It is hard to nail down the exact meaning of "reputation," and this post is not about the meaning of "reputation"; it's about the value of collective reputation. Say that faculty member X has reputation 8 and that her only colleague Y has reputation 4. Their total reputation adds up to 12. We could also say that the department has a mean collective reputation of 6 -- and we could do all kinds of weighing. But let's keep it simple. Now, another department consists of two people both rated 6. Though both departments have the same total reputation, the value of the total reputation of each department is not the same.
Compare reputation to pain. Say the pain intensity associated with ripping off your bandage after your flu shot is 2, and say that the pain intensity associated with ripping off the bandages of the face of a burn patient is 8. The total pain intensity of the group consisting of the post-flu shot person and a burn patient comes to 10. Suppose there is another two-membered group of pain patients, each with a pain intensity of 5. Suppose further that you have only a limited amount of pain medication. Are you going to distribute it evenly among the two groups (immediately after their pain experience)? Not likely. You probably would hand it all to the group with the burn victim.
Compare reputation to a dating scenario. Suppose you can date the two members of one of two groups. Both groups scored 10 total in the categories: intelligence, looks, physical attraction, personality. One group has a member who scored 10 in all four areas and another who scored close to zero in all four areas. The other group's members both scored 5 in all four areas. Regardless of which group you choose you must spend the same amount of time with each member of the group. How are you going to choose? When asked this question most people choose the group with the person who was rated 10. They are happy to endure some pretty bad dates with the person who was rated zero in order to have an amazing time with the person who was rated 10.
One last example to illustrate: Suppose your dean tells you that this year you can only shortlist, interview and hire teams of two. Call them team applicants. You shortlist two team applicants. All individuals are equally nice people. But one team applicant consists of two members both with a bunch of decent papers in third-tier journals. The other team applicant consists of a guy who hardly ever publishes and isn't all that smart and a woman with several papers in first-tier journals. The two teams have the same total score. Despite the same total, you hire the second team.
The positive value of collective reputation works a bit like the positive or negative value of pain, dating and hirability. A department with a faculty member who was rated 4 and another faculty member who was rated 8 may be more valuable than a department with two faculty members who were both rated 6. If you are going to graduate school, you want to work with the most reputable philosophers (other things being equal), and there could easily be a difference between working with an 8 and a 4 and working with two 6s. The reference letter written by the faculty member who was rated 8 may be so valuable that you could spend the rest of your graduate student career collecting garbage on the street and still be ahead of your peers.