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Introduction

Corporate reputation is a relatively young field of study which draws from disciplines as varied as strategy, marketing, organizational culture and behavior, accounting, economics and psychology (Fombrun 1996). Within the field, the definitions of basic terms such as the identity and image of organizations and how these relate to reputation are still contested between academics with different backgrounds and, indeed, overlap with similar debates in related disciplines.

Although the concepts of identity and image have been researched widely in the fields of organizational culture and behavior and marketing, it is only relatively recently that the discipline of corporate reputation has emerged and looked at the relationship between identity and image within an overall context of reputation building among stakeholders. The focus within marketing and organizational behavior research has only recently shifted toward the exploration of how identity influences image and reputation. As Hatch and Schultz (1997) note, there is limited understanding from within marketing of how internal organizational factors impact on external image, with the emphasis instead on external images constructed by customers, suppliers and other publics. Conversely, organizational studies literature concentrates almost solely on internal factors that contribute toward the formation of a corporate identity. Recent studies in corporate reputation have attempted to integrate these approaches into a more holistic understanding that straddles internal and external organizational boundaries and accounts for a wider range of stakeholders.

This chapter reviews the conceptual definitions of identity, image and reputation as stand-alone concepts drawing from corporate reputation, marketing and organizational behavior research. The chapter then goes on to examine the operation and co-existence of identity, image and reputation in an overall organizational framework, as understood in two major recent works by marketing and corporate reputation scholars. Finally, the chapter concludes on the tactical and strategic importance of understanding these frameworks for organizational performance and highlights the current business context of corporate branding and alignment strategies.

Before examining the relationship between corporate identity, image and reputation as understood by theorists in marketing and corporate reputation, we must first review the definitions of these key concepts in the academic literature.

Corporate Identity

The classic organizational definition of identity provided by Albert and Whetten (1985) is that which is “central, distinctive and enduring” about an organization. This approach presents corporate identity at the level of both appearance and behavior, therefore combining both visual representations and symbols of the organization with the behavior and actions of its members (Alessandri 2001). Similarly, Melewar (2003) defines corporate identity holistically as the sum total of structure, strategy, behavior, culture, design and corporate communication, which are all founded in corporate personality and values. It is viewed as the underlying “core” or basic character of the firm (Melewar and Jenkins 2002) and not simply the intended corporate identity fashioned by managers in marketing and communication efforts. Identity has also been defined as an organization’s “innate character,” and “a description of ‘what the organization is’ that affects everything the organization says, does and produces” (Balmer 1995). Thus, identity has as much to do with behavior as appearance and can be interpreted as “the ways in which an organization reveals its philosophy and strategy through communication, behavior and symbolism” (Leuthesser and Kohli 1997). That said, there has been hardly any empirical testing in the domain of the corporate identity construct and, in practice, managers tend to focus on highly tangible aspects of corporate identity such as corporate communication and corporate design.

Corporate identity can therefore be interpreted on two distinct levels: the tactical implementation of a visual identity in organizational symbols (logos, trademarks, advertising, marketing materials, website etc.), and the strategic view of organizational behavior and culture which is central to organizational performance. Discussion is likely to continue in the academic literature but most definitions seem to agree that corporate identity represents the internal culture, values and behavior of an organization, as well as its visual appearance (Melewar and Jenkins 2002; Melewar 2003).

Corporate Image

Most definitions of image focus on “the feelings and beliefs about the company that exist in the minds of its audiences” (Bernstein 1992). However, other researchers from the field of organizational behavior have defined it as the internal stakeholders’ beliefs about external perceptions (Dutton and Dukerich 1991). Another way of interpreting image is “what comes to mind when one hears the name or sees the logo” (Gray and Balmer 1998). As Blaich (1996, cited in Markkannen 1998) states, “literally the term should be ‘corporate images’ for there are as many as there are individuals having relationships with or knowledge, of the company.”

