Wednesday, October 24, 2007

What Could Corporations Learn from One Lady?

I returned today from the funeral of my Aunt Judy Feldman. She passed away at the age of 83 after a blessedly short battle with cancer. She was a dynamic, fun-loving, artistic women with an infectious laugh. She and my Uncle Sid had been married for 62-years and still walked around the mall holding hands.

The funeral was a wonderful tribute to her life. It was a non-traditional, non-religious service led by her son-in-law. He began his eulogy by saying that the service "was for a Jewish woman, it would be led by a Catholic man, and it would follow the Quaker tradition of sharing thoughts and memories". We all listened to some of her favorite music and then her two daughters--my cousins-- talked about their mother. Others of us gathered were then invited to share memories and stories. Finally, my uncle thanked us for coming and said that he hoped all of us would find the same good fortune he had found to be in love with someone that was so delightful for so long. His message was that we should not feel sorry for him, but rather that we should be happy for what he had for so long.

I sat and listened before I got up to speak. I had always loved my aunt and uncle dearly. They were always two extremely important people in my life, but I could never explain why. I began to understand. Virtually everything I was going to say about my aunt was the same as what had been said previously. It struck me then that I loved her so much because she loved unconditionally. She shared her love with others and asked for nothing in return. She treated everyone the same. I had felt wonderful in her presence and loved being with her, but I wasn't necessarily special. She made everyone feel special. It was never superficial. It was genuine caring. She truly listened and connected with those around her.

There is a new Arthur Page Society paper that seeks to establish the "Authentic Enterprise" as the phrase to capture the needs of the corporation in today's environment. After listening to the stories today about my aunt and her authenticity, I started to wonder: How many corporate executives are authentic enough to lead authentic corporations? How many really listen and care about their employees, their customers, their investors, their communities, their critics, and other stakeholders? Most want people to listen to them and feel that they deserve to be listened to, but how many spend time listening and caring about others?

My Aunt was a truly remarkable woman who I was fortunate to know. She was authentic. She treated everyone the same. What you saw was what you got and what you got was good. She could have taught so many companies how to be authentic, if they had only had the good fortune to have known her.

Sunday, September 30, 2007

Reputation is About Competitive Advantage, Not Being Liked

I have attended a number of conferences lately at which the term reputation was bantered about. For the most part, the term was used to denote an organization "doing good things", or "building up the trust fund so that there are friends when times are bad". These definitions fall far short of something anyone could or should take to a CEO for action. It's little wonder that there are so many companies doing so many things poorly, but investing in community activities and philanthropy believing that they are building themselves a good reputation.

A good reputation should build a relationship with key stakeholders and have them behave toward your organization in desirable ways. That is, a good reputation should help you attract and keep the best talent, it should lower your cost of capital, it should attract investors, and it should make it safe for government officials to support your actions. But, let's recognize that organizations do not operate in a vacuum. Everyone has competition. A good reputation, then, should help differentiate you from your competitors in the eyes of your key stakeholders.

So, let's stop all the talk about about doing "good things" so that people like us more. Having people like us is great, but companies don't exist to have people like them. They exist to make money. Companies with higher reputations tend to do better financially, but the financial success comes because a company meets the needs and interests of its stakeholders better than do others in the competitive set. Certainly, companies that desire a good reputation also need to be concerned with how they are viewed by their communities and others, and social responsibility is an important part of a reputation program. But, social responsibility of CRM, as is is often called, is not, I repeat is not, a reputation program. It is just part of it.

Let's put the focus where it should be when we talk about reputation with CEOs and others--on helping the organization to create value and beat the competition. That's what marketing and communications executives get paid to do.

Thursday, September 20, 2007

Privacy--Is a New Concept Needed?

There has been considerable concern amongst many people about the potential loss of privacy in the new media environment. What will we do, ask these people, when advertisers and others can reach us through our smart phones?

I share the concern about unwanted intrusions, but we have lived with these when we have used other media and have learned how to deal with them. No one invited commercials that interrupted their television shows. We never knew we had a choice other than to accept these intrusions. With new technology, we can zip through the commercials we don't want to watch. Unwanted telephone calls can now be blocked through the "Do Not Call" registry and call display.

