JOCM 26,2
Making and breaking sense: an inquiry into the reputation change Pekka Aula
340 Received 3 February 2012 Revised 10 May 2012 28 August 2012 Accepted 3 September 2012
Department of Social Research Media and Communication Studies, University of Helsinki, Helsinki, Finland, and
Saku Mantere Department of Management and Organization, Hanken School of Economics and Business Administration, Helsinki, Finland Abstract Purpose – The purpose of this paper is to expand knowledge of reputation change as a social process and to explore the implications of a social constructivist view of reputation for the challenge of reputation management. Design/methodology/approach – The authors analyze the main characteristics of a social constructivist view of reputation, and study its implications for the task of reputation management by means of an interpretative arena model of reputation change. Findings – The authors build a framework for analyzing reputation change as dialogical interaction between an organization and active stakeholders. Practical implications – The arena model is a tool for analyzing the task of corporate reputation change management across a variety of contexts. The arena model provides a conceptual tool for making sense of the crucial and intricate challenge of strategic reputation management, which places organizations engaging in struggles and collaborations with the stakeholders in symbolic environments. Originality/value – The arena model is the first framework seeking to bridge the theoretical challenge of social constructivism with the managerial task of reputation change. Keywords Reputation change, Reputation management, Communication, Social constructivism, Change management Paper type Conceptual paper
Journal of Organizational Change Management Vol. 26 No. 2, 2013 pp. 340-352 Emerald Group Publishing Limited 0953-4814 DOI 10.1108/09534811311328380
Introduction During the last decade or so, much progress has been made in understanding reputation as an organizational asset or liability (Fischer and Reuber, 2007; Fombrun, 2001; Fombrun and Shanley, 1990; Rindova et al., 2010; Schreiber, 2002; Siano et al., 2010; Ting, 2009). The structure and financial implications of reputation have also been widely studied (Boyd et al., 2010; Fombrun, 1996; Fombrun and Van Riel, 2004; North, 1990; Podolny, 1993; Rindova et al., 2007). According to this resource-based view “intangible resources such as corporate reputation significantly contribute to performance difference between organizations because they are rare, socially complex, and difficult to trade and imitate” (Rao, 1994, p. 29), and reputation management is generally motivated by the argument that reputation is positively related to corporate competitive advantage (Caruana, 1997; Fombrun, 1996; Fombrun and Van Riel, 2004; Rindova et al., 2007).
While we know that reputation is important for companies, our knowledge on how reputation is built and influenced much more limited. For example, Fischer and Reuber (2007, p. 54) argue that only “limited attention has been paid to the process by which people form initial reputational beliefs about new firms” and that we know little about “how emergent reputations are affected when stakeholders receive mixed positive and negative signals”. In a similar vein, Rindova et al. (2007, p. 31, our emphasis) note that: [. . .] while strategy and organizational researchers increasingly recognize that observers’ perceptions and beliefs about firms have a substantive effect on firms’ access to resources and performance, the processes through which these perceptions form are not well understood.
