Below is the executive summary of The Virtual Social Identity: Creating and Sustaining Reputational Value. (2000). ISBN 0-730812-1

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The Virtual Social Identity Executive Summary

Few would argue with the common wisdom that a reputation can produce value traceable to an organization’s bottom line. However, in order to quantify its value, the effects of reputation must be measurable; they must be distinguishable from the effects of other influences, and therefore, the specific attributes, qualities, or characteristics of reputation – its composite criteria – must be understood. Most of us likely think of reputation as the qualities, characteristics, and behaviours that we are known for by others. We also tend to think of reputation as something positive, although we know that a person can have a bad reputation as well.

Despite the fact that most of us can agree on these common ideas associated with reputation, when it comes to actually measuring reputational qualities and effects, we need something with more rigor, more objectivity, more substance. Without a commonly shared definition of reputation, how do we talk about it with each other? What if we define reputation differently from our stakeholders? How do we agree on the criteria upon which to base the development, management, and evaluation of an organization’s reputation? How do we compare ourselves with each other?

A review of some of the best-known indexes – including Fortune’s list of America’s Most Admired Companies, the Report on Business Magazine’s Canada’s Most Respected Corporations, Angus Reid’s Reputation Reid: The Corporate Reputation Monitor, Harris-Fombrun’s Reputation Quotient, or Walker Information’s “Corporate Reputation Report – reveals how little consensus there is on what the term ‘reputation’ means. Similar questions can be raised about the criteria comprising these indexes as well. Only a few of the criteria – customer loyalty, corporate social responsibility/ corporate social performance, and corporate citizenship to name three – have been the subjects of serious research into their nature and impact.

Despite the problems associated with defining reputation and its criteria, this concern is not fatal to an organization wanting to evaluate its reputation. We suggest an approach that considers how reputation develops: that reputation-building is a developmental ‘process’, that differentiation from rivals is a key factor, and that once formed, the reputation itself becomes a piece of information about the organization that stakeholders use as the basis of decisions and actions. We suggest approaching the evaluation and management of reputation from three perspectives:

• Understanding the process by which reputation is formed;
• Understanding how organizations are differentiated from others, including the degree to which organizations reveal their attributes and make themselves known to others;
• Understanding the degree to which people – stakeholders – perceive differences between organizations.

This approach supports and is supported by Erving Goffman’s early work into stigma (a kind of reputation) in which he articulated three critical concepts: the “social identity”, the “actual social identity”, and the “virtual social identity”. An organization’s social identity is produced when we first encounter an organization: we use “first appearances” to determine what category it falls into, and then apply a set of expectations we have developed about organizations in that category to help us anticipate what to expect from the organization in question. We turn these “anticipations” into “normative expectations”, and then into “demands” which we expect the organization to fulfill. We thus construct the organization’s virtual social identity, which is largely a stereotype built around a set of attributes that we anticipate will be found in organizations that belong to a certain category or group. The exceptional attributes possessed by an organization, either positive or negative, are the criteria by which one organization is differentiated from others in the category, and by which the organization is either discounted, or is held in greater esteem than the rest.

This conceptual framework is at the heart of “reputation”: a positive reputation is formed on the basis of the exceptional and positive attributes by which individuals or organizations become known. Of course, the attributes we associate with the virtual social identity may well differ from the actual attributes the organization possesses (the actual social identity). This gap between the actual social identity and the virtual social identity represents both opportunity and challenge to the organization: will it simply accept the reputation it is given, or take stock of its actual attributes and choose the reputation it wishes to pursue – and then pursue it? This question describes the authentic purpose of ‘reputation management’.

We advocate that organizations determine their own reputational criteria based on research that evaluates the perceptions, expectations, and values of their primary stakeholders. While there may be circumstances in which certain reputational criteria are imposed, perhaps through regulatory requirements or through standards set by industry associations, these are unlikely to offend the reputational criteria an organization might otherwise set, and offer several significant benefits:

• An organization will operate from the position of understanding stakeholders’ expectations, not only of itself but of other organizations perceived to be in the same category;
   
• An organization will have information about the actual criteria used by its stakeholders to evaluate organizations;
   
• An organization will be able to evaluate and plan its own actions and communication programs to address its stakeholders’ specific values and interests;
   
• An organization will be able to tailor its reputation program to stakeholders in order of their priority to the organization itself.

This approach calls for a robust research strategy that has a strong conceptual foundation to support replication over time. “Managing the gap” between the virtual and actual social identities as perceived by its stakeholders requires that the organization communicate and act in ways that bring the virtual and actual social identities together: stakeholders come to understand and hold realistic expectations of the organization, and the organization meets or exceeds those expectations. Monitoring how well the organization acts and how it communicates about itself is essential, and for meaningful progress to be seen, the research results must be comparable over successive rounds of surveying.

We believe that an organization’s reputation cannot be considered an asset unless and until it is deliberately managed as a dimension of corporate strategy. A good reputation is neither a silver bullet nor a magic pill: it cannot replace sound business strategy or organizational effectiveness, and it can neither overcome deficiencies in strategy or effectiveness nor hide them for very long. Making the most of a reputation is ultimately a function of the strategic and day-to-day operational decisions made by the people who live and work inside the organization. Indeed, a reputation is an outcome of organizational performance, and for this reason, reputation is sensitive to organizational decision-making regardless of whether the decisions are consciously made with a view to their impact on reputation.

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