Building a Favorable Internal Reputation: The Effect of Authentic Leadership and Transparent Communication

The value of employees as the company’s communication assets can never be underestimated, especially in today’s social media era when employees possess numerous tools to initiate conversations about the company in the public domain 24-7. Simply, how the employees feel about the company determines what they say publicly. Good or bad, such word-of-mouth, corporate insiders’ views are often perceived more credible, forming the basis of how external stakeholders perceive or evaluate the company.  The public resignation of Goldman Sachs’s executive director, Greg Smith, early last year illustrated to the corporate world why employees are an organization’s foremost stakeholders. Not only does a favorable internal reputation reinforce employee identification with corporate mission, values and beliefs, and fuel employee loyalty, motivation, and engagement; more importantly, an organization’s reputation, image, or brand, which ultimately drives the organization’s performance and success, is built from the inside out.

So how can companies build a favorable reputation in the eyes of corporate insiders?

For decades, reputation scholars and managers across business and communication fields have suggested a long list of reputation drivers, which can be roughly placed into three categories: corporate capabilities, strategic communication, and social accountability. Corporate capabilities, including aspects of leadership, strategic management, production, innovation, and talent retention, can be said to lay the foundation for a favorable organizational reputation. Social accountability, pertaining to conducting ethical organizational behaviors and being fair and honest, projects the organization as a good community citizen. Most essentially, continuous strategic communication efforts improve the organization’s media and market presence, which is a prerequisite for reputation; meanwhile it builds quality stakeholder relationships that eventually contribute to a favorable organizational reputation.

But now, another question arises: do the same factors drive an organization’s internal reputation? For quite some time, I have been interested in looking at how the organizational leadership and communication factors influence an organization’s internal reputation. The idea actually originated from my interview with the Vice President of Public Relations at Dow Chemicals in China in 2009 when he remarked, “It’s not only that public relations affects organizational management; it’s more about the other way round. The manager’s leadership quality, communication mindset, competence, and style can affect the results of communication, especially inside the organization.”

My recent study particularly focused on measuring how an emerging leadership style, authentic leadership, as accompanied by organizational transparent communication, affects the organization’s internal reputation.  Today’s employees are constantly looking for value alignment with their employer. Organizational authenticity, featured by integrity, consistency in what is said and done, and acting in an honest, trustworthy and accountable way is the new standard.  Needless to say, an authentic enterprise can never be separated from the authentic leadership. According to the Luthan and Avolio, authentic leadership is a genuine and value-based type of leadership. Authentic leaders incorporate a positive moral perspective that guides decision-making and behaviors, such as honesty, altruism, kindness, fairness, accountability, and optimism. They are deeply aware of their values, beliefs, emotions, self-identities, and abilities, and stay “true” to themselves.  Further, authentic leaders are characterized by relational transparency, advocating behaviors of disclosure, openly sharing information, expressions of their true thoughts and feelings, and objective analysis of all relevant data before reaching a conclusion.

My study shows that employees tend to like and respect the company more when they are managed by leaders who are authentic, ethical, balanced, fair, transparent, and consistent in what they say and do. Additionally, when authentic leadership is prevalent in the organization, the organization’s internal communication system is most likely to be transparent, meaning that the organization tends to disseminate all legally releasable information to employees, positive or negative, in an accurate, timely, balanced, and unequivocal manner. Such transparent communication practice demonstrates a large positive effect on employee evaluation of the organization. Simply put, authentic leadership and transparent communication as effective internal reputation drivers are evidenced by my empirical data.

In sum, considering the natural linkage between organizational leaders and the organization, and the “agent” role of managers in cascading corporate messages to employees, the importance of leadership in building corporate reputation can never be overemphasized. For best practices of internal reputation management, the organization should:

1. Provide the rightful information aligned with organizational values and goals to managers at all levels;
2. Provide training sessions to equip leaders with authentic leadership featured by positivity, honesty, genuineness, openness, and transparency. Develop effective leadership communication skills, and arm them with tools that they can use;
3. Select and promote leaders who possess characteristics (e.g., integrity, positive self-concept, high emotional intelligence) that could yield higher level of authentic leadership;
4. Listen to the concerns of employees and invite their participation in determining the information they want or need to know;
5. Provide employees complete, detailed, substantial, and truthful information in a timely manner;
6. Be consistent in its values, words, and actions, and be accountable for what it says and does; and
7. Be fair and balanced in their communication with employees.

Indeed, a company’s reputation resides in the eyes of both internal and external stakeholders. But an extraordinary and long-lasting reputation is built from the inside out with people who ultimately drive the organization’s performance: employees. While building a favorable internal reputation requires collaborative efforts of public relations, marketing, human resources, management, and even operations, it’s vital for communication managers to play the liaison’s role to coordinate these functions, develop employee-specific, relevant messages, promote an authentic and transparent communication climate, and eventually win the hearts of the corporate insiders who will make the best organizational ambassadors. 

Rita Linjuan Men, Ph.D., is an assistant professor at Southern Methodist University.