While existing studies on the “social approval assets” (Pfarrer et al., 2010) and other immaterial properties (Cornelissen and Thorpe, 2002) of the firm concentrate on the different outcomes and benefits of the good reputation, they seldom discuss the dynamics within which the reputations are born and destroyed. In order to expand our knowledge of reputation change as a social process, we will explore the challenge of reputation management from the vantage point of social constructivism. We focus on the creation and destruction of meaning through practices which strategy scholars have labeled “sensegiving” and “sensebreaking”. Based on the use of these two core communicative processes, we will develop a dialogical model of reputation change. This “arena model” will function as a conceptual tool for helping academics and practitioners to understand reputation change. The research question we seek to answer is: When do managers build organizational reputation and when do they consciously destroy reputation to clear the space for corporate rebirth or recuperation? Reputation management as construction and destruction of meaning Following the central idea of social constructivism, we define reputation as a continuously developing set of evaluative narratives, beliefs, and expectations, built and modified in dialogical communication between the target organization and its publics over time. The notion of evaluation is crucial here; reputational narratives do not merely describe their targets, they attach value and effect on them (Aula and Mantere, 2008). Reputation is built on the publics’ direct experiences with the firm, as well as through indirect forms of communication that provides information about the organizations’ actions (e.g. Gotsi and Wilson, 2001). Reputation is a discursive construction (Deetz, 1986; Czarniawska, 1997). It is neither monolithic in meaning or untouched by the passage of time, but rather dynamic and interpreted differently by different publics. According to the social constructivist view (Rao, 1994; Rindova et al., 2006; Scott and Walsham, 2005) reputation is enacted through linguistic and narrative means in social realities (Deetz, 1986). Reputations are constructed and reconstructed (Boden, 1994), but also destroyed through dialogical communicative actions (Aula and Mantere, 2008) between organization and its stakeholders. As noted by Coupland and Brown (2004, p. 1341), reputation, and its siblings such as image, and identity are not “singular or unitary ‘things’ that can be simply observed and easily measured. Rather, they are emergent aspects of an organization-centered discourse. There are at least as many identity, image and reputation attributions to a given organization as there are participants and stakeholders in it.” Reputation is intangible (Boyd et al., 2010; Budd, 1994; Helm, 2007). While it may find partial resonance and representation with physical manifestations such as logos, brands
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and trademarks, or non-physical expressions such as CEO speeches or official announcements, any expression of reputation is always an interpretation (Love and Kraatz, 2009). All that is known about an organization’s reputation is by nature symbolic; it is present in narratives (Middleton, 2009) and discourse (Boje, 1995). Viewed from this perspective, reputation is a social process. It exists in a state of continuous production and re-production of representations by various stakeholders who evaluate the actions and impressions (Pine and Gilmore, 1999) of the organization in specific operational contexts (Goffman, 1974). Stakeholders play an active role in the construction and reconstruction of organizational reputation; it emerges, evolves and changes among people, within communities (DiMaggio and Powell, 1983; Lange et al., 2011). Our work echoes Grunig and Chun-ju’s (2002) sentiment that the value of reputation management to organizations rests above all on stakeholder relationships. A good reputation is the consequence of relationships between organizations and stakeholders and their success. Instead of being owned by an organization, reputation is to a large extent controlled and enacted by others (Dutton et al., 1994). Various stakeholders, such as customers, third sector organizations and state operators play different roles in reputation building. The media, for example, act as agents who create connections between the organization and the public (Rindova et al., 2007). The media interpret the information which comes from the organization on the basis of their own information structures to meet their own ends. They look for further information, reformulate focal issues and selectively produce the texts that they offer to the public for interpretation. Stakeholders construct reality through narratives and discourse (Hatch and Schultz, 2000), operating on “markets of meaning” (du Gay, 2000). Whereas the conception of organizational environment promoted as a “business environment” by many strategic reputation management models highlights such financially oriented concepts as return on reputation capital (Ting, 2009), assets (Rindova et al., 2010), value chains (Sheehan and Stabell, 2010) and resources (Deephouse, 2000), the view around markets of meaning emphasizes the role of symbols, stories, myths, rumors, jokes and other forms of communication that construct reputation relevant narratives (Middleton, 2009) and create and convey meaning (Dowling, 2006; Vendelo, 1998) about the organization. Can reputation change be managed? The social constructivist view on reputation change proposes a fresh challenge to managers concerned with the management of their companies’ reputations. On the one hand, the constructivist view implies that reputation cannot be directly managed. The organization is merely one voice among many reputational narrators. In this sense, an organization can never control the meanings of its reputational change communication. A message is interpreted against a discourse embedded in various cultural foundations, specific to each interpreter. On the other hand, the social constructivist view argues, as any meanings, reputations can be influenced. Reputation management is possible, albeit indirectly. Reputation is built on the experiences and opinions of the public. To a great extent, it is the public that builds organizational reputation, not managers. This means that dialogical interactions (Kent and Taylor, 1998, 2002) between organizations and their multiple stakeholders, where meanings are created, changed and exchanged (Carey, 1985) are at the heart of the management of organizational reputation (Middleton, 2009).