We have never really had the privacy that we believe we have had and, if we are smart, our new technology may not only allow us more privacy, but also allow us to receive information and offers specific to our interests. To achieve this goal, however, will require us to rethink our concepts of privacy.

I have worked with lawyers at several companies who have taken a very strict definition of privacy. They will not accept the notion of "opting in" or "opting out" of information. By opting in, a customer would willingly give the company information about him or herself in exchange for receiving information, goods and/or services specifically of interest. A good example of this is "Real Age", a medical web site that asks users to provide some rather detailed and otherwise confidential medical information about themselves. In exchange, the user receives an analysis of that information that calculates their so-called "real age". Not only does the user receive this analysis, but by opting in, they also are willingly giving their permission to receive other interesting medical and health information. I have used "Real Age". Not only was I pleased to learn that my "real age" was 12-years younger than my actual age, but I later received some useful information about dieting that I could use.

When I mention this site to pharmaceutical companies, they argue that the FDA and their lawyers would never allow them to share information directly with consumers in this manner. "Opting in" is not considered possible in the pharmaceutical industry. What a shame? These companies should recogize that patients are getting information from the Internet, some valid and some not valid. There are blogs and website of all stripes that provide medical information. In fact, doctors regularly indicate in research that the majority of their patients come to them to some extent "self diagnosed and self prescibed". If pharmaceutical companies cannot communicate with patients, they are denying these patients valuable information.

Now, at the same time that I suggest this, I realize that there will be some pharma companies that will misuse the ability to communicate. They will attempt to sell the patient rather than having a helpful dialogue and/or sharing unbiased medical information. Consider the strengthening of the relationship between the pharma industry and patients if the industry were willing to share and discuss medical information rather than focus on pushing their drugs. I have not yet understood why the pharma industry is a laggard in understanding pull marketing.

The point I would argue is that we need a new concept of privacy that is more in keeping with the possibilities of new technology. We need to recognize that some people are willing to provide information in exchange for something of value. Some people, obviously, will not want to "opt in" and that should be respected. It is hoped that sites like "Real Age" will not abuse their relationship with their users, but rather will help lead a new revolution that provides willing consumers with greater useful information than they were ever able to receive in the old media environment.

Tuesday, April 24, 2007

Corporate Social Responsibility (CSR)

I recently attended a meeting in New York for senior communications officers where CSR was the focus of a two day meeting. I came away from the meeting excited to see so much attention focused on the issue, but concerned that the definition of CSR remains so fuzzy.

CSR has come to mean different things to different people and companies. The term is often used to indicate environmental responsibility. The Sustainability efforts aimed at "Triple Bottom Line" reporting by companies has spurred much of this effort. Clearly, there is a growing interest in global warming and the environment in general in the U.S.

The problem is that CSR is not another name for environmental responsibility and should not be so. CSR is about corporate social responsibility, and there are many forms that such responsibility can be demonstrated. For example, while a chemical company is expected by its stakeholders to be environmentallly responsible, the same focus by a bank likely would not get the same level of attention. I mention banks because I have come across a number of banks that have been reporting and touting their environmental records. This is wonderful and the effort will likely save the bank lots of money. However, its environmental CSR programs are likely not going to win the bank the same level of public reputation as they would the chemical company committing the same level of action.

The important of CSR is well understood by communications executives, NGOs, media, community groups and others. However, there still are many companies run by executives who need to be convinced that such programs are important to the business. Simply trying to sell the importance of doing good is not likely to be convincing to those who want to know that the company's resources are being used to enhance the company's overall value.

The best social responsibility programs, and the ones that are likely to garner the greatest support within the company, are those that are tied to the company's business strategy. A great example is the current program Johnson & Johnson is doing for the American nursing industry. Nursing has numerous problems. Nurses have long hours, poor pay and not as much respect as it should. Because nurses are important stakeholders for J&J, the company made the problem its responsibility and took on the cost of running a "Campaign for American Nursing", that celebrates the profession. This is a perfect example of "doing well by doing good". J&J has used its resources to help an important constituency. The program is directly linked to J&J's business.

