Why reputation matters, and why we rarely say so out loud
By Ed Coke
Every so often, someone on a board asks a question that ought to have been settled years ago: why should we care about our reputation? I still hear it more often than you might expect. It usually arrives dressed as a budget question, but underneath it sits a genuine puzzle. Reputation is intangible, hard to measure and slow to move. Why give it a seat at the table?
The textbook answer is perfectly sound. No organisation achieves anything alone. Customers have to buy, employees have to turn up and try, investors have to lend, regulators have to permit, communities have to tolerate. Reputation is shorthand for how willing all those people are to cooperate with you.
But I have come to think that answer, true as it is, skates over the real reasons. And those real reasons are ones we tend to keep to ourselves, because a) we might not even know them and b) if we do, they sound less like strategy and more like anthropology.
For most of human history, being pushed out of the group was close to a death sentence. A person alone did not last long. So we evolved with a question permanently running in the background: do they still value me?
The psychologists Roy Baumeister and Mark Leary described the need to belong as a fundamental human motive, as basic as many of our physical drives. Leary took the idea further with what he called sociometer theory. Self-esteem, he argued, is less about how we see ourselves than an internal gauge of how much other people want us around. If that is right, then reputation is the readout on the dial: the external evidence of whether we still belong.
Belonging, though, is only half the story. We do not just want to be in the group; we want to matter within it. We want to be listened to, respected, deferred to. We want status.
Researchers who study status distinguish two very different routes to it. One is dominance: influence won through fear, pressure and control. The other is prestige: influence that others hand you freely because they rate your character and your competence. Dominance is taken. Prestige is given.
Reputation is the currency of prestige. That is why I have taken to describing it as borrowed currency. It is power that other people choose to lend you, and like any loan, it can be recalled. That simple idea explains the asymmetry every communications leader knows in their bones: trust accumulates slowly and drains away fast. Lenders are patient while you build credit, and very quick when they think you have defaulted.
The same two needs apply to organisations, and it helps to separate them.
Belonging corresponds to legitimacy. Is your organisation accepted as a proper member of society, playing by the rules? That is your licence to operate.
Status corresponds to reputation in the fuller sense. Do you stand out from your peers? Are you admired, chosen, followed?
The two do not always travel together. A company can be thoroughly legitimate and entirely forgettable. Another can be widely admired and still be one scandal away from losing its licence. Boards that worry about only one of these are managing only half the risk.
There is a further twist. Research on what has been called ‘brands as intentional agents’ suggests we judge companies much as we judge people, by asking two questions. Are your intentions good? And can you act on them? Warmth and competence, in the psychologists’ terms. Crucially, warmth comes first and carries more weight. A company seen as highly capable but cold may be admired, even envied, but it is not trusted. Plenty of household names sit in exactly that spot, and they tend to discover it at the worst possible moment.
Nor is this only about the outside world. Employees’ own sense of belonging tracks how they believe outsiders see their employer. When the organisation’s reputation takes a hit, staff feel it personally, at the dinner table and at the school gate. That is why reputational crises so often turn into retention crises a few months later.
So when a board asks why it should invest in reputation, the honest answer goes deeper than brand value or share price. Reputation draws on two of the oldest human needs: to belong, and to be respected. Organisations are collections of people, judged by people, and none of us has outgrown the instinct to ask whether we are still wanted.
Get it right, and stakeholders extend you a line of credit. Get it wrong, and they call it in.
Ed Coke is a Folgate advisor and founder of Repute Associates, the reputation management consultancy.
This also appears in our LinknedIn newsletter, Compound Knowledge.