This leads us to propose that any model of reputation change management is to be founded on the co-creation of meaning among people in organizational contexts (see Fiske, 1990; O’Sullivan et al., 1994). Every organizational stakeholder creates his or her own perception of the organization (Helm, 2007) through subjective interpretations (Fombrun and Shanley, 1990). Instead of placing the exchange of messages between organizational members at the core of communication, the constructivist view is aware of the dialectic nature of interpretations between different parties (Taylor et al., 1996). Reputation is constructed and managed within the communicative encounters between the organization and its stakeholders. Reputation is not an outcome of communication. Rather, reputation exists within processes of communication where it is enacted and re-enacted by intra- and extra-organizational actors. Reputational arenas: making sense and breaking sense How does one manage such a complex construct, over which the organization itself would seem to have surprisingly little control? The answer begins to unfold as one starts to appreciate the fact that reputation is driven by evaluative interpretations (Lange et al., 2011) made of the organization by its stakeholders. Some of these stakeholders are known to the organization, while others are not (Grunig and Hunt, 1984). We shall employ the metaphor of reputation arena to illustrate this process of dialogical influence, i.e. constructive reputation management. The notion of a “reputation arena” suggests that organizations interact with their stakeholders in different types of discursive contexts (see also, Dowling, 2006; Romenti, 2010). The arena represents the domain where the organization meets its constituents to engage in communication. Rather than a physical place or a specific digital forum, an arena is a generic metaphor (Rowland, 1991) for any dialogical interaction where meaning is co-created between the organization and its stakeholders. Theoretically, it can be conceived to consist of language games which constitute a “form of life” for the participants (Wittgenstein, 1951; see also, Rindova et al., 2004). Arenas are embedded in the practice of communication and are intertwined with processes central to the lives of the participants: the pursuit of their interests or the crafting of their life narratives. Reputational arenas thus cannot be understood as instrumental communication media, nor as universal structures or boundaries for communication. The public and other stakeholders participate in organizations’ reputational processes as they go about their business, and indeed, as they lead their lives (Kim and Mauborgne, 2005). To present the strategic options for an organization participating in such dialogue, we can discern two basic acts of meaning making at the reputational arena: sensegiving (Gioia and Chittipeddi, 1991) and sensebreaking (Pratt, 2000). Sensegiving reinforces prominent reputational beliefs by proposing new meaning to continue existing narratives. Acts of sensegiving are founded on the notion that the central purpose of organizational communication is to maintain coherence among beliefs within the organization and among stakeholders. They build bridges between complex, unordered meaning structures, allowing collective meaning to emerge (Heath, 1994). Sensegiving is not always the most beneficial way to operate. Organizational communication may also be intended to destroy existing meanings in order to change them, through sensebreaking (Pratt, 2000; Mantere et al., 2012). Sensebreaking breaches the narrative through contradictory meanings. Organizational communication can also destroy the existing meaning-making structures and create disintegration, which can
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foster the creation of new meaning. Sensebreaking introduces meaning that contrasts with accepted beliefs, making room for new meanings. The arena model is founded on the notion that communication carries a dual function in organizational reputation building (Aula, 1996). It includes both integrating and contradictory elements with which one can create or reduce the diversity of existing meaning structures, and, consequently, increase the chance of new meanings emerging in the unfolding interaction. From the point-of-view of reputation change, both sensegiving and sensebreaking can be used by the organization in managing its reputation, as well as by the organization’s stakeholders. Sensegiving aims to build coherence with established reputational narratives (see Dowling, 2004), whereas organizations may engage in sensebreaking, for example, in order to improve their reputation-creating narratives. Four arenas for reputation change In order to flesh out our ideas on reputation change further, we will explore four archetypal reputation arenas that reputation managers may face. The two forms of influencing meaning, sensegiving and sensebreaking, can be used as a basis for four archetypal reputation arenas named “peace”, “defense”, “offense”, and “riot”. The arenas are based on dialogical communications practiced by the organization on the one hand, and its publics on the other. Both the organization and its public can use either integrative or dissipative communications to strengthen or contest the organization’s existing reputation (Figure 1). Integration builds on existing reputation while contradiction seeks to disrupt the foundations of current reputation. Arena 1: peace An organization and its public live in a peaceful relationship when both cohere in their meanings regarding the organization, in other words, when they are relatively of one