Compare this to a utility company I talked to that is focused on poverty. This is a wonderful effort, but it is not tied to the company's business strategy. The program was selected because it is a favorate of the CEO. Perhaps this same utility should offer free or severely discounted utilities to those living below the poverty line and form a partnership with a bank and mortgage company that might help poor people secure financing, jobs, etc. There would then be a program directly linked to the utility's business and it could leverage its local business network to still achieve the focus on poverty that inspires the CEO.

Often, companies shy away from programs that are tied to their business interests, thinking that this transparency might work against them. Just the opposite is the case, especially if the programs are well thought through, well executed, and good for both the community and the company. Companies need to recognize that value is created when their are enhanced relationships with stakeholders of interet and importace to the business.

One of the very best CSR programs that I was involved with was when I was at Bayer Corporation. We became leaders in efforts to enhance the interest of grade school children in science and math education. Why? Because the data showed that the U.S. was losing its competitiveness in these fields, which a company like Bayer--a pharamceutical and chemical company--despirately needed. We focused on grade school children because we learned that those who do not have an interest in science of math by 5th grade are likely not to take these courses in high school and, therefore, not to major in them in college. We were losing our children early and we needed to address this program, both for our nation's competitiveness and well as for our company's. Our work not only won us kudos, but it also brought us into closer relationships with key stakeholders like the government, both state and federal. Our employees gained enormous pride in the company and our recruiting efforts were enhanced as well.

It is important for companies to maintain and enhance their CSR activities, but they also need to focus them more clearly. Moneys spent on activities not tied to business interests are not likely to be continued when times are tough, and CSR needs to have a long term horizon. In addition, while companies may be doing many things out of concerns for the community, most are typically looking to gain some reputational advantage. To build reputation, one needs to differentiate and CSR should be part of and integrated with the overall reputation program. Let's keep in mind that employees and customers are key stakeholders for all businesses. The satisfaction of those two groups with the company enhance value and drive financial results. If we can develop CSR programs that build relationships between employees and customers, similar to what J&J and Bayer did, we will be integrating CSR with the business interests and making is strategic to the business. This, will be a formula for success for all.

Friday, February 23, 2007

Convergence of Media and Communications

I went to an Arthur Page Society event in New York this week at which the discussion focused on whether or not there was a difference between PR and advertising in the digital age. No conclusion was reached, but several interesting issues were raised. First, there continues to be a conflict between the interests and perspectives of corporate communications and marketing public relations. The former is focused on protecting the reputation of the firm, while the latter is focused on selling products. Second, there is a continuing concern about the loss of truth in the media because blogs have no editorial scrutiny. Third, there is an increase in the number of chief marketing officers and/or closer work between PR and advertising.

The digital age has not created the conflict between corporate PR and marketing PR. There has always been a strain between the broad interests of the corporation as a whole and the more narrowly focused interests of product groups. Corporate communications needs to worry about a larger number of stakeholders than does marketing PR, and thus there is often a need to provide a more cautious approach.

In terms of less truth in the media, this one is a bit troubling to me. There is an old cliche that truth in the news was what Walter Cronkite used to say it was. People may have judged Cronkite as being truthful. We need to understand that truth is and always has been in the mind of the receiver. Cronkite might have been the real source of truth, or it may have been that there were fewer sources of information at the time.

Bias has always been present in the news media. As David Brinkley once said, "bias is anything I don't agree with". Today, we have Fox News, which many people would consider conservatively biased, claiming that it is the only source of unbiased news available. To those who share Fox's biases, they are indeed unbiased and more truthful than the major news outlets.

What do we say to those who look to blogs for their sources of information and believe them to be more truthful than traditional media? Do we tell them that they are not receiving truthful information? There are totally biased, untruthful blogs, just as there have been totally untruthful newspapers in U.S. history. Pravda, the famous Russian newspaper, means "truth" in Russian. It could make that claim because it controlled information available to the citizens of the former Soviet Union. When the Soviet Union collapsed, so did control of information.

We have lost control of information and the license to publish. These used to be in a few hands. The Internet has put them in the hands of anyone and everyone. The rule now is "caveat emptor", but has it not always been the case?