If corporate image is the “mental interpretation” of an organization then it will be affected by external factors in people’s perceptions (e.g., media, competitor strategies, individual preferences) but this does not stop it being shaped and deliberately managed by the organization through its marketing and communications (Bennett and Gabriel 2003). The marketing literature defines image as “the summary of images held by external constituencies” (Hatch and Schultz 1997). Image therefore represents a complex sense-making picture in the mind of external stakeholders and is based on a set of visual cues deliberately managed by the organization and projected to outsiders. In contrast, traditional organizational behavior approaches have focused on internal members’ views of what outsiders think of the organization rather than what external parties actually think (Dutton and Dukerich 1991; Hatch and Schultz 1997). The marketing and organizational approaches to understanding image can be combined, as described by Alvesson (1990) in his conclusion that: “organizational image is a holistic and vivid impression held by an individual or a particular group towards an organization and is a result of sense-making by the group and communication by the organization of a fabricated and projected picture of itself.”

From these definitions, we can surmise generally that corporate image resides in the heads of the stakeholders, whereas corporate identity resides in the organization (Dowling 1986). Indeed, a common distinction now being made is that corporate identity is what a firm is and image is what a firm is perceived to be (Abratt 1989; Alessandri 2001).

Although further research is necessary to understand all facets of the image construct, there is general agreement that it represents the sum of a “person’s beliefs, ideas, feelings and impressions” about an organization and results in “the set of meanings” through which people know, describe, remember and relate to an organization (Dowling 1986).

Corporate Reputation

Reputation is the overall measure of how customers, employees, suppliers and industry peer groups, as well as regulators and the communities in which an organization operates, perceive a business. Reputation influences how stakeholders behave toward an organization and impacts directly on the bottom line. Reputation is crucial to an organization’s ability to attract employees and investors. It is also critical in reducing transactional costs and increasing leverage with suppliers and regulators, as well as affecting its strategic marketing options, such as premium pricing.

In the corporate reputation literature, reputation is presented as an evaluative concept based on past performance and is described as a “subjective, collective assessment of an organization’s trustworthiness and reliability” among both internal and external stakeholders (Fombrun and van Riel 1997). Most recent definitions focus on reputation as an “assessment” of organizational behavior and practice, or to a lesser degree on reputation as a state of “awareness” in which stakeholders hold perceptions of an organization but do not make judgments about it (Barnett et al. 2006). Other resource-based interpretations of reputation focus on its strategic value as an intangible asset.

Fombrun (1996) describes corporate reputation as “a perceptual representation of a company’s past actions and future prospects that describe the firm’s appeal to all of its key constituents.” In this approach reputation is presented as the totality of individual perceptions across all stakeholder groups. Reputation is therefore best understood as being founded in perceptions and experiences of an organization and denotes a judgment on the part of all stakeholders over time. It is a strategic and holistic concept by nature, and represents a clear break away from the tactical and operative focus of marketing-led research. Nevertheless, it can still be interpreted in a limited way as simply an accumulation of perceptions that lead to a greater awareness of an organization, or, as is more commonly agreed in the literature, a holistic concept that encapsulates people’s judgment of an organization’s actions and performance.

Reputation and image are often used interchangeably in the marketing literature, although they are actually distinct concepts (Chun 2005). Although images can be created relatively quickly though communication or change programs, reputation with stakeholders has to be developed over time through consistent images and experiences (Melewar 2003). Although image and reputation both refer to external perceptions and the views of stakeholders, there is a key distinction between the concepts. Thus, image relates to someone’s current and latest beliefs about an organization rather than the longer-term perspective involved in reputation, which relates to the interpretation of organizational behavior over a period of time (Chun 2005; Fillis 2003). It is therefore possible to have an image of an organization without having any direct experience of it, whereas reputation implies a foundation in experience (Chun 2005). Consequently, reputation is also more durable than image and can act as a positive store of goodwill and support or a negative bank of distrust and avoidance (Melewar 2003). An organization can have a good reputation yet possess an old-fashioned or otherwise inappropriate image; or, conversely, an organization can have a strong image developed through its visual identity and marketing program, which is not matched by a cogent reputation (Bennett and Gabriel 2003). Image and reputation also serve different purposes. Thus, an image may be good for immediate and short-term decisions, such as whether to agree to a charity’s request for a donation, while reputation is useful for long-term decisions such as choosing which university to study at or which employer to work for (Bennett and Gabriel 2003).

According to Dowling (2004) reputation can be defined as “a multi-dimensional structure comprised of corporate image and identity” within the context of “the perceived industry image and stakeholder values, driven mainly by the behavior (strategy, business process, culture, controls, employees and governance) of the organization, its value proposition to customers and its integrity.” Reputation therefore reflects an organization’s internal and external behavior and its relationships with all stakeholder groups over time.

