Reputation is valuable, and companies that have a higher perceived value attract better talent and are viewed more favourably in society.

However, reputation is also intangible – analysts and investors who make make decisions based on hard facts and analysis have a difficult time trying to quantify it.

In their book “The Market Value of Corporate Reputation”, authors Black and Carnes argue that since reputation can result in financial gains or losses for a company, it is an asset that should have a value associated with it.

The five characteristics of reputation

Simon Cole is the founding partner of the corporate reputation and branding consultancy Reputation Dividend. In his paper “The Impact of Reputation on Market Value” discusses extensive modelling undertaken by researchers to find the nature of reputation.

According to Cole, reputation has the following five features:

1. Corporate reputation is a powerful driver of shareholder return

2. The value of reputation, like any investment, can rise as well as fall

3. Reputation returns vary from company to company

4. Reputation value is driven by more than strength alone

5. Reputation management is a means to grow shareholder returns

A worrying trend

A recent digital trend that is catching on is the notion of being able to quantify reputation and influence on the web. 

According to technology writer and Harvard Business Review contributor Josh Klein, it is perhaps not a good omen that the idea of a “unified reputation currency” is starting to get popular, particularly with online searches.

In a world that is time poor, there are companies attempting to create a reputation ranking that is only a click away.

Mr Klein says this approach is principally flawed.

First and foremost, this is because reputation is context-dependent. Someone with a popular blog about risk management may achieve high influence online, however they may not be as well-versed in the subject as a senior communications professional who has spent years in the industry dealing with crises.

Another issue with this approach is that people of different reputations may end up achieving a similar rating depending on who is rating them. Mr Klein goes on to say that what is more worrying is that sometimes it is the loudest, not the most influential, person who is is heard.

“I may be able to shout over everyone else in a room, but that doesn’t mean everyone in the room respects me or pauses to consider what I have to say,” he added.

The technologist says it is some time before this utopian idea will reach fruition.  Algorithms and artificial intelligence are still not an alternative to human judgement when it comes to sophisticated matters such as reputation.

“The human brain is incredibly good at evaluating reputation across a variety of contexts using extremely fuzzy, dynamic, and relative data sets, and computers (so far) just aren’t,” he said.