Relationships Between Productivity, Reputation, and Strategy Abstract:
Businesses seek to maximize productivity because it increases efficiency, motivates employees, and can help firms compete on the strategic elements of time, cost, and quality.
Productivity has been shown to be positively correlated with reputation such that firms with good reputations tend to have higher productivity. Reputation can be improved through corporate social responsibility initiatives that seek to enhance social and environmental wellbeing.
Improved reputation can provide a sustainable competitive advantage and increase the perceived quality of a firm’s goods or services.

Introduction
In the business world, it is well understood that increased productivity is highly desirable and leads to favorable economic results. Productivity can have numerous effects on a company, particularly in relation to financial performance. Strictly speaking, productivity is defined as output over input for any given unit under evaluation, such as a business, division, department, or a set of employees. However, this measurement can be a bit more complex since productivity is determined ­­ and affected ­­ by numerous variables, some of which are not readily apparent in the accounting setting. For example, a company’s reputation can have an impact on productivity and labor efficiency, as demonstrated by the findings presented by Marty
Stuebs and Li Sun in their article “Business Reputation and Labor Efficiency, Productivity, and
Cost” (2010).
Stuebs and Sun found that reputable firms, as determined by
Fortune
’s Most Admired
Companies list, had a positive correlation with labor efficiency due to increased productivity compared to matched firms with similar characteristics aside from reputation. Labor efficiency is measured by dividing labor productivity over labor cost, and therefore labor efficiency is directly affected by productivity, such that a change in productivity will result in a positively
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correlated change in efficiency. Stuebs and Sun hypothesized that reputation would not only increase productivity but would reduce labor costs and therefore improve labor efficiency in regards to both of its determinant variables (i.e. productivity and cost). However, the results of the study showed that a firm’s reputation does not determine the cost of labor or affect it significantly. A company’s reputation is of great importance since it is a key element of a successful marketing strategy and it has been found to impact productivity. Firms have ways of influencing and changing their reputation such as through corporate social responsibility (CSR) efforts. This essay will first define CSR and show how it can be used as a tool for businesses to improve their reputation, and then it will examine issues pertaining to the study done by Stuebs and Sun, as well as related research in the fields of productivity, efficiency, and firm reputation, and the relationship that these elements have in regards to strategic objectives.

Corporate Social Responsibility and Reputation
Corporate Social Responsibility is the philosophy that businesses should operate in accordance with not only legal, but also ethical and social standards in regards to the community and the environment. CSR is often associated with sustainability efforts and includes an
“[o]
rganizations’ efforts to address a wider variety of social and environmental problems”
(Lindgreen and Swaen 2010)
. There is some debate on what specifically constitutes CSR and how it is defined. An accepted and established summary of CSR is that it “ represents a continuing commitment by an organization to behave ethically and contribute to economic development, while also improving the quality of life of its employees (and their families), the local community, and society at large” (Watts and Holme 1999).
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Oftentimes companies that go above and beyond in terms of social and sustainability efforts are rewarded by increased loyalty among customers. Indeed, this is often the motivation for implementing many CSR initiatives. Different studies have tried to show a correlation between CSR and improved financial performance, but CSR is more easily linked to firm reputation as Charles Fombrun and Mark Shanley outline in their articled entitled “What’s in a
Name? Reputation Building and Corporate Strategy.” CSR can aid firms in “differentiating themselves from competitors and building a better image and reputation” (Fombrun and Shanley
1990). Differentiation and reputation have important strategic implications for creating a sustainable competitive advantage. A good reputation can be an invaluable asset in the marketplace. Therefore, from a strategic standpoint, firms can use CSR as a tool to improve their reputation and thus improve the perceived quality of their goods and services.