The Relationship Between Identity, Image and Reputation

As we can see from the range of definitions described above, there are two main approaches to understanding the relationship between identity, image and reputation. The first is the operative and tactical approach grounded in the field of marketing and concerned mostly with consumers. The second approach is the strategic and holistic view underlying the most influential studies in the field of corporate reputation, which are concerned with all stakeholder groups and see reputation building as a cross functional organizational activity.

Despite the differences between these tactical and strategic approaches, it is clear that any attempt to understand the interrelation between identity, image and reputation must focus ultimately on the relationship between internal and external stakeholders in organizations.

In marketing and organizational behavior approaches, the specific link between internal identity and external image has attracted much attention, with most research focusing on the relationship between employees and customers (Hatch and Schultz 1997; Davies and Miles 1998). Particularly in service-led environments, customers are strongly influenced by employee behavior and their perceptions of the organization. Staff can act as brand builders who link internal culture with brand identity and organizations can manage their brand by narrowing the gap between brand identity and brand reputation (De Chernatony 1999). The assumptions, values, attitudes and beliefs of employees are thus seen to affect consumers in their purchase decisions and relationship with the organization. Many studies in the service marketing literature have even linked positive employee behavior with higher customer satisfaction levels and improved organizational performance.

This internal–external stakeholder interaction is at the heart of reputation building, and we can now examine how two recent and influential groups of theorists from the marketing and corporate reputation disciplines have attempted to define an overall framework for understanding identity, image and reputation.

A recent approach from the marketing field by Brown et al. (2006) suggests a new interdisciplinary framework to support much-needed consistency in future research. The framework suggested by Brown et al. (2006) proposes a new set of definitions based around four central viewpoints of the organization. Identity revolves around the question “who are we as an organization?” while reputation is concerned with what external stakeholders think of the organization. Image is then divided into what the organization wants others to believe about itself, the intended image, and what the organization believes others think of the organization which is the construed image. While the definitions of identity is similar to that stated in corporate reputation research, image is understood very differently as an internal and managerial concept comprised of two marketing-related functions: projecting a corporate image and understanding what the outside world thinks of the organization. Thus, the main focus of this marketing-based approach is on understanding how consumers make decisions about companies and their products and services. Image is not related to external perceptions but is understood as something which is managed by the organization and projected externally. Reputation is also viewed as relating only to perceptions among external stakeholders and does not account for the perceptions of internal stakeholders (i.e., employees and managers) which are included in the term corporate identity. See Fig. 1.

Fig. 1
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Typical marketing-based and corporate reputation approaches to identity, image and reputation

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The field of corporate reputation draws on various disciplines including marketing, organizational behavior, strategy and psychology, and takes a much more holistic view of identity, image and reputation. The most influential proponents of this view are Fombrun and van Riel (1997) whose viewpoint subsumes image and identity within reputation. In this approach, identity is the internal perception of the organization, similarly to Brown et al.’s (2006) interpretation, but image is the perception held by external observers. In turn, reputation is made up of the overall amalgamation of corporate identity and image i.e., the sum total of internal and external perceptions. Fombrun’s (1996) definition of corporate identity as “the set of values and principles employees and managers associate with the company” is very similar to Brown et al. (2006). In contrast to the marketing literature however, he does not emphasize the actions of managers and employees in projecting an identity and/or image to external constituents. The perceptions of internal stakeholders are included in identity and therefore contribute to overall reputation. Image is developed among external stakeholders and reputation is an aggregation of internal and external perceptions that results in an evaluative judgment by stakeholders. In this holistic approach, image represents the crucial link between corporate identity and reputation since it is how stakeholders process and combine perceptions of corporate behavior and identity into a picture of the organization, which feeds into a reputational judgment over time.

While the marketing-based approach is more tactical and focuses on actions toward consumers that are manageable and controlled by the organization, the corporate reputation approach adopts a more holistic view concerned with all stakeholders and concerned with how overall organizational behavior affects perceptions and evaluations over time. The latter view is concerned with the overall esteem in which an organization is held by both internal and external stakeholders, and therefore relates to various functions in organizations including marketing, public relations, public affairs, investor relations, strategy and human resources. In turn, as we might expect, the marketing based view is more concerned with the function of marketing as a strategic objective and is less concerned with the development of investor or supplier relations, for example.

