Flying at an altitude of 35,000 feet is a good place to sort out the confounding. That’s where I was this week musing about a conversation with a client who fervently pointed to Walmart as an example of a company that had done a masterful job of overcoming its reputational wounds from fair treatment of employees by subscribing to incredibly high standards on sustainability. I don’t know that I’ve ever seen Walmart held up as a case study in good reputation management, but I was intrigued by the client’s conviction that it was a best practice for his business.
While pondering this conversation I pulled out some reading I had long neglected from Jim O’Rourke in the paper his colleagues at the University of Notre Dame examined two types of reputational assessments we make about an organization: capability and character.
Capability reputations are shaped by what an organization can do in regards to its abilities and resources – the quality and performance of its operations. Character reputations are the basis on which we assess how an organization would likely do in relation to is values and intentions – how it would approach solving a problem, for example.
With these two dimensions in mind, it becomes easier to see how one might distinguish between the flawed character reputation Walmart suffers from its labor practices and the strong reputation it enjoys from its operations and sustainability performance.
The article goes on to explore how different actions, or cues, have greater or lesser impact. Turns out that positive cues regarding capabilities have more impact than negative ones. Thus when a company with an already strong reputation for quality stumbles with a product problem, it can more easily recover as stakeholders are more likely to dismiss it as a one-time event.
But character is just the reverse. We expect good behavior, hence companies struggle to get sizable lifts in their reputation from philanthropic activities because they have become an expected behavior. But, according to the research, a single act reflecting a flawed character is perceived as illuminating the true nature of an organization and thus calls into question its motives for a wider range of activities.
These two dimensions of reputation – character and capability – help illuminate another confounding industry. The banking industry continues to rank at the bottom of nearly ever reputation poll, but continues to enjoy record profits. We may not like them, but that doesn’t seem to be having any impact on their ability to perform. See Forbes article If Only Your Brand Had the Same Bad Reputation As Wall Street.
As the pilot starts his descent from 35,000 feet I’m left to wonder which of these reputational dimensions – capability or character – are more valuable to a company. Personally, character will always carry the day for me, but the lessons of Walmart and the financial services sector seem to be telling us that society may really put capability above all else.
What do you think?
Marjorie Benzkofer is the Global Lead of FleishmanHillard’s Reputation Management Practice. You can reach her at Marjorie.Benzkofer@fleishman.com.