Reputation and Productivity
Stuebs and Sun found that “reputation is positively associated with labor efficiency… due to a positive association between reputation and labor productivity” (2010). A potential explanation for this trend offered by Stuebs and Sun is that employees value a good reputation and it provides an intrinsic incentive for them to be more productive since they take pride in the company for which they work. The benefit to this explanation of the relationship between reputation and productivity is that it is straightforward and easy to accept and understand.
Ceteris paribus, an employee would rather work for a company with a better reputation, and since companies with better reputations get more job applicants, they can be more selective in hiring the best employees. Better employees will likely drive higher productivity. The problem with this explanation is that it assumes that reputation is the cause of increased productivity and
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it doesn’t consider that the relationship could be the other way around. Simply put, “correlation is not causation.” For example, it isn’t difficult to see that good management techniques and strategically aligned performance measurements can improve motivation and hence improve productivity. In the article entitled “Employee Motivation as it Relates to Effectiveness, Efficiency,
Productivity, and Performance,” Rob Kamery proposes numerous ways that managers can motivate employees and thus increase productivity and efficiency. The article proposes that
“[e]mployees have higher levels of motivation when they perceive that management cares about their welfare, when they are involved in the management process, and when the management­labor environment is positive” (Kamery 2004). Therefore there is a strong link between management involvement and employee morale, and few in the business world would argue with this assumption. Productivity naturally follows as the financial measure of employee motivation and morale.
Improved productivity can lead to better customer relations, on­time deliveries, and any number of other benefits, all of which might improve an organization’s reputation.
Therefore, when evaluating the findings of Stuebs and Sun, this alternative direction of the relationship should be considered, as well as additional variables, such as management involvement. In fact, many of the criteria used for determining a good reputation ­­ outlined by
Steubs and Sun ­­ lend support for this type of relationship, such as “quality of management,”
“wise use of corporate assets,” and “ability to attract/develop/keep talented people” (2010).
Each of these criteria could be used in support of the argument that it is productivity that drives

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reputation and not the other way around.
The specific qualities sought for reputation have an effect on ­­ and are affected by ­­ the productivity of a firm.

Productivity Measurement as a Strategic Tool

The focus on productivity is important because it can be used by management to set

goals, evaluate performance, and allocate scarce resources, such as labor, to those units which are the most productive. Productivity measurement is a part of lean management and operations.
This measure can be used to identify areas of concern or waste, and managers can analyze trends in productivity changes over time. Evaluating employees based on productivity and offering related incentives can drive motivation and goal congruence, when done effectively.
Working to increase productivity is in the interest of most firms since it can ultimately help firms compete on the strategic elements of time and cost. The productivity measure can easily be modified to show output over time and thus drive time savings and create incentives for employees to work more efficiently. Increased efficiencies mean that less resources are required to achieve the same or greater output and therefore the firm can save money on inputs such as labor. These savings could be passed on to the end consumer and allow the firm to compete on cost.
The disadvantage of focusing on productivity is that it is a limited financial measure and doesn’t necessarily take quality and value­added inputs into consideration in its calculation.
Productivity alone does not provide enough information for managers to improve overall performance. Relying too heavily on limited financial measures can lead to dysfunctional behaviors where employees are concerned with the productivity of their unit more than the strategic objectives of the firm as a whole.
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Conclusion
Numerous studies have indicated that there is a relationship between CSR and firm reputation. Firms can benefit from implementing CSR initiatives through improved reputation.
Establishing a good reputation is important for firms because it helps them compete on the strategic element of quality. A good reputation tends to imply higher quality goods or services and can be leveraged as a sustainable competitive advantage. Stuebs and Sun found a positive correlation between reputation and productivity, though there is insufficient evidence to determine whether a good reputation improves productivity or whether improvements in productivity lead to a better reputation. It is likely that productivity is affected by ­­ and in turn affects ­­ reputation, and therefore the relationship could go both directions.
Using productivity as a management tool can lead to improvements in motivation, performance, and goal congruence as long as numerous other factors are taken into consideration and the measure is not misused. Improved productivity can help firms compete strategically with the time element, since productivity can be measured as a function of output over time.
Increased productivity can also lead to cost savings since increased productivity leads to greater efficiency and therefore less input required to achieve the desired output level. If the cost savings are passed on to the customers, this creates added value and allows firms to compete on the strategic cost element.
.

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Works Cited
Fombrun, Charles, and Mark Shanley. "What's In A Name? Reputation Building And Corporate
Strategy."
Academy of Management Journal 33.2 (1990): 233­58. Web. 18 Apr. 2014. Kamery, Rob. "Employee Motivation as It Relates to Effectiveness, Efficiency, Productivity, and
Performance."
Proceedings of the Academy of Legal, Ethical and Regulatory Issues 8.2
(2004): 139­44. Web. 18 Apr. 2014. Lindgreen, Adam, and Valérie Swaen. "Corporate Social Responsibility."
International Journal of Management Reviews 12.1 (2010): 1­7. Web. 18 Apr. 2014. Stuebs, Marty, and Li Sun. "Business Reputation and Labor Efficiency, Productivity, and Cost ­
Springer."
Journal of Business Ethics (2010): 265­83. Web. 15 Apr. 2014. Watts, Phil, and Lord Holme.
Corporate Social Responsibility: Meeting Changing Expectations
.
Conches­Geneva, Switzerland: World Business Council for Sustainable Development,
1999. Web. 18 Apr. 2014.

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