Understanding Internal–External Dynamics in Reputation Building

Reputation building is most successful when it starts from within and repeatedly fulfills the expectations of (external) stakeholders (Aperia et al. 2004). Moreover, it is influenced by the interaction between different stakeholders, most visibly in the relationship between employees and customers (Hatch and Schultz 1997; van Riel and Balmer 1997). Consequently, many organizations are increasingly aware of the need to understand and manage the impact of internal behavior on the perceptions held by external stakeholders.

However, as we saw above, current definitions of identity, image and reputation vary as to the role of internal and external stakeholders in each concept. Image, in particular, has been defined as being solely internal and management-led or, alternatively, as residing exclusively in the minds of external stakeholders. On the other hand, identity is mostly attributed to internal stakeholders and reputation is often said to exist only among external stakeholders. A strategic and holistic focus on the management of reputation in the wider sense actually means that none of these definitions adequately encompasses the formation and development of identity, image and reputation in practice. Identity represents the behavior and culture of an organization among internal stakeholders, but it is influenced by the interaction with and feedback from external stakeholders. Naturally, reputation also results from the interaction between internal and external stakeholders, especially between front-line employees and customers in service industries, for example. As for image, whichever way it is defined, it is arguable that in reality there must be an act of image projection by internal stakeholders that is then received and interpreted by external stakeholders. In addition, it must be remembered that internal stakeholders such as employees and managers also develop perceptual images of the organization which they may or may not be involved in projecting, and which also result in reputation.

Overall, as the divisions between internal and external stakeholders begin to fade away in modern organizations, with employees doubling up as consumers and managers acting as investors, it is increasingly difficult to make adequate distinctions relating to identity, image and reputation. That said, since misunderstandings over definitions are unhelpful to both practitioners and academics, further research is bound to continue exploring this topic. Yet, definitional challenges aside, it is important to understand that in reality there is a complex and dynamic transfer of individual perceptions and beliefs from the inside of organizations to the outside and that reputation is ultimately an external reflection of internal organizational behavior.

Alignment Strategy

Modern organizations are keen to ensure that they live up to the values and identity that they communicate to the outside world, and that behavior is aligned and integrated with their overall strategy. Indeed, one might naturally expect some measure of alignment given that organizational identity affects and shapes the decisions and actions taken around image enhancement and reputation building campaigns (Ravasi and van Rekom 2003). Moreover, since organizational values, behavior and culture drive the relationship and communication with stakeholders, it is important for organizations to understand their identity in order to properly manage their image and reputation. For example, if an enterprising company wants to recruit like-minded people but its image is divorced from its operating culture and leads to the attraction of introverted personality types, then corporate strategy and long-term growth are compromised (Davies et al. 2004). In other words, organizations should avoid disparities between what is practiced and what is preached; otherwise, relationships with stakeholders will be damaged.

The idea of alignment is evident in the corporate identity literature too, most of which has a strong practitioner slant (Fillis 2003). Olins (1995) concludes that successful organizations align the different ways in which their corporate identity is presented to their audiences – namely their products and services, the environments in which they make or sell products, the ways they communicate and their internal and external behavior – in order to provide consistent corporate images. As reflected in the marketing and organizational literature, this process of alignment occurs especially in service industries where the junior staff have most contact with external stakeholders and there is a requirement for employees to “buy in” to the desired corporate identity (van Riel and Balmer 1997). Employees therefore have the important role of communicating the corporate identity through their behavior (Andriopoulos and Gotsi 2001).

It is therefore advisable for organizations to align corporate identity with image and reputation as much as possible. A misalignment between projected corporate identity and organizational behavior directly impacts on reputation among customer and employee groups. According to the Reputation Institute, a well-known consultancy in the field, there are many companies that have strong projected corporate identities (i.e., brands) and weak reputations. These organizations typically make promises in their marketing and communications programs which they cannot deliver on to customers. Successful companies therefore ensure that what they say about themselves matches the reality of their organizational identity and behavior, which is ultimately what will impact on reputation.

