Has this ever happened to you?
A young guy comes up to you on the street and tells you that he and his boss are in town on business, and his boss has authorized him to sell all this electronic equipment: telephones, VCRs and stereos, out of the back of the boss's car. While he elaborates on the "great deal" that he has for you on a cellular telephone, for some reason you just don't feel right about making any purchase at this time.Why?
It may be the way the individual is dressed; somehow a T-shirt and jeans just doesn't "do it" for you. The fact that this guy has several thousand dollars of electronic merchandise in the back of a '73 Pinto might further raise your suspicions. When this guy tells you of the "great warranty" that he will provide for your purchase, somehow it just doesn't convince you that this is a "legitimate" operation.
Legitimacy is defined by Webster's New World Dictionary as "according to law." Legitimacy in business goes beyond this simple definition; it is also to be in accordance with established rules, principles or standards.
Why does a company need to be legitimate?
Beyond the legal ramifications of not having legitimacy, a lack of this important quality automatic raises suspicion of mistrust and dishonesty. It is a signal to all potential customers/clients that the company lacks the integrity or ability to fulfill its end of the bargain.
To be legitimate in a business or an industry is a choice. For a new company to acquire legitimacy, there are two basic options: make or buy. Either option requires careful observation of the arena in which it competes. Either also requires assessment of costs and benefits.
This observation can occur in many ways. One method is to go to "trade" shows. Another method is to visit competitors where they transact their business and look at all the elements used in conducting business, if possible. Any forum that allows observation to occur should be pursued, barring illegal practices. By carefully observing what competitors are doing, one can analyze what is "normal" in the industry. To "make" legitimacy, the company brings in "raw" materials - inexperienced people, untried equipment, new location, etc. - and creates it much as it does any other product or service.
Then the business can take the necessary steps to "making" itself legitimate. Just as the electronicssalesman chose to sell things out of the back of his car, he and his "boss" may have chosen to lease a small retail space in a strip mall somewhere to sell their wares. In "buying" legitimacy, the process is finding people, resources, etc., that are already in a form to be used to give legitimacy.
In referring to the salesman story, a resource that could be "bought" might have been the retaining of an experienced advertising agency that had already helped another retailer establish itself, or the "boss" might have hired someone that was experienced in selling electronic goods instead of the "young man.
If a company is not actively making or buying its legitimacy with suppliers, clients and competition, then it will be coerced to make or buy legitimacy by the market forces that bear down upon it. Whether the company is aware of this or not, all businesses go through this process of legitimizing themselves to become viable and profitable.
In the store, if all electronics retailers offer 24 hour toll-free technical support for their goods, then one Pinto-driving salesman without a technical background is not going to sell much if this is what customers have come to expect.
Ultimately, legitimacy is specific to an industry. An architect may work out of his home without clients feeling that he is a fly-by-night operation. However, if a medical doctor does the same thing, his patients may make some conclusion that he may be incompetent because he "can't" practice in a "real" office or clinic. What works in one industry may not work in another.
As for the Pinto-driving salesman, what might work in selling ice cream for the Good Humor man may not be the answer in selling anyone a cellular telephone.
Without legitimacy, a company is just not going to accomplish its goals because of the issues of trust and honesty that are inextricably linked to being "legitimate." Legitimacy is then the key to building reputation and building business.
William D. Butler is the office manager of a small, successful architectural firm in Salt Lake City.