Sustainable Performance Management in High-End Luxury Goods Firms: The Use of the “Reputation-Clock” Model

Abstract

High-end luxury firms have to elaborate even more precise and complex strategies depending on a large variety of key success factors in order to manage their value chain. Meanwhile, they have to incorporate the ethical and societal strong requirements imposed by sustainability. Therefore the performance management tools that they use have to go far beyond the traditional models. In particular, these have to take into account their potential huge impact on reputation if some related risks occur, as it is considered as one of the most valuable assets a firm can own, in particular for small organizations in this industry. However, this is rarely considered as an integrated part of the performance management process of the firm, disregarding the intrinsic complex nature of the relationships that govern the process of accumulation and dilution of reputational capital in particular, and the key success factors that can be mobilized by the organization in order to engage and feed it. Building on the specific case of a small Belgian firm of the luxury industry, this paper describes the motivations and the content of a reputational performance management tool, the “Reputation-Clock” Model, which incorporates the different key success factors that a firm from the high-luxury goods industry has to leverage in order to master its strategic performance from a reputation point of view. Our findings suggest that accumulating reputational capital is influenced by the organization’s capacity to manage the related reputation risk. In particular, we distinguish the co-existence of a virtuous and a defective triangle of reputation, which mobilizes a short-list of key success factors in order to enhance the performance of the organization under study. Finally, we observe that the development of internal reputational capital measurement tools, or else the definition of a systematic procedure in order to react a reputation crisis would require much resources for this kind of firms, while flexibility and education can be key for both accumulating and protecting reputational capital.