The importance of transmitting corporate identity to organizational stakeholders who can then formulate certain images that form the foundations of the company’s reputation, is increasingly important for developing competitive advantage (Melewar 2003). For stakeholders, the relationship with an organization is vastly improved if there is no gap or misalignment between what is promised in advertisements and mission statements, for example, and the actual experience (Chun 2005). The literature goes further in suggesting that there should actually be no gaps between internal and external perceptions particularly in service industries where the customer is in direct contact with employees (Davies and Miles 1998). While this makes logical sense, it is important to understand that there is limited empirical evidence that gaps between identity (internal perceptions) and image (external perceptions) are damaging to reputation, although one might expect this to be the case (Chun 2005). The only known study completed to date examining the gaps between image and identity in UK department stores suggests that two concepts might co-evolve or be causally linked, such that image mirrors identity to some extent and the management of external image might be achieved by the management of internal identity (Davies and Chun 2002).

Corporate Branding

The logic of building reputation from within and aligning internal and external perceptions is even more urgent given the rapid rise of corporate branding strategies. The development of powerful corporate brands that represent and communicate a range of products under one vision, such as Richard Branson’s Virgin Group in the UK which offers a range of transport, financial services and consumer products, has changed the way in which many consumers perceive and relate to organizations over the last 20 years. Although some well-known fast-moving consumer goods companies such as Procter and Gamble still operate a stable of individual product brands and do not project directly a corporate brand or identity to stakeholders, it is increasingly the case that organizations use their overall identity and corporate brand to differentiate themselves in highly competitive markets. With this approach, the images and impressions formed by product marketing do not generally transfer to the organization that owns the product (unless they have the same brand name), and the corporate brand is promoted on a selective basis to nonconsumer audiences such as potential employees, investors and the media.

While product brands may appeal to separate groups of stakeholders, any corporate brand needs to appeal at an emotional level to both internal and external stakeholders (Davies and Chun 2002). Recent work in the field of corporate communication suggests that internal and external perspectives on reputation are highly interdependent, and that gaps between the two are potential causes of crises (Schultz et al. 2000). In response, Hatch and Schultz (2001) argue for the alignment of three essential strategic elements for the corporate brand: vision, culture and image. They state that a management team’s overall vision should be supported by the culture among employees, and be reflected in the external image of the organization.

Since a corporate brand creates expectations in the minds of consumers as to what the company will deliver, meeting those expectations cements overall reputation in the consumers’ eyes (Forman and Argenti 2005). Furthermore, as Argenti and Druckenmiller (2004) argue, careful management of a corporate brand can also enhance reputation by guiding and stimulating a company’s actions and keeping management focused on strategy implementation. For example, Accenture’s re-branding program in 2001 kept the organization focused on its new identity as a consultancy which went beyond the original core consulting and outsourcing services offered by Andersen Consulting, and provided new services such as venture capitalism, joint ventures, equity investment in technology companies and alliance relationships (Argenti and Druckenmiller 2004).

Conclusion

Amid the complex and dynamic interplay occurring between internal and external stakeholders in the formation of organizational reputation, it is clear that the inside of an organization, namely its culture, values and strategy, has a significant impact on perceptions held outside. Reputation is therefore increasingly viewed as a behavioral process, which must be built from within and integrated across the organization, and the rise of corporate brand management amidst the pressures of differentiation in highly competitive markets have only made this phenomenon more apparent. Moreover, particularly in the service industry where customers interact directly with employees, organizations risk damaging their reputation if they cannot act in accordance with their rhetoric toward all stakeholder groups. Increasingly, organizations are called to account if they do not practice what they preach, not only by customers, but also by the media, the government and investors.

By highlighting the differences in recent marketing-based and reputation-led approaches in the research around terminological definitions, this article hopes to encourage managers to think about the real implications of taking tactical or strategic approaches to identity, image and reputation management. While many organizations still focus on public relations or corporate communications as the function that manages reputation, there is an increasing awareness of the need to embed reputational concerns in core business functions and integrate data from all stakeholder groups in a holistic reputation management strategy. Although the holistic approach to corporate reputation – exemplified by Fombrun and van Riel – has gained substantial ground over the past decade, it remains far from universal. Marketing-based approaches will continue to be tactically useful but recent research implies that a more strategic and holistic view is necessary to capture the complexities of modern reputation management and the dynamic nature of reputation building among internal and external stakeholders.