University of Tennessee

Study Examines Role of Organizational Reputation During Scandals

May 24, 2016

Rhonda Reger
Rhonda Reger

Modern media, complete with 24-hour news cycles and social media proliferation, can produce visceral reactions to the actions of organizations, companies and universities in the public spotlight.

New research co-authored by Rhonda Reger, professor of strategic management and entrepreneurship at the Haslam College of Business at the University of Tennessee, Knoxville, shows how these reactions compound themselves based on the level of identification members of the public feel with an organization.

Reger’s paper, “Reputation as a Benefit and a Burden? How Stakeholders’ Organizational Identification Affects the Role of Reputation Following a Negative Event,” correlates levels of financial support universities receive through donations with NCAA data on major infractions by those universities’ sports teams. It was published in the Academy of Management Journal in February.

“We studied a paradox,” Reger said. “Having a strong reputation sometimes helps organizations weather negative events. Other times, though, organizations with strong reputations can be damaged more by transgressions than those with weaker reputations.”

Reger and her fellow researchers chose NCAA infractions because there appeared to be differences in reaction to negative events along with reliable data to investigate. “Just about everyone – even people outside the United States – have strong opinions about rules violations by sports teams and the penalties meted out by governing boards,” Reger said.

The researchers hypothesized that members of the public who strongly identify with a university will react differently to negative news than people who feel ambivalence, as quantified by the amount of money they donate. This mechanism could be responsible for the paradox of reputation as both a benefit and burden.

The study found that alumni, who identify closely with a university, tend to increase their level of financial support in the wake of an NCAA scandal. In doing so, they rally around a cause they believe in.

However, those same people may withdraw support to preserve their own moral standards if a crisis is too sordid.

According to Reger, these findings hold lessons applicable to the corporate world. A corporation operating in an industry generally held in high public regard may benefit from public relations investment, but one operating in a stigmatized industry is unlikely to win public support.

“We think it might be better for companies in stigmatized industries to stay out of the limelight but work hard to adhere to the highest global standards of behavior,” Reger said.

Companies in stigmatized industries should not, for example, court public attention with positive messages only to disappoint with a negative event. While raising expectations may win followers for a company, a backlash may follow unless those expectations can be fulfilled, according to Reger.

Reger’s co-authors included Anastasiya Zavyalova of Rice University, and Michael Pfarrer and Timothy Hubbard, both of the University of Georgia.