Figure 1. The Arena model of reputation
mind about the issues affecting the organization. The peace arena is a position in which the reputational messages of an organization are accepted as genuine and true by its public, as they cohere with the established reputational narratives. The story told by the organization itself conforms to that told by its public, and no major contradictions are created; sensegiving is reciprocated with sensegiving. These stories change over time, but there is no disagreement about their meanings; instead, all statements relevant to reputation create a uniformly positive conception of the organization. Many organizations would like to be in the peace arena, where the views of the organization and its public are sufficiently unified. Communication between the various stakeholders is straightforward and mutual. There is no direct contradiction between the organization and its public; the relationship is in harmony. It is hard, for example, for the most of the Westerners to look at the Panda symbol adopted by the World Wildlife Federation when the organization was founded in 1961 and question the reputation of the WWF as an agent of good and a voice of conscience. The International Red Cross is another example of an organization with the advantage of cohering narratives of itself among its stakeholders. Arena 2: defense The arena becomes a defensive field for an organization’s reputation when it is challenged by parts of its public while the organization itself strives to hold on to its previous, unified and favorable reputation. When and organization is in defense the public engages in sensebreaking, bringing forth new and contradictory meanings for the previously unified image of the organization. For many organizations, being forced in to this kind of defensive position can mean a reputational crisis. For instance, since the oil catastrophe in the Gulf of Mexico 2010, British Petroleum has invested in massive ad campaigns, seeking to assure the world of its continuing commitment to dealing with the repercussions of the oil spill. The aftermath of two scandals in 1995 saw Shell continue such campaigns for nearly a decade. Organizations may enter the defensive arena when they fight to maintain a positive evaluation of themselves against significant resistance from the public. The reason may lie within the organization itself: its operations may have changed and good standards may have been sacrificed. The reason may also be wholly independent of the organization: the values of its public, and thus the demands placed on the company, have changed, and the company’s operations have not kept up with the changes. For instance, the success of the ecosystem-based thinking in the smart phone market by Apple and others has seen Nokia, which once enjoyed a solid reputation as the leader of the mobile phone industry, now trapped in its old-school reputation. Arena 3: offense The dynamic of sensegiving and sensebreaking communication is reversed when the organization seeks to challenge the meaning attached to it by its public. An organization can also go on the offensive within the reputational arena whenever it tries to transform the unified meaning of its reputation among the public. In other words, it wants to change its reputation in a situation in which the “old reputation” is firmly embedded in the minds of its public but no longer accurate or desirable. The organization either seeks to challenge a fixed reputation representing a false image, or it seeks to upset a coherent reputation that it wants to escape. On taking office in
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March 2011, Nokia’s new CEO engaged in sensebreaking, invoking the well-known “burning platform” metaphor, suggesting that Nokia needed to abandon the old conception of itself in favor of strategic renewal. The hamburger giant McDonald’s stirs up strong emotions. Over the years its expansion to every corner of the globe has aroused heated debates over the rights of workers, US cultural imperialism and the impact fast food has on health. The perceived threat when international corporations expand is that these companies, which are often owned by faceless investment funds, will neglect the wellbeing of local communities in the name of maximizing their financial advantage. To counteract such perceptions McDonald’s marketing has strongly focused on families with children through the character of the clown Ronald McDonald. This is supported by the founding of