I am less worried about where we will find the truth than I am with the growing lack of information and perspective many people are getting in the digital era. Newspaper readership is down and so too is network news viewership. People are turning to the Internet in increasing numbers for their information. As we see more and more "Fox News type" blogs, we run the risk of people paying attention only to those media that share their biases and not getting the perspective of what others think. It is difficult to have democracy when people do not have the information to make decisions.

Finally, the issue of chief marketing officer (CMO) is an interesting and somewhat troubling event for PR. Most of the CMOs are marketing-types, with responsibility for PR. This has happened because business schools have tended to view PR as part of the marketing mix. Remember my comments about the conflicts between corporate communications and marketing PR. By putting corporate communications under marketing, companies erode the necessarily perspective that corporate communications brings and limits the understanding of multiple stakeholders, focusing primarily on customers. What is needed is for more PR to work more closely with marketing or, in companies, to assume responsibility as CMO. But, whether it is working more closely with marketing or becoming CMO will require a new type of PR person who understands business and marketing.

Wednesday, January 31, 2007

Measuring Reputation

I am often asked how best to measure reputation, since there often confusion which measure is best. Many companies rely on Fortune magazine’s “Most Admired American Companies” list that is published each spring. Others commission their own studies, using a number of different companies that offer research.

First, one needs to understand that reputation depends on who is asked; that is, it exists in the minds of stakeholders and not all stakeholders think alike. Employees may be concerned about the quality of their work-life, compensation and prospects for future growth; customers may be concerned about the quality and price of products and services; while analysts may be focused on the ability of the management team to meet its objectives, past financial results and future prospects for return on investment. So the answer about how to best measure reputation is this: use a measure of reputation that designed to best assess your reputation with the stakeholder in question.

There are a variety of “off-the-shelf” reputation studies that many companies use. Fortune magazine’s rankings are excellent, but they are designed to assess reputation with investors, analysts and executives of competitor companies. The attributes that Fortune uses to measure reputation are heavily skewed toward the needs and interests of these stakeholders. Forbes also has a ranking, but its measure is purely focused on return on assets. In Canada, Report on Business has a yearly study, using attributes similar to those used by Fortune, but with a few "tweaks" for Canadian interests. Similarly, in Germany, Manager Magazin publishes a study of reputation with attributes of interest to that country.

A number of human resources consulting firms have their own measures that assess employee satisfaction and engagement. These are related to reputation, but they usually do not ask employees and potential employees how they feel about the reputation of their company. This would be an important question since research has found that employees, particularly the best employees, are more motivated when they feel that their company has a good reputation, and high quality talent is more likely to be attracted to a company with a good reputation.

There are other measures of reputation by other groups that are not sanctioned by companies. Many of these assessments come from activist groups or non-governmental organizations (NGOs). While the company may not agree with the attributes used or the results, the studies are valid to the extent that they accurately reflect the perceptions of these groups.

For many companies, reputation studies are done by a variety of functional and business groups, such as marketing, sales, HR, corporate communications, government relations, and others. Here are some suggestions for companies to enhance their perspective on their reputations:

1. Adopt a common model of reputation that everyone can agree on. From this model, questionnaires can be developed to assess the perspectives of all stakeholders, and in a way that provides common rather than disparate data.
2. Seek a research instrument that provides linear data. Opinion research gives one a direction, but it does not provide information on the intensity of feelings and perceptions. Only linear data can give this. This allows a good researcher to find the drivers of reputation, how these drivers are linked and what moves behaviors, which is the ultimate goal of reputation management (to buy, invest, join the company, support the company, etc).
3. Only conduct research if it is actionable. Companies have lots of information, much of which they have no idea how to use. Reputation research should not be done simply to see if people like or dislike the company, but rather to set in place, monitor or adapt of program on influence.

