Systems Thinking: A Method for Reducing Reputation Risk

As firms strive to meet stakeholder demands and expectations, gaps can occur between various organizational members’ understanding of what these expectations are and what behavior organizations should deliver to meet the expectations. Fulfilling expectations is important, as it is the basis for building reputation. Furthermore, minimizing gaps between expectations and behavior delivery reduces reputation risk. However, getting everyone in the organization to pull together to minimize gaps requires an organizational mindset that is not easy to achieve. In this conceptual article, we argue for a holistic approach to reputation risk, an approach best represented by systems thinking. The systems thinking methodology is concerned with developing and testing operational explanations of organizational behavior and as such requires an understanding of the “whole” through the relationships between “organizational pieces.” We use the PZB service quality model (named for its creators Parasuraman, Zeithaml, and Berry 1985) as a framework to illustrate the inter-relationship between internal organizational pieces where stakeholder expectations, if unknown, misinterpreted or simply ignored can create gaps that provide potential hot spots for reputation risk. We also argue that the complexity of the relationships, illustrated by the PZB model coupled with the nature of reputation, make recent arguments for establishing a chief reputation officer or a single function in charge of reputation unrealistic and untenable.