facilities for the families of sick children and other philanthropic activities. Offense narratives are particularly typical when a reputational crisis has created a unified yet unfavorable perception of the organization. However, it does not have to involve a reputational crisis as such, as many organizations simply want to get rid of entrenched reputations. This is typical in businesses in which dominant business models are being challenged. For instance, digitalization has resulted in dramatic drops in revenue within industries such as print or music publishing. In such industries, previously dominant players are seeking to reinvent themselves in the public eye in fear of being trapped by their previously solid reputations. Arena 4: riot Rioting occurs in the reputational arena when neither the public nor the organization tries to unify their perceptions of the organization, or when both strive to shatter the existing perception at the same time. In these circumstances the reputation of the company splinters on both sides. Sometimes the riot arena emerges through failure of an organization’s reputation strategy. The organization may have failed in its attempt to unify perceptions and may have hopelessly confused its communication. In some cases an organization is unable to communicate logically through official channels, while in other cases an organization’s official message is essentially different from its operations close to stakeholders, for example, in terms of customer service. In some cases, firms enter the riot arena with full intention. This is true of organizations that rely on a reputation of unpredictability. In the fashion industry, for instance, many players rely on their ability to surprise the public, playing against their expectations. This may also represent a particular characteristic of many “celebrity firms” (Rindova et al., 2006). One characteristic of such firms is that they face the anticipation of their public, and their success is partly explained by their capability to surprise them. An example of this kind of company is the controversial Finnish advertising agency Bob Helsinki, which was founded in 2002. In the autumn of 2004 Finns were moved by news of the impending termination of the baboons at Helsinki Zoo. Finland’s leading daily Helsingin Sanomat reported that the renovation of the zoo’s monkey house would leave the baboons homeless, as a result of which they would have to be put down. Bob Helsinki employed a journalist with a PhD in political science for a period of one month to develop a plan for saving the baboons. It is hard to imagine that saving the baboons has anything to do with the core business of an advertising agency. Bob Helsinki used this trick to gain a tremendous amount of publicity that would have cost the company a lot more if purchased through
advertising. Bob Helsinki promoted itself as a soft player in the ruthless world of advertising. The baboons that won over the public were a perfect symbol for distinguishing the advertising agency from the superficial masses. Discussion and conclusion The social constructivist view on reputation change seems to be a promising way to build understanding how organizational reputation is managed as it highlights the limitations to the agency of managers in reputational change. Our tool and theoretical engine has been the arena model of reputation, founded on a dialogical notion of communication between the organization and an active public. The arena model provides a conceptual tool for making sense of the crucial and intricate challenge of strategic reputation change management, where organizations are engaged in struggles and collaborations with the public in symbolic environments. Our model elaborates the narrative line of thought in reputation studies (Dowling, 2006; Middleton, 2009). While our argument is aligned with scholars who consider reputation management as storytelling we contest the notion that reputational stories can be created and controlled by organizations themselves. Instead, we propose that reputational stories are co-created with stakeholders, and in some cases, even controlled by the stakeholders. However, an organization can, through its communications, participate in creating the realities that reflect on the interpretations of the organization’s own members about themselves and their environment. For example, “informing” is not just about transferring information (see Dozier et al., 1995), but also about participating in the dialogic negotiations (Kent and Taylor, 2002) that determine the development of the organization and the creation of meaning. Furthermore, our model proposes that reputation should also be studied as narratives among stakeholders: their stories, anecdotes, and other discursive elements regarding the organization. The arena model is founded on a notion of stakeholders as “rhetors” engaged in ongoing debates about what the organization is, what it does and stands for (Coupland and Brown, 2004). This emphasizes that reputation management is not the communication of what the organization does to stakeholders