Managing reputation equity

Abstract

Purpose

The article aims to elaborate on the importance of “managing reputation equity” in the banking industry.

Design/methodology/approach

This article has been derived in part from the reputation improvement plans of investment banks and in part from the author's own experience as a non‐executive director.

Findings

The most critical and strategic asset a bank possesses is its reputation. A “reputation improvement plan” is a critical document for the board of directors. In practice, reputation improvement plans vary enormously in terms of structure, format and content. This article summarizes what content should ideally be included. Furthermore, it is important to remember that reputation improvement planning is just one component of the process – the other components are implementing the plan, monitoring progress and auditing the reputation's situation. And, although the focus is often on the document, it is the process of drafting, discussing, agreeing and using it that is important. The document facilitates discussion and decision making and can then be used as a guide to action.

Practical implications

The process of producing a “reputation improvement plan” forces management to think through the issues related to a particular reputation and how to address them. The document itself summarizes the reputation's competitive position and guides the implementation of strategic initiatives. In banks (such as Goldman Sachs) that the board of directors with significant input from stakeholders (for instance, important customers), revised in a series of iterations with management before being agreed, and linked to other functional plans (e.g. operations, sales plans etc.) ensuring that all the bank's activities are focused on achieving common goals. A successful reputation improvement plan and program will only occur when at least the following combined forces are effective: a vision of something better (a clear target embedded in a plan) and a few practical first steps to achieve (to launch the process). Reputation is not a gift, but really hard work.

Originality/value

Reputational capital is a vital strategic resource. Reputations reflect a bank's relative success in fulfilling the expectations of multiple stakeholders. They are crucial because they “work” for banks. Therefore, establishing a great reputation is a key element of organizational strategy. Banks will become increasingly focused on managing their reputations over the next decade. The article is about unlocking the value of reputation through reputation improvement planning.

Citation

Klaas Jagersma, P. (2010), "Managing reputation equity", Business Strategy Series, Vol. 11 No. 3, pp. 139-144. https://doi.org/10.1108/17515631011043796