Status and Reputation

I had a facinating discussion this week with a colleague of mine at the LeBow College of Business at Drexel. Dr. Dali Ma teaches management and has been studying status of companies within the financial services sector. Our discussion focused on what status means to various industries and how this differs from reputation.

It is apparent after my discussion that companies within a given industry have a sense of status. In the pharmaceutical industry, it might be who has the deepest pipeline and best R&D; in financial services, it might be who has the highest return on assets under management; etc. These are "within industry" status determinants.

At the same time, there are judgements about status by other stakeholders. At different points in time, the status determinants within the industry may no longer be as viable as those outside the industry. An example can be seen currently in the reaction by the public and elected officials to the bonuses being paid by those on Wall Street. A year ago, these bonuses would not have been an issue. They are today because 1) the financial institutions are getting government bail-outs, and 2) because the entire economy is down.

I do a lot of work with the pharmaceutical industry and this discussion with Dali really got me thinking. At what point does status shift from inside to outside the industry? Can people within the industry do a better job of anticipating this status shift and adapt with it? The pharma industry has done a generally lousy job in this regard. It has been an industry focused on status within; it has fought demands to change the determinants of status and now is struggling to adapt. The chemical industry went though something similar in the late 1970s and early 1980s when the environmental movement was emerging. The industry "hunkered down" and judged itself against set industry standards. The determinants of status started to change and the industry had to then change to adapt. It was pulled rather than working its way through the situation on its own terms.

At some point in most industries, some company emerges to meet the new status determinants or attributes. That new "star" becomes the most reputable within the industry group. Over time, the star causes all others in the industry to change and a new status is created, at a higher level of expectation than existed previously.

This is an emerging area of research. It is being led by sociologists like Dali Ma at Drexel and Brayden King at Northwestern who calls it "legitimacy", which is the same as the concept of status. I lived through several status shifts within industries--chemical, pharmaceutical and telecom. My interest has been piqued.