but involves constant dialogue with the stakeholders about the meaning of these actions. Reputation is not something an organization can just inform other about; it is always under negotiation and as such, contested every day in different forums. Weick (1995) state that many of what we consider “things” in organizational life are in fact relationships, variables that are systematically related to each other. Similarly, organization reputation is a continuous and limitless flow of human interactions that continuously creates and transforms events. We believe that our model also has implications for managerial practices around reputation management (Table I). The arena model highlights the importance of the dual function of communication in reputation change management, expressed through the dynamic between “sensegiving” and “sensebreaking”. A manager wishing to build reputation should take into account that communication works in two directions: it can unify and strengthen the current reputation, but it can undermine or destroy meaning around reputation – sometimes on purpose and with good reason. For practicing management, this highlights the need for constant awareness of the deep structures within the
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Table I. Arena model’s conceptual foundations and implications for reputation related managerial practices
Constructivist perspective on reputation Ontology: Reputation as a social process Strategic context: Markets of meaning Focal agent: Firm stakeholders Communication: Interpretation, dialogical interaction
Arena typology
Type of communication (organization-stakeholder)
Reputation management objective
Peace
Sensegiving – Sensegiving
Sustaining status quo
Defense
Sensegiving – Sensebreaking
Offense
Sensebreaking – Sensegiving
Riot
Sensebreaking – Sensebreaking
Maintaining relationship coherence Disrupting relationship coherence to renew reputation Destroying coherence in order to tease out the element of surprise and creative chaos, and to communicate implicit messages to: – tease out the element of surprise and create chaos – communicate implicit messages
process in which a reputation is created over and over again every day. Our model also helps managers to understand the importance of the dynamic relations between organization and its stakeholders. The managers should bear in mind that all organizations’ communicational activities, whether they involve advertising, public relations or stakeholder relations, hold within them the concept of uncontrollability. An organization’s activities involve active participation in reputation arenas and even the making of passionate statements of its own. While reputation is, indeed, an important asset for the firm, more attention should be paid into the surrounding conditions in order to gain balanced knowledge on how reputations are born and changed. Understanding those communicative practices that form, reform or deform reputational capital is essential for new and renewing value-creation processes in corporations and other organizations. Such is the challenge of reputation change management: to work in multiple arenas with diverse audiences, each member of which demands its own kind of relationship. Therein also lays a tension: one needs to be sensitive to specific stakeholder needs, while preparing for the surprise emergence of new stakeholders by maintaining a coherent enough policy of good action and communication. References Aula, P. (1996), “Chaos and the double function of communication”, in Sulis, W. and Combs, A. (Eds), Nonlinear Dynamics in Human Behaviour, World Scientific Publishing, London, pp. 191-206. Aula, P. and Mantere, S. (2008), Strategic Reputation Management: Towards a Company of Good, Routledge, New York, NY. Boden, D. (1994), The Business of Talk: Organizations in Action, Polity Press, Cambridge.
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352 About the authors Dr Pekka Aula is Professor of Communication at the Department of Social Research, University of Helsinki, Finland. His research interests lie in the problematic of formation and reformation, construction and reconstruction of communicative processes in and between complex organizational networks. He has published and edited several books, and published articles in national and international journals. He is also adjunct professor at the University of Jyvaskyla. In 2011-2012 Aula was a visiting scholar at Stanford University. Pekka Aula is the corresponding author and can be contacted at:
[email protected] Dr Saku Mantere is Professor of Management and Organization at Swedish School of Economics and Business Administration in Helsinki, Finland. His research is focused on understanding organizational strategy as a social phenomenon, e.g. its discourses, practices and social positions. He has published in journals such as Organization Science, Journal of Management Studies, Strategic Organization, Journal of Organizational Change Management, Business & Society and Scandinavian Journal of Management.
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