Wednesday, January 24, 2007

Why Some CEOs Don't Get It

Robert Nardelli, former CEO of Home Depot, is a case in point of a CEO who didn't understand the complexities required of running a company in A.E. (after Enron). Enron was a wake-up call to companies and to shareholders that the smartests guys in the room are not always the most ethical. Nardelli was quoted in the Wall Street Journal as saying that he just didn't understand why shareholders were upset with him. "I have always believed that if you make your numbers, everything else will fall into place". That didn't happen and Nardelli, confused over what was happening, fell from grace.But, the real story is what happened to Nardelli. He was fired by the board, but with a severance package of about $120 million. Guess that really showed him!! Why should a CEO really care when they can leave with such a hefty sum. They must be feeling such a sense of disgrace as they sit in their island homes sipping Margaritas and telling stories about all the jerks who didn't understand their value.

There certainly are a plethora of outstanding CEOs that do not think like Nardelli. If they are doing well by their employees, customers, shareholders and others, I hope they eventually retire with all the perqs and money owed them. I have always believed that Jack Welsh deserved his large retirement package. Look what he did for GE. But, it seems that there still are too many CEOs who are rewarded for screwing up. Hard to give a message to future CEOs who see gold at the end of the rainbow, regardless of the direction they decide to take.I'd like to see boards let CEOs like Nardelli go with the same severance package given to any other corporate officer. If they have really damaged the company's reputation and ruined the lives of employees, I would hope that the board would make an example of them and help them sit in a far less comfortable retirement thinking about what might have been had they understood their roles more fully.

Product vs. Corporate Brands=--How to Decide

I spent most of my adult life as head of corporate marketing and communications at several global companies. I also studied marketing and communications in graduate school and have taught reputation and brand management at several business schools, as well as consulting to companies in this area. It never ceases to amaze me how many companies continue to attempt to apply product brand concepts to their corporate brand. While the process of brand management is the same, brand decisions must be made quite differently.

The concept of brands and brand management came from consumer product companies. Many business textbooks assert that Wedgewood China was the first know product brand. What this means is that Wedgewood was the first known person to extract greater value for his product with his name on the product than his competitors. Others had china. He had Wedgewood China. The products may have been the same, but he was able to differentiate with his personal reputation for excellence in quality and design. Since those early days, companies have been searching for ways to differentiate their products through branding. Products may be the same from an engineering and manufacturing perspective, but they can be differentiated and personalized through branding.

The mistake that companies make, however, is that they think that the brand is differentiated with a cool name or by making bold claims of difference. In product brands, consumer companies use what is called Unique Selling Proposition (USP) to differentiate what might otherwise be similar products. Toothpaste might all be the same, but some are whiteners, others have mouthwash, some have tarter control, etc. These subtle differences are designed to attract to the product those for whom these USP are important. For non-consumer products companies, differentiation can be found in what can be called Value Proposition. That is, the rationale for buying the product over another in the same competitive set. Let's understand, though, that the marketplace of non-consumer products is very different from that of consumer products. That is, the needs of the customer are different, the competitive marketplace is different, and the sales engagement is different. Despite these differences, many non-consumer products companies follow consumer products principles in their branding activities. How can you make decisions about your brand strategies?

The best way is to look at the product from the outside-in, the way the customer sees it and to understand the needs and interests that determine the buying decision. I would suggest that there are two basic variables driving buying decisions: 1) the amount of fear, uncertainty and doubt (FUD) that the customer has in making the decision to buy; and 2) the complexity of the buying decision. Consumer products elicit little FUD and there is little complexity in the buying decision. If I want a Coke but the restaurant only sells Pepsi, there is little FUD or complexity. In contrast, if I am the CIO of a company buying 20,000 desktop computers for my company, there is a great deal of FUD and complexity. I could jeopardize or lose my job if my decision is wrong, and the decision may need the input of others who are more expert that I am. It helps for a company to draw a 2x2 matrix, with one axis being FUD and the other complexity, and to determine where their products and company value proposition lie. The more FUD and complexity, the greater the interest in corporate brand. The customer wants to know that the company behind the product is viable and strong. Consumer products have less need for corporate brand and focus on product brands.The same matrix can be used to determine the right marketing communications mix to support the branding decisions. Consumer products can be driven by advertising and marketing public relations. Non-consumer products brands need strong relationship management since they often build their brands at the point of sales.

So, for those of you who are working in non-financial products companies, use this matrix the next time a brand manager or researcher comes up with a "new cool way" to brand your products. It will help provide some analytics to an otherwise emotional discussion.