Reputation & NGOs Workshop: How do NGOs use reputation to effect organizational change?

by Sera Linardi

Facilitator Comments:

Amanda Sharkey: When Do Ratings Have Indirect Effects? : The Organizational Response to Peers' Environmental Ratings' (Amanda Sharkey & Patricia Bromley)

Previous research has found that ratings have a direct effect, namely, firms that are rated low improve their behavior to protect their reputation. Amanda’s presentation goes a step further and asks whether ratings also have an indirect effect. She hypothesizes that ratings may cause even unrated firms to change their behavior. This may be due to several reasons. Inter-organizational learning may be easier since ratings clearly identify high-performing peers to learn from. In addition, firms in tightly connected industries mimic each others’ behavior in order to maintain social cohesion.

To test this hypothesis, Amanda looks at the relationship between the percentage of firms that are subject to KLD Research and Analytics’ environmental ratings and unrated firms’ emission of toxic pollutants. Amanda argues that previous research has found that these KLD ratings matter for potential investors, consumers, and employees. Even when these actors are not interested in environmental performance, low ratings can be interpreted as indication of firm’s future liabilities.   She finds that unrated firms reduce toxic emissions as the percentage of peers that are rated increases in industries that are competitive or highly regulated.

Her findings makes intuitive sense: in an environment with higher competitive pressure, firms may need to optimize in every possible dimension to attract investors and hence may be more motivated to learn from industry leaders. On the other hand, the increased motivation for firms in regulated industries may come from highly salient threats of penalty. Unfortunately the data does not yet allow us to establish these micro mechanisms. Though the evidence is consistent with the hypothesis, it is a bit tricky to establish causal mechanism since 1) selection to KLD rating is not random, 2) the expansion of KLD ratings to include a higher percentage of firms is also not random. There may be other fundamental factors or shocks in highly regulated or competitive industries that simultaneously increase both the percentage of peers rated and the environmental performance of firms. The authors are aware of these limitations and discuss potential experiments and extending the time frame of the study to further establish causality.

Deana Rohlinger: 'Organizational Reputation, Mass Media, and Institutional Change'

Why do some NGOs have great access mainstream media and are thus able to shape how issues are portrayed to a broader public? In this paper Deana argues that an NGO’s media opportunities depends on having a strong reputation; namely a match between an organization’s identity and the logic of the field. Distinguishing media into three levels, moderated media (e.g. news outlet), social media (e.g. Twitter and Facebook), and direct media (e.g. NGO’s own website), she argues that organizations with weak reputations have little access to moderated media since mainstream journalists do not contact them first to comment on breaking news.

Deana utilizes media coverage, interviews, and archival data dating back to 1980 from four organizations for her analysis: Planned Parenthood Federation of America (PPFA), National Organization for Women (NOW), Foundation for Individual Rights in Education (FIRE) and Students for Academic Freedom (SAF). She complemented this with more recent data of internet media strategy compiled from Twitter, YouTube, and other sources. She found that the lack of access to moderated media directly influences NGOs use of social media. While organizations with strong reputation can afford to use social media to make more personalized connections with their supporters, organizations with weak reputation appear to use it to gain supporters. The latter do so by informing others about their organization and by building legitimacy through retweeting or reposting content from more reputable allies.

Deanna’s findings make economic sense: supporters of an NGO are in some sense the consumers of its’ products and services. An NGO with a strong reputation by definition has a well-defined and well-advertised product. This allows it access to moderated media, and with that, a large market share. For these NGOs, the next step is to nurture and maintain the demand for their services, and they do so by personalizing their connection with their supporters. On the other hand, an NGO with a weak reputation still needs to define and advertise its product. Since these latter NGOs have no access to moderated media, they do not benefit from a built-in mass market for their services. Their first priority is creating demand for their services.

Deanna’s work leads to the question of “Can we show whether reputation drives social media strategy or if social media strategy is what drives reputation?”.   To answer this question, it will be very interesting to study the correlation between social media strategy and change in reputation for two distinct groups of NGOs. The first would be organizations that are relatively established before they adopted a social media presence.  The second would comprise new NGOs whose activities are mostly confined to the social media.