If you had to choose an industry that lends itself to poor corporate reputation, it very well may be commercial airlines. Customers have been dragged off of planes, employees have resigned in dramatic fashion, and operational meltdowns seem the norm. Still, my own experience with airlines has been generally very good — and I’ll give a break to any employee who must put up with passengers packing pet peacocks.
Instead, let me tell you about my experience with different industry “leader” in the category of dismal reputation: cable companies. Several years ago, my cable service routinely deteriorated. The service technician would visit, and correct the problem. But inevitably, service would deteriorate again. My neighbors and I compared notes one day and realized that when one of us called for service, another one of us would begin to experience problems. Turns out a small fire had melted the cover on one or two of the coax cables leading into our homes. But instead of repairing the damaged cable, the service techs simply swapped two of the cables, thus ensuring that someone had poor service. When I asked the repair technician about that, he shrugged and said that was how the company did business.
Large companies can usually survive poor reputations, particularly when they hold a monopoly in their market, like many cable companies do. Early-stage companies don’t have that advantage. Like legitimacy, corporate reputation is a social construct based on perceptions that can significantly influence a company’s ability to secure and maintain resources, from financing to board members. As the indifferent cable guy demonstrated, employees are front and center when it comes to external corporate reputation.
Most of us have a strong drive to be part of something important, something larger than ourselves. We join social groups that reinforce our self identity. Beyond that, we also strongly identify with the company we choose as our employer. We choose a company because we want to be part of the winning team and do something important. Not surprisingly then, employees are quite sensitive to how others perceive their company. A positive external reputation can bring a strong sense of pride, but the opposite is also true.
So, who is in charge of developing a strong reputation? At many companies, it’s assumed to be exclusively management’s responsibility. Employees are often unaware of their own role in creating and maintaining the reputation of the firm. This doesn’t happen by accident: Research suggests that managers often fail to engage employees as ambassadors of the company. For startups especially, this is a missed opportunity.
To engage employees in shaping a startup’s reputation, it’s important to understand the big picture. Like cell signaling pathways, there are many feedback loops when it comes to human behavior, and these are particularly complicated when identity and self-esteem are intertwined with our jobs. Research by Sabrina Helm suggests just how complex this can be.
Helm surveys the literature and describes many attitudes that influence whether employees are engaged in shaping corporate reputation of their company. Here are some of her key findings:
- Pride. Pride plays a significant role for employee job satisfaction, affective commitment (how well an employee connects with a company). Managers would do well to create a company that employees are proud to join. This involves creating and communicating a compelling vision of where the company is headed. Reputation is a key part of that. If a company has a poor external reputation, it would do well to take steps to improve it. Management could then shift to internal efforts to increase a sense of pride in belonging once the company establishes a good reputation.
- Incentives. Job satisfaction and commitment, on their own, do not make employees more aware of their own role in corporate reputation, Helm finds. As a result, managers must invest in incentives to ensure employees are both promoters and custodians of the corporate reputation, internally and externally. To start with, companies should invest in educating and training employees about their roles as ambassadors. Beyond that, management should invest in finding what motivates their employees and create incentives to commit to those causes. For life sciences startups, those might include a strong affiliation or support of a patient advocacy group, connecting with the local school systems to support science education, or sponsoring entrepreneurship in the local ecosystem through mentoring other companies.
- Management credibility. External credibility is founded on internal credibility. If senior executives are not living the corporate values, the credibility of the company in the eyes of the employees is zero. If employees sense a disconnect, incentives and other methods of fostering a positive reputation can backfire. So, walk the talk.
The bottom line is that reputation is critical to startup success, and every member of the company plays a key role in shaping it — from the CEO to the newest member of the R&D team. It is management’s responsibility to ensure that employees are aware of and invested in their contribution to reputation. In an industry with fierce competition for resources, corporate reputation can’t be overlooked.
Back to the cable guy. Eventually, I was able to resolve the poor cable issues — I moved. Often, that is what employees do when they are not engaged.
David Spellmeyer, Ph.D., is a biotechnology executive with 25 years of broad experience in the life sciences industry. He is an executive-in-residence at ShangPharma Innovation. Read full bio
Helm, S. (2011). Employees’ awareness of their impact on corporate reputation. Journal of Business Research 64, 657–663.
King, B.G., and Whetten, D.A. (2008). Rethinking the Relationship Between Reputation and Legitimacy: A Social Actor Conceptualization. Corporate Reputation Review 11, 192–207. This is an article in which the authors describe a framework in which reputation and legitimacy reinforce each other.