Reputation: Consequences of High And Low Reputation on Decision Making

Reputation is generally defined as the collective perceptions, evaluations, and beliefs that a social group holds about an individual, organization, or entity. It develops from social interactions and is shaped by cultural norms, historical contexts, and institutional structures. The reputation of a decision-maker significantly influences how their decisions are perceived, accepted, and acted upon. How is decision making different if the decision maker has high or low reputation?

This text is part of the series on decision governance. Decision Governance is concerned with how to improve the quality of decisions by changing the context, process, data, and tools (including AI) used to make decisions. Understanding decision governance empowers decision makers and decision stakeholders to improve how they make decisions with others. Start with “What is Decision Governance?” and find all texts on decision governance here.

1. Trust and Credibility of Decisions

Trust and credibility determine how stakeholders perceive the reliability and legitimacy of a decision. A decision-maker with a strong reputation benefits from inherent trust, whereas one with a weak reputation must work harder to gain acceptance. For example, a CEO with a history of sound financial decisions is likely to face fewer questions when announcing a major investment.

Low Reputation	High Reputation
Stakeholders may question the legitimacy and reliability of the decision.	Decisions are more likely to be accepted without skepticism.
Increased need for justifications and transparency to gain buy-in.	Lower need for extensive explanations, as past credibility enhances confidence.
Higher resistance from subordinates, peers, or external entities.	Easier implementation due to established trust.

2. Decision Influence and Authority

Reputation affects a decision-maker’s ability to persuade and exert authority. A respected decision-maker can influence key stakeholders more effectively, while someone with a poor reputation may struggle to assert leadership. For example, a respected industry leader advocating for policy changes will likely gain traction faster than a newcomer with little credibility.

Low Reputation	High Reputation
Limited ability to influence others, leading to challenges in execution.	Greater persuasive power, leading to smoother decision adoption.
Risk of being overruled or ignored in collaborative settings.	Decisions are more likely to shape organizational direction.
May require third-party endorsements or institutional backing to gain credibility.	Autonomous decision-making is more accepted.

3. Organizational and Market Impact

A decision-maker’s reputation extends beyond internal influence and affects external stakeholders such as investors, customers, and regulatory bodies. A positive reputation attracts opportunities and fosters market confidence, whereas a negative reputation can deter potential partnerships. For instance, a well-regarded entrepreneur launching a new venture will find it easier to attract investment than someone with a history of failed businesses.

Low Reputation	High Reputation
Stakeholders (e.g., investors, employees, customers) may lack confidence in the organization.	Increased investor, employee, and customer confidence.
Higher scrutiny from regulators, media, and competitors.	Favorable media portrayal and positive market perception.
More difficult to attract talent, partnerships, and investments.	Easier to form alliances and secure resources.

4. Risk Perception and Decision Outcomes

Perceived risk is closely tied to the decision-maker’s reputation. A leader with a strong reputation is trusted to make calculated decisions, whereas one with a weak reputation is assumed to act impulsively or irresponsibly. For example, a well-established CFO implementing a cost-cutting strategy is more likely to be viewed as pragmatic rather than desperate.

Low Reputation	High Reputation
Decisions are perceived as riskier due to past failures or inconsistencies.	Decisions are seen as calculated and competent.
Higher chance of decision reversals or second-guessing by others.	More resilience to challenges and greater institutional support.
Increased oversight and control mechanisms imposed.	Greater autonomy and flexibility in decision-making.

5. Crisis and Reputation Management

During crises, reputation plays a crucial role in how a decision-maker’s response is received. A strong reputation can provide a buffer against reputational damage, while a weak reputation can exacerbate the fallout. For example, a company with a strong track record of ethical behavior is more likely to receive the benefit of the doubt in a legal dispute.

Low Reputation	High Reputation
Crisis responses may be doubted or seen as insincere.	Stakeholders are more likely to grant the benefit of the doubt.
Harder to recover from failures; past mistakes amplify damage.	Stronger reputational buffer; reputation can mitigate backlash.
May require significant external intervention to regain credibility.	Internal corrective actions may be sufficient to restore trust.

Further Reading

• Coombs, W. T. (2007). “Protecting Organization Reputations During a Crisis: The Development and Application of Situational Crisis Communication Theory.” Corporate Reputation Review, 10(3), 163-176.
• Fombrun, C. J., & Shanley, M. (1990). “What’s in a Name? Reputation Building and Corporate Strategy.” Academy of Management Journal, 33(2), 233-258.
• Mayer, R. C., Davis, J. H., & Schoorman, F. D. (1995). “An Integrative Model of Organizational Trust.” Academy of Management Review, 20(3), 709-734.
• Pfeffer, J. (1981). “Power in Organizations.” Marshfield, MA: Pitman.
• Sitkin, S. B., & Pablo, A. L. (1992). “Reconceptualizing the Determinants of Risk Behavior.” Academy of Management Review, 17(1), 9-38.